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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Mar 192017
 
 March 19, 2017  Posted by at 9:35 am Finance Tagged with: , , , , , , , ,  No Responses »
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DPC Broadway from Chambers Street, NYC 1910

 


More Proof of Janet Yellen’s Idiocy (David Stockman)
How The Bosses ‘Game’ Workers (Moore)
Oz Parliamentary Budget Office Costs Plan To Kill Off Stamp Duty (SMH)
Russian Parliament Backs Investigation Into US Media (R.)
German Foreign Minister: Turkey Further Away From EU Membership Than Ever (R.)
Turkey Furious As Kurds Rally In Frankfurt With PKK Insignia (AFP)
Fear Stalks Refugees Huddled Along Hungary’s Border (G.)
Dirty Deals Done Dirt Cheap (ECRE)
Desperate Conditions In Greece’s Migration Jails (AlA)
‘Exiles in the Aegean’: A Year After The EU–Turkey Deal (Christopoulos)

 

 

“..corporate America will desperately unload inventories, workers and assets to appease the robo-machines of Wall Street.”

More Proof of Janet Yellen’s Idiocy (David Stockman)

During the last 129 months, the Fed has held 86 meetings. On 83 of those occasions it either cut rates or left them unchanged. So you can perhaps understand why Wednesday’s completely expected (for the last three weeks!) 25 bips left the day traders nonplussed. The Dow rallied over 100 points that day. Traders understandably believe that this monetary farce can continue indefinitely, and that our Keynesian school marm’s post-meeting presser was evidence that the Fed is still their friend. No it isn’t! Janet Yellen’s sing-song gibberish was the equivalent of a monetary DEFCON 1, alerting all except the most addicted Kool-Aid drinkers to get out of the casino.

Our monetary politburo has expanded its balance sheet by a lunatic 22X during the last three decades and in the process has systematically falsified financial asset prices and birthed a mutant debt-fueled of simulacrum of prosperity. But once it begins to withdraw substantial amounts of cash from the canyons of Wall Street as per its newly reaffirmed “normalization” policy, the whole house of cards is destined to collapse. There will be a stock market implosion soon, and that will in turn generate panic in the C-suites as the value of stock options vanish. Like in the fall of 2008 — except on an even more sweeping and long-lasting scale — corporate America will desperately unload inventories, workers and assets to appease the robo-machines of Wall Street. But there is nothing left to brake the casino’s fall.

If the money market rate conforms to the Fed’s latest command and settles at 88 basis points, it is still effectively at the zero bound. Our monetary politburo is thus still out of dry powder — except for the nuclear option of QE4, which Yellen herself made quite clear would never happen until after the next recession is already underway. Yet by then it will be too late — way too late. That’s because the market is priced as if the business cycle has been outlawed and as if the feckless band of Keynesian pretenders who have seized control of financial markets have ushered in the Nirvana of permanent full-employment. World without end. Needless to say, they haven’t because they haven’t repealed the law of supply and demand. That is, if the Fed plans to keep raising until rates until they reach 3.0% by 2019, it will have to suck massive amounts of cash out of the financial markets.

So doing, it will drive long-term yields substantially higher and thereby obliterate the ultra-low cap rate delusion on which the entire regime of Bubble Finance is based. In fact, in a blathering response at her presser about the pace by which the Fed intends to shrink its bloated $4.4 trillion balance sheet, Yellen proved she is clueless about the financial firestorm our rogue central bank is about to unleash. She claimed that the Fed could implement 3-4 money market rate increases a year, while deferring the shrinkage of its balance sheet into the indefinite future. But that it most assuredly cannot do. With a staggering overhang of $2.1 trillion of excess reserves in the financial system, even our vaunted monetary politburo cannot command the tides to recede. If it wants the money rate to rise on its appointed path through 2019, it must drain loads of cash from Wall Street.

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“In Australia, the bottom 3.9 million people share the same level of wealth as the top 10 individuals. And the gap is growing.”

How The Bosses ‘Game’ Workers (Moore)

When was the last time we heard someone talking about economic sustainability? When was the last time an economist was heard talking about equitable sharing of the economic growth? Australia “averted a recession” with 1.1 per cent growth in the December quarter. Let’s celebrate! Good news. Well, good for some. Not so good for others. Increasing disparity! The good news: company profits are “at record levels”. In the December quarter company profits rose by a whopping 20.1 per cent. One of the big winners is mining. Mining! Those same companies who were crying doom and gloom a few years ago when they defeated the government’s attempt to apply some level of taxation on their “super profits”. The bad news: well, that is for wage earners. While profits grew by 20 per cent, average wages dropped.

Tom Kennedy, of JP Morgan, explained to the ABC: “Some of the support for profits in the non-mining economy seems to be from weaker wage payments, which fell 0.5 per cent quarter-on-quarter (annual run rate slowed further to 1 per cent year-on-year) on the precarious combination of weaker wage growth, fewer hours and elevated underemployment.” In simple language Kennedy could have said: business increased profits by cutting workers’ wages, reducing hours and by employing less people. Any number of economic inquiries or reports suggest good ideas about taxation, employment and economic growth. A much smaller number examines what is equitable sharing of wealth. Even in the current climate, where the government is constantly bombarding the community about living within our means, Turnbull’s government is determined to deliver a $50 billion tax break for the corporate sector.

They have a good return on investment for political party donations. In Australia, the bottom 3.9 million people share the same level of wealth as the top 10 individuals. And the gap is growing. Sensible taxation measures are just one method of reducing the disparity by applying straightforward rules that are not subject to exemptions. In a globalised environment, corporations avoid current tax measures by moving money around the world at a touch of a button. One alternative, to provide a fair way to levy the corporate sector and one that is difficult to “game”, is a tax on gross turnover within a country. Such a tax is simple. It is hard to avoid. Big business would pay their share and contribute to community infrastructure from which they draw significant advantage.

Personal income is also “gamed”. American tycoon Warren Buffett noted his secretary paid a higher percentage of income tax than him simply because he could afford better accounting advice. The answer is to apply a “floor level” for high-income earners. It would catch the 77 individuals, identified by the Australian Tax Office in 2015, who earned over $1 million and paid NO tax. With the “Buffett Rule”, this group of selfish leeches would not have been able to avoid their fair contribution to the education, health and infrastructure that they all use. The Australia Institute identifies an injection of $2.5 billion if a 35 per cent “Buffet Rule” level was applied to just the top 1 per cent of salary earners. Surely good government means finding ways to reduce disparity. Inequality is fodder for populist movements around the world. A disparity index is just one way to remind our politicians of their responsibilities.

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Thinking about land tax is not a bad thing. But using it to lure more people into mortgage debt is.

Oz Parliamentary Budget Office Costs Plan To Kill Off Stamp Duty (SMH)

The Parliamentary Budget Office has costed a proposal that would kill stamp duty and replace it with land tax, saving home buyers up to $40,000 in Sydney and $55,000 in Melbourne, while delivering billions of dollars to fund schools and hospitals. The costing will put land tax back up for debate when Parliament returns next week as the government looks to mark its authority on the housing affordability crisis less than two months out from the federal budget. Both the NSW and Victorian governments have thrown their weight behind broader stamp duty tax reform and Treasurer Scott Morrison has indicated his support for a transition to taxing land. “When you talk about tax reform, this is far and away the biggest prize on offer,” said John Daley, the chief executive of independent think tank the Grattan Institute.

Under current regulations, home buyers pay tens of thousands of dollars in stamp duty, creating an additional hurdle for people looking to enter the market amid soaring property prices in Sydney and Melbourne. Removing stamp duty and implementing an annual land tax on all newly purchased homes would help level the playing field and generate billions of dollars in annual returns to the NSW and Victorian budgets, while also relieving federal government spending over a 15-year-period. Under the policy submitted by the Greens and backed by the Grattan Institute and the Council of the Ageing, home buyers would no longer stump up to $40,000 in stamp duty when purchasing a property worth $1 million in Sydney. In Melbourne, a home buyer would save $55,000 stamp duty on a property of the same value.

Research from the Grattan Institute shows an annual tax of $1 per every $1000 of a home’s value would cost the median Sydney household $845 a year in tax and the median Melbourne home $623 a year. To offset the cost of losing lucrative stamp duty payments, the Commonwealth would have to loan money to the states. The loans would peak in 2020 when the hit to the budget bottom line would grow to $800 million. Rising land tax revenues would enable the states to pay back the loan by 2030. The Parliamentary Budget Office estimates that in the next four years alone the tax would generate $2.3 billion in revenue for the states, but warned the overall costings were of low reliability due to the variations in number of properties sold across Australia each year.

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“..the senator should have included a clause drawing up a list of books for burning..”

Russian Parliament Backs Investigation Into US Media (R.)

The Russian lower house of parliament, the State Duma, has approved a proposal to launch an investigation into U.S. media organizations that operate in Russia, it said in a statement posted on its web site late on Friday. The investigation, which will be conducted by the Duma’s information policy, technologies and communications committee, will check whether CNN, the Voice of America, Radio Liberty and “other American media” are complying with Russian law. The statement said the Duma backed the move on Friday evening after Konstantin Zatulin, an MP from the pro-Kremlin United Russia party, proposed an investigation to retaliate for what he called a “repressive” U.S. move against Russian state-funded broadcaster RT.

He said he was referring to an initiative by U.S. Senator Jeanne Shaheen, who has introduced a bill to empower the Justice Department to investigate possible violations of the Foreign Agents Registration Act by RT. Shaheen, a Democrat, cited a U.S. intelligence agency assessment that suggested RT was part of a Russian influence campaign to help Donald Trump win the White House last year. The Kremlin and RT have strongly rejected that allegation. Foreign media in Russia are overseen by the Russian Foreign Ministry, whose spokeswoman Maria Zakharova this week singled out Shaheen’s demarche for criticism, quipping ironically that the senator should have included a clause drawing up a list of books for burning. The U.S. move also solicited the ire of Margarita Simonyan, RT’s editor-in-chief, who on Wednesday told the daily Izvestia it had echoes of the activities of U.S. Senator Joseph McCarthy..

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EU nations would never have accepted a nation of 82 million muslims as a member. Turkey’s as far away as ever, not more, not less.

German Foreign Minister: Turkey Further Away From EU Membership Than Ever (R.)

German Foreign Minister Sigmar Gabriel said in an interview with news magazine Der Spiegel published on Saturday that Turkey has never been less likely to join the European Union than now, as relations between Ankara and Berlin hit a low point. “Today Turkey is definitely further away from becoming a member of the European Union than ever before,” Gabriel said in the interview. He also said that he always had doubts about whether Turkey should join the EU but found himself in the minority in his Social Democrat (SPD) party. Before taking power in Germany in 2005, Chancellor Angela Merkel was an outspoken opponent of Turkey’s membership and instead called for a “privileged partnership”.

Gabriel disliked that idea because he thought it would make Turks feel like second-class Europeans but he said his opinion had changed since Britain’s decision to leave the EU. “Today the situation is totally different due to Brexit. We’d be well advised to bring about a ‘special relationship’ with Great Britain after its exit from the EU,” Gabriel said. “That will be an important learning process for the EU and perhaps some of it can serve as a blueprint for other countries in the long term,” Gabriel said. Turkish President Tayyip Erdogan is courting Turks abroad for support in an April 16 referendum that would grant him sweeping new powers. He infuriated Germany and the Netherlands by describing bans on planned rallies by Turkish ministers as “fascist”. The arrest of a Turkish-German journalist in Ankara has also caused upset.

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EU and US still define PKK as a terrorist organization. That should be reconsidered.

Turkey Furious As Kurds Rally In Frankfurt With PKK Insignia (AFP)

Some 30,000 pro-Kurdish demonstrators rallied in the German city of Frankfurt on Saturday calling for “democracy in Turkey” and urging a “no” vote in an upcoming referendum on expanding Turkish President Recep Tayyip Erdogan’s powers. Turkey angrily denounced the demonstration as “unacceptable”. Many demonstrators carried symbols of the outlawed Kurdistan Workers Party (PKK) which has battled the Turkish state for over three decades in a continuing insurgency. Tensions are already running high between Berlin and Ankara after German authorities refused to allow some Turkish ministers to campaign in the country for a “yes” vote in the April 16 referendum that would hand Erdogan an executive presidency. Significantly more people turned up than organisers had been expecting for the rally, which took place ahead of the annual Newroz festival when Kurds mark the traditional New Year.

