Jul 272017
 
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Hieronymus Bosch St. Jerome in Prayer 1482

 

Fed Says Balance-Sheet Unwind to Start ‘Relatively Soon’ (BBG)
Time Flies for Draghi and the Bumblebees (BBG)
The Greater Moderation (DDMB)
Thursday Is the ‘Day From Hell’ for Europe’s Stock Watchers (BBG)
Market Hype Triggers ‘New Major Warning’ Sign For Stocks (CNBC)
Financialization and Risk Asymmetry (CHS)
China’s Banks Now Stable, ‘Shadow’ Banking Less Threatening – Moody’s (CNBC)
Investor Howard Marks Says Bitcoin Is A ‘Pyramid Scheme’ (CNBC)
German Business Lobby Urges EU Action Against New US Sanctions On Russia (RT)
Macron Unleashes a Decade of Italian Anger (BBG)
Sweden Leaks Details Of Almost All Of Its Citizens (Ind.)
Armageddon Is Two and One-half Minutes Away (PCR)
Half Our Bodies’ Atoms ‘Formed Beyond The Milky Way’ (G.)

 

 

Far too much power. And then you get inane stuff like: Fed Chair Janet Yellen has allowed the labor market to strengthen .. That means exactly nothing at all.

Fed Says Balance-Sheet Unwind to Start ‘Relatively Soon’ (BBG)

Federal Reserve officials said they would begin running off their $4.5 trillion balance sheet “relatively soon” and left their benchmark policy rate unchanged as they assess progress toward their inflation goal. The start of balance-sheet normalization – possibly as soon as September – is another policy milestone in an economic recovery now in its ninth year. The Fed bought trillions of dollars of securities to lower long-term borrowing costs after cutting the main interest rate to zero in December 2008. “Near-term risks to the economic outlook appear roughly balanced,” the Federal Open Market Committee said in a statement Wednesday following a two-day meeting in Washington. “Household spending and business fixed investment have continued to expand.”

Fed watchers had anticipated that the inclusion of the term “relatively soon” would signal the central bank could announce the timing of the balance-sheet reduction program at its next meeting, scheduled for Sept. 19-20. U.S. stocks rose slightly and 10-year Treasury yields fell following the Fed’s statement. “I expect an announcement of the onset of the balance-sheet reduction at the conclusion of the September meeting, effective on the first of October,” Carl Tannenbaum, chief economist at Northern Trust Corp. in Chicago, said after Wednesday’s statement. U.S. central bankers have raised the benchmark policy rate four times since they began removing emergency policy in December 2015, and project another increase before the end of this year.

In June, the FOMC outlined gradually rising runoff caps for maturing Treasuries and mortgage-related securities, and said the program would start “this year.” Fed Chair Janet Yellen has allowed the labor market to strengthen while inflation has remained lower than the 2% goal of officials, with price pressures declining in recent months. The target range for the benchmark federal funds rate was held at 1% to 1.25%. The FOMC said it’s “monitoring inflation developments closely.”

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Also far too much power. It’s crazy to see the man’s babytalk endanger entire societies.

Time Flies for Draghi and the Bumblebees (BBG)

Five years ago today, Mario Draghi was talking about bumblebees. The European Central Bank president’s speech in London on July 26, 2012, became instantly famous because of his pledge to do “whatever it takes” to save the euro. But for all the power and clarity of that phrase, he started his remarks more obliquely. “The euro is like a bumblebee. This is a mystery of nature because it shouldn’t fly but instead it does. So the euro was a bumblebee that flew very well for several years. And now — and I think people ask “how come?”– probably there was something in the atmosphere, in the air, that made the bumblebee fly. Now something must have changed in the air, and we know what after the financial crisis.”

At the time, the currency bloc was being buffeted by soaring bond yields in peripheral nations as speculators bet the union’s fundamental flaws would rip it apart. Draghi’s answer was to state unequivocally that the immediate crisis fell under the ECB’s responsibility and he would deal with it. “The ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.” That pledge was followed by a program to buy the debt of stressed countries in return for structural reforms, and in that respect the words alone proved to be enough. Yield spreads collapsed even though the program has never been tapped.

The bumblebee metaphor tends to be forgotten, but Draghi’s point was this: even with many national governments and more than a dozen different languages dividing the labor force, the single currency can fly. He went further though, saying that it would fly better if European governments overhaul their economies and work more closely together. On that point, the ECB has less reason to be satisfied with the past five years. The institution has since become the regional banking supervisor but European-level integration has otherwise largely stalled, and Draghi has repeatedly lamented the sluggish pace of national economic reforms.

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“The last great central banker that we had in the last 110 years other than Volcker was J.P. Morgan. The difference is, when Morgan tried to contain the 1907 crisis, he wasn’t using zeros and ones of imaginary computer money; he was using his own capital.”

The Greater Moderation (DDMB)

In late June, the recently retired Robert Rodriguez, a 33-year veteran of the markets, sat down for a lengthy interview with Advisor Perspectives (linked here). Among his many accolades, Rodriguez carries the unique distinction of being crowned Morningstar Manager of the Year for his outstanding management of both equity and bond funds. He likens the current era to that of the nine years ended 1951, a period during which the Fed and Treasury held interest rates at artificially low levels to finance World War II. His main concern today is that price discovery has been so distorted by the Fed that the stage is set for a ‘perfect storm.’ His personal allocation to equities is at the lowest level since 1971. The combination of meteorological forces to bring on said storm, you ask? It may well be an act of God, an earthquake. It could just as easily be a geopolitical tremor the system cannot absorb; it’s easy enough to name a handful of potential aggressors.

Or history may simply rhyme with the unrelenting shock waves that catalyzed the subprime mortgage crisis, coupled per chance with a plain vanilla recession. We may simply and slowly wake to the realization that the assumptions we’ve used to delude ourselves into buying the most expensive credit markets in the history of mankind are built on so much quicksand. The point is panics do not randomly come to pass; they must be shocked into existence as was the case in advance of 1907 and 2007. One of Rodriguez’s observations struck a raw nerve for yours truly, who prides herself on being a reformed central banker: “The last great central banker that we had in the last 110 years other than Volcker was J.P. Morgan. The difference is, when Morgan tried to contain the 1907 crisis, he wasn’t using zeros and ones of imaginary computer money; he was using his own capital.”

It is only fair and true to honor history and add that Morgan’s efforts rescued depositors. Income inequality in the years that followed 1907 declined before resuming its ascent to its prior peak, reached at the climax of the Roaring Twenties. The Fed’s intrusions since 2007, built on the false premise of a fanciful wealth effect concocted using models that have no place in the real world, have accomplished the opposite. Income inequality has not only grown in the aftermath of The Great Financial Crisis and throughout The Greater Moderation; it has long since smashed through its former 1927 record and kept rising. The Fed’s actions have not saved the little guy; they’ve skewered him.

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Oh so busy with no price discovery.

Thursday Is the ‘Day From Hell’ for Europe’s Stock Watchers (BBG)

If you think your Thursday looks bad, spare a thought for James Edwardes Jones. The RBC analyst is bracing for what he calls the busiest earnings day he’s experienced in about 20 years covering the consumer-goods industry. Edwardes Jones plans to arrive at RBC Europe’s London offices along the River Thames about the time the world’s largest brewer, Anheuser-Busch InBev, reports results at 6 a.m. local time. Fifteen minutes later he has Nestle, followed by Danone at 6:30. Then come Diageo and British American Tobacco, along with a trading update from Britvic, all before the morning team meeting at 7:15 a.m. Next up are calls with executives of some of those companies at 8 a.m., 9:30 a.m., 1 p.m. and 2 p.m. Edwardes Jones has client notes to write before his final set of results from L’Oreal SA at 5 p.m. – 11 hours after the first batch.

Other retail or consumer-goods companies reporting Thursday include French grocer Casino, U.K. bookmaker Ladbrokes Coral and Paris-based luxury conglomerate Kering. “There has never been a day like that,” Edwardes Jones said. His recipe for getting through the day: “Maybe a quadruple espresso.” Across London’s financial district, analysts are readying themselves for what Martin Deboo at Jefferies called a “day from hell”: a bumper earnings session in which European companies worth more than $3 trillion are set to report results, according to data compiled by Bloomberg.

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Everyone still thinks they’ll be able to get out in time.

Market Hype Triggers ‘New Major Warning’ Sign For Stocks (CNBC)

With a fresh round of record-breaking highs in the stock market has come a surge in investor optimism, and that eventually could create problems. Bullishness in the most recent Investors Intelligence survey hit 60.2%, the highest level since late February. The survey comes from editors of market newsletters and thus provides a snapshot of what professional investors are thinking. Elevated levels of optimism often coincide with market dips. The last time the II survey hit this level, the S&P 500 proceeded to fall nearly 3%. John Gray, editor at II, cautions that the big spread between bulls and bears, who are at just 16.5%, is an indicator of potential danger ahead. “The latest sentiment is not encouraging for the rest of the year as markets rarely fulfill expectations,” Gray wrote.

“This is a new major warning calling for defensive measures to protect profits, renewing the same signal from earlier this year.” While there’s been plenty of talk in the market about elevated levels that could trigger a correction — or a 10% drop — II respondents don’t see it happening. Expectations for a correction dipped to 23.3% of respondents. By comparison, the correction reading was at a comparatively lofty 34% prior to the November presidential election — just before the market surged on hopes that President Donald Trump would usher in a new pro-business era in Washington. Since hitting the most recent bottom earlier in July, the market has been on what is just the latest leg higher. Defying expectations that stocks could see limited gains this year, the S&P 500 has climbed 10.6% on strength in tech, materials, health care and discretionary stocks.

Among the sampling of newsletter sentiment that II cited was a warning from Bert Dohmen’s Wellington Letter, which said the Fed could thwart the rally. “As long as Fed officials talk about hiking rates, it will enhance concerns about the Fed producing a recession,” Dohmen wrote. “We interpret each rate hike as another nail in the coffin for an economic recovery.” Ten of the last 13 Fed rate-hiking cycles ended with recession. Dohmen said that could be the case again, though he did not advocate that investors panic. “We are seeing warning signs, but not enough to run for the hills just yet. We have said for a number of months that the final phase in the bull market should be a noticeable spurt to the upside, forcing all skeptics into the market,” he wrote. “We haven’t seen that yet.”

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The opposite of skin in the game.

Financialization and Risk Asymmetry (CHS)

One of the most pernicious consequences of financialization is the shifting of risk from the top of the wealth-power pyramid to the bottom: those who benefit the most from financialization’s leveraged, speculative credit bubbles protect themselves from losses while those at the bottom of the pyramid (the bottom 99.5%) face the full fury of financialization’s formidable risk. Longtime correspondent Chad D. and I recently exchanged emails exploring how the higher debt loads and higher interest payments of financialization inhibits people at the bottom of the wealth-power pyramid (i.e. debt-serfs) from taking risks such as starting a small business. But this is only one serving of financialization’s toxic banquet of risk-related consequences.

Chad summarized how those at the apex of the wealth-power pyramid protect themselves from risk and losses. At the top levels of the pyramid, members in those groups collect way more interest than they pay out and at the very top, they get a ton of interest and pay little to none. The people at the top can take all sorts of risk, because of this dynamic and further, they also usually have a heavy influence on the financial/political machinery, so they get bailed out by taxpayers when their investments go bad. In addition, because their influence extends to the criminal justice system, they are able to commit fraud and at the same time neutralize regulators and prosecutors, thereby escaping any ramifications from their excessive risk taking and in many cases massive fraud.

As Chad observed, the wealthy own the income streams from debt (bonds, etc.), while everyone else owes the interest and principal due on debt. As this chart shows, the wealthy own business equity and financial securities and have a modest slice of debt. The bottom 90% owe most of the debt, and their primary asset is the family home– an asset that doesn’t generate income while it generates interest income for those who own the mortgage. In other words, it’s less an investment than a form of consumption– especially when the current housing bubble deflates.

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Moody’s is smoking the good stuff. What utter nonsense.

China’s Banks Now Stable, ‘Shadow’ Banking Less Threatening – Moody’s (CNBC)

Moody’s Investors Service no longer takes a negative view on China’s banking system, raising its outlook to stable on Thursday as concerns over so-called shadow banking eased. “The government’s adoption of more coordinated policy measures to curb shadow banking will help mitigate asset risks for banks, and address some key imbalances in the financial system,” Yulia Wan, a Moody’s banking analyst, said in a statement on Thursday. Shadow banking is a broad category of banking-like services from non-traditional players; it can include loans from non-financial companies as well as investment products. It is outside the bounds of normal banking regulation, so it largely goes unregulated.

Earlier this month, Moody’s had noted that actions on shadow-banking had included the central bank changing its monetary policy setting in the last quarter of 2016 to “moderate neutral” from “moderate,” which raised market funding costs and refinancing risks for banks, reducing the return from supporting long-term investments with short-term market funds. In March and April, the China Banking Regulatory Commission also requested banks test whether their interbank liabilities would exceed the regulatory ceiling at one-third of total liabilities. Moodys’ noted in the Thursday report that there were signs of declines in outstanding wealth management products issued by the mainland’s banks and fewer investments in loans and receivables among the 26 listed banks.

But it added that profit growth would be limited by continued pressure on net interest margins and slower fee-income growth on higher funding costs and stricter shadow-banking regulations. [..] “Overall delinquency rates will stabilize as corporate profit continues to recover, helped by stable and solid economic growth, steady commodity prices and a slower increase in corporate leverage,” the Moody’s statement said.

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In the present evironment, there’s no need to consider underlying value. Everything’s just a big leveraged bet on the Fed.

Investor Howard Marks Says Bitcoin Is A ‘Pyramid Scheme’ (CNBC)

Howard Marks, one of the most respected value investors out there, starkly warned his clients to avoid high-flying digital currencies. “In my view, digital currencies are nothing but an unfounded fad (or perhaps even a pyramid scheme), based on a willingness to ascribe value to something that has little or none beyond what people will pay for it,” Marks wrote in the investor letter Wednesday. Ethereum cryptocurrency is up more than 2,300% year to date through Wednesday, while bitcoin is up nearly 160% this year, according to data from industry website CoinDesk.

The co-chairman of Oaktree Capital is famous for his prescient investment memos, which predicted the financial crisis and the dotcom bubble implosion. The manager then went on to compare cryptocurrencies to the Tulip mania of 1637, the South Sea bubble of 1720 and the internet bubble of 1999. “Serious investing consists of buying things because the price is attractive relative to intrinsic value,” he wrote. “Speculation, on the other hand, occurs when people buy something without any consideration of its underlying value or the appropriateness of its price.”

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“There are suspicions the US government is introducing the new sanctions against Russia to boost exports of American natural gas to the European market.”

German Business Lobby Urges EU Action Against New US Sanctions On Russia (RT)

A US move to expand sanctions against Russia may have an adverse impact on Europe’s energy security, hurt the German economy, and appears to favor American firms, says Volker Treier, chief economist at the German Chambers of Commerce and Industry (DIHK). Treier has urged European authorities to address the new round of anti-Russian sanctions approved by the US House of Representatives on Tuesday. “The European Commission now must make efforts to shed light on the current situation, as well as resist the exterritorial effect of new US penalties. We get the impression the US pursues their own economic interests”, he told in an interview with TASS.

“If German firms are banned from participating in gas pipeline enterprises, very important projects in the energy supply security sector can be halted. In that case, the German economy will be discernibly influenced,” Treier said. The future of the Nord Stream-2 natural gas pipeline project from Russia to Germany is of particular concern to Europeans. Roughly a third of the European Union’s natural gas supply still comes from Russia. The proposed expansion would double the existing pipeline’s capacity and make Germany EU’s main energy hub. There are suspicions the US government is introducing the new sanctions against Russia to boost exports of American natural gas to the European market.

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What is happening to Italy’s sovereignty? And what do Italians think about that?

Macron Unleashes a Decade of Italian Anger (BBG)

The 2006 World Cup final should have been a triumph for Italians, but all people remember now is the iconic French soccer captain Zinedine Zidane headbutting an opponent in the last minutes. The controversy overshadowed much of the glory for the winning team that night and the subsequent carping of French fans convinced many Italians that their bigger, richer neighbor will never give them the respect they deserve, whether the field is sports, business or politics. That resentment burst into the open on Wednesday when Finance Minister Bruno Le Maire said France is ready to nationalize the STX shipyard in Saint-Nazaire if its would-be Italian buyer Fincantieri SpA doesn’t accept his government’s conditions. Fincantieri stock plunged as much as 13% and Italian ministers erupted.

Italian Finance Minister Pier Carlo Padoan said there’s “no reason” why Fincantieri should accept only a minority stake and his colleague Carlo Calenda, in charge of economic development, told Ansa newswire that Italy is ready to walk away from the deal after Le Maire changed terms already agreed with the previous administration, citing the need to protect a key national asset from foreign influence. The Italians have struggled to accept that rationale, given STX’s previous owner was Korean. President Emmanuel Macron’s June election victory may have reinvigorated the Franco-German relationship at the heart of the European Union. But ties with Italy, the continent’s No. 3 economy, are going from bad to worse, suggesting that competition for jobs, security, and indeed glory, could quickly dampen hopes for tighter EU cooperation.

“This situation is not good for business and not good for European integration,” Alessandro Ungaro, a security and defense analyst at Rome’s Institute for International Affairs, said in a phone interview. “We were hoping for a more market-friendly and pro-European stance, but they’re rejecting a European ally and reasonable industrial project in favor of a possible nationalization.” Italian officials were already smarting when they woke up on Wednesday. The previous day Macron had snubbed their Prime Minister Paolo Gentiloni by leaving him out of peace talks in Paris with Libyan Prime Minister Fayez al-Serraj and Khalifa Haftar, leader of the country’s powerful eastern-based military force. Italy sees Libya, its former colony, as its sphere of influence. Privately many Italian officials blame French meddling for contributing to the collapse of the North African country’s institutions.

[..] On Wednesday, Italy’s front pages were filled with anger at the French. “Macron’s blitz overshadows Italy,” said La Stampa, later adding on its website, “Italy and France head for naval battle.” Il Messaggero went with “Libya deal without Italy.” In response, Gentiloni invited the Libyan leader al-Serraj to Rome and held his own press conference on television to reassert his influence. “This is getting a bit childish,” said Sofia Ventura, a professor of politics at the University of Bologna, whose father is Italian and mother is French. “The problem is individual countries are looking after their interests and not really keeping with the European spirit. Among the bigger nations, Italy is weaker, it can’t fully compete.”

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IBM doesn’t look good either, I would say. Government ministers may not have the know-how, but IBM personnel does.

Sweden Leaks Details Of Almost All Of Its Citizens (Ind.)

Sweden appears to have accidentally leaked the details of almost all of its citizens. And now it’s getting worse. The brewing scandal – based around a leak that actually happened in 2015 but only emerged last week – could see prominent members of Sweden’s government removed from their post. The leak allowed unvetted IT workers in other countries to see the details of people registered in Swedish government and police databases. It happened after the government looked to outsource data held by the Transport Agency, but did so in a way that allowed that information to be available to almost anyone, critics have claimed. The opposition is seeking to boot out the ministers of infrastructure, defence and the interior – Anna Johansson, Peter Hultqvist and Anders Ygeman, respectively – for their role in outsourcing IT-services for the Swedish Transport Agency in 2015.

The minority government has said that contract process – won by IBM Sweden – was speeded up, bypassing some laws and internal procedures in a manner that may have led to people abroad, handling servers with sensitive materials. Prime Minister Stefan Lofven said on Monday his country and its citizens were exposed to risks by potential leaks as a result of the contract. The centre right opposition Alliance, comprising the Moderate, Centre, Liberal and Christian Democrat parties, has taken aim at the three ministers. “It is obvious (they) have neglected their responsibility. They have not taken action to protect Sweden’s safety”, Centre party leader Annie Loof told a news conference.

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“America has failed itself and the world.”

Armageddon Is Two and One-half Minutes Away (PCR)

Are you ready to die? You and I are going to die and not from old age, because our fellow Americans are so stupid, ignorant, and brainwashed that they believe the lies that are leading us to our certain destruction. This is what the Atomic Scientists tell us. And they are right. Can you comprehend the absurdity? President Trump is under full-scale attack from the military/security complex, the US presstitute media, the Democratic Party, and from many Republicans, such as Republican Senator from South Carolina Lindsey Graham and Republican Senator from Arizona John McCain simply because President Trump wants to reduce the dangerous tensions between the two major nuclear powers. What explains the total lack of concern for their own lives on the part of the populations in South Carolina and Arizona who send to the Senate and keep sending to the Senate two morons determined to provoke war between the US and Russia?

It should send shivers up your spine that you can ask this same question about all 50 states, and almost all congressional districts. You can ask the same question about the bordello known as “the American media.” There will be no one alive to post or to read the headlines of the war that they are helping to promote. The United States and the rest of the world with it along with all life on earth are being sent to their graves by the total failure of American leadership. What is wrong with Americans that they cannot understand that any “leader” who provokes war with a major nuclear power should be instantly institutionalized as criminally insane? Why do Americans sit night after night in front of the TV absorbing lies that commit them beyond all doubt to their deaths? America has failed itself and the world.

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We are stardust from far away.

Half Our Bodies’ Atoms ‘Formed Beyond The Milky Way’ (G.)

Nearly half of the atoms that make up our bodies may have formed beyond the Milky Way and travelled to the solar system on intergalactic winds driven by giant exploding stars, astronomers claim. The dramatic conclusion emerges from computer simulations that reveal how galaxies grow over aeons by absorbing huge amounts of material that is blasted out of neighbouring galaxies when stars explode at the end of their lives. Powerful supernova explosions can fling trillions of tonnes of atoms into space with such ferocity that they escape their home galaxy’s gravitational pull and fall towards larger neighbours in enormous clouds that travel at hundreds of kilometres per second.

Astronomers have long known that elements forged in stars can travel from one galaxy to another, but the latest research is the first to reveal that up to half of the material in the Milky Way and similar-sized galaxies can arrive from smaller galactic neighbours. Much of the hydrogen and helium that falls into galaxies forms new stars, while heavier elements, themselves created in stars and dispersed in the violent detonations, become the raw material for building comets and asteroids, planets and life. “Science is very useful for finding our place in the universe,” said Daniel Anglés-Alcázar, an astronomer at Northwestern University in Evanston, Illinois. “In some sense we are extragalactic visitors or immigrants in what we think of as our galaxy.”

The researchers ran supercomputer simulations to watch what happened as galaxies evolved over billions of years. They noticed that as stars exploded in smaller galaxies, the blasts ejected clouds of elements that fell into neighbouring, larger galaxies. The Milky Way absorbs about one sun’s-worth of extragalactic material every year. “The surprising thing is that galactic winds contribute significantly more material than we thought,” said Anglés-Alcázar. “In terms of research in galaxy evolution, we’re very excited about these results. It’s a new mode of galaxy growth we’ve not considered before.” The simulations showed that elements carried on intergalactic winds could travel a million light years before settling in a new galaxy, according to a report in the Monthly Notices of the Royal Astronomical Society.

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Jul 252017
 
 July 25, 2017  Posted by at 1:31 pm Finance Tagged with: , , , , , , , , , ,  6 Responses »
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Walter Langley Never morning wore to evening but some heart did break 1894

 

If there’s one myth -and there are many- that we should invalidate in the cross-over world of politics and economics, it‘s that central banks have saved us from a financial crisis. It’s a carefully construed myth, but it’s as false as can be. Our central banks have caused our financial crises, not saved us from them.

It really should -but doesn’t- make us cringe uncontrollably to see Bank of England governor-for-hire Mark Carney announce -straightfaced- that:

“A decade after the start of the global financial crisis, G20 reforms are building a safer, simpler and fairer financial system. “We have fixed the issues that caused the last crisis. They were fundamental and deep-seated, which is why it was such a major job.”

Or, for that matter, to see Fed chief Janet Yellen declare that there won’t be another financial crisis in her lifetime, while she’s busy-bee busy building that next crisis as we speak. These people are now saying increasingly crazy things, and that should make us pause.

Central banks don’t serve people, or even societies, as that same myth claims. They serve banks. Even if central bankers themselves believe that this is one and the same thing, that doesn’t make it true. And if they don’t understand this, they should never be let anywhere near the positions they hold.

You can pin the moment central banks went awry at any point in time you like. The Bank of England’s foundation in 1694, the Federal Reserve’s in 1913, the ECB much more recently. What’s crucial in the timing is where and when the best interests of the banks split off from those of their societies. Because that is when central banks will stop serving those societies. We are at such a -turning?!- point right now. And it’s been coming for some time, ‘slowly’ working its way towards an inevitable abyss.

Over the past few years the Automatic Earth has argues repeatedly, along several different avenues, that American society was at its richest between the late 1960s and early 1980s. Yet another illustration of this came only yesterday in a Lance Roberts graph:

 

 

Anyone see a recovery in there? Lance uses 1981 as a ‘cut-off’ date, but the GDP growth rate as represented by the dotted line doesn’t really begin to go ‘bad’ until 1986 or so. At the tail end of the late 1960s to early 1980s period, as the American economy was inexorably getting poorer, Alan Greenspan took over as Federal Reserve governor in 1987. A narrative was carefully crafted by and for the media with Greenspan as an ‘oracle’ or even a ‘rock star’, but in reality he has been instrumental in saddling the economy with what will turn out to be insurmountable problems.

Greenspan was a major driving force behind the repeal of Glass-Steagall, which was finally established through the Gramm-Leach-Bliley act of 1999. This was an open political act by the Federal Reserve governor, something that everyone should have then protested, and still should now, but didn’t and doesn’t. Central bankers should be kept far removed from politics, anywhere and everywhere, because they represent a small segment of society, banks, not society as a whole.

Because of the ‘oracle’ narrative, Greenspan was instead praised for saving the world. But all that Greenspan and his accomplices, Robert Rubin and Larry Summers, actually did in getting rid of the 1933 Glass-Steagall act separation between investment- and consumer banking was to open the floodgates of debt, and even more importantly, leveraged debt. All part of the ‘financial innovations’ Greenspan famously lauded for saving and growing economies. It was all just more debt on top of more debt.

 

 

Greenspan et al ‘simply’ did what central bankers do: they represent the best interests of banks. And the world’s central bankers have never looked back. That most people still find it hard to believe that America -and the west- has been getting poorer for the past 30-40 years, goes to show how effective the narratives have been. The world looks richer instead of poorer, after all. That this is exclusively because of rising debt numbers wherever you look is not part of the narratives. Indeed, ruling economic models and theories ignore the role played by both banks and credit in an economy, almost entirely.

Alan Greenspan left as Fed head in 2006, after having wreaked his havoc on America for almost two decades, right before the financial crisis that took off in 2007-2008 became apparent to the world at large. The crisis was largely his doing, but he has escaped just about all the blame for it. Good PR.

With Ben Bernanke, an alleged academic genius on the Great Depression, as Greenspan’s replacement, the Fed just kept going and turned it up a notch. It was no longer possible in the financial world to pretend that banks and people had the same interests, so the former were bailed out at the expense of the latter. The illusionary narrative for the public, however, remained intact. What do people know about finance, anyway? Just make sure the S&P goes up. Easy as pie.

The narrative has switched to Bernanke, and Yellen after him, as well as Mario Draghi at the ECB and Haruhiko Kuroda at the Bank of Japan, saving the world from doom. But once again, they are the ones who are creating the crisis, not the ones saving us from it. They are saving the banks, and saddling the people with the costs.

In the past decade, these central bankers have purchased $20-$50 trillion in bonds, securities and stocks. The only intention, and indeed the only result, is to keep banks from falling over, increase their profits, and maintain the illusion that economies are recovering and growing.

They can only achieve this by creating bubbles wherever they can. Apart from the QE programs under which they bought all those ‘assets’, they used -and still do- another tool: lowering interest rates to the point where borrowing money becomes so cheap everyone can do it, and then do it some more. It has worked miracles in blowing stock market valuations out of all realistic proportions, and in doing the same for housing markets in locations all over the globe.

The role of China’s central bank in this is interesting too, but it is such an open and obvious political tool that it really deserves its own discussion and narrative. Basically, Beijing did what it saw Washington do and thought: why hold back?