Saturday’s protest march in Frankfurt went off peacefully, a police spokesman said. Some of the participants carried flags and banners of the outlawed PKK, as well as portraits of the group’s jailed leader Abdullah Ocalan, who is serving a life sentence in Turkey, calling for his release. Police said no banners or flags were confiscated so as to not provoke the crowd, but added that photos had been taken which could lead to future prosecutions. Erdogan’s spokesman Ibrahim Kalin said in a statement that the presidency “condemned in the strongest terms” the fact that the rally had been allowed to go ahead. “It is unacceptable to see PKK symbols and slogans… when Turkish ministers and lawmakers are being prevented from meeting their own citizens,” he said. He said the “scandal” of the Frankfurt demonstration showed that some EU countries were actively working in favour of a “no” vote in the critical referendum.

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For those hailing Merkel for her dealings with Trump, and calling her the leader of the western world: this is what she produced in Europe, where she really is the leader.

Fear Stalks Refugees Huddled Along Hungary’s Border (G.)

Behind a high metal fence topped with loose curls of barbed wire, the newly positioned blue shipping containers lined neatly along Hungary’s southern border at Röszke provide a glimpse of the new plans of the prime minister, Viktor Orbán, to detain thousands of asylum seekers, including children. Construction on Hungary’s new detention camps and a second electrified fence, which stretches 108 miles along its border with Serbia, are now under way despite virulent opposition from the UN, human rights groups and a European court ruling which it was hoped might halt the country’s determination to imprison refugees. President János Áder signed the bill, which will allow all asylum seekers to be locked up in detention camps, and will also permit police to return asylum seekers from anywhere in the country back to Serbia.

Orbán, leader of the rightwing populist Fidesz party, has described migration as the “Trojan horse for terrorism” and considers Muslim migrants a threat to European identity and culture. More than 7,000 asylum seekers trying to reach western Europe are stuck in Serbia, outside the EU, following Hungary’s decision last summer to introduce strict limits on the number of refugees allowed to enter and began patrolling the borders with a controversial new wing of its police force known as Határvadász, or border hunters. At an open transit camp in Subotica, Serbia, 15 miles from the border crossing, where families and unaccompanied children wait to have their asylum claims processed in Hungary, officials say the new law will cause trouble for Serbia and more hardship for people here.

“We are like storage for the Hungarians,” said Nikola Ljubomirovic, coordinator at the camp, run by Serbia’s commissariat for refugees and migrants. [..] The majority of families at this camp are fleeing conflicts in Syria, Iraq and Afghanistan. They have made arduous journeys but are out of funds which would enable them to try other routes to Europe. Their only option is to claim asylum in Hungary. They face a long wait. Hungary has reduced the number of asylum seekers it accepts per day from Serbia from 200 in 2015 to 10 in January this year. The decision as to which 10 people can enter the country every weekday via two transit zones, Horgos and Kelebija, is arbitrary, far from transparent, and appears to be managed in part by refugee community leaders, leading to uncertainty and confusion among already desperate families.

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“..a legitimate objective for the EU Member States to pursue is undermining rather than ensuring the right to asylum..”

Dirty Deals Done Dirt Cheap (ECRE)

The impact of the EU Turkey – Deal is widely debated and often misrepresented. The triumphant progress reports of the Commission hail the drop in numbers of refugees arriving in Greece and people drowning in the Aegean, but ignore the wider devastating impact of Europe’s containment policy on the international protection regime and beyond. If anything, one-year into its existence the deal has “succeeded” in contributing to problematic developments in four inter-linked ways: It is a key factor in the transformation of the political debate at EU level, which moves towards a consensus that a legitimate objective for the EU Member States to pursue is undermining rather than ensuring the right to asylum (enshrined in the EU Charter of Fundamental Rights) is.

By endorsing this deal, the EU has jeopardized not only its own credibility as a global human rights actor but also the values of democracy, respect for fundamental rights and the rule of law upon which it is based. It has become the blueprint for outsourcing Europe’s protection responsibility to third countries often characterized by instability and with problematic human rights records in exchange for development aid or political favours as if refugees were tradable commodities. Finally, it has transferred substantial political capital from the EU to the regimes in question, leaving the EU beholden –with Turkey itself as the most obvious example of the increasing ability of these third countries to influence Europe rather than the other way around. No, for Europeans who believe in universal human rights there is nothing to celebrate but lots to regret at the one-year anniversary of the EU-Turkey Deal!

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There needs to be an EU summit on this, and a UN summit on the whole refugee issue. But I’ve been saying that for a long time, and it still has not happened. It will be done only when chaos rules and it’s too late.

Desperate Conditions In Greece’s Migration Jails (AlA)

Greece has struggled to implement the controversial EU-Turkey deal agreed last March, and many who arrived on the islands after March 19, 2016, ended up being held in closed detention facilities for months on end. This treatment of new arrivals is likely to only become even more strict. Greek authorities are building new detention facilities for irregular migrants on Samos, Lesvos and Kos, while looking for spaces in the islands of Leros and Chios. Maarten Verwey, coordinator for the implementation of the EU-Turkey agreement, said that new detention facilities in Greece would be temporary. But a year ago, the UN’s refugee agency decided not to back Greek authorities. “We will not provide support to mandatory ‘detention centers’ for refugees in Greece,” said an official announcement from the UNHCR.

Greece is using ex-military camps, police stations and specially built detention centres to house those seeking refuge in the medium term. These are different from the reception and identification centres at the hotspots where newly arrived refugees and migrants are initially held. There are currently six detention centres with a total of 5,215 places in Amygdaleza, Petrou Ralli, Corinth, Paranesti, Xanthi and Orestiada. A new report, titled Forgotten, by Aitima, an Athens-based NGO, says there are some 2,000 “irregular migrants” now detained in Greece – but this number might increase fast in the next few months as pre-departure facilities on the islands are completed. Officials believe that the creation of “closed-structure facilities”, each with a capacity of 150-200 people, will be the key to easing pressure on islands where more than 10,000 new arrivals are stranded.

Conditions inside existing detention facilities in Greece continue to be alarming. Most are without hot water, reports Aitima. They have no heating, there are no interpreters, no social workers and no psychologists. Detained migrants complain about inedible food. No provisions of clothes and shoes from the authorities are given. Doctors visit detention areas only in very urgent cases.

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History repeating.

‘Exiles in the Aegean’: A Year After The EU–Turkey Deal (Christopoulos)

Bert Birtles, an Australian journalist and poet, arrived in Athens in the fall of 1935 to meet Dora “at sunset under the Parthenon”. Very soon, the interest of the young devoted admirers of classical Greece shifted from the archaeological ruins to contemporary politics. In 1936, following a fascist coup, Bert and Dora started visiting islands of the Aegean that were used as destinations for exiles. In 1938, Birtles published Exiles in the Aegean, his “personal narrative of Greek politics and travel”. The book offers an exciting first-hand chronicle of the experiences and lives of the exiled leftists on the islands of Anafi and Gavdos, but also Leros, Karpathos and Lesvos. These islands continued to operate as spaces of “administrative displacement” throughout the twentieth century, and it was only in 1974, after the end of the colonels’ dictatorship, that this practice came to an end.

Even for my generation, born in the late 1960s, the phrase “to the dry islands” was the synonym of isolation, just as the phrase “to the mountains” was the synonym of resistance against the Axis forces in the 1940s. And then, in the 1980s, the “dry islands” became the ideal tourist resort, one of the must-see destinations of the world: a synonym of pleasure and relaxation. At the dawn of the 21st century, the islands of the eastern Aegean, close to the Turkish coast, became the first entry point to the EU for the thousands fleeing their countries, either for fear of being persecuted, or just in search of a decent life in Europe. Islands became the stepping stone to Athens, and, in turn, Athens a stepping stone to northern Europe. Islands offer a prototype for an exercise in control and biopolitics, as Foucault would put it.

The pre-1974 Greek state, which was not exactly famous for its democratic culture, knew this well. The European Union, on the other hand, only really realised this a year ago, with the infamous EU-Turkey statement addressing what the Europeans labelled a “migration crisis”, i.e. the arrival of a million refugees in a continent of half a billion inhabitants… Islands, both now and then, are regarded as the ideal quarantine zone: first it was for communists so they wouldn’t intoxicate their environment with their ideas, now for migrants and refugees, with a twofold objective. First, to send the message that this is what lies ahead for those who intend to make their way across the Aegean. Second, to send a message to European citizens and to address their primary fear: the buffer zone at the periphery of the EU ensures that no more refugees and immigrants can enter the ‘promised land’.

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Mar 162017
 
 March 16, 2017  Posted by at 9:16 am Finance Tagged with: , , , , , , , , , ,  No Responses »
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Arthur Rothstein “Quack doctor, Pittsburgh, Pennsylvania” 1938

 


Hawaii Judge Halts Trump’s New Travel Ban Before It Can Go Into Effect (R.)
Trump Proposes Historic Cuts Across Government to Fund Defense (BBG)
Janet Yellen Explains Why She Hiked In A 0.9% GDP Quarter (ZH)
Fed Rate Hikes + Low Growth = Recession (MW)
How The Fed Rate Hike Will Impact Millions Of Americans (MW)
How Global Central Banks Have Set Interest Rates Since 2008 (Tel.)
Beware the Debt Ceiling (BBG)
Amazon Is Going To Kill More American Jobs Than China Did (MW)
PM Mark Rutte Sees Off Challenge Of Geert Wilders In Dutch Election (G.)
Northern Ireland Vote Jolts Already Disunited Kingdom (R.)
Erdogan, Europe Head for Political Blow-Up They Can’t Afford (BBG)
Turkey Protests Dutch Government by Returning 40 Holstein Cows (BBG)
Spike In Number Of Greeks Renouncing Inheritance To Avoid Taxes (K.)
New Zealand River Granted Same Legal Rights As Human Being (G.)

 

 

Not much room left to move, it would seem. And the Supreme Court is still some distance away, if the case even gets there.

Hawaii Judge Halts Trump’s New Travel Ban Before It Can Go Into Effect (R.)

Just hours before President Donald Trump’s revised travel ban was set to go into effect, a U.S. federal judge in Hawaii on Wednesday issued an emergency halt to the order’s implementation. The action was the latest legal blow to the administration’s efforts to temporarily ban refugees as well as travelers from six predominantly Muslim countries, which the President has said is needed for national security. Trump lashed out at the judge’s ruling, saying it “makes us look weak.” Trump signed the new ban on March 6 in a bid to overcome legal problems with a January executive order that caused chaos at airports and sparked mass protests before a Washington judge stopped its enforcement in February. U.S. District Judge Derrick Watson put an emergency stop to the new order in response to a lawsuit filed by the state of Hawaii, which argued that the order discriminated against Muslims in violation of the U.S. Constitution.

Judge Watson concluded in his ruling that while the order did not mention Islam by name, “a reasonable, objective observer … would conclude that the Executive Order was issued with a purpose to disfavor a particular religion.” Watson was appointed to the bench by former Democratic President Barack Obama. Speaking at a rally in Nashville, Trump called his revised executive order a “watered-down version” of his first. “I think we ought to go back to the first one and go all the way, which is what I wanted to do in the first place,” Trump said. Trump called the judge’s block “unprecedented judicial overreach” and said he will take the case “as far as it needs to go,” including to the U.S. Supreme Court. The Department of Justice called the ruling “flawed both in reasoning and in scope,” adding that the president has broad authority in national security matters. “The Department will continue to defend this Executive Order in the courts,” it said a statement.

[..] The government, in its court filings cautioned the court against looking for secret motives in the executive order and against performing “judicial psychoanalysis of a drafter’s heart of heart.” Watson said he did not need to do that, because evidence of motive could be found in the president’s public statements. He said he did not give credence to the government’s argument that the order was not anti-Muslim because it targeted only a small percentage of Muslim-majority countries. “The notion that one can demonstrate animus toward any group of people only by targeting all of them at once is fundamentally flawed,” the judge wrote.

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The military-industrial complex.

Trump Proposes Historic Cuts Across Government to Fund Defense (BBG)

President Donald Trump is proposing historically deep budget cuts that would touch almost every federal agency and program and dramatically reorder government priorities to boost defense and security spending. The president’s fiscal 2018 budget request, which will be formally delivered Thursday to Congress, would slash or eliminate many of the Great Society programs that Republicans have for decades tried to peel back while showering the Pentagon and Department of Homeland Security with new resources. Some of the deepest cuts are reserved for the agencies and programs Trump has often derided. The State Department would be hit with a 28% reduction below fiscal 2016 levels that mainly targets international aid and development assistance; the EPA would face a 30% reduction.