 

Fast forward to today and we see that we’ve landed in a whole new, and next, phase of the story. The world’s central banks are all stuck in their own – self-created – bubbles and narratives. They all talk about how they solved all the issues, and how they will now return to normal, but the sad truth is they can’t and they know it.

The Fed stopped purchasing assets through its QE program a while back, but it could only do that because Frankfurt and Japan took over. And now they, too, talk about quitting QE. Slowly, yada yada, because of control, yada yada, but they know they must. They also know they can’t. Because the entire recovery narrative is a mirage, a fata morgana, a sleight of hand.

And that means we have arrived at a point that is new and very dangerous for the entire global economy and all of its people.

 

That is, the world’s central bankers now have an incentive to create the next crisis. This is because they know this crisis is inevitable, and they know their masters and protégés, the banks, risk suffering immensely or even going under. ‘Tapering’, or whatever you might call the -slow- end to QE and the -slow- hiking of interest rates, will prick and blow up bubbles one by one, and often in violent fashion.

When housing bubbles burst, economies lose the primary ingredient for maintaining -let alone increasing- their money supply: banks creating money out of thin hot air. Since the money supply is one of the key components of inflation, along with velocity of money, there will be fantastic outbursts of debt deflation. You’ve never seen -let alone imagined- anything like it.

The worst part of it is not government debt, though that, when financed with bond sales, is not not an instrument to infinity and beyond either. But the big hit to economies will be private debt. Where in many bubble areas, and they’re too numerous too mention, eager potential buyers today fret over affordable housing supply, it’ll all turn on a dime and owners won’t be able to sell without being suffocated by crippling losses.

Pension funds, which have already suffered perhaps more than any other parties because of low interest ZIRP and NIRP policies, have switched en masse to riskier assets like stocks. Well, another whammy, and a bigger one, is waiting just outside the door. Pensions will be so last century.

 

That another crisis is waiting to happen, and that politics and media have made sure that just about no-one at all is aware of it, is one thing. We already knew this, a few of us. That the world’s main central bankers have an active incentive to bring about the crisis, if only by sitting on their hands long enough, is new. But they do.

Yellen, Draghi and Kuroda may opt to leave before pulling the trigger, or be fired soon enough. But whoever is in the governor seats will realize that unleashing a crisis sooner rather than later is the only option left not to be blamed for it. Let the house of dominoes crumble now, and they can say “nobody could have seen this coming”, while at the same time saving what they can for the banks and bankers they serve. That option will not be on the table for much longer.

We should have never given them, let alone their member/master banks, the power to conjure up trillions out of nothing, and use that power as a political tool. But it is too late now.

 

 

Jul 142017
 
 July 14, 2017  Posted by at 9:21 am Finance Tagged with: , , , , , , , , , , ,  4 Responses »
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Pablo Picasso Nude, Green Leaves and Bust 1932

 

Global Shares Rise To Record New Highs (R.)
Britain In Worse Shape To Withstand A Recession Than In 2007 (G.)
IMF Warns Canada On Housing, Trade, Rate Hikes (R.)
40% Of The Fed’s Interest On Excess Reserves Is Paid To Foreign Banks (ZH)
Will Corporate Bonds Cross Over? (DDMB)
Turkey Chooses Russia Over NATO for Missile Defense (BBG)
100,000 and Counting: No Letup in Turkey Coup Purges a Year On (BBG)
Philip Morris’ Anti-Anti-Smoking Campaign (R.)
Globalisation: The Rise And Fall Of An Idea That Swept The World (G.)
Tepco: Decision Already Been Made To Release Radioactive Tritium Into Sea (JT)
Italy’s Poor Almost Triple in a Decade Amid Economic Slumps

 

 

Nothing has value anymore.

Global Shares Rise To Record New Highs (R.)

Upbeat data helped send world shares to a fourth all-time high in less than a month on Thursday as Wall Street edged higher in anticipation of solid earnings, while crude oil gained on evidence of stronger demand in China. Stocks were buoyed in Asia and elsewhere a day after Federal Reserve Chair Janet Yellen signaled a rise in interest rates would be less aggressive than some investors had expected. Sentiment was boosted after China reported upbeat data on exports and imports for June, the latest sign that the global growth is picking up a bit. That offset reports of higher production by key members of OPEC in a report by the International Energy Agency (IEA), lifting oil prices.

The data pushed Asian shares up more than 1% and lifted MSCI’s 47-country gauge of global equity markets to a fresh record high with a gain of 0.29%. “Yesterday’s move was in response to Yellen comments that should inflation remain below the 2% target rate, the central bank will be less aggressive in their tightening program,” said Sam Stovall, chief investment strategist at CFRA Research. “Today, the market is saying that’s old news and let’s focus on the matter at hand, which is earnings that will be coming out in earnest this week,” Stovall said. U.S. shares rose in anticipation second-quarter earnings will grow 7.8% for S&P 500 companies, according to Thomson Reuters data.

Read more …

Don’t worry, everybody is.

Britain In Worse Shape To Withstand A Recession Than In 2007 (G.)

Britain’s public finances are in worse shape to withstand a recession than they were on the eve of the 2007 financial crash a decade ago and face the twin threat of a fresh downturn and Brexit, the Treasury’s independent forecaster has warned. The Office for Budget Responsibility – the UK’s fiscal watchdog – said another recession was inevitable at some point and that Theresa May’s failure to win a parliamentary majority in last month’s election left the public finances more vulnerable to being blown off course than they were in 2007. In its first in-depth analysis of the fiscal risks facing Britain, the OBR said its main message was clear: “Governments should expect nasty fiscal surprises from time to time – because policy can only reduce risks, not eliminate them – and plan accordingly.

“And they have to do so in the context of ongoing pressures that are likely to weigh on receipts and drive up spending and a variety of risks that governments choose to expose themselves to for policy reasons. This is true for any government, but this one also has to manage the uncertainties posed by Brexit, which could influence the likelihood or impact of other risks.” The OBR said the size of the UK’s Brexit divorce bill – currently a matter of dispute between London and Brussels – would have little impact on the public finances. But it noted that even a small fall in Britain’s underlying growth rate after departure from the EU would lead to a big increase in the country’s debt burden.

If a knock to trade with the rest of Europe caused productivity to slip by just 0.1 percentage points over the next 50 years, tax receipts would be £36bn lower. With spending growth left unchanged, the debt-to-GDP ratio would end up around 50 percentage points higher, the OBR added. The campaign group Open Britain said the OBR’s report showed “a hard Brexit poses a real threat to our economy. People voted for £350m a week for the NHS, not a £36bn black hole in the public finances that could mean severe cuts to the NHS”.

Read more …

Has Australia been warned yet?

IMF Warns Canada On Housing, Trade, Rate Hikes (R.)

The IMF said on Thursday that while Canada’s economy has regained momentum, housing imbalances have increased and uncertainty surrounding trade negotiations with the United States could hurt the recovery. The report, written before the central bank raised interest rates by a quarter of a percentage point on Wednesday to 0.75%, also said the Bank of Canada’s current monetary policy stance is appropriate, and it cautioned against tightening. “While the output gap has started to close, monetary policy should stay accommodative until signs of durable growth and higher inflation emerge,” it said, adding that rate hikes should be “approached cautiously.” Cheng Hoon Lim, IMF mission chief for Canada, later clarified that even with Wednesday’s rate hike, monetary policy remains “appropriately accommodative.”

“The Bank of Canada’s increase of the policy rate reflects encouraging economic data over the past few months. We welcome the good news on the economy,” Lim said in an emailed statement. “Given the considerable uncertainty around the growth and inflation outlook, the Bank should continue to take a cautious approach in further adjusting the monetary policy stance,” she added. In a statement following its annual policy review with Canada, the IMF cautioned that risks to Canada’s outlook are significant – particularly the danger of a sharp correction in the housing market, a further decline in oil prices, or U.S. protectionism. It said financial stability risks could emerge if the housing correction is accompanied by a recession, but said stress tests have shown Canadian banks could withstand a “significant loss” on their uninsured residential mortgage portfolio, in part because of high capital position.

House prices in Toronto and Vancouver have more than doubled since 2009 and the boom has fueled record household debt, a vulnerability that has also been noted by the Bank of Canada. “The main risk on the domestic side is a sharp correction in the housing market that impairs bank balance sheets, triggers negative feedback loops in the economy, and increases contingent claims on the government,” the Fund said. The Fund also warned U.S. protectionism could hurt Canada, laying out a scenario for higher tariffs that could come with the renegotiation of NAFTA. If the United States raises the average tariff on imports from Canada by 2.1 percentage points and there is no retaliation from Canada, there would be a short-term impact on real GDP of about 0.4%.

Read more …

Bankers have no more use for borders than birds do.

40% Of The Fed’s Interest On Excess Reserves Is Paid To Foreign Banks (ZH)

Recall that as we showed first all the way back in 2011, the total cash on the books of commercial banks with operations in the US tracks the Fed’s excess reserves almost dollar for dollar. More importantly, the number is broken down by small and large domestic banks, as well as international banks. It is the last number that is of biggest interest, because now that Congress is finally scrutinizing the $4.5 trillion elephant in the room, i.e., the Fed’s balance sheet, it may be interested to know that approximately 40%, or $838 billion as of the latest weekly data, in reserves parked at the Fed belongs to foreign banks.

While we will reserve judgment, and merely point out that of the $100 or so billion in dividends and buybacks announced by US banks after the latest stress test a substantial amount comes directly courtesy of the Fed – cash that ultimately ends up in shareholders’ pockets – we will note that the interest the Fed pays to foreign banks operating in the US who have parked reserves at the Fed, amounts to $10.4 billion annualized as of this moment. This is a subsidy from the Fed, supposedly an institution that exists for the benefit of the US population, going directly and without any frictions to foreign banks, who – just like in the US – then proceed to dividend and buybacks these funds, “returning” them to their own shareholders, most of whom are foreign individuals.

While the number appears modest, it is poised to grow substantially as the Fed Funds rate is expected to keep growing, ultimately hitting 3.0% according to the Fed. Indicatively, assuming excess reserves remain unchanged for the next 2-3 years and rates rise to 3.0%, that would imply a total annual subsidy to commercial banks amounting to $65 billion, of which $25 billion would go to foreign banks every year. We wonder if this is the main reason why the Fed is so desperate to trim its balance sheet as it hikes rates, as sooner or later, someone in Congress will figure this out.

Read more …

Unintended consequences? One of many?

Will Corporate Bonds Cross Over? (DDMB)

Unbeknownst to unassuming corporate bond holders, they too will soon be forced into the slow lane. For the moment, the vast majority fancy themselves that equally exasperating driver who won’t get out of the fast lane, determined to bully their way to their damned destination. As for the perils of tailgating, they’re for the other guy, the less agile driver with rubbery reflexes. That’s all good and well and has been for many years. Bond market fender benders are nearly nonexistent. The question is: Will central bankers worldwide turn placid parkways into highways to hell as they ‘remove accommodation,’ to borrow from their gently genteel jargon? That’s certainly one way to interpret Federal Reserve Chair Janet Yellen’s latest promise to shrink the balance sheet ‘appreciably.’

Care for a translation? How easily does “Aggressive Quantitative Tightening” roll off the tongue? Perhaps you’ve just bitten yours instead. Enter the International Monetary Fund (IMF), The Institute of International Finance (IIF), The Bank of International Settlements (BIS), and by the way, the Emerging Markets complex including and especially China. As a former central banker, it is with embarrassing ease yours truly can bandy about fantastic figures. No surprise that nary an eyebrow was raised at the latest figures out of the IIF that aggregate global debt is closing in on $220 trillion, as touched on last week. Consider that to be the broad backdrop. Now, narrow in on the IMF’s concerns that financial stability could be rocked by a rumble in US corporate debt markets.

Using firms’ capacity to service their debts from current earnings as a simple and elegant yard stick, the report warned that one in ten firms are failing outright. The last two years of levering up have exacted rapid damage: earnings have fallen to less than six times interest expense, this during an era of unprecedented low interest rates. And as record non-financial debt as a percentage of GDP quickly approaches 50%, the share of income required to service this mountain is at a seven-year high. Should financial conditions tighten (the report was published in April prior to the Fed’s June rate hike), one-in-five firms are likely to default, which rises to 22% if rates continue to rise.

Read more …

“..The Russian system would not be compatible with other NATO defense systems, but also wouldn’t be subject to the same constraints imposed by the alliance, which prevents Turkey from deploying such systems on the Armenian border, Aegean coast or Greek border..”

Turkey Chooses Russia Over NATO for Missile Defense (BBG)

Turkey has agreed to pay $2.5 billion to acquire Russia’s most advanced missile defense system, a senior Turkish official said, in a deal that signals a turn away from the NATO military alliance that has anchored Turkey to the West for more than six decades. The preliminary agreement sees Turkey receiving two S-400 missile batteries from Russia within the next year, and then producing another two inside Turkey, according to the Turkish official, who asked not to be named because of the sensitivity of the matter. A spokesman for Russia’s arms-export company Rosoboronexport OJSC said he couldn’t immediately comment on details of a deal with Turkey. Turkey has reached the point of an agreement on a missile defense system before, only to scupper the deal later amid protests and condemnation from NATO.

Under pressure from the U.S., Turkey gave up an earlier plan to buy a similar missile-defense system from a state-run Chinese company, which had been sanctioned by the U.S. for alleged missile sales to Iran. Turkey has been in NATO since the early years of the Cold War, playing a key role as a frontline state bordering the Soviet Union. But ties with fellow members have been strained in recent years, with Turkish President Recep Tayyip Erdogan pursuing a more assertive and independent foreign policy as conflict engulfed neighboring Iraq and Syria. Tensions with the U.S. mounted over U.S. support for Kurdish militants in Syria that Turkey considers terrorists, and the relationship with the European Union soured as the bloc pushed back against what it sees as Turkey’s increasingly autocratic turn.

Last month, Germany decided to withdraw from the main NATO base in Turkey, Incirlik, after Turkey refused to allow German lawmakers to visit troops there. The missile deal with Russia “is a clear sign that Turkey is disappointed in the U.S. and Europe,” said Konstantin Makienko, an analyst at the Center for Analysis of Strategies and Technologies, a Moscow think-tank. “But until the advance is paid and the assembly begins, we can’t be sure of anything.” The Russian system would not be compatible with other NATO defense systems, but also wouldn’t be subject to the same constraints imposed by the alliance, which prevents Turkey from deploying such systems on the Armenian border, Aegean coast or Greek border, the official said. The Russian deal would allow Turkey to deploy the missile defense systems anywhere in the country, the official said.

[..] The official said the systems delivered to Turkey would not have a friend-or-foe identification system, which means they could be deployed against any threat without restriction.

Read more …

That must have been one hell of a conspiracy.

100,000 and Counting: No Letup in Turkey Coup Purges a Year On (BBG)

The scale of Turkey’s crackdown on alleged government opponents following last year’s attempted coup was confirmed by a top official, as the nation prepares to mark the anniversary of the failed putsch amid deepening concern over the rule of law. Authorities have fired 103,824 state employees and suspended 33,483 more since the July 15 bid to seize power by a section of the military, Deputy Prime Minister Numan Kurtulmus said in an interview. The purge of suspected followers of U.S.-based cleric Fethullah Gulen, accused by the government of orchestrating the coup attempt, is necessary to ensure national security, he said. ustice Ministry data showed 50,546 suspected members of Gulen’s organization were in prison on July 3, and that arrest warrants had been issued for 8,000 others. The preacher denies involvement in the takeover attempt.

“There might be crypto members of Feto who walk on the snow without leaving tracks,” Kurtulmus said, using an abbreviation of Gulen’s first name that officials have adopted since the defeated military power grab to refer to his movement. “Related agencies are carefully conducting their work against this possibility.” Just this week, Erdogan rebuffed criticism over the detention of a group of international rights activists, including the director of Amnesty International Turkey, as they held a workshop on an island off Istanbul. “They gathered as if they were holding a meeting to continue July 15,” the president said. Amnesty criticized Turkey on Tuesday after the detentions were extended by seven days. “It is truly absurd that they are under investigation for membership of an armed terrorist organization,” Amnesty Europe Director John Dalhuisen said in an email. “For them to be entering a second week in police cells is a shocking indictment of the ruthless treatment of those who attempt to stand up for human rights in Turkey.”

Read more …

Dirty deeds.

Philip Morris’ Anti-Anti-Smoking Campaign (R.)

A group of cigarette company executives stood in the lobby of a drab convention center near New Delhi last November. They were waiting for credentials to enter the World Health Organization’s global tobacco treaty conference, one designed to curb smoking and combat the influence of the cigarette industry. Treaty officials didn’t want them there. But still, among those lined up hoping to get in were executives from Japan Tobacco International and British American Tobacco Plc. There was a big name missing from the group: Philip Morris International Inc. A Philip Morris representative later told Reuters its employees didn’t turn up because the company knew it wasn’t welcome. In fact, executives from the largest publicly traded tobacco firm had flown in from around the world to New Delhi for the anti-tobacco meeting.

Unknown to treaty organizers, they were staying at a hotel an hour from the convention center, working from an operations room there. Philip Morris International would soon be holding secret meetings with delegates from the government of Vietnam and other treaty members. The object of these clandestine activities: the WHO’s Framework Convention on Tobacco Control, or FCTC, a treaty aimed at reducing smoking globally. Reuters has found that Philip Morris International is running a secretive campaign to block or weaken treaty provisions that save millions of lives by curbing tobacco use. [..] Confidential company documents and interviews with current and former Philip Morris employees reveal an offensive that stretches from the Americas to Africa to Asia, from hardscrabble tobacco fields to the halls of political power, in what may be one of the broadest corporate lobbying efforts in existence.

Read more …

It needs growth, and there ain’t none.

Globalisation: The Rise And Fall Of An Idea That Swept The World (G.)

It was only a few decades ago that globalisation was held by many, even by some critics, to be an inevitable, unstoppable force. “Rejecting globalisation,” the American journalist George Packer has written, “was like rejecting the sunrise.” Globalisation could take place in services, capital and ideas, making it a notoriously imprecise term; but what it meant most often was making it cheaper to trade across borders – something that seemed to many at the time to be an unquestionable good. In practice, this often meant that industry would move from rich countries, where labour was expensive, to poor countries, where labour was cheaper. People in the rich countries would either have to accept lower wages to compete, or lose their jobs. But no matter what, the goods they formerly produced would now be imported, and be even cheaper.

And the unemployed could get new, higher-skilled jobs (if they got the requisite training). Mainstream economists and politicians upheld the consensus about the merits of globalisation, with little concern that there might be political consequences. Back then, economists could calmly chalk up anti-globalisation sentiment to a marginal group of delusional protesters, or disgruntled stragglers still toiling uselessly in “sunset industries”. These days, as sizable constituencies have voted in country after country for anti-free-trade policies, or candidates that promise to limit them, the old self-assurance is gone. Millions have rejected, with uncertain results, the punishing logic that globalisation could not be stopped. The backlash has swelled a wave of soul-searching among economists, one that had already begun to roll ashore with the financial crisis. How did they fail to foresee the repercussions?

Read more …

The world should not allow the Fukushima secrecy any longer.

Tepco: Decision Already Been Made To Release Radioactive Tritium Into Sea (JT)

Radioactive tritium, said to pose little risk to human health, will be released from the crippled Fukushima No. 1 nuclear power complex into the sea, according to a top official of the plant operator. “The decision has already been made,” Takashi Kawamura, chairman of Tokyo Electric Power Company, said in a recent interview with media outlets, referring to the discharge of tritium, which remains in filtered water even after highly toxic radioactive materials are removed from water used to cool the damaged reactors at the plant. At other nuclear power plants, tritium-containing water has routinely been released into the sea after it is diluted. But the move by Tepco has prompted worries among local fishermen about the potential ramifications for their livelihood as public perceptions about fish and other marine products caught off Fukushima could worsen.

They are the first public remarks by the utility’s management on the matter, as Tepco continues its cleanup of toxic water and tanks containing it continue to fill the premises of the plant, where three reactors suffered meltdowns after tsunami flooded the complex in March 2011 following a massive earthquake. Kawamura’s comments came at a time when a government panel is still debating how to deal with tritium-containing water at the Fukushima plant, including whether to dump it into sea. Saying its next move is contingent on the panel’s decision, Kawamura indicated in the interview that Tepco will wait for a decision by the government before it actually starts releasing the water into sea. “We cannot keep going if we do not have the support of the state” as well as Fukushima Prefecture and other stakeholders, he said.

Read more …

The EU is one big success story.

Italy’s Poor Almost Triple in a Decade Amid Economic Slumps

Italians living below the level of absolute poverty almost tripled over the last decade as the country went through a double-dip, record-long recession. The absolute poor, or those unable to purchase a basket of necessary goods and services, reached 4.7 million last year, up from almost 1.7 million in 2006, national statistics agency Istat said Thursday. That is 7.9% of the population, with many of them concentrated in the nation’s southern regions. As Italy went through its deepest, and then its longest, recession since World War II between 2008 and 2013, more than a quarter of the nation’s industrial production was wiped out. Over the same period unemployment also rose, with the rate rising to as high as 13% in 2014 from a low of 5.7% in 2007. Joblessness was at 11.3% at last check in May.

For decades, Italy has grappled with a low fertility rate – just 1.35 children per woman compared with a 1.58 average across the 28-nation EU as of 2015, the last year for which comparable data are available. “The poverty report shows how it is pointless to wonder why there are fewer newborn in Italy,” said Gigi De Palo, head of Italy’s Forum of Family Associations. “Making a child means becoming poor, it seems like in Italy children are not seen as a common good.” The number of absolute poor rose last year in the younger-age classes, reaching 10% in the group of those between 18 and 34 years old. It fell among seniors to 3.8% in the age group of 65 and older, the Istat report also showed.

Earlier this year, the Rome-based parliament approved a new anti-poverty tool called inclusion income that is replacing existing income-support measures. It will benefit 400,000 households, for a total of 1.7 million people, Il Sole 24 Ore daily reported, citing parliamentary documents. The program will be funded with resources of around €2 billion ($2.3 billion) this year which should rise to nearly €2.2 billion in 2018, Sole also said

Read more …

Jul 132017
 
 July 13, 2017  Posted by at 8:56 am Finance Tagged with: , , , , , , , , ,  3 Responses »
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Vincent van Gogh Vineyards with a View of Auvers 1890

 

‘Investors Underestimate How Low The Bar Is For The Fed’ (CNBC)
Unwinding QE will be “More Disruptive than People Think” (WS)
I Wouldn’t Rule Out Another Financial Crisis – IMF’s Lagarde (CNBC)
The US Stock Market Is 66% Higher Than It Should Be (Kee jr)
Valuation Measures & Forward Returns (Lance Roberts)
Nonprime Mortgages Prove Leery Investors Are Finally Hungry Again (CNBC)
VISA takes its War on Cash to US Retailers (WS)
Greece To Exit EU’s Excessive Deficit Procedure (K.)
Brain Drain Gathers Pace as One in Three Greeks Looks for a Job Abroad
Germany Profits From Greek Debt Crisis (HB)
Defiant Varoufakis Ready to Face ‘Even Martial Court’ Over Plan B (GR)

 

 

What Yellen says is not so interesting. What lies beyond those carefully crafted speeches is.

BTW, no Trump today, but maybe we can start a separate gossip page.

“The Fed says it’s going to hike again this year, markets says 50-50. The Fed says three, four times next year, the market says it’s not going to happen at all..”

‘Investors Underestimate How Low The Bar Is For The Fed’ (CNBC)

Patrick Armstrong, the CIO at Plurimi Investment Managers, believes that very high valuations, an expected tightening in monetary policy and too much optimism over tax cuts and new fiscal spending should leave investors cautious on the United States. “Valuation doesn’t matter in the short term but at current CAPE (cyclically adjusted price to earnings, which gives a more clear indication of a stock price in comparison to average earnings over the last 10 years) of 29 times, U.S. equities have historically delivered negative real returns over periods of two to five years,” he said in an investment outlook published earlier this month. The U.S. Federal Reserve has begun normalizing its policy in the wake of improved economic growth and low unemployment levels.

According to Armstrong, the easy monetary policy of the past had boosted equities but this might change with the Fed’s plans to hike rates and reduce its balance sheet. “I think there was a clear warning in the last (meeting) minutes talking about risk premium, price earnings and investors haven’t acknowledged it, but when the Fed starts worrying about equity markets, as an equity investor they’ve given you that warning,” he told CNBC on Tuesday. The third reason to be “short” – where a trader takes a bet that prices will fall – on U.S. equities is the government’s plans on fiscal policy. President Donald Trump promised tax cuts and big infrastructure spending, which made U.S. equities rally since he took office last November. However, such policies are yet to reach the consultation stage and doubts have emerged over the president’s ability to deliver.

[..] Speaking to CNBC Tuesday, Armstrong suggested that investors aren’t listening to the U.S. Federal Reserve. “What investors are completely underestimating is how low the bar is for the United States Federal Reserve. They have told us what they intend to do, the markets don’t believe any of it,” Armstrong said. “The Fed says it’s going to hike again this year, markets says 50-50. The Fed says three, four times next year, the market says it’s not going to happen at all,” he added.

Read more …

Central banks are trying to get out before the blast. But in doing so they bring it forward. Were given far too much power.

Unwinding QE will be “More Disruptive than People Think” (WS)

“We’ve never had QE like this before, and we’ve never had unwinding like this before,” said JPMorgan CEO Jamie Dimon at the Europlace finance conference in Paris. “Obviously that should say something to you about the risk that might mean, because we’ve never lived with it before.” He was referring to the Fed’s plan to unwind QE, shedding Treasury securities and mortgage-backed securities on its balance sheet. The Fed will likely announce the kick-off this year, possibly at its September meeting. According to its plan, there will be a phase-in period. It will unload $10 billion the first month and raise that to $50 billion over the next 12 months. Then it will continue at that pace to achieve its “balance sheet normalization.” Just like the Fed “created” this money during QE to buy these assets, it will “destroy” this money at a rate of $50 billion a month, or $600 billion a year.

It’s the reverse of QE, with reverse effects. Other central banks are in a similar boat. The Fed, the Bank of Japan, and the ECB together have loaded up their balance sheets with $14 trillion in assets. Unwinding this is going to have some impact – likely reversing some of the asset price inflation in stocks, bonds, real estate, and other markets that these gigantic bouts of asset buying have caused. The Bank of Japan has been quietly tapering its asset purchases for a while to where it buys only enough to keep the 10-year yield barely above zero. And the ECB has tapered its monthly purchases by €20 billion earlier this year and is preparing the markets for more tapering. Once central banks stop buying assets, the phase starts when central banks try to unload some of those assets. The Fed is at the threshold of this phase.

Dimon was less concerned about the Fed’s rate hikes. People are too focused on rate hikes, he said, according to a Bloomberg recording of the conference. If the economy is strong, economic growth itself overcomes the issues posed by higher rates, he said. The economy has been through rate hikes many times before. They’re a known quantity. But “when selling securities in the market place starts,” that’s when it gets serious. “When that happens of size or substance, it could be a little more disruptive than people think,” he said. Whatever it will do, no one knows what it will do – because “it never happened before.”

Read more …

Don’t woryy, they serve the same lords.

I Wouldn’t Rule Out Another Financial Crisis – IMF’s Lagarde (CNBC)

The IMF’s Managing Director, Christine Lagarde, has said that she would not rule out another financial crisis in her lifetime, indicating that comments made recently by Federal Reserve Chair Janet Yellen may have been premature. “There may, one day, be another crisis,” Lagarde told CNBC Tuesday on the sidelines of a joint conference with the IMF and the Croatian National Bank in Dubrovnik. Lagarde’s comments responded to a statement made by Yellen a fortnight earlier in which she said she does not expect to see another financial crisis in her lifetime. “I plan on having a long life and I hope she (Yellen) does, too, so I wouldn’t absolutely bet on that because there are cycles that we have seen over the past decade and I wouldn’t exclude that,” Lagarde said.