Also in the crosshairs are agriculture programs, clean energy projects and federal research funding. “You see reductions in many agencies as he tries to shrink the role of government, drive efficiencies, go after waste, duplicative programs,” Office of Management and Budget Director Mick Mulvaney told reporters. “If he said it in the campaign, it’s in the budget.” Trump’s proposal for $1.15 trillion in federal discretionary funding for fiscal year 2018 is certain to face vigorous opposition from lawmakers in both parties who will resist chopping favored programs, whether foreign aid, rural water projects, or development grants for Appalachia and the Mississippi Delta. In addition to a solid wall of opposition from Democrats, senior Republicans including Senate Majority Leader Mitch McConnell have raised objections to specific agency cuts even before the budget request went to the Capitol.

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It’s all about credibility. “Fighting inflationary pressures”?!

Janet Yellen Explains Why She Hiked In A 0.9% GDP Quarter (ZH)

It appears that, the worse the economy was doing, the higher the odds of a rate hike.

Putting the Federal Reserve's third rate hike in 11 years into context, if the Atlanta Fed's forecast is accurate, 0.9% GDP would mark the weakest quarter since 1980 in which rates were raised (according to Bloomberg data).

We look forward to Ms. Yellen explaining her reasoning – Inflation no longer "transitory"? Asset prices in a bubble? Because we want to crush Trump's economic policies? Because the banks told us to?

For now it appears what matters to The Fed is not 'hard' real economic data but 'soft' survey and confidence data…

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“..raising interest rates off ultralow levels during a period of tepid economic growth coincides with recessions in the following three to nine months..”

Fed Rate Hikes + Low Growth = Recession (MW)

The Federal Reserve on Wednesday lifted benchmark interest rates for only the third time in about a decade, and that has caused trepidation among some market participants. Lance Roberts, chief investment strategist at Clarity Financial, makes the case in one chart that raising interest rates off ultralow levels during a period of tepid economic growth coincides with recessions in the following three to nine months (see chart below, which compares real, inflation-adjusted, GDP to Fed interest rate levels).

The Fed lifted key rates by a quarter-point Wednesday to a range of 0.75% to 1%. The rate increase comes as the U.S. economy has been growing at a lackluster pace. Government data show that gross domestic product—the official report card of economic performance—was growing at a seasonally adjusted pace of 1.9% in the fourth quarter compared with 1.6% in 2016 and 2.6% in 2015. “Outside of inflated asset prices, there is little evidence of real economic growth, as witnessed by an average annual GDP growth rate of just 1.3% since 2008, which by the way is the lowest in history since…well, ever,” Roberts wrote in a blog post March 9 (see chart below):

Woeful productivity, defined as the average output per hour of work, has been another bugaboo for economists and the Fed, for the past six years. Higher rates could exacerbate both problems, especially since corporations tend to benefit when borrowing costs are low. Roberts told MarketWatch in a recent interview that the “Fed lifts interest rates to slow economic growth and quell inflationary pressures.” He argues that outside of a stock market that has been mostly zooming higher, “economic growth is weak.”

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Debtors get screwed, savers get some air. Sounds cute and all, but there’s so much debt out there.

How The Fed Rate Hike Will Impact Millions Of Americans (MW)

Bad news for those with credit card debt: The Federal Reserve hiked its key rate on Wednesday by a quarter%age point and, as a result, your own interest rates could rise almost immediately. The Fed raised the rate for federal funds by a quarter%age point, to 0.75% to 1% at the end of its two-day meeting on Wednesday, and signaled two further rates rises in 2017. In other words, the Fed announced an increase in how much banks will be charged to borrow money from Federal Reserve banks. (The Fed raises and lowers interest rates in an attempt to control inflation.) That increase will most likely eventually be passed on to consumers, said Sean McQuay, a credit card expert at the personal finance website NerdWallet. Many households with credit card debt — the average household carrying credit card debt has more than $16,000 — will likely take a hit. Here’s how the latest Fed rate increase could impact your credit cards and bank accounts.

Credit cards Because a rise in the federal funds rate means banks will likely pay more to borrow from the Federal Reserve, they may pass that cost on to consumers. Credit card interest rates are variable (banks and credit card companies should state that their rates are variable in the literature customers receive to learn about their cards), and they are tied to the prime rate, an index a few%age points above the federal funds rate. It is a benchmark that banks use to set home equity lines of credit and credit card rates; as federal funds rates rise, the prime rate does, too. As a result, credit card holders are likely to see their interest rates rise, and that will happen soon, said Greg McBride, the chief financial analyst at the personal finance company Bankrate, told MarketWatch.

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Written just before Yellen’s hike.

How Global Central Banks Have Set Interest Rates Since 2008 (Tel.)

After the financial crisis in 2008 central banks across the world cut their base lending rates to varying degrees, with some introducing negative rates of interest. [..] The US economy has performed strongly in recent months, leading Fed chair Janet Yellen to say that policymakers are now ready to change their stance on interest rates. The expectation is that there will be a steady hike in rates in the coming years and that, in the longer term, interest rates should be hovering around 3pc. Market traders are predicting three interest rate rise in the US this year alone. Ms Yellen has said that waiting too long to raise interest rates risked more rapid increases later if the economy started to overheat. If the Fed does see fit to continue to increase interest rates, it could signal the start of a similar pattern in other countries that have, thus far, kept rates very low since the financial crisis.

The Bank of England’s base lending rate stood at 5.75pc in July 2007 but was slashed repeatedly in the following months and years. Since March 2009 the Bank’s lending rate has been languishing below 1pc. In contrast to the expected direction of interest rates in the US, last August BoE Governor Mark Carney cut the rate again from 0.5pc to 0.25pc. [..] The ECB’s deposit rate has been at -0.4pc since early 2016 while the Swiss National Bank’s lending rate has been even lower than this. Mark Carney has said that the next move on interest rates in the UK will be an upward one but that it will be “limited and gradual”. However with the economic uncertainty surrounding Brexit it may be some time before rate rises catch up with the US. And it is likely to be some time before the ECB feels it can gamble with a significant rate rise.

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June 1 drop-off.

Beware the Debt Ceiling (BBG)

Euphoria has been pervasive in the stock market since the election. But investors seem to be overlooking the risk of a U.S. government default resulting from a failure by Congress to raise the debt ceiling. The possibility is greater than anyone seems to realize, even with a supposedly unified government. In particular, the markets seem to be ignoring two vital numbers, which together could have profound consequences for global markets: 218 and $189 billion. In order to raise or suspend the debt ceiling (which will technically be reinstated on March 16), 218 votes are needed in the House of Representatives. The Treasury’s cash balance will need to last until this happens, or the U.S. will default. The opening cash balance this month was $189 billion, and Treasury is burning an average of $2 billion per day – with the ability to issue new debt.

Net redemptions of existing debt not held by the government are running north of $100 billion a month. Treasury Secretary Steven Mnuchin has acknowledged the coming deadline, encouraging Congress last week to raise the limit immediately. Reaching 218 votes in favor of raising or suspending the debt ceiling might be harder than in any previous fiscal showdown. President Donald Trump almost certainly wants to raise the ceiling, but he may not have the votes. While Republicans control 237 seats in the House, the Tea Party wing of the party has in the past has steadfastly refused to go along with increases. The Republican Party is already facing a revolt on its right flank over its failure to offer a clean repeal of the Affordable Care Act. Many members of this resistance constitute the ultra-right “Freedom Caucus,” which was willing to stand its ground during previous debt ceiling showdowns.

The Freedom Caucus has 29 members, which means there might be only 208 votes to raise the ceiling. (It’s interesting to recall that, in 2013, President Trump himself tweeted that he was “embarrassed” that Republicans had voted to extend the ceiling.) It may be unrealistic to expect Democrats to save the day – at least initially. House Democrats may be more than happy to sit back and watch Republicans fight among themselves. If the Democrats eventually ride to the rescue, it probably won’t be until after a period of Republican-on-Republican violence. Nobody wants the Treasury to reach the point where it has to prioritize payment of interest over other obligations – a threshold where creditworthiness and market confidence will have begun to retreat. The bond market already seems to be reacting to this possibility, sending yields higher and prices lower, even as the S&P/Dow/Nasdaq have been on a tear and are showing scant concern over the potential turmoil.

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Change with an enormous impact. Do we really want this?

Amazon Is Going To Kill More American Jobs Than China Did (MW)

Amazon.com has been crowing about its plans to create 100,000 American jobs in the next year, but as with other recent job-creation announcements, that figure is meaningless without context. What Amazon won’t tell us is that every job created at Amazon destroys one or two or three others. What Jeff Bezos doesn’t want you to know is that Amazon is going to destroy more American jobs than China ever did. Amazon has revolutionized the way Americans consume. Those who want to shop for everything from books to diapers increasingly go online instead of to the malls. And for about half of those online purchases, the transaction goes through Amazon.

For the consumer, Amazon has brought lower prices and unimaginable convenience. I can buy almost any consumer product I want just by clicking on my phone or computer — or even easier, by just saying: “Alexa: buy me one” — and it will be shipped to my door within days or even hours for free. I can buy books for my Kindle, or music for my phone instantly. I can watch movies or TV shows on demand. But for retail workers, Amazon is a grave threat. Just ask the 10,100 workers who are losing their jobs at Macy’s. Or the 4,000 at The Limited. Or the thousands of workers at Sears and Kmart, which just announced 150 stores will be closing. Or the 125,000 retail workers who’ve been laid off over the past two years.

Amazon and other online sellers have decimated some sectors of the retail industry in the past few years. For instance, employment at department stores has plunged by 250,000 (or 14%) since 2012. Employment at clothing and electronics stores is down sharply from the earlier peaks as more sales move online. “Consumers’ affinity for digital shopping felt like it hit a tipping point in Holiday 2014 and has rapidly accelerated this year,” Ken Perkins, the president of Retail Metrics, wrote in a research note in December. And when he says “digital shopping,” he really means Amazon, which has increased its share of online purchases from about 10% five years ago to nearly 40% in the 2016 holiday season.

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Rutte lost big and is the winner.

PM Mark Rutte Sees Off Challenge Of Geert Wilders In Dutch Election (G.)

The Dutch prime minister, Mark Rutte, has seen off a challenge from the anti-Islam populist Geert Wilders to claim a resounding victory in parliamentary elections widely seen as a test for resurgent nationalism before key European polls. With nearly 95% of votes counted and no further significant changes expected, Rutte’s centre-right, liberal VVD was assured of 33 MPs, by far the largest party in the 150-seat Dutch parliament, national news agency ANP said. Wilders’ Freedom party (PVV) looked certain to finish second, but a long way behind on 20 seats, just ahead of the Christian Democrat CDA and liberal-progressive D66 which both ended up in third position on 19 seats. “Our message to the Netherlands – that we will hold our course, and keep this country safe, stable and prosperous – got through,” Rutte told a cheering crowd of supporters at the VVD’s election night party.

After Britain’s shock Brexit vote and Donald Trump’s presidential victory in the US, he added, the eyes of the world had been on the vote: “This was an evening when … the Netherlands said ‘Stop’ to the wrong sort of populism.” A first-place finish for the anti-immigration, anti-EU PVV would have rocked Europe. In France, the far-right leader Marine Le Pen is expected to make the second-round runoff in the presidential election in May, while the Eurosceptic Alternative für Deutschland (AfD) is on target to win its first federal parliament seats later in the year. Relieved European politicians were quick to applaud. A spokesman for European commission president Jean-Claude Juncker hailed “a vote against extremists” while French foreign minister Jean-Marc Ayrault tweeted: “Congratulations to the Netherlands for halting the advance of the far right.”

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What’s going to be left by the time Brexit is reality?

Northern Ireland Vote Jolts Already Disunited Kingdom (R.)

A nationalist surge at elections in Northern Ireland and a Scottish demand for a second independence referendum have raised doubts over whether the United Kingdom can hold together after it leaves the European Union. Last year’s referendum on EU membership saw England and Wales vote to leave while Scotland and Northern Ireland voted to remain, straining the ties that bind the UK together. Scottish leader Nicola Sturgeon dealt a blow to British Prime Minister Theresa May on Monday by demanding a new vote on independence in late 2018 or early 2019, making her move much sooner than expected. But while the Scottish issue had been well flagged since the Brexit vote, a snap provincial assembly election in Northern Ireland produced a genuine shock: for the first time since the partition of Ireland in 1921, unionists lost their majority.

Nationalist party Sinn Fein, backed by many of Northern Ireland’s Catholics, narrowed the gap with the Democratic Unionist Party, whose support base is among pro-British Protestants, to just one seat. This has revived the slow-burning question of whether Northern Ireland will stay in the United Kingdom over the long term or become part of the Republic of Ireland. This could be achieved by a referendum, often referred to as a border poll. “A border poll might be 10 years away and it might still be lost, but clearly this election has shown a different dynamic in Northern Ireland politics,” said Peter Shirlow, Director of Irish Studies at the University of Liverpool. “This opens the door for a different scenario.”

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No visa-free travel either.

Erdogan, Europe Head for Political Blow-Up They Can’t Afford (BBG)

Politicians in Turkey and the European Union stoking tensions for short-term electoral gain may have done lasting damage to vital economic and security ties. While relations between the EU and Turkey have been rocky for years, the furor of recent days – with Turkish President Recep Tayyip Erdogan freely hurling the Nazi epithet at his western antagonists – marks a rift that could prove irreparable. Turkey has been negotiating EU membership since 2005, but progress has come close to a halt. “Even without anyone saying it, Turkey’s EU membership talks will go into an irreversible coma now,” said Marc Pierini, who served as the EU’s ambassador to Turkey from 2006-2011 and is a visiting scholar at Carnegie Europe, a Brussels-based think tank. “That will suit everybody, except Turkey’s democrats.”

[..] Pierini sees a wider clash between two populisms – one anti-Muslim in Europe, and the other fighting for the Islamization of the secular Turkish Republic – that risks an uncontrolled downward spiral. Europe’s leaders, he said, “are losing sight of the fundamentals, that you have a counter-revolution going on in Turkey,” where Erdogan is trying to reverse the westward course on which Mustafa Kemal Ataturk set the country in 1923. Hanging in the balance is a deal struck a year ago, under which Turkey agreed to cooperate in stemming the flow of refugees from Syria. In exchange, the EU provided more than $3 billion in economic aid and pledges both to “re-energize” Turkey’s stalled membership talks and deliver visa-free travel for Turks entering the 26-nation Schengen area, both of which are increasingly politically toxic for EU leaders.

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Where it hurts.

Turkey Protests Dutch Government by Returning 40 Holstein Cows (BBG)

Two months after a Turkish butcher broke the Internet, the country’s red meat producers are trying a novel way to break the Dutch government’s resolve. Members of the Ankara-based Beef and Lamb Producers Association have sent 40 Holstein cows back to the Netherlands to show their displeasure at a decision to prevent Turkish ministers from conducting political campaigning on their soil, the association’s chairman Bulent Tunc said in telephone interview. A fiery diplomatic spat has erupted between the two countries after the EU state, which is holding its own elections on Wednesday, refused access to Turkish ministers seeking to campaign on a referendum to expand President Recep Tayyip Erdogan’s powers.

While Tunc called the number of cows being shipped away “symbolic,” he spoke of widespread support for the Turkish president’s stance among association members, who number 160,000. Those involved in the cattle trade are also considering putting a stop to purchases of tractors, equipment, feed and bull semen — and extending the boycott to Austria, which Tunc accused of sharing the Dutch government’s stance. “There are many alternatives,” he said, citing Brazil and Romania as possibilities. “Turkey is a huge market for livestock imports and countries are dying to get in.”

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More Greek tragedies. Imagine having to give up age-old family homes and/or land because you can’t afford taxes.

Spike In Number Of Greeks Renouncing Inheritance To Avoid Taxes (K.)

An increasing number of people are turning their backs on properties they have inherited to avoid paying the higher taxes that accompany them, according to new data from the country’s courts which show that applications for renunciation of property rose 86.4% last year compared to 2013. According to the latest statistics, which were made public on Wednesday, a total of 54,422 such applications were lodged with the country’s local courts last year, compared to 45,628 in 2015 and 29,199 in 2013. Experts attribute the rise to the tremendous increase in property taxes that successive governments have imposed over the years as part of bailout agreements with Greece’s creditors. According to official figures, property owners paid seven times more in taxes last year compared to 2009, the year before the crisis hit.

In 2009, property taxes did not exceed €500 million, while revenue collected from property reached €3.5 billion last year. Most of those who filed documents last year to renounce their inheritance did so in the country’s major cities, with 11,655 applications recorded in Athens, 5,563 in Thessaloniki, 1,938 in Piraeus and 1,473 in Patra. People are not only giving up family houses and apartments but also plots of lands. According to Nikos Stasinopoulos, formerly the head of the association representing Greek notaries, many people in the provinces give up inherited land even when the tax they would have to pay on it is relatively small. He offered the example of one beneficiary in the region of Gortynia who gave up a plot on which he faced a €150 levy, and a second who inherited a total of 98 plots of land in the region of Larissa from his father and aunt and was “relieved” to discover that he could hand them over to the state to avoid paying tax.

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We have lost all wisdom. Only native peoples have any left.

“..all Maori tribes regard themselves as part of the universe, at one with and equal to the mountains, the rivers and the seas.”

New Zealand River Granted Same Legal Rights As Human Being (G.)

In a world-first a New Zealand river has been granted the same legal rights as a human being. The local Maori tribe of Whanganui in the north island has fought for the recognition of their river – the third-largest in New Zealand – as an ancestor for 140 years. On Wednesday, hundreds of tribal representatives wept with joy when their bid to have their kin awarded legal status as a living entity was passed into law. “The reason we have taken this approach is because we consider the river an ancestor and always have,” said Gerrard Albert, the lead negotiator for the Whanganui iwi [tribe]. “We have fought to find an approximation in law so that all others can understand that from our perspective treating the river as a living entity is the correct way to approach it, as in indivisible whole, instead of the traditional model for the last 100 years of treating it from a perspective of ownership and management.”

The new status of the river means if someone abused or harmed it the law now sees no differentiation between harming the tribe or harming the river because they are one and the same. Chris Finlayson, the minister for the treaty of Waitangi negotiations, said the decision brought the longest-running litigation in New Zealand’s history to an end. “Te Awa Tupua will have its own legal identity with all the corresponding rights, duties and liabilities of a legal person,” said Finlayson in a statement. “The approach of granting legal personality to a river is unique … it responds to the view of the iwi of the Whanganui river which has long recognised Te Awa Tupua through its traditions, customs and practise.” Two guardians will be appointed to act on behalf of the Whanganui river, one from the crown and one from the Whanganui iwi.

Albert said all Maori tribes regarded themselves as part of the universe, at one with and equal to the mountains, the rivers and the seas. [..] “We can trace our genealogy to the origins of the universe,” said Albert. “And therefore rather than us being masters of the natural world, we are part of it. We want to live like that as our starting point. And that is not an anti-development, or anti-economic use of the river but to begin with the view that it is a living being, and then consider its future from that central belief.”

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Mar 102017
 
 March 10, 2017  Posted by at 9:47 am Finance Tagged with: , , , , , , , , , ,  1 Response »
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Marjory Collins “Italian girls watching US Army parade on Mott Street, New York” 1942

 


Janet Yellen Is Busy Preparing America For A New Economic Era (G.)
Albert Edwards: Next Week The Fed Will Unleash “A Bond Market Bloodbath” (ZH)
Bill Gross: Don’t Be Fooled By ‘Trump Mirage’ (Forbes)
Why Do Politicians Continue To Push The Zombie Creed Of Austerity? (G.)
New WikiLeaks Reveal Proof Of Slippery Slope Toward Totalitarianism (Kucinich)
Assange Says Leaks Show CIA’s ‘Devastating Incompetence’ (AFP)
China Concerned At Revelations In Wikileaks Dump Of Hacked CIA Data (R.)
Truman Was Right About the CIA (Deist)
Don’t Forget JFK’s Fight With The CIA (LR)
China Rails Against US For Human Rights Violations (R.)
China As A Superpower (Tavares)
Germany’s ‘Powerhouse’ Economy Is Cracking (CNBC)
1/8th Of QE Money, Given To The Public, Would Have Had The Same Effect (MK)
One in Three U.K. Homeowners Earn More From Property Than Work (BBG)
Poland Reacts With Fury To Re-Election Of Donald Tusk (G.)
80% of Greek Households Struggle To Make Ends Meet (BBG)

 

 

“The old rule of thumb is that recessions come around every seven years..” But the old rule said nothing about QE. It talked about functioning markets, not what we see now.

Janet Yellen Is Busy Preparing America For A New Economic Era (G.)

The head of the US central bank is busy preparing America, its new president, and indeed the world, for rising interest rates – and for a new economic era. The story of US interest rates this decade is simple to the point of tedium. The key fed funds rate has been dragging along just above zero ever since the banking crash. In December 2015, it was nudged up by a quarter of a%age point by Ms Yellen and her colleagues at the Federal Reserve. A whole year later, they nudged it up again, which means that seven years after the notional end of the US recession it stands at mere 0.75%. That is set to change. Over the past few weeks, rate setters at the Fed have dropped broader and broader hints that interest rates will go up as soon as next Wednesday – and will keep going up.

Last Friday was the turn of Ms Yellen. Speaking in Chicago, she said: “We currently judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect.” That is about as straightforward as you get in central-bank speak. Nor is that likely to be the end of the rises: according to the Fed’s charts, committee members now forecast three interest-rate rises this year alone, and more in 2018. There are geopolitical reasons to hold off making too early a move. Next month, France’s presidential election, in which rightwing, anti-euro candidate Marine Le Pen is leading the polls, kicks off. Last year, the Fed held off in June before the Brexit vote. While the timing is still moot, there are few betting that rates won’t rise.

Considering this, three observations can be made. First, even while all this briefing has been going on, US asset markets have remained remarkably buoyant. That is very different from the nerves exhibited by investors in US Treasury bonds in 2013, when Ms Yellen’s predecessor, Ben Bernanke, dared to suggest he might turn off the tap marked “easy money”. Even with a much more volatile figure in the White House, financial markets seem far more confident on the prospects for the US. Second, by raising rates now the Fed is giving itself vital room for manoeuvre ahead of the next downturn. The old rule of thumb is that recessions come around every seven years – which would mean, going by the National Bureau of Economic Research, that the next bust is not far away.

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“All that is needed now is for the Fed to sprinkle life-giving rate hikes onto these, as yet dormant, seeds of destruction.”

Albert Edwards: Next Week The Fed Will Unleash “A Bond Market Bloodbath” (ZH)

Make no mistake. Unlike most in the markets, I remain a secular bond bull and do not think this 35 year long bull bond market is over. I believe the US Fed has created another massive credit bubble that will, when it bursts, lay the global economy very low indeed. Combine this with the problems of a Chinese economy dependent on increasingly ineffective injections of credit to produce increasingly pedestrian GDP growth and you have a right global mess. The 2007/8 Global Financial Crisis will look like a soft-landing when the Fed blows this sucker sky high. The seeds for that debacle have already been sown with the Fed having presided over one of the biggest corporate credit bubbles in US history. All that is needed now is for the Fed to sprinkle life-giving rate hikes onto these, as yet dormant, seeds of destruction.

Accelerated Fed rate hikes will cause tremors in the Treasury bond markets, forcing rates up, most especially in the 2 year – just like 1994. But as yet another central bank-inspired global recession unfolds, I believe US 10y bond yields will ultimately converge with Japanese and European yields well below zero – in other words, buy 10y bonds on weakness! [..] For those few of us in the markets of a certain age, Orange County conjures up only one thing: 1994 goes down in infamy as one of the biggest ever bond market bloodbaths in history culminating at the end of the year with Orange County in California going bankrupt (younger clients in their late 20s will only know the OC as the mid-2000s teen programme based in Newport Beach, which I watched religiously with my then teenage son and daughter).

I remember the 1994 period as if it were yesterday (unlike yesterday itself). Despite the Fed telegraphing the series of rate hikes and market participants forecasting multiple hikes, it was most curious how the market went into total convulsion. I was chatting to my ‘similarly young’ colleague Kit Juckes about this and he reminded me that the whole yield curve gapped up some 50bp immediately! It was a bloodbath, especially for 2y paper.