She, however, noted the unpredictability of financial crises and said that finance ministers and policymakers should act with caution to prepare for such eventualities. “Where it will come from, what form it takes, how international and broad-based it will be is to be seen, and typically the crisis never comes from where we expect it,” she added. “Our duty, and certainly the message that we give to the finance ministers, to the policymakers, is ‘be prepared’. Make sure that your financial sector is under good supervision, that it’s well regulated, that the institutions are rock-solid, and anticipate at home with enough buffers so that you can resist the potential crisis.”

Read more …

And we will see undershoot on the way down. The Fed killing off price discovery will be a scourge on society.

The US Stock Market Is 66% Higher Than It Should Be (Kee jr)

I have, in previous articles here on MarketWatch, pointed out the fundamental risks in the U.S. stock market. I have identified the liquidity risks created by the ECB and the Federal Reserve in the tightening of monetary policy, in the reduction of the Fed’s balance sheet, and the likelihood that these risks will prick the asset bubble that the market is in today. Most people I speak and email with agree. The risks are high, as the price-to-earnings multiple of the S&P 500 (about 25, depending on the indicator) is far greater than its historical norm (14.5). The truth, however, is that no one knows for sure. But, still, people are apathetic. In fact, my experience over the past 20 years and through each of the past two major asset bubbles (the internet bubble in 2000 and the credit crisis in 2008-2009), is that the unanimous identification of an asset bubble did not take place until after the asset bubble had burst.

By that time, all of the major indices — the Dow Jones Industrial Average S&P 500, Nasdaq 100 and Russell 2000 — had already fallen. The result largely handcuffed investors to investments that were severely underwater. As luck would have it, though, after the credit crisis, the Fed’s policy-making body printed $2 trillion and, with that money, bought assets to prop up the economy and save investors from destruction. Largely, this perceived savior is probably why investors are so lethargic when it comes to the asset bubble that we are probably in right now. This bubble even seems to include real estate and bonds in addition to stocks, and it has been driven by fabricated central bank liquidity.

Admittedly, I cannot be sure what will happen. I do not know if this bubble will burst, and I do not know if central banks will come running to the rescue again, as they did after the credit crisis. Unfortunately, I do know a great deal of people who believe that the central banks of the world will simply print more money if the going gets tough again, but that is a seriously risky bet. With major indices coming off all-time highs and technical trading patterns (dojis) surfacing in long-term chart patterns last week, potential reversal signals are coming on a technical basis. As much as it is appealing to opt for relaxation and vacationing during the summer months, some time must be spent evaluating the conditions the market is facing right now.

In previous articles, I have offered alternatives to the traditional buy-and-hold methodology, and I think everyone should consider heading that way because strategies like “lock and walk” can work no matter what happens. The risks in the market today are extremely high for buy-and-hold investors because the liquidity picture is changing for the worse, and that is fundamental in nature. But longer-term technical observations point toward serious risks as well. My longer-term macroeconomic analysis, The Investment Rate, is offering warnings that this market is 66% higher than it should be. Given the changes in liquidity and technical observations happening now, those risk warnings should be heard with an acute ear.

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A whole bunch of Lance graphs again. Hard to choose. But pretty as the graphs are, they do not paint a pretty picture. They say BUBBLE.

Valuation Measures & Forward Returns (Lance Roberts)

[..] if the market can reverse the current course of weakness and rally above recent highs, it will confirm the bull market is alive and well, and we will continue to look for a push to our next target of 2500. With portfolios currently fully allocated, we are simply monitoring risk and looking for opportunities to invest “new capital” into markets with a measured risk/reward ratio. However, this is a very short-term outlook which is why “price is the only thing that matters.” “Price measures the current “psychology” of the “herd” and is the clearest representation of the behavioral dynamics of the living organism we call “the market.” But in the long-term, fundamentals are the only thing that matters. I have shown you the following chart many times before. Which is simply a comparison of 20-year forward total real returns from every previous P/E ratio.

I know, I know. “P/E’s don’t matter anymore because of Central Bank interventions, accounting gimmicks, share buybacks, etc.” Okay, let’s play. In the following series of charts, I am using forward 10-year returns just for consistency as some of the data sets utilized don’t yet have enough history to show 20-years of forward returns. The purpose here is simple. Based on a variety of measures, is the valuation/return ratio still valid, OR, is this time really different? Let’s see. Tobin’s Q-ratio measures the market value of a company’s assets divided by its replacement costs. The higher the ratio, the higher the cost resulting in lower returns going forward. Just as a comparison, I have added Shiller’s CAPE-10. Not surprisingly the two measures not only have an extremely high correlation, but the return outcome remains the same.

One of the arguments has been that higher valuations are okay because interest rates are so low. Okay, let’s take the smoothed P/E ratio (CAPE-10 above) and compare it to the 10-year average of interest rates going back to 1900. The analysis that low rates justify higher valuations clearly does not withstand the test of history.

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Substitute nonprime for subprime and you open a whole new can of suckers again. “No, these are fine and upstanding citizens. They just don’t have access to normal bank loans.” Gee, why is that?

Nonprime Mortgages Prove Leery Investors Are Finally Hungry Again (CNBC)

The appetite for riskier mortgages is rising, and a small cadre of investment firms is ready to feed it. Angel Oak Capital Advisors just announced its second rated securitization of nonprime residential mortgages this year, a deal worth just more than $210 million and its largest ever. Its first deal was slightly less, but demand from borrowers and investors alike is growing, and the securitizations are growing with it. Angel Oak is one of very few firms offering these private-label mortgage-backed securities — the ones that were so very popular during the last housing boom and which were later blamed for the financial crisis. Today’s nonprime loans, however, are nothing like the ones of the past. The government cracked down on faulty loan products, those with low teaser rates, negative amortization and no documentation.

Still, for the past decade investors wouldn’t touch anything that wasn’t government-backed. Only now are they seeing value and dipping their toes in again. The number of nonprime mortgage-backed securities “skyrocketed” in the second quarter of this year, according to Inside Mortgage Finance — a total of $1.08 billion of MBS backed by nonprime home loans. That was the strongest quarter for the sector since the financial crisis. It is still, however, nothing compared with the volume that caused the housing crash. “At one point during the housing boom, we had a third of all mortgage originations that were nonprime [subprime or Alt-A, the latter having low or no documentation]. We’re not going to be even 5% of the market if we have a record year this year. It still has a long, long way to go,” said Guy Cecala, CEO of Inside Mortgage Finance.

That is because while investors are hungry for yield, they are still very skeptical. The ratings agencies are as well. That makes it difficult for companies like Angel Oak, and its competitors — Lone Star and Deephaven Mortgage — to issue large quantities of nonprime MBS. Nonprime securitizations today are far less risky, consisting of loans that were underwritten far more stringently. Angel Oaks’ securitization does consist of both fixed- and floating-rate loans. “In addition to borrowers that had prior credit events, our loans are also for borrowers who are self-employed,” said Lauren Hedvat, capital markets director at Angel Oak. “They are of high credit quality, but they are not able to access mortgage products by the more traditional bank routes.”

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Start paying cash everywhere.

VISA takes its War on Cash to US Retailers (WS)

“We’re focused on putting cash out of business,” Visa’s new CEO Al Kelly said on June 22 at Visa Investor Day. Pushing consumers into digital and electronic payments is the company’s “number-one growth lever.” Visa has been dogged by the stubborn survival of cash and checks, despite widespread government and corporate efforts to kill them off. Globally, check and cash transactions totaled $17 trillion in 2016, Visa President Ryan McInerney said. Confusingly, that’s up 2% from a year earlier. So today, Visa rolled out a new initiative on its war on cash. It’s designed “for small business restaurants, cafés, or food truck owners,” and the like. In this trial, it will award up to $10,000 each to 50 eligible businesses (online businesses are excluded) when they commit to refusing cash payments.

Going “100% cashless,” as Visa calls it, means that consumers can only pay with debit or credit cards or with their smartphones. That’ll be the day. You go to your favorite taco truck, and when it comes time to pay, you pull out a wad of legal tender, only to be treated to an embarrassed nod toward a sign that says, “No Cash.” I’d walk. But Visa hopes that other folks will pull out their Visa-branded card or a smartphone with a payment app that uses the Visa system. This would help Visa extract its fees from the transaction. “We have an incredible opportunity to educate merchants and consumers alike on the effectiveness of going cashless,” Jack Forestell, Visa’s head of global merchant solutions, said in the press release, which touted a “study” that Visa recently “conducted” that “found that if businesses in 100 cities transitioned from cash to digital, their cities stand to experience net benefits of $312 billion per year.”

However dubious these “net benefits” may be, one thing is not dubious: Visa gets a cut from every transaction made via Visa-branded cards or digital payment systems that use Visa. The merchant pays the cut and then tries to pass it on to customers via higher prices. The total card fees normally range between 1% and 3%. Among the entities that get to divvy this moolah up are the bank that issued the visa card and the credit card network – such as Visa, MasterCard, and the like. Visa gets just a small piece of the pie, but if it is on every transaction, it adds up. And payments by cash and check seriously get in the way of a lot of money. In 2016, Visa extracted $15 billion from processing transactions globally without even carrying any credit risk (the banks have to deal with that).

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Purely symbolic. Everyone loves to present a meme of recovery, but it’s not there. Ironically, the move from deficit to -forced- surplus guarantees it. Greece should run a deficit now to boost its economy.

Greece To Exit EU’s Excessive Deficit Procedure (K.)

After eight years, Greece emerged on Wednesday from the European Commission’s process for countries with excessive deficit. The Commission proposed Greece’s exit from the process as its general government debt has dropped below the threshold of 3% of GDP. This is a largely symbolic move, but it does have some significance given that the government is planning to return to the bond markets for the first time since 2014. Economic Affairs Commissioner Pierre Moscovici gave a wink to the markets on Wednesday, saying that the disbursement of the tranche of 7.7 billion euros on Monday and the decision on the deficit is “good news that the markets ought to read,” even though he explained that what the investors do is not up to him.

Commission Vice President Valdis Dombrovskis called on Greece to capitalize on its achievements and continue to strengthen confidence in its economy, which is crucial as the country prepares its return to the credit markets. The Commission’s proposal for Greece’s emergence from the deficit procedure has to be ratified by the EU’s finance ministers, but has little practical use. Ultimately, Greece’s fiscal targets are dictated by the bailout agreement and not by the rules that apply to other eurozone members. As one European official told Kathimerini, “nothing changes essentially, the fiscal targets Greece must hit remain high and [yesterday’s] decision is only of a symbolic dimension.”

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Greece can only get worse, for many years into the future.

Brain Drain Gathers Pace as One in Three Greeks Looks for a Job Abroad

A new study highlights the problem in the Greek labor market as more than 30% of Greek unemployed say that they are actively seeking a job abroad. According to the annual survey by the firm Adecco titled “Employability in Greece,” the brain drain phenomenon has been increasing over the last three years. In 2015 only about 11% of unemployed respondents said that they were actively looking for a job abroad. This figure increased to 28% in 2016 and reached 33% this year. The responses show that the unemployed have different reasons to seek work abroad. Whereas in 2005, the main reason was the prospect of a better wage, in 2016 and 2017 the main reason given were better career opportunities.

The study conducted for the third year running, in collaboration with polling company LMG, was based on a sample of 903 people from the age of 18 to 67. According to other findings, 37% of respondents say that they have been out of the labor market for at least 12 months. Despite the slight improvement in official unemployment rates, the Adecco survey finds that there is an increasing number of people who state that they have been at least once without a job – 58% this year compared to 54% in 2016. According to the data, more than 1 out of 4 (28%) are out of the labor market, a higher rate compared with the previous two years.

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Money that could have helped Greece escape the claws of Schäuble et al. The pattern is not coincidental.

Germany Profits From Greek Debt Crisis (HB)

The German government has long been accused by critics of profiting from Greece’s debt crisis. Now there are some new numbers to back it up: Loans and bonds purchased in support of Greece over nearly a decade have resulted in profits of €1.34 billion for Germany’s finance ministry, which confirmed the number in response to a parliamentary query from the Green Party, according to a report by German daily Süddeutsche Zeitung. The profits come from a range of programs, running into the hundreds of billions, that Germany and other euro-zone countries have backed to keep Greece’s government and economy afloat since its massive debt crisis emerged in 2009. It includes, for example, a €393-million profit generated from a 2010 loan by the development bank KfW, which is owned by the German government.

The report also shows that Germany’s central bank, the Bundesbank, has received profits from the Securities Market Program (SMP), a now-defunct government bond-buying plan initiated by the ECB and run from 2010 to 2012. The ECB collected more than €1.1 billion in 2016 in interest payments on the nearly €20 billion-worth of Greek bonds it bought through the SMP, according to the report. This year, the figure will be €901 million, which will again be redistributed to the euro zone’s 19 member states. Since 2015, Germany has collected a total of €952 million in SMP profits. The new revelations drew strong criticism from the Greens Party, in opposition. “The profits from collecting interest must be paid out to Greece. [Finance Minister] Wolfgang Schäuble cannot use the Greek profits to clean up Germany’s federal budget,” Manuel Sarrazin, EU expert for the Green Party in the parliament, told the Süddeutsche newspaper.

Mr. Schäuble, a member of Chancellor Angela Merkel’s conservative Christian Democrats, has been cannily keeping Germany’s federal budget balanced over the past four years, taking on no new debt. Berlin’s surplus amounted to €6.2 billion in 2016 alone. Critics complain that Greece’s crisis has helped it achieve that goal. “It might be legal for Germany to profit from the crisis in Greece, but from a moral and solidarity perspective, it is not right,” Sven-Christian Kindler, budget policy spokesperson for the Green Party, also told the paper. Mr. Schäuble has said he is open to reducing Greece’s interest burden but has resisted calls to end them completely. His finance ministry has argued that, with inflation, deferring interest payments would eventually end up costing Greece’s creditors.

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There are many parties not too keen on such an investigation, and Varoufakis is not one of them.

Defiant Varoufakis Ready to Face ‘Even Martial Court’ Over Plan B (GR)

Undeterred over the controversy surrounding the new disclosures over the system of a parallel currency that was apparently considered by the government of Alexis Tsipras in 2015, Yanis Varoufakis said that he is ready to face any court to respond to the charges. Speaking in a radio show, Varoufakis, the finance minister at the time and the instigator of the parallel payments system or Plan B, said that Tsipras had a copy of the proposals from as early as 2012 when he was still in opposition. “I have handed the plan to Tsipras in 2012,” so it could become the government’s plan B if negotiations with Greece’s creditors collapsed.

Mr. Varoufakis said he was willing to accept any kind of judicial investigation into Plan B and his role in drafting it. “Let’s have a special court of inquiry, or even a martial court, or any other court, so all the facts can be revealed,” he said responding to calls from the opposition for a judicial inquiry. He also attacked the SYRIZA-led government for refusing to proceed with an investigation. The Varoufakis Plan B for the Greek economy in the event that the country clashed with creditors and went bankrupt was to partially pay civil servants with coupons. Parts of the plan were revealed last week by his financial advisor Glenn Kim.

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Jul 112017
 
 July 11, 2017  Posted by at 9:39 am Finance Tagged with: , , , , , , , , ,  6 Responses »
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Max Ernst Santa Conversazione 1921

 

Trump Bump for President’s Media Archenemies Eludes Local Papers (BBG)
How Economics Became A Religion (Rapley)
The Breaking Point & Death Of Keynes (Roberts)
Central Banks’ Focus on Financial Stability Has Unintended Consequences (BBG)
Janet Yellen’s Complacency Is Criminal (Bill Black)
‘We’re Flowing Toward The Path Of 1928-29’ – Yusko (CNBC)
Fresh Fears Of UK Housing Market Collapse (Sun)
The European Union Has a Currency Problem (NI)
Schaeuble Says Italy Bank-Liquidation Aid Shows Rule Discord (BBG)
Is This the End of China’s Second Housing Bubble? (ET)
The World Is Facing A ‘Biological Annihilation’ Of Species (Ind.)

 

 

The echo chamber is highly profitable. Gossip sells. It’s not personal. It’s only business. And in many boardrooms the question these days is: Why are we not more like the New York TImes?

Trump Bump for President’s Media Archenemies Eludes Local Papers (BBG)

President Donald Trump loves to hurl his Twitter-ready insult at the New York Times: #failingnytimes. But in the stock market, the New York Times Co. has been looking like a roaring success lately, particularly by the standards of the beleaguered newspaper industry. Since Trump won the presidency in November, the publisher’s share price has soared 57%. Online subscriptions are up, bigly – about 19% in the first quarter alone. Scrutinizing the president turns out to be good business, at least for top national papers like the Times and the Washington Post. A different story is playing out for local publications, which are still suffering through the industry’s long decline and need to retain subscribers who are sympathetic to Trump.

Consider McClatchy Co., which owns about 30 papers, including the Miami Herald. Its shares have plummeted 31% since Election Day. Subscriptions have barely budged. The diverging fortunes in the industry have underscored what many in the traditional news business know only too well: Famous titles can lumber on as they grope for a digital future, but most local papers are fighting for survival. “For us in Texas, the bump has definitely been more muted because we’re not the primary source of news out of the White House,” said Mike Wilson, editor of the Dallas Morning News. “We serve a community with many deeply conservative pockets. That may be a different demographic from the New York Times and Washington Post audience.”

[..] The Washington Post, owned by Amazon.com founder Jeff Bezos, has more than 900,000 digital subscribers, including hundreds of thousands who signed up in the first quarter, according to a person familiar with the matter who asked not to be identified discussing private information. The newspaper declined to comment on its subscriber figures. The Post and the Times have been competing for scoops on the biggest story of the year: the Trump administration’s alleged ties to Russia. On several occasions, they’ve published blockbuster stories within hours of each other. Trump often attacks their coverage on Twitter, which seems to drive even more readers to subscribe.

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We adhere to the school of economics that suits the powerful best.

How Economics Became A Religion (Rapley)

Although Britain has an established church, few of us today pay it much mind. We follow an even more powerful religion, around which we have oriented our lives: economics. Think about it. Economics offers a comprehensive doctrine with a moral code promising adherents salvation in this world; an ideology so compelling that the faithful remake whole societies to conform to its demands. It has its gnostics, mystics and magicians who conjure money out of thin air, using spells such as “derivative” or “structured investment vehicle”. And, like the old religions it has displaced, it has its prophets, reformists, moralists and above all, its high priests who uphold orthodoxy in the face of heresy. Over time, successive economists slid into the role we had removed from the churchmen: giving us guidance on how to reach a promised land of material abundance and endless contentment.

For a long time, they seemed to deliver on that promise, succeeding in a way few other religions had ever done, our incomes rising thousands of times over and delivering a cornucopia bursting with new inventions, cures and delights. This was our heaven, and richly did we reward the economic priesthood, with status, wealth and power to shape our societies according to their vision. At the end of the 20th century, amid an economic boom that saw the western economies become richer than humanity had ever known, economics seemed to have conquered the globe. With nearly every country on the planet adhering to the same free-market playbook, and with university students flocking to do degrees in the subject, economics seemed to be attaining the goal that had eluded every other religious doctrine in history: converting the entire planet to its creed.

Yet if history teaches anything, it’s that whenever economists feel certain that they have found the holy grail of endless peace and prosperity, the end of the present regime is nigh. On the eve of the 1929 Wall Street crash, the American economist Irving Fisher advised people to go out and buy shares; in the 1960s, Keynesian economists said there would never be another recession because they had perfected the tools of demand management. The 2008 crash was no different. Five years earlier, on 4 January 2003, the Nobel laureate Robert Lucas had delivered a triumphal presidential address to the American Economics Association. Reminding his colleagues that macroeconomics had been born in the depression precisely to try to prevent another such disaster ever recurring, he declared that he and his colleagues had reached their own end of history:

“Macroeconomics in this original sense has succeeded,” he instructed the conclave. “Its central problem of depression prevention has been solved.”

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Will the last days of our economics coincide with the last days of our economic model? Will Keynes die in a collapse?

The Breaking Point & Death Of Keynes (Roberts)

Keynes contended that “a general glut would occur when aggregate demand for goods was insufficient, leading to an economic downturn resulting in losses of potential output due to unnecessarily high unemployment, which results from the defensive (or reactive) decisions of the producers.” In other words, when there is a lack of demand from consumers due to high unemployment then the contraction in demand would, therefore, force producers to take defensive, or react, actions to reduce output. In such a situation, Keynesian economics states that government policies could be used to increase aggregate demand, thus increasing economic activity and reducing unemployment and deflation. Investment by government injects income, which results in more spending in the general economy, which in turn stimulates more production and investment involving still more income and spending and so forth.

The initial stimulation starts a cascade of events, whose total increase in economic activity is a multiple of the original investment. Unfortunately, as shown below, monetary interventions and the Keynesian economic theory of deficit spending has failed to produce a rising trend of economic growth.

Take a look at the chart above. Beginning in the 1950’s, and continuing through the late 1970’s, interest rates were in a generally rising trend along with economic growth. Consequently, despite recessions, budget deficits were non-existent allowing for the productive use of capital. When the economy went through its natural and inevitable slowdowns, or recessions, the Federal Reserve could lower interest rates which in turn would incentivize producers to borrow at cheaper rates, refinance activities, etc. which spurred production and ultimately hiring and consumption.

However, beginning in 1980 the trend changed with what I have called the “Breaking Point.” It’s hard to identify the exact culprit which ranged from the Reagan Administration’s launch into massive deficit spending, deregulation, exportation of manufacturing, a shift to a serviced based economy, or a myriad of other possibilities or even a combination of all of them. Whatever the specific reason; the policies that have been followed since the “breaking point” have continued to work at odds with the “American Dream,” and economic models.

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Central banks focus on their member banks.

Central Banks’ Focus on Financial Stability Has Unintended Consequences (BBG)

Central bankers are spending a lot of time talking about financial stability. So much so that many economists, strategists and investors are saying financial stability has become a de facto third mandate for policy makers along with price stability and full employment. This development, however, has the potential to bring about some unintended consequences such as central banks adopting a much shallower tightening path than they currently envision. It’s important to understand two things. First, in highly levered economies, like those we currently see in developed nations around the world, interest rates and financial stability are closely linked. That was evident in the recent “synchronized” global sell-off in the rates markets triggered by central banks signaling concern about relatively high asset prices brought on by artificially low borrowing costs, and their potential to foster financial instability.

Second, central banks have, perhaps paradoxically, contributed to financial instability by employing so-called forward guidance that provided investors with a sense of how long they would be keeping rates at record-low levels. So, with economies gradually recovering and employment generally robust, it’s understandable that investors would behave in a manner that suggests they expect favorable financial conditions to seemingly last in perpetuity. Consider the dollar. Its weakness against both developed and emerging-market currencies this year occurred even though expectations for stronger economic growth and fiscal stimulus rose. The decline in the value of the dollar value means the cost to borrow in the currency has dropped despite the Federal Reserve’s three interest-rate increases since mid-December.

It also means hedging costs in currencies ranging from the euro to the South Korean won are rising at a less-than-ideal time. That can be seen in cross-currency basis swap rates, which are essentially the cost to exchange a fixed-rate obligation for a floating-rate obligation. In the case of the won, the swap rate has turned more negative, suggesting a possible “shortage” of the currency to borrow in the interbank market as geopolitical tensions in the region reach levels not seen in years. And, the almost 8% appreciation in the euro in both nominal and real effective exchange rate terms has driven the cost to borrow in the shared currency higher as European Central Bank officials surprise markets by starting to talk about pulling back from unprecedented monetary easing measures.

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Looks like the world would have been much better off without central banks.

Janet Yellen’s Complacency Is Criminal (Bill Black)

[..] her inaction as Fed chairman has encouraged criminal behaviour. First, Yellen’s “lifetime” pronouncement in 2017 ignored Yellen’s pronouncements in 1996 – and how disastrously they fared in the most recent financial crisis. In 1996, Yellen gave a talk at a conference at the Levy Institute at Bard College, which Minsky attended. The Minneapolis Fed published her speech as an article entitled “The New Science of Credit Risk Management.” The speech was an ode to financial securitization and credit derivatives. The Minneapolis Fed, particularly in this era, was ultra-right wing in its economic and social views. Yellen’s piece is memorable for several themes. With the exception of two passages, it reads as gushing propaganda for the largest banks. It is relentlessly optimistic. Securitization and credit derivatives will reduce individual and systematic risk.

Yellen assures the reader that finance is highly competitive and that the banks will pass on the savings from reducing risk to even unsophisticated borrowers in the form of lower interest rates. The regulators should reduce capital requirements, particularly for credit instruments with high credit ratings. Banks now have a vastly more sophisticated understanding of their credit risks and manage them prudently. There is no discussion of perverse incentives even though bank CEOs were making them ever more perverse at an increasing rate. There is no discussion of the fate of the first collateralized debt obligations (CDOs). Michael Milken, a confessed felon, devised and sold the first CDO – backed by junk bonds. That disaster blew up five years before she gave her speech. At the time Yellen published her article the second generation of CDOs was becoming common.

That generation of CDOs was backed by a hodgepodge of risky loans. They blew up about four years after she gave her speech. The third wave of CDOs was backed by toxic mortgages, particularly endemically fraudulent “liar’s” loans. They blew up in 2008. Securitization contributed to the disaster. The Fed championed vastly lower capital requirements for banks – particularly he largest banks. Fortunately, the Federal Deposit Insurance Corporation (FDIC) fought a ferocious rearguard opposition that blocked this effort. The Fed succeeded, however, in allowing the largest banks to calculate their own capital requirements through proprietary risk models that (shock) massively understated actual risk. Bank CEOs used the lower capital requirements, the biased risk models, and the opaque CDOs to massively increase risk and predate on black and Latino home borrowers.

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We have a hard time remembering and learning.

‘We’re Flowing Toward The Path Of 1928-29’ – Yusko (CNBC)

Although the economy has been steady this year, at least one analyst has dire predictions, comparing the current period to the buildup to the Great Depression and warning that this fall is when things will come to a head. Mark Yusko, CEO of Morgan Creek Capital, has been predicting bad news for the economy since January and he is sticking by that, saying Monday on CNBC’s “Power Lunch” that he believes too much stimulus and quantitative easing has resulted in a “huge” bubble in U.S. stocks. “I have this belief that we’re flowing toward the path of 1928-29 when Hoover was president,” Yusko said. “Now Trump is president. Both were presidents with no experience who come in with a Congress that is all Republican, lots of big promises, lots of things that don’t happen and the fall is when people realize, ‘Wait, it hasn’t played out the way we thought.'”

He points to evidence of declining growth as well as that fall is a weak time traditionally for the U.S. economy as people return from vacation. “[By the fall], we’ll have a lot more evidence of declining growth. Growth has been slipping,” he said. However, it was not all gloom and doom as Yusko said the emerging markets were still strong places to invest. “Growth is where you want to invest,” he said. “All the growth is in the emerging markets, the developing world. It’s really tough if you look around the developed world.” he said profits in the United States are the same as they were in 2012. Yusko said at the beginning of the year “every single analyst” said emerging markets were going to underperform the U.S. “That hasn’t been the case,” he said. Indeed, in 2017 the iShares MSCI Emerging Markets ETF (EEM) has been up more than 18% while the S&P 500 index has risen more than 8%.

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“..the number of homes sold in May for less than the asking price rose to 77%.”

Fresh Fears Of UK Housing Market Collapse (Sun)

New signs of the housing market slipping are expected this week when one of the best lead indicators of house price movement is released. The UK Residential Market Survey from the Royal Institution of Chartered Surveyors is expected to show a decrease in the number of members reporting house price rises. It comes after last weekend, it was reported is on the edge of a property price crash which could be as bad as the collapse in the 1990s according to experts who are also warning property value could plunge by 40%. Ahead of this week’s survey, Howard Archer, chief economic adviser to consultancy EY Item Club, told the Mail on Sunday: ‘It may well be that heightened uncertainty after the General Election weighed down on an already fragile housing market in June.’

The expectation of a crash has raised alarms about whether we could see a return of “negative equity” which is when a house falls so much in value it is worth less than the mortgage. Around one million people were hit with negative equity in the 1990s, the Mail on Sunday has reported. Paul Cheshire, professor of Economic Geography at the London School of Economics, said: “We are due a significant correction in house prices. “I think we are beginning to see signs that correction may be starting.” Prices plunged by 37% in 1989 when the price boom fell apart. In its most recent figures, The National Association of Estate Agents reported the number of homes sold in May for less than the asking price rose to 77%. Prof Chesire added that falls in real incomes is also likely to spark for a fall in house prices.