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Remember Nicole talking about multiple claims to underlying real wealth: “Our highly levered financial system is like a truckload of nitro glycerin on a bumpy road,” Gross says. “One mistake can set off a credit implosion where holders of stocks, high yield bonds, and yes, subprime mortgages all rush to the bank to claim its one and only dollar in the vault.”

Bill Gross: Don’t Be Fooled By ‘Trump Mirage’ (Forbes)

Bill Gross has never been one to mince words – and his March investment outlook is no anomaly in his oeuvre of outspoken manifestos. In his latest investor letter, out Thursday morning, Janus Capital’s billionaire bond guru warns against putting too much faith in the market exuberance inspired by President Trump and his agenda. “‘Don’t lose it’ is my first and most important conceptual lesson for [my kids] despite the Trump bull market and the current ‘animal spirits’ that encourage risk, as opposed to the preservation of capital,” Gross writes. (Though more a matter of coincidence, the reference to animal spirits is a canny turn of phrase: JPMorgan chief Jamie Dimon said in an interview Thursday morning that business and consumer confidence has “skyrocketed” because Trump has “woken up the animal spirits.”)

Gross goes on: “Don’t be allured by the Trump mirage of 3-4% growth and the magical benefits of tax cuts and deregulation. The U.S. and indeed the global economy is walking a fine line due to increasing leverage and the potential for too high (or too low) interest rates to wreak havoc on an increasingly stressed financial system. Be more concerned about the return of your money than the return on your money in 2017 and beyond.” This not the first time Gross has gone after Trump: he levied criticism in November (“I write in amazed, almost amused bewilderment at what American voters have done to themselves,” he said at the time) and again in December (“investors must consider the negatives of Trump’s anti-globalization ideas”). But the rationale in his latest investor letter is different from his prior notes, centering less on Trump’s policies and more on the global credit situation.

The world economy, Gross says, currently holds more credit relative to GDP than it did at the beginning of the 2008 financial crisis. In the U.S., credit is 350% of annual GDP, “and the ratio is rising,” he says. In China, that ratio sits close to 300%. Gross acknowledges that capitalism depends on credit expansion, but says that credit creation has its limits, and interest rates must be carefully monitored so that borrowers can repay their debts. But if rates are too low, “the system breaks down,” because savers and pension funds can’t earn a high enough rate of return to service those debts. “Our highly levered financial system is like a truckload of nitro glycerin on a bumpy road,” Gross says. “One mistake can set off a credit implosion where holders of stocks, high yield bonds, and yes, subprime mortgages all rush to the bank to claim its one and only dollar in the vault.”

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“We are being schooled in an extraordinary cognitive dissonance..”

Why Do Politicians Continue To Push The Zombie Creed Of Austerity? (G.)

The US cognitive linguist George Lakoff characterises politics as a clash between two opposing models of parenting. Rightwingers subscribe to the strict, responsible parent with a firm grip on the purse strings, while leftwingers prefer the nurturing, providing version. Everyone is currently in thrall to the strict-parent model. Politicians and supposedly impartial broadcasters are constantly noting that, of course, “times are tight”. The beneficent state is a luxury we can no longer afford. “We can’t go back to 1945,” government ministers intone wearily, as if explaining to a child, before blithely announcing a return to other mid-century relics – such as grammar schools. Despite being thoroughly discredited by economists, and despite Theresa May’s promised investment programme, the zombie creed of austerity staggers on.

On what basis, exactly, do we live in straitened times? Yes, there’s the cost and uncertainty of Brexit. But a year or two ago, it was something else – the fallout from the recession, or turbulence in the eurozone. This is opportunistic shock doctrine stuff, where any bungling failure or general sense of global adversity can lend partisan political choices the air of necessity. The annual ritual of the budget reanimates the pernicious myth that the economy is like a household budget. Since we have our own currency, we actually enjoy capacious fiscal elasticity. The “strict” parent is really a mean parent. The “fairer funding formula”, by which the government is proposing to take money from some schools to give to supposedly more deserving ones, is a pointless zero-sum game. Instead of making children fight over measly slivers of cake, why not just bake a bigger one?

There are extraordinary funds in private hands, if only we conceived of them as part of our common wealth. A report last week by property consultants Knight Frank predicted that the number of UK-based ultra-high-net-worth individuals (those with more than £24m in assets) will rise by 30% over the next decade. There is more than £10trn squirrelled away in the UK. The NHS costs £110bn a year; total government spending on education is £85bn a year. We are being schooled in an extraordinary cognitive dissonance, with luxury housing developments springing up in plain sight across the capital. If you question the basis on which we deem these evident riches untouchable, you are dismissed as hopelessly naive. There’s something doubly infantilising about this reaction: aren’t you aware that belts need to be tightened? And don’t you know the difference between public and private money?

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“We have crossed the threshold of a cowardly new world..”

New WikiLeaks Reveal Proof Of Slippery Slope Toward Totalitarianism (Kucinich)

The U.S. government must get a grip on the massive opening that the CIA, through its misfeasance, nonfeasance and malfeasance, has created. If Tuesday’s WikiLeaks document dump is authentic, as it appears to be, then the agency left open electronic gateways that make all Americans vulnerable to spying, eavesdropping and technological manipulation that could bring genuine harm. That the CIA has reached into the lives of all Americans through its wholesale gathering of the nation’s “haystack” of information has already been reported. It is bad enough that the government spies on its own people. It is equally bad that the CIA, through its incompetence, has opened the cyberdoor to anyone with the technological skills and connections to spy on anyone else.

The constant erosion of privacy at the hands of the government and corporations has annihilated the concept of a “right to privacy,” which is embedded in the rationale of the First, Third, Fourth, Ninth and Fourteenth Amendments to the U.S. Constitution. It is becoming increasingly clear that we are sliding down the slippery slope toward totalitarianism, where private lives do not exist. We have entered a condition of constitutional crisis that requires a full-throated response from the American people. I have repeatedly warned about the dangers of the Patriot Act and its successive iterations, the execrable national security letters that turn every FBI agent into a star chamberlain, the dangers of fear-based security policies eroding our republic. We have crossed the threshold of a cowardly new world, and it’s time we tell the government and the corporations who have intruded to stop it.

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The CIA should have shared its info with Apple et al, to make phones etc safe. It did not.

Assange Says Leaks Show CIA’s ‘Devastating Incompetence’ (AFP)

WikiLeaks founder Julian Assange on Thursday accused the CIA of “devastating incompetence” for failing to protect its hacking secrets and said he would work with tech companies to develop fixes for them. “This is a historic act of devastating incompetence, to have created such an arsenal and then stored it all in one place,” Assange said. “It is impossible to keep effective control of cyber weapons… If you build them, eventually you will lose them,” Assange said. Assange was speaking in a press conference streamed live from Ecuador’s embassy in London, where he has been living as a fugitive from justice since 2012. He said his anti-secrecy website had “a lot more information” about the Central Intelligence Agency’s hacking operation but would hold off on publishing it until WikiLeaks had spoken to tech manufacturers.

“We have decided to work with them to give them some exclusive access to the additional technical details we have so fixes can be developed and then pushed out. “Once this material is effectively disarmed by us we will publish additional details about what has been occurring,” he added. [..] WikiLeaks itself said the documents, hacking tools and code came from an archive that had circulated among US government hackers and private contractors. “The CIA has been so careless to produce this material. So do various cyber mafia already have it? Do foreign intelligence agencies already have it? It’s quite possible numerous people already might have it,” Assange said.

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is WikiLeaks going to share info with China tech as well?

China Concerned At Revelations In Wikileaks Dump Of Hacked CIA Data (R.)

China expressed concern on Thursday over revelations in a trove of data released by Wikileaks purporting to show that the CIA can hack all manner of devices, including those made by Chinese companies. Dozens of firms rushed to contain the damage from possible security weak points following the anti-secrecy organization’s revelations, although some said they needed more details of what the U.S. intelligence agency was up to. Widely-used routers from Silicon Valley-based Cisco were listed as targets, as were those supplied by Chinese vendors Huawei and ZTE and Taiwan supplier Zyxel for their devices used in China and Pakistan.

Chinese Foreign Ministry spokesman Geng Shuang said China expressed concern about the reports and reiterated its opposition to all forms of hacking. “We urge the U.S. side to stop listening in, monitoring, stealing secrets and internet hacking against China and other countries,” Geng told a daily news briefing. China is frequently accused by the United States and other countries of hacking attacks, which it always denies. The Chinese government has its own sophisticated domestic surveillance program and keeps tight control of the internet at home, saying such measures are needed to protect national security and maintain stability.

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“They spend billions of dollars on stirring up trouble so they’ll have something to report on.”

Truman Was Right About the CIA (Deist)

Unfortunately it was only in hindsight that Truman came to see the “Iron Law of Oligarchy” at work, which posits that all organizations – particularly government bureaucracies – eventually fall under the control of an elite few. That elite, he came to understand, did not include the president or his cabinet:

Truman: I think [creation of the CIA] was a mistake. And if I’d know what was going to happen, I never would have done it. [..] But it got out of hand. The fella … the one that was in the White House after me never paid any attention to it, and it got out of hand. Why, they’ve got an organization over there in Virginia now that is practically the equal of the Pentagon in many ways. And I think I’ve told you, one Pentagon is one too many. Now, as nearly as I can make out, those fellows in the CIA don’t just report on wars and the like, they go out and make their own, and there’s nobody to keep track of what they’re up to. They spend billions of dollars on stirring up trouble so they’ll have something to report on. They’ve become … it’s become a government all of its own and all secret. They don’t have to account to anybody.

That’s a very dangerous thing in a democratic society, and it’s got to be put a stop to. The people have got a right to know what those birds are up to. And if I was back in the White House, people would know. You see, the way a free government works, there’s got to be a housecleaning every now and again, and I don’t care what branch of the government is involved. Somebody has to keep an eye on things. And when you can’t do any housecleaning because everything that goes on is a damn secret, why, then we’re on our way to something the Founding Fathers didn’t have in mind. Secrecy and a free, democratic government don’t mix. And if what happened at the Bay of Pigs doesn’t prove that, I don’t know what does. You have got to keep an eye on the military at all times, and it doesn’t matter whether it’s the birds in the Pentagon or the birds in the CIA.

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“..by the time he was assassinated, Kennedy was at full war against the U.S. national-security establishment. He was challenging all of their Cold War assumptions. He was proposing peaceful coexistence with what the CIA and the military had said was an implacable foe that was determined to take over America. And he was doing the unthinkable — making friends with the Soviet Union (i.e., Russia), Cuba, and the communist world.”

Don’t Forget JFK’s Fight With The CIA (LR)

Kennedy came into office as a standard cold warrior. That is, like most Americans in the 1950s and 1960s, he had bought into the notion that had been inculcated into the American people since the end of World War II — that America’s wartime partner and ally, the Soviet Union (i.e., Russia), was coming to get us and subject the American people to communism. To combat what was billed as an international communist conspiracy based in Moscow, Americans were told, it would be necessary to adopt the same type of governmental structure that existed in Russia — a national-security apparatus grafted onto America’s original limited-government structure that had been established by the Constitution. That apparatus included a giant, permanent, and ever-growing military establishment, or what President Eisenhower would later call “the military-industrial complex.”

It also consisted of a secretive agency called the CIA, which would come to wield omnipotent powers within what continued to be billed as a “limited government.” Such powers would include assassination, regime-change operations, foreign coups, kidnapping, torture, rendition, involuntary medical experimentation (e.g., MKULTRA), spying and surveillance of Americans — the types of things that characterized the KGB and even the Hitler’s Gestapo. Kennedy believed in this apparatus. Even though it had been adopted without a constitutional amendment, he believed it was necessary to keep America free and safe from the Reds, who, it was said, were coming to get us. He experienced his first dose of reality a few months after being sworn into office, when the CIA presented its secret plan to invade Cuba and effect regime change there.

The plan called for using CIA-trained Cuban exiles to do the invading, with the U.S. government denying any role in the operation. Kennedy’s job, under the CIA plan, would be to lie about U.S. involvement in the invasion, thereby making him America’s liar-in-chief (and indirectly subjecting him to blackmail by the CIA). The CIA assured Kennedy that the invasion could succeed without U.S. air support, and JFK made it clear that no air support would be furnished. The CIA lied. In fact, they knew that there was no way that the operation could succeed without air support. But they figured that once the invasion got underway, Kennedy would have no effective choice but to change his mind and provide the needed air support. It was a classic CIA set up of a newly elected president.

When the invasion started to fail, the CIA urged the president to change his mind. He refused to do so, and the invasion force was easily defeated. The CIA considered Kennedy’s action to be a grave betrayal of America and the CIA’s Cuban “freedom fighters.” Kennedy publicly took responsibility for the debacle but privately he was outraged. He knew that the CIA had set him up, with the aim of maneuvering him into intervening with air support. He fired the much-revered and much-respected CIA Director Allen Dulles (who, in a classic conflict of interest, would later be appointed to the Warren Commission). Reflecting his disdain for the CIA, Kennedy promised to “splinter the CIA into a thousand pieces and scatter it to the winds.”

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Yes, it’s come to this. That door is now wide open.

China Rails Against US For Human Rights Violations (R.)

China lashed out at the United States for its “terrible human rights problems” in a report on Thursday, adding to recent international criticism of Washington on issues ranging from violence inflicted on minorities to U.S. immigration policies. The U.S. State Department’s annual report on rights in nearly 200 countries last week accused China of torture, executions without due process, repression of political rights and persecution of ethnic minorities, among other issues. In an annual Chinese response to the U.S. report, China’s State Council, or cabinet, said the United States suffered from rampant gun violence and high levels of incarceration. U.S. airstrikes in Iraq and Syria had caused thousands of civilian deaths, according to the report, which was carried by the state-run Xinhua news agency.

“With the gunshots lingering in people’s ears behind the Statue of Liberty, worsening racial discrimination and the election farce dominated by money politics, the self-proclaimed human rights defender has exposed its human rights ‘myth’ with its own deeds,” the State Council said. “The United States repeatedly trampled on human rights in other countries and wilfully slaughtered innocent victims,” it said, referring to deaths in U.S. drone strikes. On Wednesday, the U.N. High Commissioner for Human Rights, Zeid Ra’ad al-Hussein, said U.S. President Donald Trump’s comments about migrants, Mexicans and Muslims were “harmful and fuel xenophobic abuses” and that his immigration policies could lead to breaches of international law. Trump’s derogatory campaign rhetoric against Muslims and Mexican immigrants won enthusiastic backing from prominent white supremacists who embrace anti-Jewish, anti-black and anti-Muslim ideologies, though the president has disavowed their support.

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“President Xi Jinping offers some hints. He has discussed the prospects for “democratizing” the international system..”

China As A Superpower (Tavares)

One way to gauge China’s longer term intentions is to assess what Chinese leaders are saying today. President Xi Jinping has articulated a vision for China over the next few decades. This vision has been termed the “Chinese Dream” or the “great rejuvenation of the Chinese nation.” These slogans capture goals, milestones, and timelines. In terms of timeframe, the Chinese refer to the “two one hundreds”: i) the centenary of the founding of the Chinese Communist Party in 2021; and ii) the centenary of the founding of the People’s Republic of China in 2049. By 2021 China hopes to become what the Chinese call a “moderately well-off society.” By mid-century China hopes to be on par with other developed countries.

Most measures for tracking China’s progress are socio-economic in nature: disposable income, socioeconomic equality, access to higher education, access to healthcare and so forth. To achieve these objectives, China still hews to the basic principle laid out by paramount leader Deng Xiaoping, namely, peace and development. The concept of peace and development derives from the notion that China needs a peaceful external environment to develop economically. But there are also external components to China’s long term goals, particularly China’s relations with the rest of the world. President Xi Jinping offers some hints. He has discussed the prospects for “democratizing” the international system. This is code for a transition from a unipolar world dominated by the United States to a multipolar world.

As China rises, China envisions the emergence of a new global configuration in which China is a great power among other coequal great powers, including the European Union, India, and Russia, in the international system. This aligns with the “rise of the rest” hypothesis. As China gets very strong, it would also seek to amend the rules that have governed the current international order in ways that accommodates China’s interests as a great power. China’s rise thus raises a series of important questions about the implications for Asia. What does China want in East Asia as it rises? Would China seek to become the dominant power in East Asia? Would it seek a dramatically reduced role for the United States? More troubling, would China seek a Sino-centric regional order in which many of its neighbors, including Japan, must acquiesce to its strategic prerogatives?

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“..German industrial new orders dropping by 7.4% on the month in January – the biggest monthly fall since 2009 [..] January figures showed a drop of 10.5% in domestic demand and a contraction of 4.9% in foreign orders.”

Germany’s ‘Powerhouse’ Economy Is Cracking (CNBC)

Germany is often described as the “powerhouse” of Europe, but the health of the world’s fourth largest economy is not as rosy as most people think, according to one economist. “The crack in Germany’s economy has become most evident in consumer spending. Retail sales volumes have slowed consistently since growth rates peaked in mid-2015. They have crashed in the last six monthly reports,” Carl Weinberg, chief economist at High Frequency Economics, said in a note earlier this week. Hard data shows that Germany’s economy has been facing problems for at least the past six months, despite an uptick in growth at the end of last year. At the same time, income has been slowing dramatically and the reasons behind this are far from clear.

“As domestic demand is imploding, so is foreign demand,” Weinberg added. “Exports are flat year-on-year. This is not to say that net exports are not rising. However, the flat gross exports mean industrial output to make goods for export is not growing.” “Without growth of either exports or domestic consumer spending, industrial production has stalled,” Weinberg said. On Tuesday, data showed German industrial new orders dropping by 7.4% on the month in January – the biggest monthly fall since 2009. According to Reuters, a breakdown of the January figures showed a drop of 10.5% in domestic demand and a contraction of 4.9% in foreign orders.

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Second part of the show. Last week, Steve ‘submittied evidence’ on QE to a Treasury Committee in the UK.

“If these conventional theories of economics actually worked, you and I wouldn’t have an audience.”

1/8th Of QE Money, Given To The Public, Would Have Had The Same Effect (MK)

In this episode of the Keiser Report, Max and Stacy discuss why neoliberalism didn’t make us richer. In the second half, Max interviews professor Steve Keen about Quantitative easing (QE) and its role in financial crisis.

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But they will tell you this is normal.

One in Three U.K. Homeowners Earn More From Property Than Work (BBG)

Home prices in 31% of the U.K.’s local authority districts have risen more than the total average take-home pay of workers in the area over the past two years, according to Halifax. While homeowners would have to sell their houses to realize those gains, it illustrates how quickly prices have risen, as well as how hard it is for new buyers to get on the property ladder. Rising house prices have helped underpin consumption, the backbone of Britain’s economy, even as wage increases have been more modest. Still, the distribution of gains highlight regional disparities. More than 90% of the areas were in London, the South and East of England, the report published Friday said.

The biggest gap was in Haringey, a borough in the north of the capital city, where house prices increased by an average of 139,803 pounds ($169,805), exceeding average take-home earnings by 91,450 pounds or 3,810 pounds per month. “While it’s no longer unusual for houses to ‘earn’ more than the people living in them in some places, there are clearly local impacts,” said economist Martin Ellis. “Homeowners in these areas can build up large levels of equity quickly, but for potential buyers whose wages have failed to keep pace, the cost of buying a home has become more unaffordable.” The only areas where earnings exceeded house price increases were the North East, Scotland and Northern Ireland.

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The peak AND the bottom of EU democracy. Tusk is in Brussels to represent Poland. But Poland doesn’t want him to do that. The EU doesn’t care.

Poland Reacts With Fury To Re-Election Of Donald Tusk (G.)

Donald Tusk has won a second term as European council president, overcoming bitter opposition from Poland that has left the country isolated in Europe. Tusk, a former Polish prime minister, was re-elected on Thursday with overwhelming support to lead the council, the body that organises EU leaders’ meetings, for a second term lasting two and a half years. His reappointment until the end of 2019 means he will play a crucial role in Britain’s negotiations to leave the EU. The Pole, from the pro-European centre-right Civic Platform party, overcame strong resistance from his own government, led by the Eurosceptic Law and Justice party (PiS). The outcome was never in doubt, but is a blow for the Warsaw government, which responded with fury. “We know now that it [the EU] is a union under Berlin’s diktat,” the Polish foreign minister, Witold Waszczykowski, told Polish media, echoing persistent claims by PiS that the EU is controlled by Berlin.

Despite its anger, however, Poland was left isolated as other countries including traditional central European allies lined up to back Tusk, a popular choice to guide the EU through difficult Brexit talks and tense debates on migration. News of his re-election was broken by Belgium’s prime minister, Charles Michel, who tweeted his congratulations less than two hours after the meeting had started. In a rare formal vote, 27 of the EU’s 28 governments supported Tusk. The Polish prime minister, Beata Szydlo, confirmed that Poland would retaliate by blocking the EU summit communique, a statement summarising EU policy on economic growth, migration and the western Balkans. But the document can still be approved in a different procedure, a manoeuvre likely to deepen the wedge between Warsaw and other EU capitals.

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For some reason the text with the graph is about the UK, though that’s obviously not where the problem is.

80% of Greek Households Struggle To Make Ends Meet (BBG)

Around one in six U.K. households had “great difficulty” or “difficulty” in making ends meet in 2015, according to Eurostat. While that’s below the estimated average of 26% across the European Union, it’s more than triple the proportion of struggling Swedes and about double the%age in Germany. With inflation forecast to accelerate this year and grocers such as Wm Morrison Supermarkets Plc warning price increases will soon hit, British consumers look set to face a further squeeze on living standards this year.

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Mar 042017
 
 March 4, 2017  Posted by at 9:42 am Finance Tagged with: , , , , , , , , , ,  4 Responses »
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DPC Pine Street below Kearney after the great San Francisco earthquake and fire 1906

 


Yellen Points To March Rate Hike As Fed Signals End Of Easy Money (R.)
The Fed Is Embarking On A Path That Usually Ends With A Recession (Udland)
A Selloff Is Looming As Fear Stalks The Stock Market Rally (MW)
Medicine In The USA Is A Hostage Racket (Jim Kunstler)
Chevron Warns Future Oil Drilling May Be ‘Economically Infeasible’ (Ind.)
Germany-Turkey War Of Words Escalates (BBC)
UK Could Quit EU Without Paying A Penny (G.)
Greece Should Be Added to ECB’s QE Bond-Buying List (BBG)
To Solve Refugee Crisis, Stop Funding Terrorism – Tulsi Gabbard (TAM)
Austria To Stop Giving Food, Shelter To Rejected Asylum Seekers (ZH)
US Considers Separating Women And Children Who Enter Country Illegally (G.)
Parents Fearing Deportation Pick Guardians For US Children (R.)

 

 

‘The end of easy money’ will only come through collapse.

Yellen Points To March Rate Hike As Fed Signals End Of Easy Money (R.)

The U.S. Federal Reserve’s long-stalled ‘liftoff’ of interest rates may finally get airborne this year as policymakers from Chair Janet Yellen on Friday to regional leaders across the United States signaled that the era of easy money is drawing to a close. Yellen capped off a seemingly coordinated push from the central bank on Friday when she cemented the view that the Fed will raise interest rates at its next meeting on March 14-15, and likely be able to move faster after that than it has in years. It’s a welcome turn for the Fed chair, who has hoped to get rates off the ground throughout her three-year tenure, and now sees the economy on track and investors aligned around the idea.

“At our meeting later this month, the committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate,” Yellen said at a business luncheon in Chicago. “The process of scaling back accommodation likely will not be as slow as it was in 2015 and 2016,” she added. Stocks were up slightly, and futures tied to rate-hike expectations moved little on Yellen’s remarks. The comments from Fed speakers this week had already pushed market pricing of a March hike to 80%. The Fed has struggled for the past three years to raise interest rates off the zero lower bound as the U.S. economy slowly healed after the Great Recession. Issues from sluggish inflation globally to the dampening effect of a strong dollar and low energy prices blew them off course. By contrast, 2017 may be the year the Fed is able to follow through on its forecast of three rate hikes.

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Central bank manipulation is a craziness that can end in one way only.

The Fed Is Embarking On A Path That Usually Ends With A Recession (Udland)

Stocks are at record highs. And while the Trump administration’s early days have been filled with internal political chaos, the market’s reaction has continued to remain positive. On Wednesday, when U.S. stocks had their best day of the year, the popular SPY ETF, which tracks the S&P 500, saw $8.2 billion in new inflows, its single-best day since December 2014. But something else happened on Wednesday that should have equity bulls quite a bit more concerned: markets got behind the idea the Federal Reserve will raise interest rates in March and, perhaps, be more aggressive about raising rates in than previously expected.On Friday, Fed Chair Janet Yellen signaled that a March rate hike is on the table and said the pace of the Fed raising rates in 2017 would likely exceed that seen in 2015 and 2016.