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The EU has a power problem. Germany dictates all important decisions, and in its favor.

The European Union Has a Currency Problem (NI)

Donald Trump, for all his rhetorical clumsiness and intellectual limitations, still sometimes makes a valid point. He does when he says that Germany is “very bad on trade.” However much Berlin claims innocence and good intentions, the fact remains that the euro heavily stacks the deck in favor of German exporters and against others, in Europe and further afield. It is surely no coincidence that the country’s trade has gone from about balance when the euro was created to a huge surplus amounting at last measure to over 8% of the economy—while at the same time every other major EU economy has fallen into deficit. Nor could an honest observer deny that the bias distorts economic structures in Europe and beyond, perhaps most especially in Germany, a point Berlin also seems to have missed.

The euro was supposed to help all who joined it. When it was introduced at the very end of the last century, the EU provided the world with white papers and policy briefings itemizing the common currency’s universal benefits. Politically, Europe, as a single entity with a single currency, could, they argued, at last stand as a peer to other powerful economies, such as the United States, Japan and China. The euro would also share the benefits of seigniorage more equally throughout the union. Because business holds currency, issuing nations get the benefit of acquiring real goods and services in return for the paper that the sellers hold. But since business prefers to hold the currencies of larger, stronger economies, it is these countries that tend to get the greatest benefit. The euro, its creators argued, would give seigniorage advantages to the union as a whole and not just its strongest members.

All, the EU argued further, would benefit from the increase in trade that would develop as people worried less over currency fluctuations. With little risk of a currency loss, interest rates would fall, giving especially smaller, weaker members the advantage of cheaper credit and encouraging more investment and economic development than would otherwise occur. Greater trade would also deepen economic integration, allow residents of the union to choose from a greater diversity of goods and services, and offer the more unified European economy greater resilience in the face of economic cycles, whether they had their origins internally or from abroad. It was a pretty picture, but it did not quite work as planned. Instead of giving all greater general advantages, the common currency, it is now clear, locked in distorting and inequitable currency mispricings.

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Those rules only last until they get in the way of some greater good anyway.

Schaeuble Says Italy Bank-Liquidation Aid Shows Rule Discord (BBG)

German Finance Minister Wolfgang Schaeuble joined his counterparts from the Netherlands and Austria in calling for a review of European Union bank-failure rules after Italy won approval to pour as much as €17 billion ($19.4 billion) of taxpayers’ cash into liquidating two regional lenders. Schaeuble said Italy’s disposal of Banca Popolare di Vicenza and Veneto Banca revealed differences between the EU’s bank-resolution rules and national insolvency laws that are “difficult to explain.” That’s why finance ministers convening in Brussels on Monday have to discuss the Italian cases and consider “how this can be changed with a view to the future,” he told reporters in Brussels before the meeting.

Dutch Finance Minister Jeroen Dijsselbloem said the focus should be on EU state-aid rules for banks that date from 2013, before the resolution framework was put in place. Italy relied on these rules for its state-funded liquidation of the two Veneto banks and its plan to inject €5.4 billion into Banca Monte dei Paschi di Siena SpA. The EU laid down new bank-failure rules in the 2014 Bank Recovery and Resolution Directive after member states provided almost €2 trillion to prop up lenders during the financial crisis. The BRRD foresees small banks going insolvent like non-financial companies. Big ones that could cause mayhem would be restructured and recapitalized under a separate procedure called resolution, in which losses are borne by owners and creditors, including senior bondholders if necessary.

Elke Koenig, head of the euro area’s Single Resolution Board, said last week that the framework for failing lenders needs to be reviewed to “see how to align the rules better.” The EU commissioner in charge of financial-services policy, Valdis Dombrovskis, said that this could only happen once banks have built up sufficient buffers of loss-absorbing debt. The EU’s handling of the Italian banks was held up by U.S. Federal Reserve Bank of Minneapolis President Neel Kashkari as evidence that requiring banks to have “bail-in debt” doesn’t prevent bailouts. The idea that rules on loss-absorbing liabilities that can be converted to equity or written down to cover the costs of a bank collapse “rarely works this way in real life,” he wrote in an op-ed in the Wall Street Journal.

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“..the average Chinese would have had to spend more than 160 times his annual income to purchase an average housing unit at the end of 2016.”

Is This the End of China’s Second Housing Bubble? (ET)

When the economy started to cool in the beginning of 2016, China opened up the debt spigots again to stimulate the economy. After the failed initiative with the stock market in 2015, Chinese central planners chose residential real estate again. And it worked. As mortgages made up 40.5% of new bank loans in 2016, house prices were rising at more than 10% year over year for most of 2016 and the beginning of 2017. Overall, they got so expensive that the average Chinese would have had to spend more than 160 times his annual income to purchase an average housing unit at the end of 2016. Because housing uses a lot of human resources and raw material inputs, the economy also stabilized and has been doing rather well in 2017, according to both the official numbers and unofficial reports from organizations like the China Beige Book (CBB), which collects independent, on-the-ground data about the Chinese economy.

“China Beige Book’s new Q2 results show an economy that improved again, compared to both last quarter and a year ago, with retail and services each bouncing back from underwhelming Q1 performances,” states the most recent CBB report. However, because Beijing’s central planners must walk a tightrope between stimulating the economy and exacerbating a financial bubble, they tightened housing regulations as well as lending in the beginning of 2017. Research by TS Lombard now suggests the housing bubble may have burst for the second time after 2014. “We expect the latest round of policy tightening in the property sector to drive down housing sales significantly over the next six months,” states the research firm, in its latest “China Watch” report. One of the major reasons for the concern is increased regulation. Out of the 55 cities measured in the national property price index, 25 have increased regulation on housing purchases.

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The most tragic species.

“..Earth’s capacity to support life, including human life, has been shaped by life itself..”

The World Is Facing A ‘Biological Annihilation’ Of Species (Ind.)

The world is experiencing a “biological annihilation” of its animal species because of humans’ effect on the Earth, a new study has found. Researchers mapped 27,600 species of birds, amphibians, mammals and reptiles – nearly half of known terrestrial vertebrate species – and concluded the planet’s sixth mass extinction even was much worse than previously thought. They found the number of individual animals that once lived alongside humans had now fallen by as much as 50%, according to a paper in the journal Proceedings of the National Academy of Sciences. The study’s authors, Rodolfo Dirzo and Paul Ehrlich from the Stanford Woods Institute for the Environment, and Gerardo Ceballos, of the National Autonomous University of Mexico, said this amounted to “a massive erosion of the greatest biological diversity in the history of the Earth”.

The authors argued that the world cannot wait to address damage to biodiversity and that the window of time for effective action was very short, “probably two or three decades at most”. Mr Dirzo said the study’s results showed “a biological annihilation occurring globally, even if the species these populations belong to are still present somewhere on Earth”. The research also found more that 30% of vertebrate species were declining in size or territorial range. Looking at 177 well-studied mammal species, the authors found that all had lost at least 30% of the geographical area they used to inhabit between 1990 and 2015. And more than 40% of these species had lost more than 80% of their range. The authors concluded that population extinction were more frequent than previously believed and a “prelude” to extinction.

“So Earth’s sixth mass extinction episode has proceeded further than most assume,” the study said. About 41% of all amphibians are threatened with extinction and 26% of all mammals, according to the International Union for Conservation of Nature (IUCN), which keeps a list of threatened and extinct species. [..] “When considering the frightening assault on the foundations of human civilisation, one must never forget that Earth’s capacity to support life, including human life, has been shaped by life itself,” the paper stated.

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Jun 302017
 
 June 30, 2017  Posted by at 9:35 am Finance Tagged with: , , , , , , , , , ,  7 Responses »
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Claude Monet Impression Sunrise 1872

 

Trump Travel Ban Goes Into Effect Amid New Court Challenge (BBG)
Yes, Ms. Yellen…There Will Be Another Financial Crisis (Roberts)
Car Deals: Must Be Subprime, Must Finance Through Chrysler Capital (Mish)
Signs Of An Auto Bubble: Dealer Offers “Low Credit Score Discount” (ZH)
Japan May Industrial Output Slumps At Steepest Pace In Over 6 Years (R.)
Bob Woodward Chides NYT, Mainstream Media: ‘Fair Mindedness is Essential’ (DC)
Russia-gate Is A Scandal In Search Of A Specific Crime (Robert Parry)
New York Times Forced To Retract Longstanding Lie About Russian Hacking (M.)
Maria Bartiromo Slams John Podesta Over His Ties To Russia (PFW)
Comey Friend Unveils “Smoking Gun” Nothingburger (ZH)
Peace is Popular (Ron Paul)
Greece Garbage Cleanup Begins As Workers Halt Strike Action (K.)
Italy Threatens To Turn Away Foreign NGO Ships With Rescued Migrants (dpa)
Closing Italian Ports ‘A Cry For Help’, Say Weary Crew Of Rescue Boat (G.)

 

 

Let’s have it, so the courts can hold all points of view against the light of the law.

Trump Travel Ban Goes Into Effect Amid New Court Challenge (BBG)

The Trump administration’s revised travel ban faced a new court challenge as soon as it took effect Thursday after the president’s signature immigration policy already weathered months of protests, legal wrangling and delays. A new set of restrictions on refugees and immigrants from six predominantly Muslim countries took effect at 8 p.m. EDT. The administration said the rules should help prevent the chaotic airport scenes witnessed when President Donald Trump’s initial order was abruptly imposed in January. But a half-hour before the ban took effect, Hawaii asked a judge to clarify whether the government violated instructions from the U.S. Supreme Court in defining who’s covered by the ban and who’s excluded.

If implemented as intended, the travel restrictions would allow Trump to declare partial victory on his campaign promise to stem the flow of refugees and travelers from nations he deems a security risk. Lower court decisions to uphold two of his proposed travel bans were early, public defeats for the administration in its initial weeks. To minimize disruptions this time, the State Department, Homeland Security Department and Justice Department coordinated in advance to establish clearer guidelines for thousands of consular officers, airlines and travelers. And unlike in January, when hundreds of travelers arriving in the U.S. were turned back or detained at airports, those already holding a valid visa will be let in. “The American public could have legitimate concerns about their safety when we open our doors,” State Department spokeswoman Heather Nauert said at a briefing Thursday.

“We want to open our doors to people who are willing to go through proper screening measures and who want to be here and want to be productive members of our society.” The latest effort followed a U.S. Supreme Court ruling this week that travelers from the six nations – Iran, Libya, Somalia, Sudan, Syria and Yemen – with “bona fide” connections in the U.S. be exempted from the travel ban. That definition was interpreted to mean that travelers with specific, close family members in the U.S., including spouses, children, and siblings, could be let in. But people whose closest connections are grandparents, aunts and uncles could be barred. Students or travelers with business or professional ties from the affected countries also are exempt if they can show a relationship that’s formal and documented, and not based on an intent to evade the ban.

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She’s gotta go. That was just too crazy. A few points and graphs from Lance’s longer article.

Yes, Ms. Yellen…There Will Be Another Financial Crisis (Roberts)

That is a pretty bold statement to make considering that every one of her predecessors failed to predict the negative consequences of their actions. Will there will be another “Financial Crisis” in our lifetimes? Yes, it is virtually guaranteed. The previous “crisis” wasn’t about just “an asset gone bad,” but rather the systemic shock caused by a “freeze” in the credit markets when Lehman Brothers filed for bankruptcy. Counterparties evaporated, banks froze lending and the credit market ceased to function. Credit, not the stock market, is the “lifeblood” of the economy. Of course, it is all good now because the Fed says so with Ms. Yellen placing a great amount of faith in the Fed’s own carefully constructed, and recently released results, of “bank stress tests.” Interestingly, EVERY bank passed with flying colors. In other words, the Millennial generation has now passed the baton of “Everybody Gets A Trophy” to the banking sector. [..] Here is why Janet Yellen is wrong in believing another “Financial Crisis” can’t occur:

Catalyst 1: Delinquency & Defaults We are already seeing the early warning signs with delinquency rates rising and commercial lending on the decline in both consumer and commercial and industrial loans. [..] Of course, this also includes the credit problems of the collapse in Commercial Real Estate which is grossly leveraged at a time when prices have begun to stagnate with an oversupply of inventory sitting on the ground.

Catalyst 2: Leverage & Robots It isn’t just bank loans which will catalyze the coming financial crisis. It is also, be the massive surge in debt and leverage over the last eight years including student loans, credit cards, corporate debt and margin loans. As I discussed recently in the “Illusion Of Liquidity:” “The illusion of liquidity has a dangerous side effect. The process of the previous two debt-deleveraging cycles led to rather sharp market reversions as margin calls, and the subsequent unwinding of margin debt fueled a liquidation cycle in financial assets. The resultant loss of the ‘wealth effect’ weighed on consumption pushing the economy into recession which then impacted corporate and household debt leading to defaults, write-offs, and bankruptcies.”

Catalyst 3: Pensions Lastly, and a point clearly missed by Ms. Yellen in her quest to dismiss financial crisis risks, is the $3 Trillion “Pension Crisis” that is just one sharp downturn away from imploding. The cresting of the “baby boom” generation now puts these massively underfunded pensions at risk of a “run on assets” during the next downturn which could send the entire system into chaos. Of course, this problem can be directly traced to the malfeasance of pension fund managers, and pension boards, which used excessively high return rates to lower costs of contributions.

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Lenders need new loans something desperate.

Car Deals: Must Be Subprime, Must Finance Through Chrysler Capital (Mish)

Reader Brian emailed an ad for huge discounts on cars. The fine print is rather amusing: Must be subprime and must finance through Chrysler Capital. Frequently, when you see an ad “only x available at this price”, there are really none available at that price. They all went to friends of the dealer. I called about the 2017 Patriot and there were still some left but they were “going fast”. The ad reads “Primary customer must have a FICO score below 620 and must finance through Chrysler Capital” I asked what happens if my credit score was above 620. As expected, I could not get that price. For someone with a credit score of 800 the price jumps to $13,485.

I asked what happens if I pay all cash. That price is $13,995. I asked about prepayment penalties and California does not allow them. Still, the MSRP is $21,760 and you can get one for $13,995. That is a discount of 35.7% off the MSRP. I do not know what this model typically sells for, but that seems like a hefty discount. A subprime buyer can pay $11,995. That is a discount of 44.9% off MSRP. Since there are no prepayment penalties, one could immediately pay it off in theory. In practice, someone with a credit score below 620 is extremely unlikely to be in a position to pay the loan off immediately.

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Don’t forget: when loans are paid back, money disappears from the system.

Signs Of An Auto Bubble: Dealer Offers “Low Credit Score Discount” (ZH)

If you’re still on the fence about whether the auto market in this country is anything but a massive bubble being propped up by extremely loose credit underwriting standards, then we think we’ve just found some definitive evidence for you. As Jalopnik noted earlier today, at first glance the following advertisement for a $55,000 truck from a dealership in Texas looks fairly ‘normal’…an extremely high starting MSRP at the top followed by a series of incentive offers that make the vehicle look “affordable.” But, take a closer look and we think you just might find something rather disturbing…that’s right, a $1,500 discount offered only to people with “Low Credit Scores.”

Ordinarily, of course, lender/dealer financing incentives like these would be offered to folks with good credit, because…well, that’s at least somewhat logical, but it seems as though this particular dealer has already sold a $55,000 truck to everyone with good credit and is looking to ‘creatively’ broaden it’s addressable market. Meanwhile, looking at the fine print, it seems as though this incentive is particularly targeted at subprime borrowers with credit scores below 620. “April 2017 Pricing on all new vehicles may include up to $1500 in finance rebates that have certain credit requirements to be able to claim this rebate. The finance office is Credit Score based and you must be below 620 to qualify. If you are over a 620 you must add up to $1500 to the price. Varies by make and model. Not all units are eligible for this rebate. Call Dealer for Details.”

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Rollercoaster territory. Wonder why. +4.0% in April, -3.2% in May, expected + 2.8% in June and -0.1% in July.

Japan May Industrial Output Slumps At Steepest Pace In Over 6 Years (R.)

Japan’s industrial output fell 3.3% in May from the previous month due to lower production of cars and construction equipment, preliminary government data showed on Friday, in a sign of a temporary lull in manufacturing activity. The result compared with the median estimate of a 3.2% decline in a Reuters poll of economists. It followed a 4.0% increase in April, which was the fastest increase in almost six years, the data from the Ministry of Economy, Trade and Industry showed. Manufacturers surveyed by the ministry expect output to rise 2.8% in June and fall 0.1% in July.

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I’m sort of sorry I feel inclined to delve into US politics, but enough is enough. “..maybe more essential is a game plan for reporting this and going to Moscow and finding the bookkeeper.”

Bob Woodward Chides NYT, Mainstream Media: ‘Fair Mindedness is Essential’ (DC)

Famed investigative journalist Bob Woodward criticized the media’s open bias toward President Trump on Tuesday in remarks following a screening of “All The President’s Men” in Washington, D.C. Woodward, the reporter who broke the Nixon Watergate scandal the media now loves to compare to the Trump administration, said it’s crucial the press retain the trust of the public, and execute a deep “fair-mindedness” when reporting. He pointed to a list of Trump’s “lies” compiled by The New York Times in which some of the president’s are misjudged as an example of overt bias, after he was asked about the media’s treatment of Trump in a Q&A session at Landmark E Street Cinema. “[Number three on the list] was that Trump said he was on the cover of Time magazine 14 or 15 times when it was in fact 11 times,” Woodward said. “… That’s not a lie.”

He likened Trump’s statement instead to someone getting pulled over for speeding and telling the police officer that they were driving the speed limit. “Tone matters, and headlines matter, and you want people to [trust you],” he said. “[It] really betrays the anti-Trump media bias,” Woodward added, regarding the media’s coverage of the investigation into Russian meddling in the election. “I think a kind of brief, deeply fair-mindedness is essential, but as essential or maybe more essential is a game plan for reporting this and going to Moscow and finding the bookkeeper.” The bookkeeper was a reference to a key source for Woodward and Carl Bernstein in their Watergate coverage. Woodward has been a consistent voice for journalism in recent months, calling the Buzzfeed dossier “a garbage document” and saying that the Comey investigation was “not yet Watergate,” contradicting frequent mainstream claims.

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Great history lesson on previous US scandals.

Russia-gate Is A Scandal In Search Of A Specific Crime (Robert Parry)

So how do Watergate and Iran-Contra compare and contrast with Russia-gate? One key difference is that in Watergate in 1972-73 and Iran-Contra in 1985-86, you had clear-cut crimes (even if you don’t want to believe the two “prequels” from 1968 and 1980, respectively). In Watergate, five burglars were caught inside the DNC offices on June 17, 1972, as they sought to plant more bugs on Democratic phones. (An earlier break-in in May had installed two bugs, but one didn’t work.) Nixon then proceeded to mount a cover-up of his 1972 campaign’s role in funding the break-in and other abuses of power. In Iran-Contra, Reagan secretly authorized weapons sales to Iran, which was then designated a terrorist state, without informing Congress, a violation of the Arms Export Control Act. He also kept Congress in the dark about his belated signing of a related intelligence “finding.”

And the creation of slush funds to finance the Nicaraguan Contras represented an evasion of the U.S. Constitution. There was also the attendant Iran-Contra cover-up mounted both by the Reagan White House and later the George H.W. Bush White House, which culminated in Bush’s Christmas Eve 1992 pardons of six Iran-Contra defendants as special prosecutor Lawrence Walsh was zeroing in on possible indictment of Bush for withholding evidence. By contrast, Russia-gate has been a “scandal” in search of a specific crime. President Barack Obama’s intelligence chieftains have alleged – without presenting any clear evidence – that the Russian government hacked into the emails of the Democratic National Committee and of Hillary Clinton’s campaign chairman John Podesta and released those emails via WikiLeaks and other Internet sites. (The Russians and WikiLeaks have both denied the accusations.)

The DNC emails revealed that senior Democrats did not maintain their required independence regarding the primaries by seeking to hurt Sen. Bernie Sanders and help Clinton. The Podesta emails pulled back the curtain on Clinton’s paid speeches to Wall Street banks and on pay-to-play features of the Clinton Foundation. Hacking into personal computers is a crime, but the U.S. government has yet to bring any formal charges against specific individuals supposedly responsible for the hacking of the Democratic emails. There also has been no evidence that Donald Trump’s campaign colluded with Russians in the hacking. Lacking any precise evidence of this cyber-crime or of a conspiracy between Russia and the Trump campaign, Obama’s Justice Department holdovers and now special prosecutor Robert Mueller have sought to build “process crimes,” around false statements to investigators and possible obstruction of justice.

In the case of retired Lt. Gen. Michael Flynn, Trump’s first national security adviser, acting Attorney General Sally Yates used the archaic Logan Act of 1799 to create a predicate for the FBI to interrogate Flynn about a Dec. 29, 2016 conversation with Russian Ambassador Sergey Kislyak, i.e., after Trump’s election but before the Inauguration. The Logan Act, which has never resulted in a prosecution in 218 years, was enacted during the period of the Alien and Sedition Acts to bar private citizens from negotiating on their own with foreign governments. It was never intended to apply to a national security adviser of an elected President, albeit before he was sworn in. But it became the predicate for the FBI interrogation — and the FBI agents were armed with a transcript of the intercepted Kislyak-Flynn phone call so they could catch Flynn on any gaps in his recollection, which might have been made even hazier because he was on vacation in the Dominican Republic when Kislyak called.

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“The “17 intelligence agencies” lie had been completely, thoroughly debunked for weeks..”

New York Times Forced To Retract Longstanding Lie About Russian Hacking (M.)

Seventeen intelligence agencies: if you’ve been following the maniacal #TrumpRussia coverage to any extent, you’ve heard this phrase used uncritically, time and again, regardless of your ideological loyalties. Pundits, papers and rank-and-file establishment loyalists have been unquestioningly regurgitating the nonsensical line that 17 intelligence agencies confirmed Russian interference in the US elections ever since Hillary Clinton made that baseless assertion in a debate back in October. The innate absurdity of the claim was immediately attacked by WikiLeaks and anti-establishment outlets who pointed out that this would necessarily need to involve full investigations from agencies like the Coast Guard, the DEA and the Energy Department in order to be true.

Nevertheless, many high-profile pro-establishment outlets like Politifact and USA Today found Clinton’s claims to be 100% true on the grounds that James Clapper, then-Director of National Intelligence and notorious Russophobic racist, “speaks on behalf of” all 17 intelligence agencies. To this day Politifact stands by its false claim on the basis of that same spurious assertion. It turns out, however, that in addition to Clapper’s office there were only three intelligence agencies involved in that assessment, not 17, and that the conclusions were drawn not by the actual agencies in full, but by a mere two dozen loyalists from those agencies hand-selected by Russophobic eugenicist Clapper himself. The great Robert Parry notes in his Consortium News article about this point, “as any intelligence expert will tell you, if you ‘hand-pick’ the analysts, you are really hand-picking the conclusion. For instance, if the analysts were known to be hard-liners on Russia or supporters of Hillary Clinton, they could be expected to deliver the one-sided report that they did.”

As reported by Parry, we have known about these facts since they emerged from Clapper’s racist face hole on May 8, and they were confirmed by former CIA Director John Brennan on May 23. And yet at a California technology conference on May 31, Hillary Clinton repeated the same lie she’s been spouting since October: “Seventeen agencies, all in agreement, which I know from my experience as a Senator and Secretary of State, is hard to get. They concluded with high confidence that the Russians ran an extensive information war campaign against my campaign, to influence voters in the election. They did it through paid advertising we think; they did it through false news sites; they did it through these thousand agents; they did it through machine learning, which you know, kept spewing out this stuff over and over again. The algorithms that they developed. So that was the conclusion.”

The “17 intelligence agencies” lie had been completely, thoroughly debunked for weeks, and yet not a soul called Clinton out on her brazen lie within the establishment press. Indeed, establishment pundits like Megyn Kelly continued to repeat the lie, and have continued to do so throughout the month of June. All this changed when CNN was sent reeling by a 1–2–3-punch combination ensuing from its horrendously propagandistic Russia coverage, which has seen three of its journalists lose their jobs and sent the network into international disgrace. All of a sudden we are seeing establishment outlets getting a lot more conscientious about what they choose to publish about the Russian Federation, and today we saw none other than the New York Times posting the very first retraction of this long-debunked lie that we have seen in establishment media.

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Even the New York TImes has issued a correction repudiating the “17 intelligence agencies” meme. There’s a James Clapper testimony video in which he says it was only CIA, NSA and FBI, “not all 17”. But Podesta just keeps using it. One creepy individual, if you ask me.

Maria Bartiromo Slams John Podesta Over His Ties To Russia (PFW)

Even after James O’Keefe and Project Veritas essentially blew the lid right off the fake ‘Russia hacked the election’ narrative, Hillary Clinton’s former campaign chairman, John Podesta, doubled down on the debunked narrative when challenged by Fox News’ Maria Bartiromo on his ties to a Kremlin-backed company. Podesta met behind closed doors on Tuesday with the members of the House Intelligence Committee as part of the panel’s investigation into supposed Russian efforts to meddle in the presidential election. When asked what he could tell the Thursday Fox audience about the House Intel meeting, Podesta explained that the panel wanted to know “what had happened to me and the effect on the campaign … the effect of the Russian interference in our democratic process.”

“They’re probing what actually happened, whether if there was collusion and what we’re going to do about,” Podesta told Bartiromo. “They asked me not to get into specific questions that they asked me and my specific answers but in general terms, they’re taking a bipartisan look at this stage.” Fox Host Maria Bartiromo then chimes in with a question that digs sharply into the skin of Podesta. “Don’t you find it odd that there’s been so much attention on the Trump Campaign and the Trump associates and potential collusion with the Russians when in fact it’s really the Democrats who have deeper and stronger ties to Russia,” Bartiromo said. “I mean John I have to ask your own situation..”

Bartiromo then goes on to break down how Podesta joined the board of the board of a small energy company in 2011 which later received $35 million from a Kremlin-funded entity. According to Bartiromo, Podesta also owns 75,000 shares in a Russian company and failed to disclose this to the Obama administration. And this is where things got heated…

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Accusing the dead. Low.

Comey Friend Unveils “Smoking Gun” Nothingburger (ZH)

For about a week now, Benjamin Wittes, the Brookings Institution senior fellow and noted ally of former FBI Director James Comey, has been taunting the Trump administration with tweets suggesting that another ‘bombshell’ story, presumably related to the Russia investigation, was in the works and set to drop any minute. Of course, people took notice of the warnings because Wittes posted similar tweets just before the New York Times published their now infamous story on Comey’s memos So what was the “bombshell” story? It seems to have come in the form of a rather bizarre, and thoroughly difficult to follow, Wall Street Journal article entitled “GOP Operative Sought Clinton Emails From Hackers, Implied a Connection to Flynn.”

To summarize the ‘bombshell’, the story is about a long-time Republican opposition researcher, 81-year-old Peter W. Smith, who apparently set out on a mission to find Hillary’s 30,000 emails which the FBI confirmed had gone missing. In his efforts to find those emails, he scoured hacking chat rooms looking for clues and/or hackers that might be able to help him. The WSJ alleges that Smith may or may not have been working with Michael Flynn but, in the end, they found absolutely nothing. To summarize even further, a guy tried to find Hillary’s missing emails and failed…HALT THE PRESSES! Of course, the goal of the story is to paint some sinister plot that involved Smith and Michael Flynn enlisting the help of some Russians to hack the 2016 election…thus ‘proving’ the collusion angle.

Unfortunately, the story seems to prove the exact opposite which is, if Flynn was really running around on some wild goose chase looking for Hillary’s missing 30,000 emails by chatting up hackers on a message board then we have to assume that means he wasn’t in any way connected to the original hack which ended up on WikiLeaks. [..] Of course, it’s only deeper in the story that the WSJ admits they have no idea if Flynn was even involved with Smith…but no one reads an entire article so it’s fairly irrelevant. “What role, if any, Mr. Flynn may have played in Mr. Smith’s project is unclear. In an interview with The Wall Street Journal, Mr. Smith said he knew Mr. Flynn, but he never stated that Mr. Flynn was involved.” [..] Meanwhile, the WSJ confirms that Smith died last month at the age of 81. So there you have it…all the makings of another salacious, ‘bombshell’ story with multiple references to Russians, hackers, collusion, shady dealings with Michael Flynn, etc, yet still no evidence of pretty much anything.