And while an accomodative Fed has been seen as a backstop for markets during the post-crisis bull run higher, a tighter Fed is bad news for stocks because when rates begin to rise, the end of the bull market has already been signaled. As we highlighted in our daily market outlook post, David Rosenberg at Gluskin Sheff wrote Thursday that, “Monetary policy is profoundly more important to the markets and the economy than is the case with fiscal policy, though all the Fed is doing now is removing accommodation.” Rosenberg added that, “there have been 13 Fed rate hike cycles in the post-WWII era, and 10 landed the economy in recession. Soft landing are rare and when they have occurred, they have come in the third year of the expansion, not the eighth.”


The gray bars mark recessions. Ahead of recessions, rates usually rise. Right now, rates are set to rise.

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Fear vs greed.

A Selloff Is Looming As Fear Stalks The Stock Market Rally (MW)

Wall Street’s so-called fear index has started to move in lockstep with stock prices and that has one money manager warning of an impending selloff even as market sentiment remains fairly stable. Jesse Felder, founder of the Felder Report and an alumni of Bear Stearns, on Friday shared a chart that showed an increasingly positive correlation between the S&P 500 and the CBOE Market Volatility Index. “Normally stocks and the VIX move in opposite directions…and it makes sense that rising stock prices mean less fear and vice versa,” said Felder. However, that reverse relationship has started to change in recent days as expectations of a market correction mount.

The VIX is a measure of the market’s expectation for volatility over the next 30 days and is calculated from the implied volatilities of S&P 500 index options. A low reading indicates a placid market while a higher number suggests elevated uncertainty. “The options market is pricing in greater volatility ahead even though stocks don’t yet reflect this same dynamic,” Felder told MarketWatch. “Over the past few years this signal has preceded anywhere from a 2% to a 10% correction.”

That this trend comes on top of the 10-year Treasury yield’s nearly 40% surge over the past year as the Federal Reserve prepares to tighten monetary policy suggest risky assets such as equities will face significant selling pressure. Analysts are projecting the Fed to raise interest rates three times this year, a view reinforced by comments from Fed Chairwoman Janet Yellen on Friday that a rate hike at the next Federal Open Market Committee in mid-March is likely. “The Fed looks like it will take its third step toward tightening here soon so it might pay to remember the old Wall Street adage ‘three steps and a stumble.’ For these reasons, I think the chance of a major reversal is higher than it has been in the past,” he said.

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“Some things are too big to fail; some are too broken to fix.”

Medicine In The USA Is A Hostage Racket (Jim Kunstler)

The ObamaCare quandary. A fiasco for sure. Under it, not uncommonly, a family pays $12,000-a-year for a policy that carries a $5,000 deductible. That’s an interesting number in a land were most people don’t even have enough ready cash for routine car repairs. The cruel and idiotic injustice of such a set-up could only happen in a society that has normalized pervasive lying, universal accounting fraud, and corporate racketeering. I personally doubt the existing health care system can be reformed. Anyway, we’re starting in the wrong place with it. The part that nobody talks about is the psychopathic pricing system that drives medicine. The average cost for a normal (non-surgical) hospital childbirth in America these days is $10,000. WTF? An appendectomy: between $9,000 and $20,000 depending on where. WTF?

These days, a hip replacement runs about $38,000. Of course, you will never find out what a treatment or procedure costs before-the-fact. They simply won’t tell you. They’ll say something utterly ridiculous like, “we just don’t know.” You’ll find out when the bills roll in. Last time I had a hip replacement, I received a single line-item hospital charge report from the insurance company that said: “Room and board, 36 hours… $23,000.” Say what? This was apart from the surgeon’s bill and the cost of the metal implant, just for occupying a bed for a day and a half pending discharge. They didn’t do a damn thing besides take my blood pressure and temperature a dozen times, and give me a few hydrocodone pills.

The ugly truth, readers, is that medicine in the USA is a hostage racket. They have you in a tight spot at a weak moment and they extract maximum payment to allow you to get on with your life, with no meaningful correlation to services rendered — just whatever they could get. Until these racketeers are compelled under law to post their prices openly and transparently, no amount of tweaking the role of insurers or government policy will make any difference. Note, too, that there is a direct connection between the outrageous salaries of hospital executives and their non-transparent, dishonest, and extortionist pricing machinations. The pharma industry is, of course, a subsidiary racket and needs to be subject to the kind of treatment the Department of Justice used to dispense to the likes of the Teamsters Union.

The healthcare system probably will not be reformed, but rather will collapse, and when it does, it will reorganize itself in a way that barely resembles current practice. For one thing, citizens will have to gain control over their own disastrous behavior, especially their eating, or else suffer the consequences, namely an early death. Second, the hospital system must be decentralized so that localities are once again served by small hospitals and clinics. The current system represents a mergers-and-acquisitions orgy that went berserk the past quarter century. The resulting administrative over-burden at every medical practice in the land is a perfectly designed fraud machine for enabling rackets. Preliminary verdict: congress will get nowhere in 2017 trying to fix this mess. Some things are too big to fail; some are too broken to fix. The coming debacle in finance, markets, and currencies will speed its demise.

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Because of climate legislation.

Chevron Warns Future Oil Drilling May Be ‘Economically Infeasible’ (Ind.)

In an industry first, one of the world’s biggest oil companies has warned it could face legal action over climate change. Chevron, the California-based multinational, admitted it could be the subject of “governmental investigations and, potentially, private litigation” because of its role in causing global warming. And the firm added that regulations designed to reduce greenhouse gas emissions might also render the “extraction of the company’s oil and gas resources economically infeasible”. Environmentalists suggested the decision to admit the threat to the company could be a reaction to legal case brought last year against Exxon Mobil by the Boston-based Conservation Law Foundation, which alleges the fossil fuel company tried to discredit climate science despite knowing the risks in order to make money.

Chevron was one of a number of oil firms targeted in a campaign by the Union of Concerned Scientists in the US to “stop funding climate disinformation”. And, in an official filing about the state of its financial health to the US Securities and Exchange Commission (SEC), the company lays out possible reasons why it might have been in its interest to cast doubt on scientific evidence that its products are causing a problem. Laws requiring the reduction of emissions – like legislation that could be in the UK Government’s long-delayed Emissions Reduction Plan – “may result in increased and substantial … costs and could, among other things, reduce demand for hydrocarbons”, Chevron said in a section called “risk factors”.

“In the years ahead, companies in the energy industry, like Chevron, may be challenged by an increase in international and domestic regulation relating to greenhouse gas emissions,” it said. “Such regulation could have the impact of curtailing profitability in the oil and gas sector or rendering the extraction of the company’s oil and gas resources economically infeasible.”

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Makes me fear for Greece.

Germany-Turkey War Of Words Escalates (BBC)

A row between Ankara and Berlin over a series of cancelled Turkish political rallies in Germany is continuing to escalate. On Friday, Turkish President Recep Tayyip Erdogan accused Berlin of “aiding and harbouring” terror. He said a German-Turkish journalist detained by Turkey was a “German agent” and a member of the outlawed Kurdish militant group, the PKK. A source in Germany’s foreign ministry told Reuters the claims were “absurd”. Earlier German Chancellor Angela Merkel said she respected local authorities’ decisions to cancel rallies that Turkey’s justice and economy ministers had been scheduled to address. Turkey is trying to woo ethnic Turkish voters ahead of a key referendum. About 1.4 million Turks living in Germany are eligible to vote in the April referendum, in which President Erdogan aims to win backing for sweeping new powers.

The constitutional changes would boost Mr Erdogan’s presidency and significantly weaken parliament’s role. Turkish officials have been angered after local German officials withdrew permission for rallies in Gaggenau, Cologne and Frechen. Gaggenau authorities had said there was insufficient space for the rally, while Cologne officials said they had been misled about the purpose of the event. Turkish Justice Minister Bekir Bozdag, who had been due to speak in Gaggenau, said he saw “old illnesses flaring up” between the two Nato allies. Meanwhile, Turkish Foreign Minister Mevlut Cavusoglu accused the German government of backing opposition to Mr Erdogan’s planned constitutional changes. He said: “You are not Turkey’s boss. You are not a first class [country] and Turkey is not second class. We are not treating you like that, and you have to treat Turkey properly. “If you want to maintain your relations with us, you have to learn how to behave.”

Germany’s foreign ministry said the central government had nothing to do with the cancellations, and Ankara should refrain from “pouring oil on the fire”. The growing row is troubling for Chancellor Merkel because she persuaded Turkey to help block the surge of migrants – many of them Syrian refugees – into the EU. Separately, the Dutch government on Friday described plans for a Turkish referendum campaign rally in Rotterdam as “undesirable”. Turkish Foreign Minister Mevlut Cavusoglu was reportedly meant to attend the rally scheduled for 11 March. Ties between Berlin and Istanbul are also strained over Turkey’s arrest of Deniz Yucel, a journalist who works for Die Welt. Mr Yucel “hid in the German embassy as a member of the PKK and a German agent for one month”, Mr Erdogan said. “When we told them to hand him over to be tried, they refused.” German’s foreign ministry called the spy claims “absurd”. Ms Merkel, referring to the case earlier, told reporters in Tunis: “We support freedom of expression and we can criticise Turkey.”

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The EU’s position in the talks will weaken as the union crumbles.

UK Could Quit EU Without Paying A Penny (G.)

The UK could walk away from the European Union in 2019 without paying a penny, the House of Lords has said, in a report bound to raise tensions with Brussels in the run-up to Brexit talks. The British government would have no legal obligation to either pay a €60bn Brexit bill mooted by the European commission or honour payments into the EU budget promised by the former prime minister David Cameron, according to analysis by the House of Lords EU financial affairs sub-committee. In a report published on Saturday, the committee argues that the British government would be on strong legal ground if it chose to leave the EU without paying anything, adding that Brussels would have no realistic chance of getting any money.

The peers stress, however, that if the government wants goodwill from EU countries and a deal on access to European markets, agreement on the budget will be important. “The UK appears to have a strong legal position in respect of the EU budget post-Brexit and this provides important context to the article 50 negotiations,” said Lady Falkner of Margravine, the Liberal Democrat peer who chairs the sub-committee. “Even though we consider that the UK will not be legally obliged to pay into the EU budget after Brexit, the issue will be a prominent factor in withdrawal negotiations. The government will have to set the financial and political costs of making such payments against potential gains from other elements of the negotiations.”

[..] The peers’ argument will be toxic to the EU’s chief Brexit negotiator, Michel Barnier, whose staff drew up the mooted bill ranging from €55bn-€60bn. This covers the UK’s share of EU civil staff pensions, unpaid bills and decommissioning nuclear power plants. Barnier is expecting the UK to pay into the EU budget in 2019 and 2020, putting the UK on the hook for payments worth £12.4bn, agreed by Cameron in 2013. The EU’s €1tn, seven-year budget was negotiated in late 2013 by EU leaders including the British prime minister. It is due to expire at the end of 2020, although bills may be trickling in until 2023. This reflects that payments for EU-funded infrastructure projects, such as roads or airports, are not settled until two to three years after being promised.

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There is no reason for the ECB not to include Greece. Never was. It’s pure economic strangulation.

Greece Should Be Added to ECB’s QE Bond-Buying List (BBG)

Greece and its creditors look poised to strike a deal that will allow the nation to draw down aid and avoid defaulting on its debts in July. That sounds good, but it is, in fact, just a fudge. What’s needed instead is for the country to regain access to capital markets in its own right. To help make that happen, the European Central Bank should add Greek bonds to the list of securities eligible for purchase under its quantitative easing program.

The deal Greece is about to agree with its European partners and the IMF is the latest in a long line of compromises that have failed to address the core issue – that Greece’s debts, now 170% of economic output, are so burdensome they are preventing a recovery. The IMF is right to argue that Greece needs additional debt relief on the €174 billion it owes to the European Financial Stability Facility and the European Stability Mechanism. With elections looming this year in the Netherlands, France and Germany, however, details about that relief will probably have to wait until next year; voters don’t want to hear about Greek bailouts right now. But the ECB can act swiftly to include Greek bonds in its asset purchase program.