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“95% of employees at the State Department, Pentagon, CIA, NSA, and the rest of the alphabet soup agencies do not come and go with elections.”

Peace is Popular (Ron Paul)

Peace is popular. That was Ron Paul’s message to our audience in Texas earlier this spring, and it has been his consistent message since first running for Congress in the 1970s. So why do seemingly endless wars remain such a stubborn feature of the American presidency, with the shameful complicity of Congress? Americans who supported Trump did so overwhelmingly because he promised a populist “America First” approach to both domestic and foreign policy. Every poll shows that the domestic economy, culture wars, and immigration were the animating issues of the election – not our ongoing military misadventures in the Middle East. Nobody voted for an escalation of US involvement in Syria, nobody voted to ramp up the never-ending war in Afghanistan by dispatching the Mother of All Bombs, and nobody voted to resurrect an absurd decades-old conflict with North Korea.

Yet President Trump has done all of these things, largely abandoning the noninterventionist promises of Candidate Trump. Perversely, ordering a missile attack on a Syrian air base was the first and only act that earned him praise from his enemies at organs like the New York Times and Washington Post. “He’s finally acting presidential” they gushed. To understand Trump’s departures from his campaign rhetoric is to understand the very nature of politics and the bureaucratic state. Nobody goes to Washington to “run” the government. Washington runs them. Trump, ostensibly the biggest outsider to win the presidency in modern American history, cannot overcome the entrenched foreign policy establishment any more than he can overcome gravity. 95% of employees at the State Department, Pentagon, CIA, NSA, and the rest of the alphabet soup agencies do not come and go with elections.

They, along with the vast apparatus of defense contractors, are not going anywhere. Permanent war and interventionism requires permanent funding. And like all tax-funded enterprises, war is inherently anti-capitalist. It diverts resources, swells state bureaucracies, and hides the horrific human and economic costs in a cloak of patriotism and platitudes about America’s role in the world. When we hear Vice President Pence talk about “rebuilding the arsenal of democracy,” he really means it. Ludwig von Mises saw German war socialism up close as a lieutenant in the Austro-Hungarian army during the Great War. Under Wehrwirtschaftslehre, the German doctrine of war economics, the normal calculations of capitalist businessmen go out the window. Costs, quality, demand, and profit become wholly secondary to the overriding goal of preparing the nation for war.

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After 2 weeks. Forecast for Athens today: 43ºC (110ºF). Ditto for the weekend.

Greece Garbage Cleanup Begins As Workers Halt Strike Action (K.)

Municipal garbage collectors Thursday started the long and unpleasant task of picking up thousands of tons of trash that has been rotting under the sun for the past two weeks after unionists decided to call off strike action demanding job security. As fears of a threat to public health spiked Thursday amid an intensifying heat wave, the union representing protesting workers, POE-OTA, announced that they would be ending their action. The decision came on the day of a 24-hour strike by POE-OTA workers who pressed on with the walkout despite having wrested concessions from the government earlier in the week. Local authorities in Athens, Thessaloniki and other cities are now expected to rehire thousands of sanitation workers whose short-term contracts have expired.

According to sources, the Interior Ministry is on Friday to issue a circular to local authorities across the country, calling for the implementation of an amendment approved in Parliament on Wednesday which foresees the extension of workers’ short-term contracts. It remains unclear how POE-OTA will react, however, if municipalities end up hiring fewer than the 6,150 people currently employed on short-term contracts in sanitation. Meanwhile contract workers have to clean up the mess in the streets. According to Giorgos Broulias, deputy mayor of Athens, it will take at least four days to pick up all the trash. “It will then take even more days for parts of the capital to be washed down with cleansing agents and disinfectants,” he told Kathimerini.

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I even saw a number of 20,000 arrivals so far this week.

Italy Threatens To Turn Away Foreign NGO Ships With Rescued Migrants (dpa)

Italy is poised to instruct its ports to turn away foreign ships carrying rescued migrants unless other EU countries agree to greater burden-sharing on refugee arrivals, a senior government source said Wednesday. The threat would apply to ships run by NGOs but not to foreign state units operating under EU border agency Frontex and EU naval mission Eunavfor Med Sophia, the source told dpa. The same source said Italy’s ambassador to the EU, Maurizio Massari, was sent to meet EU Migration Commissioner Dimitris Avramopoulos to deliver the message that “Italy is dealing with a serious situation and Europe cannot turn the other way.” “The ambassador highlighted that Italy’s efforts have been enormous and well beyond international obligations [and] under the current circumstances it is difficult for our authorities to allow further disembarkations of migrants,” an Italian diplomat added.

It was not immediately clear whether the ban against foreign NGO ships could be enacted legally. It could affect several German vessels operated by German sea rescue charities, such as Jugend Rettet and Sea Watch. “We are a bit worried by this idea,” said Michele Trainiti, sea rescue coordinator for the Doctors Without Borders (MSF). The medical charity operates two boats in the Mediterranean, including one with a non-Italian flag. He said diverting vessels to France, for example, “would require many more days of navigation with people in very precarious situations,” which current MSF rescue vessels “are not equipped for.”

Rome’s hard-line message filtered out following the record rescue of nearly 10,000 migrants since the weekend, and in the wake of Prime Minister Paolo Gentiloni’s failure at last week’s EU summit to convince partners to take in more asylum seekers. It also came in the wake of a Sunday local election rout for the ruling centre-left Democratic Party, which several commentators blamed on public discontent with rising immigration and government proposals to grant citizenship to children of foreign residents.

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Europe is morally and politically gapingly empty.

Closing Italian Ports ‘A Cry For Help’, Say Weary Crew Of Rescue Boat (G.)

As 1,032 people plucked from the Mediterranean prepared to disembark the MS Aquarius onto southern Italian soil on Thursday, bringing refugee and migrant arrivals to more than 12,000 this week, those who had rescued them said they understood why Rome was threatening to close its ports to such vessels. “Officially, we haven’t heard anything from the Italian government … but if this is indeed the case, if anything it sounds more like a cry for help from the Italian government towards the EU,” said Marcella Kraay, a Dutch coordinator with Médecins Sans Frontières, as the ship arrived at Porto di Corigliano in Calabria. “And that goes along with what we’ve always asked for, which is for the EU to organise dedicated search and rescue in the Mediterranean. Until that happens we are forced to be out there because people are in danger, they’re going to drown if we’re not there.”

The last week has seen a surge of refugees arriving on humanitarian rescue ships. The Aquarius, which has been been undertaking risky year-round search and rescue missions in waters north of Libya since 2015, set a new record on Tuesday as it recovered more than 1,000 people in just one day. More than 5,000 people arrived in Italy on Monday alone, according to the International Office for Migration. The Italian government, which came under pressure from a strong challenge from the centre-right in local elections this week, has responded by giving its EU ambassador a mandate to raise the issue with the European commission – including the possibility it could close its ports to the ships. A commission spokeswoman said it supported Italy’s “call for a change in the situation” and the bloc’s migration ministers would tackle the matter next week.

“Over the last few months we’ve heard so many things said that were going to happen, or that should happen, or politicians basically gearing up for elections, that it doesn’t make me feel all that much right now,” said Kraay on board the Aquarius, which is chartered by the German-French charity SOS Méditerranée. “Let’s cross that bridge when we get there … until now we just need to stay focussed on doing our job.”

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Jun 292017
 
 June 29, 2017  Posted by at 9:42 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Paul Klee Still Life 1929

 

Banks Unleash Big Payouts After Fed’s Stress Tests (BBG)
Yellen Questioned As China Debt Surpasses 300% Of GDP (CNBC)
Corporations Are Still The Largest Buyer Of Stocks (BBG)
NYSE President Targets Short Sellers (WS)
Forget Fake News, Investors Should Realize The Markets Are Fake (CNBC)
CNN’s Van Jones: “The Russia Thing Is Just A Big Nothing Burger” (ZH)
CNN Proclaims Trump’s War On Media “Is Physically Endangering Reporters” (ZH)
The Presstitutes, Not Russia, Interfered in the US Presidential Election (PCR)
Schaeuble Bemoans EU ‘Loophole’ Used in Italy Banks’ Rescue (CNBC)
Accept Demands or it’s Goodbye Qatar (GulfNews)
Scientists Fear “Supervolcano” Eruption At Yellowstone (ZH)
World’s Plastic Binge ‘As Dangerous As Climate Change’ (G.)

 

 

If you needed any more proof that the Fed has caused the crisis.

Banks Unleash Big Payouts After Fed’s Stress Tests (BBG)

The Federal Reserve told big banks they have more than enough capital, and they promptly announced a windfall for their shareholders. JPMorgan Chase, Citigroup and Bank of America led U.S. firms in unveiling plans to boost dividends and stock buybacks more than analysts had projected, after every lender passed annual stress tests for the first time since the Fed began the reviews in the wake of the 2008 financial crisis. Shares across the industry rallied in late trading. Still, Capital One slipped more than 2% after it was the lone bank to stumble through the exam Wednesday, garnering conditional approval to make payouts while it fixes “material weaknesses” in planning. Lofty payouts once made banks hot stocks before the financial crisis exposed many of them as too thinly capitalized.

The companies’ plans unveiled on Wednesday show how they’re trying to generate investor interest – even as many still struggle to meet profitability targets and a few languish below book value. “This is the big payoff after seven years of pushing the industry to get to a place where capital planning is well ingrained,” said David Wright, a managing director at Deloitte’s advisory business who once worked at the Fed. “They reached the summit.” The Fed’s projections also show regulators may have more leeway to ease rules after years of forcing companies to curtail risk-taking and beef up internal controls – demands that eroded revenue and fueled costs.

The industry is counting on President Donald Trump to soften that oversight by appointing more business-friendly board members to the Fed, shifting the balance of power from regulators to shareholders. Earlier this month, Treasury Secretary Steven Mnuchin recommended that stress tests be performed every other year and that banks maintaining a sufficiently high level of capital be exempt from exams. “The highly positive report card puts more wind at the backs of the Trump administration and others who want to soften Dodd-Frank-era regulations,” Ian Katz at Capital Alpha Partners said in a note Wednesday, referring to a 2010 rewrite of industry rules. “That’s an additional bit of longer-term good news for banks.”

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Yellen has fallen victim to the opioid epidemic.

Yellen Questioned As China Debt Surpasses 300% Of GDP (CNBC)

Global debt has hit a record level in the first quarter of this year, mainly driven by emerging markets, raising questions of whether there will be another financial crisis in the near future. Data from the Institute of International Finance showed that global debt reached $217 trillion in the first quarter of this year, or 327% of GDP. “The debt burden is not distributed evenly. Some countries/sectors have seen deleveraging while others have built up very high debt levels. For the latter, rising debt may create headwinds for long-term growth and eventually pose risks for financial stability,” the IIF said in its Global Debt Monitor report on Tuesday. On Tuesday, U.S. Fed Chair Janet Yellen told an audience in London that banks are in a “very much stronger” position and another financial crisis is unlikely “in our lifetime.”

The 2008 financial crisis began with high indebtedness levels by U.S. households. But Yellen’s remarks aren’t’ consensual. “I think Yellen’s comment – if I am interpreting it correctly – is a huge hostage to fortune. The words Titanic and unsinkable spring to mind,” Erik Jones, professor of international political economy at Johns Hopkins University, told CNBC via email. Casrten Brzeski, senior economist at ING said that “high debt levels mean that the debt crisis has not been solved, yet. Neither in the US, nor in the Eurozone. Increasing debt levels in Asia and other emerging market economies also show that a structural change has not yet taken place.” “All of this, however, does not mean that we are at the verge of a other financial crisis. Central banks and low interest rates have and should continue to limit this risk significantly,” he added via email.

[..] “Total debt in emerging markets (excluding China) has increased by some $0.9 trillion to over $23.6 trillion in the first quarter of 2017—mainly driven by Brazil (up $0.6 trillion to $3.6 trillion) and India (up $0.2 trillion to 2.9 trillion),” the IFF said in its report. China poses a great risk in itself with households accelerating their borrowing. “The household debt-to-GDP ratio hit an all-time high of over 45% in the first quarter of 2017 —well above the Emerging Market average of around 35%. In addition, our estimates based on monthly data on total social financing suggest that China’s total debt surpassed 304% of GDP as of May 2017,” the IIF noted.

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Buyback Mountain.

Corporations Are Still The Largest Buyer Of Stocks (BBG)

The buyers of stocks may not be who everyone thinks they are.Last week, Goldman Sachs released a report saying the recent bull market is being increasingly fed by a single source: exchange-traded funds. The Wall Street Journal echoed on Wednesday with an article titled “ETF Buyers Propel Stock Market Rally.” That certainly follows the recent narrative that the great shift to passive investing – ETFs predominantly follow indexes – is what is driving the market. It is also appears to be wrong, at least according to the most recent data, which came out earlier this month from the Federal Reserve. ETFs, which it should be said are mostly just individuals buying stocks in new packaging, are indeed on pace to plow more money into equities this year than they have in the past, nearly $400 billion, up slightly more than 100% from a year ago.

But they are still not the biggest buyer of stocks. The entities shoveling more money into the stock market than any other this year, as has been the case for the past few years, remain corporations. Buybacks are on pace to reach nearly $550 billion, or $150 billion more than ETFs. ETFs, which it should be said are mostly just individuals buying stocks in new packaging, are indeed on pace to plow more money into equities this year than they have in the past, nearly $400 billion, up slightly more than 100% from a year ago. But they are still not the biggest buyer of stocks. The entities shoveling more money into the stock market than any other this year, as has been the case for the past few years, remain corporations. Buybacks are on pace to reach nearly $550 billion, or $150 billion more than ETFs.

Buybacks are down this year, by 13%, for the first time in a while. So a case could be made that the force driving the market is shifting, though it’s a weak one. Earlier this year, many were predicting that buybacks would drop by 30%. But even if what’s driving the market is shifting, ETFs still do not appear to be holding the keys.

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A longtime favorite among panicky dictatorial types.

NYSE President Targets Short Sellers (WS)

Short sellers like Andrew Left, founder of Citron Research, serve a real purpose in the markets and in society. His analysis helped reveal what’s going on at Valeant Pharmaceuticals and brought media focus on how the company conspired not only to manipulate up its reported sales and earnings but also drug prices for consumers. But short sellers are nuts. Short sellers are fighting a system that is totally rigged in every way against them. They’ve chosen to make money when share prices fall. They’ve chosen to make money in the most painful way possible. Self-flagellation comes to mind. Because the entire system is rigged to make share prices rise, no matter what. And when they rise, short sellers get their heads handed to them.

NYSE Group President Tom Farley, who should be neutral about share prices and should be primarily concerned about the functioning of the market, hammered home just how rigged that fight is. “It feels kind of icky and un-American, betting against a company,” he told lawmakers in Washington yesterday. Even those engaging in rampant hype, lies, and worse, I presume. According to Bloomberg: He added that because short-selling can actually improve markets, public companies don’t necessarily want to ban it outright – instead they want to see more stringent disclosure. “They say, ‘Let’s have a little more transparency,”’ said Farley. This urge for “transparency” is ironic. No one complains how Warren Buffett does it. Through Berkshire Hathaway, he quietly buys enough shares of a company to gain ownership in the single-digit percentage range.

This buying activity drives up the price. His brokerage firm knows, word spreads, and those in the know also buy the shares. Then the stake is disclosed in an SEC filing. Instantly, shares jump further. “Buffett Buys x% of…” the media scream. With his avuncular face on CNBC and other TV shows, he gets to promote what a great company this is, how he believes in the management, yada-yada-yada. Shares jump further. Then he quietly buys some more shares, a small amount this time. When the SEC filing becomes public, the whole media circus starts all over again, and shares jump some more.

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Something I’ve been hammering on forever. Only, if you follow the logic, there’s another step: investors should realize that they themselves are fake, too.

Forget Fake News, Investors Should Realize The Markets Are Fake (CNBC)

The global rally in financial markets is unsustainable because it only seems to respond to changes in the real economy when it fits a certain narrative, according to the CIO of investment firm Fasanara Capital. “I call it fake markets… you know, these days they talk about fake news (but) these are fake markets in a way right?” Francesco Filia, CIO of Fasanara Capital, told CNBC on Wednesday. Filia argued financial markets had become “complacent” and “insensitive” to fundamental changes in the economy. He suggested while markets appeared to surge higher on so-called good data, a mirrored response lower on negative sentiment had not been evident.

“I think this kind of market environment is both unstable and unsustainable… at some point, something is going to happen that is going to all of a sudden wake up markets as to this overvaluation,” Filia said. European bourses were trading lower on Wednesday after European Central Bank President Mario Draghi appeared to hint the ECB would be prepared to scale back its monetary policy amid improving economic prospects for Europe. Meanwhile, in the U.S., the broader S&P 500 index posted its biggest one-day drop in about six weeks overnight and closed at its lowest point since the end of May. Wall Street’s losses appeared to accelerate on news that the U.S. Senate had delayed voting on a health care reform bill.

When Filia was asked to explain how his ‘fake markets’ theory stacked up with declining global stocks on Wednesday, he replied, “A pullback of 1% in the stock market from all-time highs? I wouldn’t call it exactly re-pricing things up. It’s just slowing the pace at which you grow.” Filia cited “Stein’s Law” as a fitting adage for the state of financial markets at present. Herbert Stein, chief economist to U.S. President Richard Nixon wrote: “If something cannot continue forever, it will stop.”

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Ouch. Project Veritas has promised a -compromising- CNN video ‘every day this week’. A conversation that’s long overdue.

CNN’s Van Jones: “The Russia Thing Is Just A Big Nothing Burger” (ZH)

Yesterday, after dropping his first undercover CNN bombshell, which starred producer John Bonifield admitting that CNN’s endless ‘Russian meddling’ crusade was “mostly bullshit” directed by the network’s CEO Jeff Zucker with the sole intent of spiking ratings, Project Veritas’ James O’Keefe promised there was more to come. And, all we knew was that the subject of the second video would be “someone we all knew…” As it turns out, that ‘someone’ is none other than CNN’s Van Jones who inadvertently got caught revealing his true thoughts on CNN’s ‘Russian meddling’ narrative, namely that the whole story is a “big nothing burger.” PV Reporter: “What do you think is going to happen this week with the whole Russia thing?” Van Jones: “The Russia Thing Is Just A Big Nothing Burger” PV Reporter: “Really?” Van Jones: “Yeah.”

Of course, while we’re happy that Van Jones decided to tell the truth, if only while he thought no one was listening, we do wonder how he intends to explain his seemingly conflicted ‘on-air’ versus ‘off-air’ personalities to his children. As you may recall, Jones was the same distraught CNN commentator who spent election night describing Trump as a “bully” and a “bigot” all while saying that his “biggest fear” was how he could explain Trump’s victory to his children… Perhaps it’s time to think about how you can explain to your children why you exploited your position and fame to provoke mass hysteria among a divided American electorate, over a story you knew to be false…hysteria which very well could have contributed to a mass shooting that nearly claimed the life of Steven Scalise.

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Only possible comeback attempt? Problem is: CNN war on Trump may be “Physically Endangering Reporters” at least as much. And no, Trump didn’t start this.

CNN Proclaims Trump’s War On Media “Is Physically Endangering Reporters” (ZH)

It’s been a tough week for CNN, so they needed a distraction, and what better way to try and gain back some credibility – from a worldwide audience now likely questioning every word out of the ‘news’ network’s mouth – than to proclaim “we are going to see a reporter face physical harm because” of President Trump’s “declaration of war on the media.” As RealClear Politics reports, CNN’s Clarissa Ward, a foreign correspondent serving as guest co-host on Wednesday’s broadcast of CNN’s News Day, fretted “people” in war zones have been “emboldened” by President Trump’s “declaration of war on the media.” Ward, expressing concern for members of the media in dangerous areas of the world, said to guest Chris Cillizza, “I can only imagine what a person like you is dealing with. At what point does this become reckless or irresponsible?”

Playboy White House correspondent Brian Karem – who is now infamous for his whiney exchange with White House deputy spokeswoman Sarah Huckabee Sanders at Tuesday’s press briefing – replied that Ward is “absolutely right” and talked about the trial and tribulations of reporters who have been jailed and even killed. “Our newspapers after Donald Trump’s election, we’ve gotten threats from both the far left and the far right,” Karem said. “They are emboldened, it is dangerous, and the fact of the matter is, it is insulting to the memory of the people who have given their lives for the cause for providing information to the public to then be told you are fake media, you do not matter, and what you’re doing is false.” Karem went as far to predict “we are going to see a reporter face physical harm because” of Trump.

“And quite frankly, every one of us should stand up against that because it is undermining the First Amendment. It is dangerous, making it dangerous for reporters. You’re absolutely right, there is going to come a time, and it’s not going to be too far off I surmise when we’re going to see a reporter is going to face physical harm because of this,” he said. We suggest readers put down all sharp objects before embarking on the following four minutes of utter farce as each personality seems to want to one-up the last in their grandstanding of just how threatened they are by Trump’s words…

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Paul Craig Roberts put what I wrote last night in Feeding Frenzy in the Echo Chamber, in a sharper perspective.

The Presstitutes, Not Russia, Interfered in the US Presidential Election (PCR)

Unlike Oliver Stone, who knew how to interview Vladimir Putin, Megyn Kelly did not. Thus, she made a fool of herself, which is par for her course. Now the entire Western media has joined Megyn in foolishness, or so it appears from a RT report. James O’Keefe has senior CNN producer John Bonifield on video telling O’Keefe that CNN’s anti-Russia reporting is purely for ratings: “It’s mostly bullshit right now. Like, we don’t have any big giant proof.” CNN’s Bonifield is reported to go on to say that “our CIA is doing shit all the time, we’re out there trying to manipulate governments.” And, of course, the American people, the European peoples, and the US and European governments are being conditioned by the “Russia did it” storyline to distrust Russia and to accept whatever dangerous and irresponsible policy toward Russia that Washington comes up with next.

Is the anti-Russian propaganda driven by ratings as Bonifield is reported to claim, or are ratings the neoconservatives and military/security complex’s cover for media disinformation that increases tensions between the superpowers and prepares the ground for nuclear war? RT acknowledges that the entire story could be just another piece of false news, which is all that the Western media is known for. Nevertheless, what we do know is that the fake news reporting pertains to Russia’s alleged interference in the US presidential election. Allegedly, Trump was elected by Putin’s interference in the election. This claim is absurd, but if you are Megyn Kelly you lack the IQ to see that. Instead, presstitutes turn a nonsense story into a real story despite the absence of any evidence. Who actually interfered in the US presidential election, Putin or the presstitutes themselves?

The answer is clear and obvious. It was the presstitutes, who were out to get Trump from day one of the presidential campaign. It is CIA director John Brennan, who did everything in his power to brand Trump some sort of Russian agent. It is FBI director Comey who did likewise by continuing to “investigate” what he knew was a non-event. We now have a former FBI director playing the role of special prosecutor investigating Trump for “obstruction of justice” when there is no evidence of a crime to be obstructed! What we are witnessing is the ongoing interference in the presidential election, an interference that not only makes a mockery of democracy but also of the rule of law. The presstitutes not only interfered in the presidential election; they are now interfering with democracy itself. They are seeking to overturn the people’s choice by discrediting the President of the United States and those who elected him.

The Democratic Party is a part of this attack on American democracy. It is the DNC that insists that a Putin/Trump conspiracy stole the presidency from Hillary. The Democrats’ position is that it is too risky to permit the American people—the “deplorables”— to vote. The Democratic Party’s line is that if you let Americans vote, they will elect a Putin stooge and America will be ruled by Russia. Many wonder why Trump doesn’t use the power of the office of the presidency to indict the hit squad that is out to get him. There is no doubt that a jury of deplorables would indict Brennan, Comey, Megyn Kelly and the rest. On the other hand, perhaps Trump’s view is that the Republican Party cannot afford to go down with him, and, therefore, as he is politically protected by the Republican majority, the best strategy is to let the Democrats and the presstitutes destroy themselves in the eyes of flyover America.

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Er, wait, Schaeuble was there when the loophole was put into place.

Schaeuble Bemoans EU ‘Loophole’ Used in Italy Banks’ Rescue (CNBC)

Finance Minister Wolfgang Schaeuble on Wednesday underscored Germany’s concerns about what he called a regulatory loophole after the EU cleared Italy to wind up two failed banks at a hefty cost to local taxpayers. Schaeuble told reporters that Europe should abide by rules enacted after the 2008 collapse of U.S. financial services firm Lehman Brothers that were meant to protect taxpayers. Existing European Union guidelines for restructuring banks aimed to ensure “what all political groups wanted: that taxpayers will never again carry the risks of banks,” he said.

Italy is transferring the good assets of the two Veneto lenders to the nation’s biggest retail bank, Intesa Sanpaolo , as part of a transaction that could cost the state up to €17 billion ($19 billion). The deal, approved by the European Commission, allows Rome to solve a banking crisis on its own terms rather than under potentially tougher European rules. Noting that closure under national insolvency laws benefited owners and investors, Schaeuble said: “We in Europe need to think about this regulatory loophole.”

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Will Saud’s new kid on the block go to war with Qatar? What will Trump do? And Putin?

Accept Demands or it’s Goodbye Qatar (GulfNews)

In a series of clear warning messages to Qatar, Arab Gulf officials have stressed that meeting a set of demands that were put forward by four Arab countries is the only way out of the crisis for Doha. The officials said they are considering further economic pressure on Qatar, such as reducing commercial links with states that continue to trade with Doha. UAE Ambassador to Moscow, Omar Gobash, sent a strong message to Doha that it could face expulsion from the Gulf Cooperation Council if it does not meet the 13-point-demands set by Saudi Arabia, the UAE, Bahrain and Egypt. The four countries had cut their diplomatic relations with Doha earlier this month over Qatar’s foreign policy and its support to terrorism.

In an interview in London with The Guardian, Gobash said there are “certain economic decisions that we can take which are being considered right now”. “One possibility would be to set conditions on our own trading partners and say you want to work with us then you have got to make a commercial choice. “If Qatar was not willing to accept the demands, it is a case of ‘Goodbye Qatar’ we do not need you in our tent anymore,” he said. Meanwhile, Dr Anwar Mohammad Gargash, UAE Minister of State for Foreign Affairs, called on Qatar to make a “wise and well-thought choice” move before the time frame given by the four Arab countries to Doha to comply with the demands. “Now that the hour of truth is coming nearer, we invite the brother to choose his surroundings, to choose honesty and transparency in dealing [with the issue],” he said in a tweet.

“We have long suffered from the brother’s conspiracy to undermine our stability and we have witnessed his support for a partisan agenda seeking to create chaos in our Arab world. Now, we tell him: Enough! Get back to your senses or go on your way, but without us,” he posted on his Twitter account yesterday. He was referring to Qatar as brother. In Washington, Saudi Foreign Minister Adel Jubeir showed a tougher stand saying that there is no room for negotiations with Qatar. “We made our point, we took our steps and it’s up to the Qataris to amend their behavior,” Saudi Foreign Minister Adel Al Jubeir told reporters. Once they do, “then things will be worked out. But if they don’t, they will remain isolated.”

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One of the world’s largest supervolcanoes.

Scientists Fear “Supervolcano” Eruption At Yellowstone (ZH)

More than 800 earthquakes have now been recorded at the Yellowstone Caldera, a long-dormant supervolcano located in Yellowstone National Park, over the last two weeks – an ominous sign that a potentially catastrophic eruption could be brewing. However, despite earthquakes occurring at a frequency unseen during any period in the past five years, the US Geological Survey says the risk level remains in the “green,” unchanged from its normal levels, according to Newsweek. The biggest earthquake in this “swarm” – which registered a magnitude of 4.4 – took place on June 15, three days after the rumblings started. That quake was the biggest in the region since a magnitude 4.8 earthquake struck close to Norris Geyser Basin in March 2014. This magnitude 4.4 earthquake was so powerful that people felt it in Bozman Montana, about eight miles away.

A scientist from the University of Utah said the quakes have also included five in the magnitude three range, and 68 in the magnitude two range. “The swarm consists of one earthquake in the magnitude 4 range, five earthquakes in the magnitude 3 range, 68 earthquakes in the magnitude 2 range, 277 earthquakes in the magnitude 1 range, 508 earthquakes in the magnitude 0 range, and 19 earthquakes with magnitudes of less than zero,” the latest report said. An earthquake with a magnitude less than zero is a very small event that can only be detected with the extremely sensitive instruments used in earthquake monitoring.” There is normally a rise in seismic activity before a volcano erupts. And scientists currently believe there’s a 10% chance that a “supervolcanic Category 7 eruption” could take place this century, as pointed out by theoretical physicist Michio Kaku.

An eruption, Kaku said, is long overdue: The last one occurred 640,000 years ago. To be sure, the swarm has slowed down considerably this week, and larger swarms have been recorded in the past, according to Jacob Lowenstern, the scientists in charge of the Yellowstone Volcano Observatory. Yet the possibility that the volcano could be on the verge of what’s called a “supereruption” should be enough to give the government pause. But scientists have said recently that there’s some evidence to suggest the next one could occur this century.

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That’s over 30 pieces of plastic each and every day:

“..people who eat seafood ingest up to 11,000 tiny pieces of plastic every year.”

World’s Plastic Binge ‘As Dangerous As Climate Change’ (G.)

A million plastic bottles are bought around the world every minute and the number will jump another 20% by 2021, creating an environmental crisis some campaigners predict will be as serious as climate change. New figures obtained by the Guardian reveal the surge in usage of plastic bottles, more than half a trillion of which will be sold annually by the end of the decade. The demand, equivalent to about 20,000 bottles being bought every second, is driven by an apparently insatiable desire for bottled water and the spread of a western, urbanised “on the go” culture to China and the Asia Pacific region. More than 480bn plastic drinking bottles were sold in 2016 across the world, up from about 300bn a decade ago. If placed end to end, they would extend more than halfway to the sun. By 2021 this will increase to 583.3bn, according to the most up-to-date estimates from Euromonitor International’s global packaging trends report.

Most plastic bottles used for soft drinks and water are made from polyethylene terephthalate (Pet), which is highly recyclable. But as their use soars across the globe, efforts to collect and recycle the bottles to keep them from polluting the oceans, are failing to keep up. Fewer than half of the bottles bought in 2016 were collected for recycling and just 7% of those collected were turned into new bottles. Instead most plastic bottles produced end up in landfill or in the ocean. Between 5m and 13m tonnes of plastic leaks into the world’s oceans each year to be ingested by sea birds, fish and other organisms, and by 2050 the ocean will contain more plastic by weight than fish, according to research by the Ellen MacArthur Foundation. Experts warn that some of it is already finding its way into the human food chain.Scientists at Ghent University in Belgium recently calculated people who eat seafood ingest up to 11,000 tiny pieces of plastic every year.

Last August, the results of a study by Plymouth University reported plastic was found in a third of UK-caught fish, including cod, haddock, mackerel and shellfish. Last year, the European Food Safety Authority called for urgent research, citing increasing concern for human health and food safety “given the potential for microplastic pollution in edible tissues of commercial fish”. Dame Ellen MacArthur, the round the world yachtswoman, now campaigns to promote a circular economy in which plastic bottles are reused, refilled and recycled rather than used once and thrown away. “Shifting to a real circular economy for plastics is a massive opportunity to close the loop, save billions of dollars, and decouple plastics production from fossil fuel consumption,” she said.

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Jun 282017
 
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James Dean in a photobooth 1949

 

All Companies Hit By Ransomware Attack Used Bootleg Or Unpatched Software (WS)
Yellen: Banks Very Much Stronger; No Financial Crisis In Our Lifetime (CNBC)
There Is No Excuse For Janet Yellen’s Complacency (Steve Keen)
Yellen: “I Don’t Believe We Will See Another Crisis In Our Lifetime” (ZH)
Trio of Fed Speakers Warn on Valuations With Eyes on Tightening (BBG)
Car Loans, Credit Card Debt Push UK Back Towards Another Credit Crisis (Tel.)
UK Banks Ordered To Hold More Capital As Consumer Debt Surges (G.)
ECB VP: Slack In European Economy Looks Worse Than We Thought (CNBC)
Chinese Satellite Data Hint At Ominous Manufacturing Slowdown (ZH)
UK Government Refuses To Pay For Fireproof Cladding (Ind.)
Democrats The Only Thing Standing In The Way Of Single-Payer In California (CP)
Democrats The Only Thing Standing In The Way Of Single-Payer In California (CP)
The Human Tragedy Of Drug Abuse And Car Crashes (BBG)
Search Results Show Why Europe Is Mad at Google (BBG)
‘Google, Facebook Are Super Monopolies On The Scale Of Standard Oil’ (CNBC)
Greeks Work 203 Days Out Of The Year To Pay Taxes (K.)
Greek Garbage Collectors Reject Compromise As Trash Piles Up (AP)
At Least 24 Migrants Die Off Libya in 48 Hours, More Than 8,000 Rescued (R.)

 

 

Wolf Richter explains what happened yesterday. They’re all either thieves or extremely stupid/negligent.

Merck, Rosneft, Ukraine government, Ukraine International Airport, Maersk, WPP (world’s largest advertising agency), Mondelez etc. They’ve all been found to either use bootleg software or not having patched their systems with a readily available Microsoft patch.

All Companies Hit By Ransomware Attack Used Bootleg Or Unpatched Software (WS)

The Petya ransomware attack infected over 2,000 computer systems across the world as of midday today, according to Kaspersky Lab, cited by Reuters. Russia and Ukraine were most affected. Other victims were in Britain, France, Germany, Italy, Poland, and the US. When China starts up its computers, it will suffer the consequences for not staying in bed. The malware includes code known as “Eternal Blue,” which was also used in the WannaCry attack in May. Experts believe the code was purloined from NSA. The ransomware encrypts hard drives of infected machines and then demands $300 in bitcoin in order for the user to regain access. Petya takes advantage of the same vulnerability in Windows as WannaCry. But Microsoft released a patch to fix this vulnerability on March 14.

Patched computers were not affected by WannaCry, and are not affected today. The Windows Malicious Software Removal Tool detects and removes the malware automatically during the updating process. But that update isn’t available for bootleg copies of Windows – hence China’s disproportionate problems with the attack in May. And computers that are running legitimate versions of Windows but hadn’t been updated for whatever reason are vulnerable. Amazingly, when WannaCry hit, plenty of companies were mauled because some dude hadn’t updated their machines. Corporate and government networks were hit. You’d think after the hue and cry in May, all legit corporate systems would be updated, and bootleg copies of Windows would be replaced either by a legit copy of Windows or another operating system. But no. Rinse and repeat.

[..] These are big sophisticated companies, many of them with global operations, and therefore with global IT networks, not mom-and-pop operations. And yet the Windows machines in their networks hadn’t been updated and had remained vulnerable, or were using bootleg copies of Windows that couldn’t be updated, even after all the hoopla in May about this vulnerability. Just sitting here and shaking my head.

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Grandma goes nuts.

Yellen: Banks Very Much Stronger; No Financial Crisis In Our Lifetime (CNBC)

Fed Chair Janet Yellen said Tuesday that banks are “very much stronger” and another financial crisis is unlikely anytime soon. Speaking during an exchange in London with British Academy President Lord Nicholas Stern, the central bank chief said the Fed has learned lessons from the financial crisis and has brought stability to the banking system. Banks last week passed the first round of the Fed’s stress tests to see how they would perform under adverse conditions like a 10% unemployment rate and turbulence in commercial real estate and corporate debt. “I think the public can see the capital positions of the major banks are very much stronger this year,” Yellen said. “All of the firms passed the quantitative parts of the stress tests.”

She also made a bold prediction: that another financial crisis the likes of the one that exploded in 2008 was not likely “in our lifetime.” The crisis, which erupted in September 2008 with the implosion of Lehman Brothers but had been stewing for years, would have been “worse than the Great Depression” without the Fed’s intervention, Yellen said. Yellen added that the Fed learned lessons from the financial crisis and is being more vigilant to find risks to the system. “I think the system is much safer and much sounder,” she said. “We are doing a lot more to try to look for financial stability risks that may not be immediately apparent but to look in corners of the financial system that are not subject to regulation, outside those areas in order to try to detect threats to financial stability that may be emerging.”

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Steve explains that Yellen knows Minsky, but prefers to ignore him.

There Is No Excuse For Janet Yellen’s Complacency (Steve Keen)

Janet Yellen has been reported by Reuters as saying in London yesterday that “she does not believe that there will be a run on the banking system at least as long as she lives”: “Would I say there will never, ever be another financial crisis? You know probably that would be going too far but I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will be,” Yellen said at an event in London. The only word I can use to describe this belief is “delusional”. The only way in which her belief could be justified would be in financial crises were truly random events, caused by something outside the economy—or just by a very bad throw of the economic dice. This is indeed the perspective of mainstream “Neoclassical” economic theory, in which Yellen was trained, and because of which she was deemed eligible—and indeed eminently suitable—to Chair the Federal Reserve.

This is the theory that led the OECD to proclaim, two months before the crisis began in August 2007, that “the current economic situation is in many ways better than what we have experienced in years”, and that they expected that “sustained growth in OECD economies would be underpinned by strong job creation and falling unemployment.”. It is the theory that led her colleague David Stockton, then the Director of the Division of Research and Statistics at the Fed, to dismiss the possibility of a recession after the crisis had begun, in December 2007—the very month that the recession is now regarded as having commenced: “Overall, our forecast could admittedly be read as still painting a pretty benign picture: despite all the financial turmoil, the economy avoids recession and, even with steeply higher prices for food and energy and a lower exchange value of the dollar, we achieve some modest edging-off of inflation.” (FOMC, Dec 2007)

So what we are getting from her is not merely her own personal complacency, but the complacency of an approach to economics which has always been grounded in the beliefs that (a) capitalism is inherently stable, (b) that the financial sector can be ignored—yes that’s right, ignored—when doing macroeconomics, and (c) that the Great Depression was an anomaly that can also be ignored, because it can only have been caused either by an exogenous shock or bad government policy, both of which cannot be predicted in advance.

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It’s a really crazy thing to say. Does she expect to be fired soon?

Yellen: “I Don’t Believe We Will See Another Crisis In Our Lifetime” (ZH)

If there was any confusion why the Fed intends to keep hiking rates, even in the face of negative economic data and disappearing inflation, it was put to rest over the past 2 days when not one, not two , not three, but four Fed speakers, including the three most important ones, made it clear that the Fed’s only intention at this point is to burst the asset bubble. First there was SF Fed president John Williams who said that “there seems to be a priced-to-perfection attitude out there” and that the stock market rally “still seems to be running very much on fumes.” Speaking to Australian TV, Williams added that “we are seeing some reach for yield, and some, maybe, excess risk-taking in the financial system with very low rates. As we move interest rates back to more-normal, I think that that will, people will pull back on that,

Then it was Fed vice chairman Stan Fischer’s turn, who while somewhat more diplomatic, delivered the same message: “the increase in prices of risky assets in most asset markets over the past six months points to a notable uptick in risk appetites…. Measures of earnings strength, such as the return on assets, continue to approach pre-crisis levels at most banks, although with interest rates being so low, the return on assets might be expected to have declined relative to their pre-crisis levels–and that fact is also a cause for concern.” Fischer then also said that the corporate sector is “notably leveraged”, that it would be foolish to think that all risks have been eliminated, and called for “close monitoring” of rising risk appetites.

All this followed the statement by Bill Dudley, who many perceive as the Fed’s shadow chairman, who yesterday warned that rates will keep rising as long as financial conditions remain loose: “when financial conditions tighten sharply, this may mean that monetary policy may need to be tightened by less or even loosened. On the other hand, when financial conditions ease—as has been the case recently—this can provide additional impetus for the decision to continue to remove monetary policy accommodation.” And finally, it was Yellen herself, who speaking in London acknowledged that some asset prices had become “somewhat rich” although like Fischer, she hedged that prices are fine… if only assumes record low rates in perpetuity:

“Asset valuations are somewhat rich if you use some traditional metrics like price earnings ratios, but I wouldn’t try to comment on appropriate valuations, and those ratios ought to depend on long-term interest rates,” she said. It was not all doom and gloom. Responding to a question on financial system stability, Yellen said post-crisis regulations (and $2.5 trillion in excess reserves which just happen to be fungible and give the banks the impression that they are safe) had made financial institutions much “safer and sounder.” “Will I say there will never, ever be another financial crisis? No, probably that would be going too far. But I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will.”

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There were smokescreeens a-plenty too.

Trio of Fed Speakers Warn on Valuations With Eyes on Tightening (BBG)

When a trio of Federal Reserve officials delivered remarks on Tuesday, the state of U.S. financial markets came in for a little bit of criticism. When all was said and done, U.S. equities sank the most in six weeks, yields on 10-year Treasuries rose and the dollar weakened to the lowest level versus the euro in 10 months. Fed Chair Janet Yellen said that asset valuations, by some measures “look high, but there’s no certainty about that.” Earlier, San Francisco Fed President John Williams said the stock market “seems to be running very much on fumes” and that he was “somewhat concerned about the complacency in the market.” Fed Vice-Chair Stanley Fischer suggested that there had been a “notable uptick” in risk appetite that propelled valuation ratios to very elevated levels.

The Fed officials’ comments came amid a torrent of events that buffeted financial markets Tuesday, from an IMF cut to its U.S. growth forecast, Google suffering the biggest ever EU antitrust fine, a fresh blow to the Republican agenda in Washington and a global cyberattack. Still, selling in U.S shares accelerated around 1:30 p.m. as Yellen delivered her assessment of the market since the central bank raised interest rates June 14. “Asset valuations are somewhat rich if you use some traditional metrics like price earnings ratios, but I wouldn’t try to comment on appropriate valuations, and those ratios ought to depend on long-term interest rates,” Yellen said during a speech in London.

Investors are on guard for signs of a change in its economic outlook that could delay rate increases or when it will begin shrinking its $4.5 trillion balance sheet. Yellen said the Fed’s plans for the balance sheet were “well understood” by financial markets. Officials have said they intend to begin allowing the portfolio to roll off this year. In the end, Yellen made it pretty apparent that that her plans for continued monetary policy tightening haven’t shifted. “We’ve made very clear that we think it will be appropriate to the attainment of our goals to raise interest rates very gradually,” Yellen said.

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All the credit was the only thing that kept the country going.

Car Loans, Credit Card Debt Push UK Back Towards Another Credit Crisis (Tel.)

Banks are “forgetting the lessons” of the financial crisis, increasing the risk of reckless lending which could land them — and the wider economy — in trouble later, Mark Carney has warned. Credit card lending is booming and the Bank of England fears that banks are becoming complacent, assuming the relatively good economic times will continue indefinitely. As a result lenders are cutting down the amount of capital they put aside to keep them safe if those loans turn bad — something that could leave them in financial trouble if there is a recession and customers cannot pay back their debts. “I think it is forgetting some of the lessons of the past, or not fully learning the lessons of the past,” said Mr Carney, the Bank of England’s Governor. He said that the economy overall is performing well and total lending is not getting out of hand, but consumer credit is growing by more than 10pc per year, with credit cards and car loans growing particularly fast.

“Most financial stability indicators are neither particularly elevated nor subdued. Nevertheless, there are pockets of risk that warrant extra vigilance,” he said at the publication of the latest Financial Stability Report. “Consumer credit has increased rapidly. Lending conditions in the mortgage market are becoming easier. And lenders may be placing undue weight on the recent performance of loans in benign conditions.” As well as holding more capital against credit card debt and consumer loans, banks have also been warned that next month the Financial Conduct Authority and the Prudential Regulation Authority will also publish new affordability rules to make sure customers are likely to be able to repay their debts.

The situation is deemed relatively urgent — one part of an annual assessment of the losses which banks could make in a hypothetical recession has been brought forwards this year. Instead of publishing the results in November, the consumer credit part of the so-called stress tests will be revealed in September. That decision reflects the short-term nature of consumer loans. Short-term loans can also pose a threat to financial stability because households take them less seriously than mortgages. Consumer debts only amount to one-seventh of the total of mortgage debt, but they account for 10-times the amount of bad loans which banks write off.

That also has implications for the wider economy — a household in financial trouble will cut spending deeply to make sure it can still pay the mortgage, but is less worried about credit cards. Mortgage lending standards are also under the spotlight. The Financial Policy Committee told banks in 2014 that they should assess whether borrowers could still afford their mortgages if the Bank of England’s base rate went up by three%age points. Most banks calculated this by adding 3%age points to their standard variable rates, but some lenders said that in this scenario they might not pass the full cost onto customers. Officials reject this interpretation and have ordered banks to add the full 3 points to their rates when judging the affordability.

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First you lower rates, then you take measures against the fully predictable consequences.

UK Banks Ordered To Hold More Capital As Consumer Debt Surges (G.)

The Bank of England is to force banks to strengthen their financial position in the face of a rapid growth in borrowing on credit cards, car finance and personal loans. The intervention by Threadneedle Street means banks will need to set aside as much as £11.4bn of extra capital in the next 18 months and is intended to protect the financial system from the 10% rise in consumer lending over the year. The Bank is also bringing forward the part of the annual stress tests on banks that scrutinises their exposure to consumer credit by two months to September. The Bank’s Prudential Regulation Authority and the City regulator, the Financial Conduct Authority, will also publish next month how they expect lenders to treat borrowers in the consumer credit market.

The Bank’s half-yearly assessment of risk to financial markets also set out measures to rein in the riskiest mortgage lending, highlighted the risks associated with the UK’s exit from the EU and said commercial property prices were “at the top end of sustainable valuations”. While the Bank found risks to financial stability were neither “particularly elevated nor subdued” it warned that there “pockets of risk that warrant vigilance”. “Consumer credit has increased rapidly. Lending conditions in the mortgage market are becoming easier. And lenders may be placing undue weight on the recent performance of loans in benign conditions,” said Mark Carney, governor of the Bank of England.

Carney said the decision to call on banks to hold more capital – which is largely a rejig of their current resources rather than raising new funds – was taken after domestic risks returned to “standard” levels. A year ago, after the Brexit vote, the Bank had relaxed regulatory requirements on banks – using new tools it was given after the financial crisis – and is now reversing that decision.

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“..if we adopt, as in the U.S., a broader concept of unemployment (which in the U.S. they call U6) then unemployment in the euro area is at 18% whereas it is at 9% in the case of the U.S..”

ECB VP: Slack In European Economy Looks Worse Than We Thought (CNBC)

The difference between current and potential levels of output in the euro area economy could be greater than the ECB originally thought, its vice president, Vitor Constancio, warned on Tuesday. “What we see, what we observe is that domestic factors of inflation starting with wage and cost developments and then also price decisions are not responding the way we would expect in view of our more common estimates of this slack. So we have to ask ourselves – are these measures of the slack of the economy correct?,” explained Constancio, speaking to CNBC from the ECB Forum on central banking in Sintra. The board had therefore begun to ask themselves whether other variables should instead be considered to establish a more accurate view of the current economic situation.

“The unemployment rate now is 9.3% according to the normal international standard of measuring employment …. But if we adopt, as in the U.S., a broader concept of unemployment (which in the U.S. they call U6) then unemployment in the euro area is at 18% whereas it is at 9% in the case of the U.S. which would imply that the slack is then bigger than we could judge some time ago,” he noted. “That being the case it justifies fully what the president (Mario Draghi) said at the end of his speech (on Tuesday) that we need persistence. If we want to bring inflation to our target of below but close to 2% then we have to persist in the type of monetary policy that we been adopting,” he added.

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Earlier, we saw Yellen vs Minsky. Here’s China’s Minsky moment.

Chinese Satellite Data Hint At Ominous Manufacturing Slowdown (ZH)

A reading published by San Francisco-based SpaceKnow Inc. which uses commercial satellite imagery to monitor activity across thousands of industrial sites signaled deterioration in the country’s manufacturing sector for the first time since August. The gauge, known as the China Satellite Manufacturing Index, fell to 49.6, below the 50 break-even level. The index incorporates satellite data from thousands of industrial sites across China. Satellite imagery has often proved eerily presceint in the recent past: In the US, satellite data analyzing activity in retailers’ parking lots pointed to significant activity weakness at core US retail locations, even as sentiment indicators were suggesting an uptick in sales following the election. Meanwhile, small- and medium-sized enterprises showed the lowest level of confidence in 16 months, and conditions in the steel business remained lackluster, according to Bloomberg.

Some other indicators have been slightly more sanguine: sales-manager sentiment stayed positive, and outlook of financial experts recovered. Still, data suggest that output in China’s economy slowed during the second quarter after a strong start to the year, with investment slowing, some credit becoming tighter and signs that curbs on the country’s property market are starting to have an impact. Should growth continue to slow, China’s leaders would find themselves in an awkward position, with the country’s twice-a-decade leadership transition expected to occur this fall when the 19th Party Congress convenes to appoint its new senior leadership. It’s widely believed that China’s President Xi Jinping will begin serving his second five-year term.

[..] [That] could be the spark that ignites China’s “Minsky moment” – the financial cataclysm that Kyle Bass and other perma-china-bears have been waiting for when China’s overleveraged market crumbles to dust – might finally be in the offing. Indeed, though China’s markets have been relatively calm recently, the PBOC’s attempts to tighten liquidity have sparked some instability in recent months. Back in March, the central bank had to engage in mini bailouts when a jump in interbank rates caused some small regional lenders to default on their interbank loans after money market rates shot higher. Meanwhile, China’s weakening credit impulse should give any China bulls pause.

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Completely nuts. Feels like they’re looking to get tossed out.

UK Government Refuses To Pay For Fireproof Cladding (Ind.)

Councils face bills running to hundreds of millions of pounds to make tower blocks safe after the Government said it would not guarantee extra money to pay for vital work to prevent a repeat of the Grenfell disaster. Ninety-five high-rise buildings in 32 local authority areas have failed safety tests, the Department for Communities and Local Government (DCLG) said yesterday, with hundreds more blocks still to be tested. The findings prompted Theresa May to announce a “major national investigation” into the use of cladding on high-rise blocks, with every sample so far tested in the wake of the Grenfell found to be unsafe. But despite emergency fire safety checks being carried out nationwide under central government direction, councils will not be reimbursed for refurbishment work carried out.

A DCLG spokesperson said there was “no guarantee” of central government funding and that it would be “up to local authorities and housing associations to pay” for the work needed to ensure residents’ safety. The spokesperson said financial support would be considered on a “case by case” basis for those that could not afford to carry out the necessary work, but did not clarify what the criteria for that consideration would be. The announcement was met with severe criticism from some of the councils affected, with local authorities already having their budgets severely squeezed after years of austerity measures. Julie Dore, leader of Sheffield City Council, which is among the authorities to have discovered unsafe cladding, said “starved” councils would be forced to make cuts to other areas, including schooling, if central government did not help with costs.

“Local authorities have been starved of money over the past seven years. Our spending power has decreased,” she said. “There is no way we can afford to reclad our tower blocks. If we have to find that money, it will come from other projects, from investing in the fabric of our schools, capital investment in our infrastructure, the money has to come out of that. And it can’t really be done. “I say absolutely, categorically that the Government should pay. If they can find £1bn to send to Northern Ireland, that gets more spending per capita than anywhere else, to buy 10 votes, then these people, living in high-rise towers, deserve better.”

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There is no serious press left in the US to get to the bottom of this.

Democrats The Only Thing Standing In The Way Of Single-Payer In California (CP)

Nothing better illustrates the political bankruptcy of the Democratic Party—for all progressive intents and purposes—than California State Assembly Speaker Anthony Rendon’s announcement on Friday afternoon that he was going to put a “hold” on the single-payer health care bill (SB 562) for the state, effectively killing its passage for at least the year. The Democratic Party finds itself in a bind in California. They hold the governorship and a supermajority in both houses of the legislature, so they can pass any bill they want. SB 562 had passed the Senate 23-14. There was enormous enthusiasm among California progressive activists, who [..] were working tirelessly, and hopeful of success. After all, Bernie’s people were taking over the California party from the bottom since the election.

I recall a night of drinking last year with an old friend who has been spearheading that effort, as he rebuffed my skepticism, and insisted that this time there would be a really progressive takeover of the California party, and single-payer would prove it. After all, once enough progressive pressure was been put on the legislators, the bill would be going to super-progressive Democratic Governor, Jerry Brown, who had made advocacy of single-payer a centerpiece of his run for President in 1992, saying: “We treat health care not as a commodity to be played with for profit but rather the right of every American citizen when they’re born.” Bernie foretold. Unfortunately, today that Governor is, according to Paul Song, co-chair of the CHC, “doing everything he can to make sure this never gets on his desk.”

And it won’t. Unfortunately, all the Democrats like Rendon, who “claims to be a personal supporter of single-payer,” will make sure that their most progressive governor is not put in the embarrassing position of having to reject what he’s been ostensibly arguing for for twenty-five years, of demonstrating so blatantly what a fraud his, and his party’s, progressive pretensions are. Thus unfolds the typical Democratic strategy: Make all kinds of progressive noises and cast all kinds of progressive votes, while carefully managing the process so that the legislation the putatively progressives putatively support never gets enacted. Usually, they blame Republican obstructionism, and there certainly is enough of that, and where there is, it provides a convenient way for Democrat legislator to “support” legislation they know will be blocked and wouldn’t really enact themselves if they could.

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Phones are as addictive as opioids.

The Human Tragedy Of Drug Abuse And Car Crashes (BBG)

More than 130,000 Americans are killed annually by preventable causes, and the number has been climbing at a faster rate recently because of opioid abuse and car crashes involving drivers distracted by mobile devices. The death count jumped more than 7% in 2015 to about 146,600, according to a report by the National Safety Council Tuesday. The council said lawmakers often overlook simple solutions that could avoid deaths on the roads or in people’s homes, while public attention is focused on events that are relatively rare in the U.S., like terrorist attacks or plane crashes. Vehicle mishaps and poisonings, driven by opioid abuse, killed more than 80,000 people combined in 2015. Preventable accidents cost society about $850 billion a year, according to the group.

“Culturally, we’re numb to these things,” NSC President Deborah Hersman said in a phone interview. “Why are these deaths any less tragic or important? We should be talking about these things every day because they affect our families.” The toll from opioids is worsening, partly because so many patients become dependent on painkillers, often turning to street drugs like heroin. Almost one in four people on Medicaid, the U.S. health program for the poor, received powerful and addictive opioid pain medicines in 2015, Express Scripts Holding Co. said this month. The council said lawmakers should tighten oversight of the distribution of prescription medications and improve access to drugs that can reverse overdoses and treat addiction.

[..] “We need to make distracted driving socially unacceptable,” Tom Goeltz, whose daughter Megan was killed in a car crash last year, said at a news conference held by the NSC Tuesday. “This tragedy could have easily been prevented.” Goeltz, a Minnesotan who works to help industrial companies avoid accidents, said his daughter was pregnant when her car was struck by a distracted driver. “As a safety consultant with over 30 years of experience, I was powerless to save my daughter,” he said. “We all know people that have been killed on our roads. We all know somebody. How is this acceptable to us? We need to do more. You don’t want to be a part of this club.”

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“..Google has 90 days to come up with its own solution [..]. If it doesn’t do that, the EU will fine it up to 5% of the entire company’s daily global revenue.”

Search Results Show Why Europe Is Mad at Google (BBG)

Europe hit Alphabet’ Google with a $2.7 billion fine on Tuesday, saying it broke antitrust laws by favoring one of its search services over rival websites. The case centers around Google Shopping ads, which place color pictures, prices and links to products that consumers have typed into its search engine. The EU’s Competition Chief Margrethe Vestager said Google’s search algorithms should treat its own Shopping service the same way as other price-comparison sites. What exactly does this look like in practice? Here’s a walk-through of what the EU is so upset about. This is for desktop computer searches. On phones, there’s less digital real estate, leaving even less space for competitors. Before we start, it’s important to note that Google argues customers aren’t that interested in clicking through to other price comparison sites and want to go directly to retailers’ sites from Google. It denies any wrongdoing and is considering an appeal.

Google Shopping Today: The screenshot below shows results for a search in Germany for “gas grill.” Five Google Shopping ads take up the most valuable part of the page at the top. No other comparison shopping websites show up in the first couple of links. Scrolling down, you see the first result for a competing price comparison service – Idealo – come in at number six. There’s another at number 11, Moebel24. But that link is listed as an ad, meaning Moebel24 had to pay for that placement, even though it’s near the bottom of the page. The EU says this is bad because consumers click far more often on results appearing higher up in Google’s search results. Even on a desktop computer, the top ten results on page 1 generally get about 95% of all clicks on generic search results (with the top result receiving about 35% of all clicks), the European Commission said on Tuesday.

2014 Proposal: The EU’s Google investigation has been going for years. Vestager’s predecessor tentatively struck a deal with Google in 2014 for a hybrid model that set aside space in those top Shopping search boxes for other price comparison websites. But the agreement fell apart when competitors realized they had to pay for that placement. [..] What could Google do to satisfy Europe’s demands this time? Vestager said Google has 90 days to come up with its own solution, as long as it gives equal treatment to competing price comparison sites. If it doesn’t do that, the EU will fine it up to 5% of the entire company’s daily global revenue. [..] Google would have to sacrifice space currently occupied by its own Shopping ads to make the latter idea work, cutting into a highly profitably and growing revenue stream.

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US anti-trust laws are strong enough to counter this. But you need politicians to apply them.

‘Google, Facebook Are Super Monopolies On The Scale Of Standard Oil’ (CNBC)

Google shareholders won’t be phased by the EU’s $2.7 billion fine against the company for competition abuses related to its shopping business, Elevation Partners co-founder Roger McNamee told CNBC on Tuesday. “As a shareholder of Google you’re looking at this and saying: ‘We won again,'” McNamee said. The venture capitalist spoke hours after EU regulators fined Google a record €2.4 billion ($2.7 billion), ruling that the search-engine giant violated antitrust rules for its online shopping practices. Google said it will consider appealing the decision to the highest court in Europe. “Google, Facebook, Amazon are increasingly just super-monopolies, especially Google and Facebook. The share of the markets they operate in is literally on the same scale that Standard Oil had … more than 100 years ago – with the big differences that their reach is now global, not just within a single country,” he said on “Squawk Alley.”

The fine is not large enough to change Google’s behavior, he added. “The only thing that will change it is regulations that actually say you can or can’t do something.” McNamee said Google’s business model isn’t structured in a way that allows for competition. “The way that Google’s product works makes its anti-competitive behavior much more obvious — but do not underestimate how powerful Facebook’s monopoly has been to boosting Instagram and WhatsApp,” he said. The competition issue with the big tech companies extends beyond the EU into the U.S., he said. “They do stifle innovation. They stifle entrepreneurship. … You can see this even in Silicon Valley it’s very hard for any of the unicorn generation of companies to actually reach successful critical mass because, you know, one of their competitors gets acquired by Google and Facebook and then the category is over,” said McNamee. “I think it’s a big policy question the world is going to have to deal with over the next few years,” he said.

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The problem is not even the duration, France and Belgium are worse. The problem is what Greeks are left with after taxes are paid, which is much less than the others.

Greeks Work 203 Days Out Of The Year To Pay Taxes (K.)

Greeks will work an average of 203 days this year to pay taxes to the state and social insurance contributions, according to research conducted by the Dragoumis Center for Liberal Studies (KEFIM) to raise awareness about tax freedom day – the first day of the year in which a country has theoretically earned enough income to pay its taxes. In the case of Greece, this day will be on July 23, which means that Greeks will have worked 15 days more than last year, when tax freedom day arrived on July 7. The only two European Union countries in which tax freedom day will arrive after that in Greece are France and Belgium. Cyprus celebrated its tax freedom day on March 29, while Malta and Ireland did the same on April 18 and 30 respectively. Bulgaria was next on May 18 before Finland on June 22.

KEFIM, which conducted research into the topic for a third straight year, said citizens are working an increasing number of days each year to meet their tax obligations and, compared to 2006, Greeks now work two months more to this end. Referring to the results of the research, financial analyst and member of KEFIM’s scientific council Miranda Xafa said the “government managed to achieve a primary surplus by tax hikes and not through spending cuts.” Xafa also said that for every 100 euros a self-employed professional makes, 82 go toward tax and and other contributions. New Democracy vice president Adonis Georgiadis said that Greece had “lost another month because of overtaxation.” “Our aim when we become the government is to reverse the trend,” he said.

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Today is day 12 of the garbage strike. Weekend weather forecast up to 44ºC (111ºF). Some judge needs to declare a public health emergency, if Tsipras is too scared to do it.

Greek Garbage Collectors Reject Compromise As Trash Piles Up (AP)

Greece’s municipal garbage collectors on Tuesday rejected a government compromise offer and decided to continue an 11-day protest that has left mounds of festering refuse piled up across Athens amid high temperatures during the key summer tourism season. Municipal workers union head Nikos Trikas said the protest will go on as planned until Thursday at least, after an inconclusive meeting with Prime Minister Alexis Tsipras. The union is pressing the left-led government to honor a pledge to provide permanent jobs for long-term contract workers, and rejected Tsipras’ proposals as a “slight” but unsatisfactory improvement on past offers. Greek authorities have warned that the uncollected trash poses a public health risk ahead of a heat wave forecast for later this week.

Tourism Minister Elena Kountoura urged the union to reconsider, arguing that the protest “endangers public health, and is bad for tourism as well as the country’s international image.” The Athens Trade Association has also called on the two sides to reach a compromise, warning that piles of garbage would discourage tourists from traveling to the Greek capital. Tourism is a vital source of revenue for Greeces battered economy. Although not technically on strike most of the time, municipal workers have been blockading garages where municipal trash collection trucks operate from, as well as landfill sites across the country. Trikas said that unions will review their position Thursday, when they have called a 24-hour strike. He also pledged to increase emergency crews that the union has on duty to ensure that the garbage mounds do not mushroom out of all control.

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Where are Merkel and Macron? Why are their voters not demanding they tackle the issue?

At Least 24 Migrants Die Off Libya in 48 Hours, More Than 8,000 Rescued (R.)

Red Crescent volunteers recovered the bodies of 24 migrants on Tuesday that were washed up in an eastern suburb of the Libyan capital, Tripoli, as large-scale rescues were made in the Mediterranean. Residents in Tajoura district said the bodies had begun washing up at the end of last week. Several had been partially devoured by stray dogs, according to a local coast guard official. The toll was expected to increase as the flimsy boats used to carry migrants as far as international waters normally carry more than 100 people. Three migrants died in the Mediterranean on Monday night, a German aid group said, during Italian-led rescue operations in which thousands more were pulled to safety.

About 5,000 migrants were picked up off the Libyan coast by emergency services, Italy’s navy, aid groups and private boats on Monday, and rescues were continuing on Tuesday, according to an Italian coastguard spokesman. “Despite all efforts, three people died from a sinking rubber boat” and rescue boats in the area are struggling to cope, German humanitarian group Jugend Rettet said on Facebook. Jugend Rettet (Rescuing Youth) is one of about nine aid groups patrolling seas into which people traffickers have sent more than half a million refugees and migrants on highly dangerous voyages towards Europe over the past four years. “We reached the capacity limit of our ship, while our crew is seeing more boats on the horizon. Currently, all vessels are overloaded,” Jugend Rettet added.

About 72,000 migrants arrived in Italy on the perilous route from Libya between Jan. 1 and June 21, roughly 20% more than in 2016, and more than 2,000 died on the way, according to the International Organization for Migration.

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Jun 152017
 
 June 15, 2017  Posted by at 9:59 am Finance Tagged with: , , , , , , , , , ,  7 Responses »
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Francisco de Goya Saturn Devouring His Son 1819–1823

 

Fed Raises Rates, Unveils Balance Sheet Cuts In Sign Of Confidence (R.)
The Fed Is Flying Blind (BBG)
Peak Economic Delusion Signals Coming Crisis (Smith)
When the Fed Tightens, It Leads to Financial “Events (Phoenix)
Senate Overwhelmingly Approves New Sanctions To “Punish” Russia (ZH)
What If The Russia Russia Russia Story Was Nothing? (HotAir)
Pentagon Agrees To Sell $12 Billion In F-15s To Qatar (ZH)
The Old Are Eating the Young (Satyajit Das)
Greek Economy Minister Calls Wolfgang Schäuble ‘Dishonest’ (R.)
Greece Is Germany’s ‘De Facto Colony’ (Pol.)
EU Officials Warn Athens Not To Take Debt Issue To Leaders’ Summit (K.)

 

 

It’s getting increasingly frustrating to try and find objective views of anything to do with Trump or Putin. And I don’t want to live in an echo chamber. So I left out Mueller’s Trump investigation.

Yellen is stuck. Next.

Fed Raises Rates, Unveils Balance Sheet Cuts In Sign Of Confidence (R.)

The Federal Reserve raised interest rates on Wednesday for the second time in three months and said it would begin cutting its holdings of bonds and other securities this year, signaling its confidence in a growing U.S. economy and strengthening job market. In lifting its benchmark lending rate by a quarter%age point to a target range of 1.00% to 1.25% and forecasting one more hike this year, the Fed seemed to largely brush off a recent run of mixed economic data. The U.S. central bank’s rate-setting committee said the economy had continued to strengthen, job gains remained solid and indicated it viewed a recent softness in inflation as largely transitory. The Fed also gave a first clear outline on its plan to reduce its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities, most of which were purchased in the wake of the 2007-2009 financial crisis and recession.

It expects to begin the normalization of its balance sheet this year, gradually ramping up the pace. The plan, which would feature halting reinvestments of ever-larger amounts of maturing securities, did not specify the overall size of the reduction. “What I can tell you is that we anticipate reducing reserve balances and our overall balance sheet to levels appreciably below those seen in recent years but larger than before the financial crisis,” Fed Chair Janet Yellen said in a press conference following the release of the Fed’s policy statement. She added that the balance sheet normalization could be put into effect “relatively soon.” The initial cap for the reduction of the Fed’s Treasuries holdings would be set at $6 billion per month, increasing by $6 billion increments every three months over a 12-month period until it reached $30 billion per month.

For agency debt and mortgage-backed securities, the cap will be $4 billion per month initially, rising by $4 billion at quarterly intervals over a year until it reached $20 billion per month. [..] The Fed has now raised rates four times as part of a normalization of monetary policy that began in December 2015. The central bank had pushed rates to near zero in response to the financial crisis. Fed policymakers also released their latest set of quarterly economic forecasts, which showed only temporary concern about inflation and continued confidence about economic growth in the coming years. They forecast U.S. economic growth of 2.2% in 2017, an increase from the previous projection in March. Inflation was expected to be at 1.7% by the end of this year, down from the 1.9% previously forecast.

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The Fed’s been flying blind for well over 10 years.

The Fed Is Flying Blind (BBG)

The architects of U.S. monetary policy at the Federal Reserve should be happy. They’ve succeeded beyond their own expectations in bringing down the unemployment rate without triggering an outburst of inflation. Stock indexes are near record highs, and interest rates remain low. But those who set interest rates are in the awkward position of not understanding how things got so good—and are therefore confused about what to do next. “The Fed isn’t run by computers, it’s run by people,” says David Rosenberg, chief strategist at Gluskin Sheff. “Like all of us they have their flaws and their blind spots. On June 14, the Federal Open Market Committee voted as expected to raise the federal funds rate a quarter point, to a range of 1% to 1.25%. It said it expects inflation to rise to its 2% target “over the medium term.”

For Fed Chair Janet Yellen and company, the central mystery continues to be why inflation remains below 2% despite unemployment having dropped to just 4.3% in May. Even ex-convicts and high school dropouts are getting job offers one reason why many economists believe it’s inevitable that wages must rise. When you have a shortage of supply of something, its price will go up, says Gad Levanon, chief U.S. economist at the Conference Board, a business-supported research group. A tight job market, however, hasn’t translated into inflation. The Fed’s preferred measure of inflation, the personal consumption expenditures price index, rose just 1.7% in April from a year earlier. On June 14, as the Fed was meeting, the Bureau of Labor Statistics announced that the Consumer Price Index excluding food and energy rose just 0.1% in May, the third surprisingly low reading in three months.

Michael Feroli, chief U.S. economist at JPMorgan Chase., sympathizes with Yellen’s predicament. He said in an interview before the FOMC meeting that Yellen is relying out of necessity on the Phillips curve, which says that lower unemployment leads to higher inflation. “It’s kind of the best we’ve got” as a descriptor of the economy, he says. Still, Feroli couldn’t resist headlining his report on the puzzlingly low CPI number, “Captain Phillips goes overboard.” Some economists worry that the Fed rate increases will abruptly cool the economy by increasing the cost of borrowing via credit cards, auto loans, and student loans, as well as business loans. Rosenberg, who’s more bearish than most economists, points out that recessions occurred 10 of the last 13 times the Fed raised interest rates. He says the U.S. is due for a recession within the next 12 months.

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“The question is not “when” we will enter collapse; we are already in the midst of an economic collapse. ”

Peak Economic Delusion Signals Coming Crisis (Smith)

According to the Atlanta Fed, US GDP in the first quarter of 2017 has declined to 0.7% , going back to lows touched on in 2014 after the Fed reduced QE.

The US has lost 5 million manufacturing jobs since the year 2000, and this trend has accelerated in recent years. Manufacturing in the US only accounts for 8.48% of all jobs according to May statistics. 102 million working age Americans do not currently have a job. This includes the 95 million Americans not counted by the Bureau of Labor because they assume these people have been unemployed so long they “do not want to work”. Thousands of retail outlet stores, the primary engine of the American economy, are set to close in 2017. Sweeping bankruptcies and downsizing are ravaging the retail sector, and internet retailers are not taking up the slack despite highly publicized growth. In 2016, online retail sales only accounted for 8.1% of all retail sales.

Oil inventories continue to amass as US energy demand declines. Declining energy demand is a sure sign of overall economic decline. OPEC and other entities continue to argue that “too much supply” is the issue; an attempt to distract away from the reality of lower consumption and the falling wealth of consumers. Corporate earnings expectations continue their dismal path, suggesting that stock markets have been supported by central bank stimulus and blind investor faith in central bank intervention. The stimulus is now being cut off. How long before investor faith is finally lost?

It is unfortunate that so many people only track stocks when accounting for economic health. They have crippled themselves and their own observations, and actually condescend when confronted with counter-observations and data. They help globalists and international financiers by perpetuating false narratives; sometimes knowingly but often unconsciously. And, when the system does destabilize to the point that they actually realize it, they will blame all the wrong culprits for their pain and suffering. The question is not “when” we will enter collapse; we are already in the midst of an economic collapse. The real question is, when will the uneducated and the biased finally notice? I suspect the only thing that will shock them out of their stupor will be a swift stock market drop, since this is the only factor they seem to pay attention to. This will happen soon enough.

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That much is obvious.

When the Fed Tightens, It Leads to Financial “Events (Phoenix)

The Fed concludes its June meeting today. The Fed fund futures markets put the odds of the Fed hiking rates again at 99.6%. This would mark the third rate hike by the Fed during this cycle. Why would this matter? Because it indicates the Fed is embarked on a serious tightening cycle. One rate hike can be a fluke. Two rate hikes could even be just policy error. But three rate hikes means the Fed is determined.

As Bank of America noted in a recent research note, when the Fed becomes determined to tighten… it usually ends in an “event.” What would an “event” look like for today’s market? A Crash is coming…

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It’s a craze. It’s doing so much damage.

Senate Overwhelmingly Approves New Sanctions To “Punish” Russia (ZH)

The U.S. Senate on Wednesday approved new sanctions to punish Russia for “meddling” in the 2016 election. The bipartisan legislation, which passed with an overwhelming 97-2 vote, slaps new sanctions on Russia and restricts President Trump from easing them in the future without first receiving congressional approval. The only two senators to vote against the measure were Sens. Mike Lee (R-UT) and Rand Paul (R-KY), while Chris Van Hollen (D-Maryland) abstained. Known as the Crapo Amendment, after Mike Crapo (R-Idaho), chairman of the Senate Banking, Housing and Urban Affairs Committee, the measure was endorsed by Foreign Relations Committee Chairman Bob Corker (R-Tennessee) and ranking member Ben Cardin (D-Maryland). The deal was attached to an Iran sanctions bill that is expected to pass later this week.

While top Republican senators had initially wanted to give the White House space to try improving U.S.-Russia relations, but ultimately decided talks with Russia have been moving too slowly. The sanctions against Russia are “in response to the violation of the territorial integrity of the Ukraine and Crimea, its brazen cyber-attacks and interference in elections, and its continuing aggression in Syria,” according to the deal’s sponsors. The amendment also allows “broad new sanctions on key sectors of Russia’s economy, including mining, metals, shipping and railways” and authorizes “robust assistance to strengthen democratic institutions and counter disinformation across Central and Eastern European countries that are vulnerable to Russian aggression and interference.”

New sanctions would be imposed on “corrupt Russian actors” and those “involved in serious human rights abuses,” anyone supplying weapons to the Syrian government or working with Russian defense industry or intelligence, as well as “those conducting malicious cyber activity on behalf of the Russian government” and “those involved in corrupt privatization of state-owned assets.” The biggest neocon in Congress, John McCain, was delighted with the outcome: “We must take our own side in this fight. Not as Republicans, not as Democrats, but as Americans,” said Sen. John McCain (R-AZ) before the vote. “It’s time to respond to Russia’s attack on American democracy with strength, with resolve, with common purpose, and with action.” As AP adds, lawmakers took action against Russia in the absence of a forceful response from President Donald Trump.

While the president has sought to improve relations with Moscow and rejected the implication that Russian hacking of Democratic emails tipped the election his way, non-stop “anonymous sources” have repeatedly leaked “news” to the NYT and WaPo, suggesting Trump colluded with Russia and/or was being probed by the FBI. Following Comey’s testimony, which confirmed there is no “there” there, the media attacks against Trump have shifted, and now accuse the president of obstruction of justice and interference with the FBI’s investigation into Mike Flynn. Speaking earlier on Wednesday, Vladimir Putin’s spokesman Dmitry Peskov said told reporters the Kremlin will hold out with its reaction until the U.S. decides on new sanctions against Russia. “We wouldn’t like to enter this sanctions spiral again. But that’s not our choice.” Indeed, and with the US having made Russia’s choice for them, we now look for Moscow’s response.

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They’ll just keep digging until they find something, and then blow that up way out of proportion.

What If The Russia Russia Russia Story Was Nothing? (HotAir)

Everyone has been busily trying to parse the Jeff Sessions testimony since the Attorney General took the stand but there doesn’t seem to be a lot to work with. Allahpundit talked about the number of times that Sessions declined to answer certain questions about private conversations he had with the president, but that’s some fairly thin gruel to build a presidency-ending scandal out of. But the one question which seems to still be off limits for most of the MSM is the really ugly one: what if this turns out to be a dry hole? Much of the speculation swirling around this entire saga has been based on anonymous sources supposedly spilling secrets about Oval Office conversations or supposed Russians hiding behind the potted plants. With all of that smoke, there certainly must be a fire, right? But that depends whether the smoke is coming from an actual blaze or some reporting blazing up some prime wacky tobacky.

Having hearings was supposed to clear up many of these questions. Take for example the widely reported and frequently repeated assertion that the Attorney General had a third, unreported meeting with the Russians at the Mayflower. That’s been stated so often that it’s basically become an article of faith on CNN and MSNBC. But yesterday Sessions was asked about it and he simply said… no. There was no third meeting. And? What happens now? Unless the New York Times can produce some video or at least a credible witness who saw Session sneaking off into the cloak room with the Russian ambassador or one of his henchmen that’s pretty much a dead end. And that’s falling into a pattern with so many other aspects of the entire tapestry of accusations against the Trump administration, a group of allegedly nefarious traitors who were colluding with the Russians to cripple the American elections.

David French at National Review tackles what may eventually become the biggest question of all. What if that never happened and it was all a fictional tale assembled by the media? “While we certainly aren’t privy to all the relevant information or all the relevant testimony, nothing that James Comey said last week or that Jeff Sessions said today (much less any of the questions directed his way) contained so much as a meaningful hint that the Committee was on the verge of uncovering the political scandal of the century. Rather, the focus keeps shifting to much narrower questions regarding Trump’s decision to fire James Comey — questions that are important but far less historically consequential than any claim that a president or his attorney general are traitors to their country…

Truth is truth, and it’s important for responsible people to not just understand and respond to actual evidence — no matter where it leads — but also acknowledge its absence. And so far the absence of evidence points to Trump’s innocence of some of the worst allegations ever leveled against an American president or his senior team.”

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Pentagon wouldn’t mind a little war.

Pentagon Agrees To Sell $12 Billion In F-15s To Qatar (ZH)

Remember when Trump called on Qatar to stop funding terrorism, claiming credit for and endorsing the decision of Gulf nations to isolate their small neighbor (where the most important US airbase in the middle east is located),even as US Cabinet officials said their blockade is hurting the campaign against ISIS. You should: it took place just 5 days ago. “We had a decision to make,” Trump said, describing conversations with Saudi Arabia and other Gulf countries. “Do we take the easy road or do we finally take a hard but necessary action? We have to stop the funding of terrorism.” Also last week, Trump triumphantly announced on twitter that “during my recent trip to the Middle East I stated that there can no longer be funding of Radical Ideology. Leaders pointed to Qatar – look!”

Well, Qatar funding terrorism apparently is not a problem when it comes to Qatar funding the US military industrial complex, because just two weeks after Trump signed a record, $110 billion weapons deal with Saudi Arabia, moments ago Bloomberg reported that Qatar will also buy up to 36 F-15 jets from the Pentagon for $12 billion …. even as a political crisis in the Gulf leaves the Middle East nation isolated by its neighbors and criticized by President Donald Trump for supporting terrorism, according to three people with knowledge of the accord. According to the Pentagon, the sale will give Qatar a “state of the art” capability, not to mention the illusion that it can defend itself in a war with Saudi Arabia. If nothing else, Uncle Sam sure is an equal-opportunity arms dealer, and best of all, with the new fighter planes,

Qatar will be able to at least put on a token fight when Saudi Arabia invades in hopes of sending the price of oil surging now that every other “strategy” has failed. To be sure, the sale comes at an opportune time: just days after Qatar put its military on the highest state of alert, and scrambled its tanks. All 16 of them. Maybe the world’s wealthiest nation realized it’s time beef up its defensive capabilities? Qatar’s defense minister will meet with Pentagon chief Jim Mattis on Wednesday to seal the agreement, Bloomberg reported citing people who spoke on condition of anonymity because the sale hasn’t been announced. Last year, congress approved the sale of up to 72 F-15s in an agreement valued at as much as $21 billion but that deal took place before the recent political crisis in the region.

It is unclear what the Saudi reaction will be to the news that Trump is arming its latest nemesis. If our thesis that Riyadh is hoping for Qatar to escalate the nest leg of the conflict is correct, then the Saudis should be delighted.

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“..society as a partnership between those who are living, those who are dead, and those who are yet to be born.”

The Old Are Eating the Young (Satyajit Das)

Edmund Burke saw society as a partnership between those who are living, those who are dead, and those who are yet to be born. A failure to understand this relationship underlies a disturbing global tendency in recent decades, in which the appropriation of future wealth and resources for current consumption is increasingly disadvantaging future generations. Without a commitment to addressing this inequity, social tensions in many societies will rise sharply. entral to the issue is that the rapid rise in living standards and prosperity of the past 50 years has been largely based on rising debt levels, ignoring the costs of environmental damage and misallocation of scarce resources. A significant proportion of recent economic growth has relied on borrowed money – today standing at a dizzying 325% of global GDP.

Debt allows society to accelerate consumption, as borrowings are used to purchase something today against the promise of future repayment. Unfunded entitlements to social services, health care and pensions increase those liabilities. The bill for these commitments will soon become unsustainable, as demographic changes make it more difficult to meet. Degradation of the environment results in future costs, too: either rehabilitation expenses or irreversible changes that affect living standards or quality of life. Profligate use of mispriced non-renewable natural resources denies these commodities to future generations or increases their cost. The prevailing approach to dealing with these problems exacerbates generational tensions. The central strategy is “kicking the can down the road” or “extend and pretend,” avoiding crucial decisions that would reduce current living standards, eschewing necessary sacrifices, and deferring problems with associated costs into the future.

Rather than reducing high borrowing levels, policy makers use financial engineering, such as quantitative easing and ultra-low or negative interest rates, to maintain them, hoping that a return to growth and just the right amount of inflation will lead to a recovery and allow the debt to be reduced. Rather than acknowledging that the planet simply can’t support more than 10 billion people all aspiring to American or European lifestyles, they have made only limited efforts to reduce resource intensity. Even modest attempts to deal with environmental damage are resisted, as evidenced by the recent fracas over the Paris climate agreement. Short-term gains are pursued at the expense of costs which aren’t evident immediately but will emerge later.

This growing burden on future generations can be measured. Rising dependency ratios – or the number of retirees per employed worker – provide one useful metric. In 1970, in the U.S., there were 5.3 workers for every retired person. By 2010 this had fallen to 4.5, and it’s expected to decline to 2.6 by 2050. In Germany, the number of workers per retiree will decrease to 1.6 in 2050, down from 4.1 in 1970. In Japan, the oldest society to have ever existed, the ratio will decrease to 1.2 in 2050, from 8.5 in 1970. Even as spending commitments grow, in other words, there will be fewer and fewer productive adults around to fund them.

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Schäuble couldn’t care less.

Greek Economy Minister Calls Wolfgang Schäuble ‘Dishonest’ (R.)

Greek Economics Minister Dimitri Papadimitriou has accused German Finance Minister Wolfgang Schaeuble of being “dishonest” by blocking debt relief for Greece despite his acknowledgement that Athens has implemented significant reforms. Euro zone finance ministers and the IMF are expected to strike a compromise deal on Greece on Thursday, paving the way for new loans for Athens while leaving the contentious debt relief issue for later. Papadimitriou told German newspaper Die Welt in an interview published on Thursday that Schaeuble first had acknowledged that Greece had met the requirements, but then changed his mind. “I haven’t met Schaeuble yet and I don’t want to be impolite, but his behavior seems dishonest to me,” he added.

Papadimitriou said German resistance to debt relief for Greece raised questions about the very idea and structure of the euro zone. The success of right-wing populists in Europe also showed dissatisfaction with such European structures, he said. “Greece is being made a sacrificial lamb,” he said. Papadimitriou also warned Schaeuble against making decisions based purely on domestic politics, noting that Germany had also received debt relief when it was rebuilding after World War Two. Debt relief is needed to help Greece expand its economy, he said, noting that Athens was not asking for a debt cut, but rather lower interest rates or longer repayment schedules. Greek President Prokopis Pavlopoulos also called on the euro zone finance ministers to spell out concrete measures to reduce the Greek debt burden.

“Greece has fulfilled its commitments and adopted the required reforms. Now it is time for the Europeans to comply with their commitments on debt relief,” Pavlopoulos said in an interview with German business daily Handelsblatt. German opposition politicians also criticized Schaeuble by honing in on the fact that the IMF is likely to participate in the third bailout, but will only disburse any loans when debt measures have been clearly outlined. Gerhard Schick from the Greens party accused Schaeuble of a “lousy trick” with the IMF participation. Thomas Oppermann, senior member of the co-governing Social Democrats (SPD), told Bild newspaper: “Schaeuble must put his cards on the table ahead of the election and say what German taxpayers will have to expect.”

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“Europe stopped listening to Greece a long time ago.”

Greece Is Germany’s ‘De Facto Colony’ (Pol.)

Poor Alexis Tsipras. For days, the Greek leader has been working the phones, trying to secure the best possible terms for his country as it enters the last mile of its seemingly endless cycle of bailouts. So far, his efforts have won him more mockery than respect — especially in Germany. “He keeps calling the whole time, and the chancellor says again and again, ‘Alexis, this issue is for the finance ministers,’” German Finance Minister Wolfgang Schäuble told an audience here on Tuesday, referring to the Greek prime minister’s attempts to win over Angela Merkel to his cause. Eurozone finance ministers are set to decide at a meeting in Luxembourg on Thursday whether to release a more than €7 billion tranche of aid to Greece. No one doubts Athens will get the money. Schäuble all but committed to it on Tuesday.

But Tsipras wants something even more precious: debt relief. No serious economist believes Greece will ever crawl out from under its more than €300 billion debt without significant forgiveness from its creditors. That means convincing Germany, the country to which Greece owes the most. For much of Greece’s nearly decade-long depression, the country was hostage to its domestic politics. Now, it’s hostage to Germany’s. Berlin, which has long opposed outright debt relief, refuses to budge. With a general election in Germany set for late September, Merkel and Schäuble are unlikely to soften their position anytime soon. The Greek bailouts remain politically toxic in Germany, and any agreement involving debt forgiveness would be seen domestically as an admission the rescue effort had failed — and at the German taxpayers’ expense.

Over the years, Germany has quietly accepted more subtle forms of forgiveness, like extending maturities on Greece’s loans and reducing the interest burden. But a straightforward cut, as demanded by the International Monetary Fund, remains out of the question. At least until after the election. Unfortunately for Tsipras, he has very little say in the matter. One big reason he wants debt relief now is that it would allow the European Central Bank to include Greece in its bond-buying program, known as quantitative easing. That would go a long way toward boosting investor confidence in Greece’s stability. But Greece won’t be eligible for the program as long as its debt burden isn’t deemed sustainable. And with the ECB’s program set to be wound down soon, Greece may never benefit. Tsipras may yet try to resist a deal this week and take the matter to next week’s summit of European leaders in Brussels. That’s unlikely to make much difference. Truth is, Europe stopped listening to Greece a long time ago.

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More blackmail.

EU Officials Warn Athens Not To Take Debt Issue To Leaders’ Summit (K.)

As Finance Minister Euclid Tsakalotos braces for a Eurogroup meeting in Luxembourg on Thursday which all evidence suggests will not yield a satisfactory debt solution for Greece, European officials on Wednesday warned Athens against trying to broach the issue at an EU leaders’ summit next week. “If the matter is not resolved today, then it will be discussed at the next Eurogroup, where the agreement won’t be any better,” one source in Brussels told Kathimerini. Sources in Berlin, which has taken a hard line in the face of calls by the IMF for Greek debt relief, struck a similar tone, with one official noting that the matter falls squarely within the remit of the Eurogroup, “a message that has been made absolutely clear.”

“I don’t remember any Greek problem being solved at the EU leaders’ summit level,” another source representing Greece’s international creditors told Kathimerini, referring to previous efforts by Prime Minister Alexis Tsipras to broach issues relating to the country’s international bailouts with Angela Merkel and other EU leaders. A spokesman for Germany’s Finance Ministry, however, struck a positive tone, saying he was looking forward to agreeing on a “viable comprehensive package.” A proposal by French officials, that a solution to Greek debt relief be linked to the country’s growth rate, is expected to be discussed in Luxembourg on Thursday, though it is unlikely to be embraced in its entirety.

Meanwhile, Athens sounded a defiant note on Wednesday, with a high-ranking government official warning that if German Finance Minister Wolfgang Schaeuble does not budge from his positions to make way for a final agreement, then “there are others in higher positions than him that can give a solution.” “If there is no positive move, in the next few days or during the Eurogroup, from the German minister, then it looks like Angela Merkel will be forced to hold the hot potato,” a government official told the Athens News Agency on Wednesday.

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Apr 132017
 
 April 13, 2017  Posted by at 8:44 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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Eruption of Mount Vesuvius 1944

 

Former GM Vice Chair: I Think Tesla Is Doomed (CNBC)
It’s Time for Bank Hardball (Tan)
America In the Age of Hypocrisy, Hubris, and Greed (Frank)
Trump Flips On Five Core Campaign Promises In Under 24 Hours (ZH)
Trump Lays Groundwork for Federal Government Reorganization (BBG)
The Politics of the IMF (WF)
If An Electorate Falls In The Forest, Is Their Voice Heard? (DDMB)
NY Fed Boss May Have Blabbed During Blackout (Crudele)
The Potential For The Disastrous Rise Of Misplaced Power Persists (Assange)
No Greek Pensions Expected To Avoid Cuts (K.)
IMF Chief Lagarde Says ‘Halfway’ There On Greek Talks (R.)
Stop Pretending on Greek Debt (BBG)
Detention Of Child Refugees Should Be Last Resort, Brussels Says (G.)
Crucified Man Had Prior Run-In With Authorities (Petri)

 

 

More on the Ponzi.

Former GM Vice Chair: I Think Tesla Is Doomed (CNBC)

GM’s former Vice Chairman Bob Lutz dropped a whole lot of reality on some unsuspecting Tesla cheerleaders on CNBC this morning. “I am a well known Tesla skeptic. Somehow it’s levitating and I think it’s Elon Musk is the greatest salesman in the world. He paints this vision of an unlimited future, aided and abetted by some analysts. It’s like Elon Musk has been beamed down from another planet to show us mortals how to run a company.” “The fact is it’s a constant cash drain. They’re highly dependent on federal government and state incentives for money which constantly flows in. They have capital raises all the time.” “Even the high-end cars that they build now cost more to build than they’re able to sell them for.” “Mercedes, BWM, Volkswagen, GM, Audi and Porsche are all coming out with 300-mile [range] electric luxury sedans…I think they’re doomed.”

“Their upside on pricing is limited because everybody else sells electric vehicles at a loss to get the credits to be able to sell the sport utility vehicles and the pickup trucks. So that puts a ceiling on your possible pricing.” “And if he can’t make money on the high-end Model S and Model X’s which sell up to $100,000, how in the world is he going to make money on a $35,000 small car? Because I have news for you, 42 years of experience, the cost of a car doesn’t come down proportional to it’s price.” “If you have a situation where the cost of producing a car, labor and materials, is higher than your sell price, your business model is flawed. And it’s doomed and it’s going to fail.”

“The battery plant, in my estimation, is a joke. There are no cost savings from making a lithium ion plant bigger than other people lithium ion plants, because making lithium ion cells is a fully automated process anyway. So, whether you got full automative in a small building or 10x full automation in a big building, you’re not saving any money.”

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Break up the banks!

It’s Time for Bank Hardball (Tan)

Wall Street’s top executives should be pressed for substantive answers to harder-hitting questions about long-term performance. That’s a notion being trumpeted by well-known bank analyst Mike Mayo, who has never been one to shy away from criticizing the companies he covers. And boy, does he have a point. On Wednesday, Mayo published some questions he plans to ask Citigroup’s Chairman Michael O’Neill and CEO Michael Corbat at its annual general meeting later this month. They haven’t truly been held accountable for the lender’s mediocre returns, which includes its inability to meet a targeted return on tangible common equity of 10% by 2015, a goal that has since been pushed to 2019. Mayo’s solutions include another round of restructuring, or, if something is structurally wrong, perhaps the bank should break up.

Another valid question is why Citi feels the need measure its financial and share price performance against European lenders Barclays, Deutsche Bank and HSBC? (The question is somewhat rhetorical: It’s so the bank doesn’t place dead last, which it would on most metrics if compared with U.S. rivals). And oddly enough, it removes its weaker European counterparts for compensation comparison purposes. The same can’t be said for Bank of America, which in addition to reviewing its closest five U.S. competitors, evaluates the performance at worse-off European banks such as Credit Suisse and Royal Bank of Scotland as well as similarly-sized U.S.-based companies such as Coca-Cola and General Electric. This seems unnecessary and almost like an easy way to justify Chairman and CEO Brian Moynihan’s potentially outsized $20 million in annual pay.

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“For Americans who work for a living however, nothing ever seems to improve.”

America In the Age of Hypocrisy, Hubris, and Greed (Frank)

“The whole world wants to know about what the hell is happening with us. So let’s talk about it. I live in Washington now, and the people I live among have no idea how people live here in the Midwest, not the faintest idea… The last couple of years here in America have been a time of brisk prosperity according to official measurements, with unemployment down and the stock market up. For Americans who work for a living however, nothing ever seems to improve. Wages do not grow, median household income is still well below where it was in 2007. Economists have a way of measuring this, they call it the ‘labor share of the Gross National Product’ as opposed to the share taken by stockholders. The labor share of Gross National Product’ hit its lowest point since records were started in 2011, and then it stayed there right for the next couple of years.

In the fall of 2014, with the stock market hitting an all time high, a poll showed that nearly 3/4 of the American public believed that the economy was still in recession, because for them it was. There was time when average Americans could be counted upon to know correctly whether the country was going up or down, because in those days when America prospered, the American people prospered as well. These days things are different. Let’s look at it in a statistical sense. If you look at it from the middle of the 1930’s (the Depression) up until the year 1980, the lower 90% of the population of this country, what you might call the American people, that group took home 70% of the growth in the country’s income.

If you look at the same numbers from 1997 up until now, from the height of the great Dot Com bubble up to the present, you will find that this same group, the American people, pocketed none of this country’s income growth at all. Our share of these great good times was zero, folks. The upper 10% of the population, by which we mean our country’s financiers and managers and professionals, consumed the entire thing. To be a young person in America these days is to understand instinctively the downward slope that so many of us are on.”

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And gets away with it.

Trump Flips On Five Core Campaign Promises In Under 24 Hours (ZH)

Blink, and you missed Trump’s blistering, seamless transformation into a mainstream politician. In the span of just a few hours, President Trump flipped to new positions on several core policy issues, backing off on no less than five repeated campaign promises. In a WSJ interview and a subsequent press conference, Trump either shifted or completely reversed positions on a number of foreign and economic policy decisions, including the fate of the US Dollar, how to handle China and the future of the chair of the Federal Reserve.

Goodbye strong dollar and high interest rates In an announcement that rocked currency markets, Trump told the WSJ that the U.S. dollar “is getting too strong” and he would prefer the Federal Reserve keep interest rates low. “I do like a low-interest rate policy, I must be honest with you,” Mr. Trump said. “I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me. But that’s hurting—that will hurt ultimately,” he added. “Look, there’s some very good things about a strong dollar, but usually speaking the best thing about it is that it sounds good.”

Labeling China a currency manipulator Trump also told the Wall Street Journal that China is not artificially deflating the value of its currency, a big change after he repeatedly pledged during his campaign to label the country a currency manipulator. “They’re not currency manipulators,” the president said, adding that China hasn’t been manipulating its currency for months, and that he feared derailing U.S.-China talks to crack down on North Korea. Trump routinely criticized President Obama for not labeling China a currency manipulator, and promised during the campaign to do so on day one of his administration.

Yellen’s future Trump also told the Journal he’d consider re-nominating Yellen to chair the Fed’s board of governors, after attacking her during his campaign.” I like her. I respect her,” Trump said, “It’s very early.” Trump called Yellen “obviously political” in September and accused her of keeping interest rates low to boost the stock market and make Obama look good. “As soon as [rates] go up, your stock market is going to go way down, most likely,” Trump said. “Or possibly.”

Export-Import Bank Trump also voiced support behind the Export-Import Bank, which helps subsidize some U.S. exports, after opposing it during the campaign. “It turns out that, first of all, lots of small companies are really helped, the vendor companies,” Trump told the Journal. “Instinctively, you would say, ‘Isn’t that a ridiculous thing,’ but actually, it’s a very good thing. And it actually makes money, it could make a lot of money.” Trump’s support will anger conservative opponents of the bank, who say it enables crony capitalism.

NATO Finally, Trump said NATO is “no longer obsolete” during a Wednesday press conference with NATO Secretary General Jens Stoltenberg, backtracking on his past criticism of the alliance. During the campaign, he frequently called the organization “obsolete,” saying did little to crack down on terrorism and that its other members don’t pay their “fair share.” “I said it was obsolete. It is no longer obsolete,” the president said Wednesday. Trump has gradually become more supportive of NATO after it ramped up efforts to increase U.S. and European intelligence sharing regarding terrorism.

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There could be some advantages to a clean-up, but guaranteed they’re going to screw this up by cutting at the wrong places.

Trump Lays Groundwork for Federal Government Reorganization (BBG)

President Donald Trump is issuing a presidential memorandum that will call for a rethinking of the entire structure of the federal government, a move that could eventually lead to a downsizing of the overall workforce and changes to the basic functions and responsibilities of many agencies. The order, which will go into effect Thursday, also will lift a blanket federal hiring freeze that has been in place since Trump’s first day in office almost three months ago and replace it with hiring targets in line with the spending priorities the administration laid out in March, said Mick Mulvaney, director of the Office of Management and Budget. The move is a part of Trump’s campaign pledge to “drain the swamp” and get rid of what the administration views as inefficiencies in the federal government, Mulvaney said.

It comes as the White House also is trying to curb the size of many government agencies through a proposed budget that calls for historically deep spending cuts to everything from medical research to clean-energy programs. The push to reshape the government as well as the budget cuts are almost certain to draw opposition from Congress. “We think at the end of the day this leads to a government that is dramatically more accountable, dramatically more efficient, and dramatically more effective, following through on the very promises the president made during the campaign and that he put into place on day one,” Mulvaney said. He said the administration is starting with a “blank sheet of paper” as to how the government should operate and has set up a website to solicit ideas.

One solution may be to organize it by function, like putting all areas that deal with trade under one department, or to break up large departments into a number of smaller agencies. As an example, Mulvaney said there are 43 different workforce-training programs across at least 13 agencies – without a single point person in charge of them – that could be brought under one roof. “We’re now transitioning into the smarter, more surgical plans of running the government,” Mulvaney said in an interview on MSNBC Wednesday morning.

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Useful background. “..the US also claimed the right to remain fully informed about the financial comings and goings of every single member state, thenceforth and permanently.”

The Politics of the IMF (WF)

At the historic New Hampshire-based Bretton Woods Conference of 1944, delegates from 44 nations across the globe came together to create the International Monetary Fund (IMF) and the World Bank. The former was officially founded on 27 December 1945 with 29 member countries; financial operations commenced on 1 March 1947. From that first meeting in New Hampshire, it was established that the thrust of the IMF’s mission would be to promote greater economic cooperation within the international arena. Though today the IMF maintains its mandate has remained as such, over the years the organisation has evolved alongside a changing global landscape, becoming an extraordinarily powerful organisation as a result.

[..] .. the US played an undeniably dominant role in establishing the IMF and dictating how it would operate. A crucial factor in its make up, and in the US’ ongoing influence within the organisation, was the distribution of voting power among member states. Rather than allocating votes in accordance with the size of a member’s population – which would be the most democratic approach to take – the US instead pushed for voting power to correspond with the volume of contributions made. Unsurprisingly, those contributions made by the US, the world’s biggest economy, were far greater than those of any other member state.

By contributing $2.9bn – double the amount made by the UK, the second biggest contributor at the time – the US was guaranteed twice the number of voting rights, together with veto privileges and a blocking minority. The manoeuvre enabled the superpower to secure near-absolute control of the IMF’s activities. In order to further consolidate its dominant role, the US also claimed the right to remain fully informed about the financial comings and goings of every single member state, thenceforth and permanently.

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“The longer the voices of the desperate go unheard, as just so many silently falling trees in the forest, the more piercing their cries will be in the end.”

If An Electorate Falls In The Forest, Is Their Voice Heard? (DDMB)

It was not until the June 1883 publication of the magazine The Chautauquan that the question was put as such: “If a tree were to fall on an island where there were no human beings would there be any sound?” Rather than pause to ponder, the answer followed that, “No. Sound is the sensation excited in the ear when the air or other medium is set in motion.” A vexatious debate has ensued ever since, one that eventually stumped the great Albert Einstein who finally declared “God does not play dice.” In recognizing this, Einstein also resolved himself to the quantum physics conclusion, that there is no way to precisely predict where individual electrons can be found – unless, that is, you’re Divine.

Odds are high that the establishment, which looks to ride away with upcoming European elections, is emboldened by quantum physics. The entrenched parties appear set to retain their power holds, in some cases by the thinnest of margins. What is it the French say about la plus ca change? Is it truly the case that the more things change the more they stay the same? Is this state of stasis sustainable, you might be asking? Clearly the cushy assumption is that the voices of those whose votes will not result in change will be as good as uncast, unheard and unremarkable. Except…and this is a big ‘except’ – time is on the side of the castigated and for one simple reason – they are young.

[..] And then there is the matter of the refugee crisis, the cost of which few in the United States fully appreciate. Faced with impossible living conditions and no access to work in Jordan, Turkey and Lebanon, hundreds of thousands have opted to risk the journey to Europe. In 2015, 1.3 million asylum seekers landed in Europe, half of whom traced their origins to Syria, Afghanistan and Iraq. That number plunged in 2016 to 364,000 owing mainly to a deal between the EU and Turkey which blocks the flow of migrants to Europe. The cost, not surprisingly, is enormous. Europeans spend at least $30,000 for every refugee who lands on her shores. By some estimates, the cost would have been one-tenth that, as in $3,000 per refugee, had the journey to Europe NOT been made in the first place.

[..] At some point demographics will start to matter. The situation in France is no doubt grave, with youth unemployment at nearly 24%. But that pales in comparison to Italy where 39% of its young workers don’t have jobs to go to, day in and day out. Older voters determined to keep the establishment intact will begin to die off. In their wake will be a growing majority of voters who are increasingly disenfranchised, disaffected and despondent. If there’s one lesson Europeans can glean from their allies across the Atlantic, it’s that bullets can be dodged, but not indefinitely. As we are learning the hard way, necessary reforms are challenging to enact. Avoidance, though, will only succeed in feeding anger and despair. The longer the voices of the desperate go unheard, as just so many silently falling trees in the forest, the more piercing their cries will be in the end.

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There’s a lot of that going on. Stanley Fisher does it too.

NY Fed Boss May Have Blabbed During Blackout (Crudele)

Back in 2011, I caught William Dudley, the president of the New York Federal Reserve Bank, having meetings he wasn’t supposed to have with some of Wall Street’s top players. And nobody cared. Nobody cared despite the fact that Dudley could have easily passed along all sorts of confidential information to these people, who would have immediately known how to profit enormously from what they were being told. I am mentioning this because the head of the Richmond, Va., Fed, Jeffrey Lacker, abruptly resigned last week for doing far less bad than Dudley might have done. Lacker says he took an October 2012 phone call from an analyst at an investment advisory firm and had a conversation about something the Fed was considering — the purchase of $40 billion worth of mortgage bonds — to try to help the economy.

[..]Lacker is a pipsqueak compared with Dudley, who has a permanent position on the Fed’s policymaking Open Market Committee — and whose bank controls the trading operations for the whole Fed. I looked it up, and Lacker’s conversation with the analyst didn’t occur during the Fed’s so-called blackout period, which starts a week before its policy meetings. As I wrote back in 2011, several of Dudley’s meetings did. During these blackout periods, Fed officials are supposed to clam up — and make no public pronouncements, which I assume would cover Dudley’s informal dinners. As I wrote back in January 2011, I have no way of knowing what Dudley discussed at his blackout-period meetings. But unless he and his guests sat mute and expressionless during their meetings, there’s a good likelihood that something could be gleaned from the New York Fed president’s remarks.

Just so those investigators in the “separate” investigation don’t have to go to any trouble, I’m going to repeat here some of what I wrote back then. At one of the questionable Dudley meetings, in March 2009, the Fed’s blackout period ran from March 10 to 18. On March 11, Dudley met with Jan Hatzius, chief economist of Goldman Sachs. Dudley had once worked at Goldman, so he and Hatzius were friends. Dudley’s calendar says it was an “informal meeting” that took place from 6 p.m. to 7 p.m. at the Pound and Pence restaurant near the New York Fed. That was on Dudley’s calendar, as was the notation “PRE-FOMC BLACKOUT PERIOD,” written in bold, all caps. So his assistant was clearly trying to warn him about restrictions. Let’s hope the separate investigation that Lacker mentioned is of the New York Fed. And, if they don’t already, investigators now know where to look.

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WikiLeaks wants the same thing as the WaPo? Are we sure?

The Potential For The Disastrous Rise Of Misplaced Power Persists (Assange)

The media has a long history of speaking truth to power with purloined or leaked material — Jack Anderson’s reporting on the CIA’s enlistment of the Mafia to kill Fidel Castro; the Providence Journal-Bulletin’s release of President Richard Nixon’s stolen tax returns; the New York Times’ publication of the stolen “Pentagon Papers”; and The Post’s tenacious reporting of Watergate leaks, to name a few. I hope historians place WikiLeaks’ publications in this pantheon. Yet there are widespread calls to prosecute me. President Thomas Jefferson had a modest proposal to improve the press: “Perhaps an editor might begin a reformation in some such way as this. Divide his paper into 4 chapters, heading the 1st, ‘Truths.’ 2nd, ‘Probabilities.’ 3rd, ‘Possibilities.’ 4th, ‘Lies.’

The first chapter would be very short, as it would contain little more than authentic papers, and information.” Jefferson’s concept of publishing “truths” using “authentic papers” presaged WikiLeaks. People who don’t like the tune often blame the piano player. Large public segments are agitated by the result of the U.S. presidential election, by public dissemination of the CIA’s dangerous incompetence or by evidence of dirty tricks undertaken by senior officials in a political party. But as Jefferson foresaw, “the agitation [a free press] produces must be submitted to. It is necessary, to keep the waters pure.” Vested interests deflect from the facts that WikiLeaks publishes by demonizing its brave staff and me. We are mischaracterized as America-hating servants to hostile foreign powers.

But in fact I harbor an overwhelming admiration for both America and the idea of America. WikiLeaks’ sole interest is expressing constitutionally protected truths, which I remain convinced is the cornerstone of the United States’ remarkable liberty, success and greatness. I have given up years of my own liberty for the risks we have taken at WikiLeaks to bring truth to the public. I take some solace in this: Joseph Pulitzer, namesake of journalism’s award for excellence, was indicted in 1909 for publishing allegedly libelous information about President Theodore Roosevelt and the financier J.P. Morgan in the Panama Canal corruption scandal. It was the truth that set him free.

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Madness.

No Greek Pensions Expected To Avoid Cuts (K.)

The Labor Ministry’s main plan to save 1% of GDP from 2019 pension expenditure provides for reductions even to very low pensions if the recalculation process shows a difference from the original calculation according to the previous method, the so-called “personal difference.” The ministry is trying to avoid having to impose very big cuts – the personal difference is estimated to range up to 40% – and sources say it is hoping to cap the reductions at 20 or 25%. The final decisions will be made when the creditors’ representatives return to Athens later this month.

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Lagarde wants Greece on its knees. She keeps insisting on more pension cuts, without any regard for the effects on Greek people. That will make the economy worse, not better. And she knows it.

IMF Chief Lagarde Says ‘Halfway’ There On Greek Talks (R.)

IMF chief Christine Lagarde on Wednesday said Greece was heading in the right direction on reforms but talks on its bailout and the IMF’s potential role in it were “only halfway through.” Greece and its international lenders are negotiating reforms the country needs to carry out to maintain a sustainable growth path in the years following the end of its bailout program, which ends in mid-2018. “What I have seen in the last couple of weeks is heading in the right direction. We are only halfway through in the discussions,” Lagarde told a conference in Brussels. Last week, eurozone finance ministers agreed the “overarching elements” of reforms needed in Greece in exchange for a new loan under its 86-billion-euro program, the third since 2010.

The new loan is needed to pay debt due in July. Talks are continuing and no date is fixed yet for the return of negotiators to Athens. The Greek government believes negotiators could go back to Greece after the IMF Spring Meetings on April 21-23. “We are still elaborating under what terms we could possibly give some lending to the country. We are not there yet,” Lagarde said, adding any IMF loan to Greece would have to abide by strict conditions. She said debt restructuring will be needed to guarantee the sustainability of Greek finances. The scope of the restructuring “will be decided at the end of the program,” but “the modalities have to be decided upfront,” Lagarde said.

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They have no interest in solving Greece’s problems.

Stop Pretending on Greek Debt (BBG)

Greece and its creditors say they’ve made progress in their endless negotiations over the country’s debts – enough to avoid a default on payments worth more than €7 billion in July. That’s good, but it was the easy part. The definitive settlement that Greece and the European Union both need still isn’t in sight. For the past seven years, the IMF and euro-zone institutions have supported Athens with loans in exchange for fiscal austerity and structural economic reform. This strategy has failed to break Greece’s vicious circle of a shrinking economy and higher debt. Europe needs to bring this spiral to an end without further delay – by putting Greece’s debts on a credibly downward path. The IMF has made it clear that it will only take part in a rescue program that includes a realistic assessment of debt sustainability.

This is a welcome break from the past: Time and again, creditors have deluded themselves that Greece can run implausibly high budget surpluses for years. Germany, especially, is keen to keep the IMF involved. With luck, Berlin might be willing to adjust the creditors’ proposals accordingly. Greece has gone through nearly a decade of punishing austerity. Its unemployment rate is still stuck near 25%. Last week’s deal includes further tax and pension reforms worth 2% of GDP. If consumers and companies are to spend and invest again, they must see an end to the tunnel. Economic necessity and political feasibility point to the same conclusion: Firm fiscal restraint is essential – but not so firm as to be self-defeating.

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It shouldn’t be a last resort, it should be no resort. This is the EU trying to deflect attention away from its own deplorable failings by pointing to Hungary. Don’t fall for it.

Detention Of Child Refugees Should Be Last Resort, Brussels Says (G.)

Detention of child refugees should be “a last resort”, the European commission has said, in remarks that will be seen as a rebuke to Hungary where asylum seekers, including minors, are being held in barbed-wire fenced camps. The statement from Brussels is part of a long awaited plan to protect child refugees in Europe. About 386,300 children made an asylum claim in the EU in 2016, a six-fold increase since 2010 that has left some countries struggling to cope. The EU plan comes one day after Germany announced it was halting refugee transfers to Hungary, until Budapest stops the systematic detention of all asylum seekers.

Under the EU’s Dublin regulation, asylum seekers are to be returned to the first country they registered in. Routine detention of refugees is banned. Hungary announced last month that all asylum seekers older than 14 would be kept in converted shipping containers on the border while their claims were assessed. About 110 people were living in the camps, including four unaccompanied children, and children with their families, when the UN refugee agency assessed the camps last week. The situation for asylum seekers had worsened since the new law came into effect, the UNHCR said, as the organisation also warned of “highly disturbing reports” of police violence meted out to refugees attempting to cross the border.

[..] Hungary already risks being taken to the European court of justice for failure to take in a mandatory quota of asylum seekers, a decision imposed on Budapest in September 2015. The clock is ticking towards a deadline to disperse 160,000 asylum seekers from Greece and Italy to other EU member states (excluding the UK) by September 2017. The EU’s most senior official on migration warned that Hungary risked being taken to the European court of justice if it failed to meet its target. “From September the relocation scheme is ending. This does not mean it is going to die. It will continue,” said Dimitris Avramopoulos, the European commissioner for home affairs, . “EU countries who do not want to be part of our policy, they will be confronted with measures we can take,” he said, in a coded reference to court action that could land governments with hefty fines.

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It’s that time of year.

Crucified Man Had Prior Run-In With Authorities (Petri)

The gentleman arrested Thursday and tried before Pontius Pilate had a troubled background. Born (possibly out of wedlock?) in a stable, this jobless thirty-something of Middle Eastern origin had had previous run-ins with local authorities for disturbing the peace, and had become increasingly associated with the members of a fringe religious group. He spent the majority of his time in the company of sex workers and criminals. He had had prior run-ins with local authorities — most notably, an incident of vandalism in a community center when he wrecked the tables of several licensed money-lenders and bird-sellers.

He had used violent language, too, claiming that he could destroy a gathering place and rebuild it. At the time of his arrest, he had not held a fixed residence for years. Instead, he led an itinerant lifestyle, staying at the homes of friends and advocating the redistribution of wealth. He had come to the attention of the authorities more than once for his unauthorized distribution of food, disruptive public behavior, and participation in farcical aquatic ceremonies. Some say that his brutal punishment at the hands of the state was out of proportion to and unrelated to any of these incidents in his record. But after all, he was no angel.

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