German Chancellor Angela Merkel has told ECB President Mario Draghi that she’s willing to let inclusion in his QE program be used as an incentive to persuade Greece to agree to the new deal, the Greek news service Kathimerini reported on Wednesday, without identifying the source of its information. Draghi has made a new agreement between Greece and its lenders a condition of adding Greek debt to the 60 billion euros of bonds the central bank will buy from April, as it scales back the monthly program from 80 billion euros. Greek Prime Minister Alexis Tsipras told lawmakers last week that he’s hopeful the latest bailout review can be completed by March 20, when euro-region finance ministers are scheduled to meet in Brussels.

While Greek yields have declined in recent weeks, they remain too high for the country to attempt to tap the markets. Greece’s two-year borrowing cost of about 7%, for example, compares with just 2% for Italy and 1.7% for Spain, both of which have benefited from the support of ECB purchases:

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“..never once laying blame to the U.S. military establishment for spending over $1 billion a year arming Syrian rebels.”

To Solve Refugee Crisis, Stop Funding Terrorism – Tulsi Gabbard (TAM)

Democratic Congresswoman Tulsi Gabbard, the politician who previously accused the U.S. of arming ISIS, is still calling on the U.S. government to stop its disastrous regime change policies in the Middle East. According to a press release made public on Tuesday, Gabbard has again called for the U.S. to stop aiding terrorists like al-Qaeda and ISIS. Gabbard’s guest at the presidential address to Congress, a Kurdish refugee activist, also called for an end to the U.S. policy of “regime change in Syria.” Gabbard said:

“In the face of unimaginable heartbreak, Tima has been a voice for the voiceless, a champion for refugees worldwide, and a strong advocate for ending the regime change war in Syria. I am honored to welcome her to Washington tonight as we raise our voices to call on our nation’s leaders to end the counterproductive regime change war in Syria that has caused great human suffering, refugees, loss of life, and devastation. We urge leaders in Congress to pass the Stop Arming Terrorists Act and end our destructive policy of using American taxpayer dollars to provide direct and indirect support to armed militants allied with terrorist groups like al-Qaeda and ISIS in Syria, who are fighting to overthrow the Syrian government.”

Gabbard also reportedly told Russian state-owned news station RT: “For years, our government has been providing both direct and indirect support to these armed militant groups, who are working directly with or under the command of terrorist groups like Al-Qaeda and ISIS, all in their effort and fight to overthrow the Syrian government.” The activist, Tima Kurdi, is more widely known as the aunt of a three-year-old boy who drowned on the shores of Turkey in September 2015. The image went viral on social media and was easily manipulated by the mainstream media to further the United States’ agenda in the region, never once laying blame to the U.S. military establishment for spending over $1 billion a year arming Syrian rebels.

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Welcome to Europe. It’s the same as America.

Austria To Stop Giving Food, Shelter To Rejected Asylum Seekers (ZH)

In a bill aimed at encouraging asylum seekers to leave voluntarily, Austrian lawmakers are considering halting the provision of food and accommodation to migrants who are denied asylum and refuse to leave the country. Austria took in roughly 90,000 asylum seekers in 2015, more than 1 percent of its population, as it was swept up in Europe’s migration crisis when hundreds of thousands of people crossed its borders, most on their way to Germany. As Reuters notes, it has since tightened immigration restrictions and helped shut down the route through the Balkans by which almost all those people – many of them fleeing war and poverty in the Middle East and elsewhere – arrived. Asylum applications fell by more than half last year.

Asylum seekers in Austria get so-called basic services, including free accommodation, food, access to medical treatment and €40 pocket money a month. But now, Austria’s centrist coalition government on Tuesday agreed on a draft law which would allow authorities to stop providing accommodation and food to rejected asylum seekers who refuse to leave the country. “The first thing is basically that they don’t get anything from the Austrian state if they don’t have the right to stay here. Is that so hard to understand?” As Politico reports, Interior Minister Wolfgang Sobotka said the law, which will need approval by parliament, was designed to encourage rejected asylum seekers to leave voluntarily.

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This is getting too absurd.

US Considers Separating Women And Children Who Enter Country Illegally (G.)

Women and children crossing together illegally into the United States could be separated by US authorities under a proposal being considered by the Department of Homeland Security, according to three government officials. Part of the reason for the proposal is to deter mothers from migrating to the United States with their children, said the officials, who have been briefed on the proposal. The policy shift would allow the government to keep parents in custody while they contest deportation or wait for asylum hearings. Children would be put into protective custody with the Department of Health and Human Services, in the “least restrictive setting” until they can be taken into the care of a US relative or state-sponsored guardian.

Currently, families contesting deportation or applying for asylum are generally released from detention quickly and allowed to remain in the United States until their cases are resolved. A federal appeals court ruling bars prolonged child detention. Donald Trump has called for ending so-called “catch and release”, in which people who cross illegally are freed to live in the United States while awaiting legal proceedings. Two of the officials were briefed on the proposal at a 2 February town hall for asylum officers by US Citizenship and Immigration Services asylum chief John Lafferty. A third DHS official said the department was actively considering separating women from their children but has not made a decision. About 54,000 children and their guardians were apprehended between 1 October 2016, and 31 January 2017, more than double the number caught over the same time period a year earlier.

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The sadness is deafening.

Parents Fearing Deportation Pick Guardians For US Children (R.)

Parents who immigrated illegally to the United States and now fear deportation under the Trump administration are inundating immigration advocates with requests for help in securing care for their children in the event they are expelled from the country. The Coalition for Humane Immigrant Rights of Los Angeles (CHIRLA) advocacy group has been receiving about 10 requests a day from parents who want to put in place temporary guardianships for their children, said spokesman Jorge-Mario Cabrera. Last year, the group said it received about two requests a month for guardianship letters and notarization services. At the request of a nonprofit organization, the National Lawyers Guild in Washington D.C. put out a call this week for volunteer attorneys to help immigrants fill out forms granting friends or relatives the right to make legal and financial decisions in their absence.

In New Jersey, immigration attorney Helen Ramirez said she is getting about six phone calls a day from parents. Last year, she said, she had no such calls. “Their biggest fear is that their kids will end up in foster care,” Ramirez said. President Donald Trump’s administration has issued directives to agents to more aggressively enforce immigration laws and more immigrants are coming under scrutiny by the authorities. For parents of U.S. citizens who are ordered removed, the U.S. Immigration and Customs Enforcement (ICE) agency “accommodates, to the extent practicable, the parents’ efforts to make provisions” for their children, said ICE spokeswoman Sarah Rodriguez. She said that might include access to a lawyer, consular officials and relatives for detained parents to execute powers of attorney or apply for passports and buy airline tickets if the parents decide whether or not to take the children with them.

Randy Capps of the Migration Policy Institute (MPI), a Washington-based non-profit that analyzes the movement of people worldwide, said that while putting contingency plans in place is a good idea, he does not think the level of fear is justified. During the previous administration of President Barack Obama, a Democrat, the likelihood of both parents being deported was slim, Capps said. He doubts there will be a huge shift under Republican Trump toward deporting both parents. “The odds are still very low but not as low as they were – and this is just the beginning of the administration,” he said.

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Feb 142017
 
 February 14, 2017  Posted by at 10:09 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
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David Myers Theatre on 9th Street. Washington, DC July 1939

 


Top Trump Aide Flynn Resigns Over Russia Contacts (AFP)
Judge Grants Injunction Against Trump Travel Ban In Virginia (AP)
Is Trump the New Boris Yeltsin? (Max Keiser)
Bond Traders Fear Yellen Is Planning A ‘St. Valentine’s Day Massacre’ (MW)
Yellen Outlook ‘Irrelevant’ Because Trump Will Reshape Fed (CNBC)
The Fed Is Bad For America – But Getting Rid Of It Isn’t The Answer (DDMB)
Made For Each Other (Jim Kunstler)
Democracies Must Reclaim Power Over The Production Of Money (Pettifor)
China Factory Prices Surge Most Since 2011, Boosting Reflation (BBG)
Putin’s Central Banker Is on a Tear (BBG)
The Euro May Already Be Lost (ETT)
Greece To Exceed Its Primary Surplus Target In 2018 (R.)
Greece Lines Up Rothschild For Debt Advisory Role As Bankruptcy Looms (IW)
To Those Who Kept Me Alive All These Years: Thank You (Chelsea Manning)
Lesbos Doctors Accuse NGOs Of Failing To Care For Refugees (K.)

 

 

I still don’t fully get it. Was Flynn set up? Hard to believe he didn’t know his calls would be recorded and transcribed. He ran US -military- intelligence for a number of years, for pete’s sake. How could he not have known?

Top Trump Aide Flynn Resigns Over Russia Contacts (AFP)

Donald Trump’s national security advisor Michael Flynn resigned amid controversy over his contacts with the Russian government, a stunning first departure from the new president’s inner circle less than a month after his inauguration. The White House said Trump had accepted Flynn’s resignation amid allegations the retired three star general discussed US sanctions strategy with Russia’s ambassador Sergey Kislyak before taking office. Flynn – who once headed US military intelligence – insisted he was honored to have served the American people in such a “distinguished” manner. But he admitted that he “inadvertently briefed” the now Vice President Mike Pence with “incomplete information” about his calls with Kislyak. Pence had publicly defended Flynn, saying he did not discuss sanctions, putting his own credibility into question.

“Regarding my phone calls with the Russian Ambassador. I have sincerely apologized to the President and the Vice President, and they have accepted my apology,” read Flynn’s letter, a copy of which was released by the White House. The White House said Trump has named retired lieutenant general Joseph Kellogg, who was serving as a director on the Joint Chiefs of Staff, to be interim national security advisor. Flynn’s resignation so early in an American administration is unprecedented, and comes after details of his calls with the Russian diplomat were made public – upping the pressure on Trump to take action. Several US media outlets in Monday reported that top Trump advisors were warned about Flynn’s contacts with the Russians early this year. Questions will now be raised about who knew about the calls and why Trump did not move earlier to replace Flynn.

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The ban is now all but dead. But they’ll throw out another one soon.

Judge Grants Injunction Against Trump Travel Ban In Virginia (AP)

A federal judge Monday granted a preliminary injunction barring the Trump administration from implementing its travel ban in Virginia, adding another judicial ruling to those already in place challenging the ban’s constitutionality. The ruling is significant from a legal standpoint because U.S. District Judge Leonie Brinkema found that an unconstitutional religious bias is at the heart of the travel ban, and therefore violates First Amendment prohibitions on favoring one religion over another. She said the evidence introduced so far indicates that Virginia’s challenge to the ban will succeed once it proceeds to trial. A federal appeals court in California has already upheld a national temporary restraining order stopping the government from implementing the ban, which is directed at seven Muslim-majority countries.

But the ruling by the 9th Circuit Court of Appeals was rooted more in due process grounds, said Virginia Attorney General Mark Herring, a Democrat who brought the lawsuit against Trump in Virginia. “Judge Brinkema’s ruling gets right to the heart of our First Amendment … claim,” Herring said in a conference call Monday night. In her 22-page ruling, Brinkema writes that Trump’s promises during the campaign to implement what came to be known as a “Muslim ban” provide evidence that the current executive order unconstitutionally targets Muslims. “The president himself acknowledged the conceptual link between a Muslim ban and the EO (executive order),” Brinkema wrote. She also cited news accounts that Trump adviser Rudy Giuliani said the executive order is an effort to find a legal way for Trump to be able to impose his Muslim ban. Herring said that “the overwhelming evidence shows that this ban was conceived in religious bigotry.”

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“The creeping tide of kleptocracy will be appeased at every juncture.”

Is Trump the New Boris Yeltsin? (Max Keiser)

The hope that Trump would take on Wall Street crooks is dead. It was a long shot to begin with but it’s now clear that his level of financial illiteracy and corruption, a hallmark of Obama’s Presidency, is on par, or perhaps even exceeds Obama’s. What we see shaping up in the first few weeks of Trump’s Presidency is his emergence as the new Boris Yeltsin, the puppet idiot installed by America’s neo-cons and Wall St. bankers after the Soviet Union collapsed to drown the country in debt and deceit. Yeltsin was a drunk clown who gave away the country to oligarchs, who turned the country into a kleptocracy – all happening under the laughing approval of President Bill Clinton. Today Trump fills the Yeltsin role in American politics. As Wall St. laughs, Trump begins the process of giving away (read: privatizing) America’s assets to be owned by our new ruling kleptocracy.

Inflation is coming…But not because wages go up, but because price gouging and monopoly pricing starts to dominate our everyday lives with no cheap substitutes coming from overseas due to an increasing global level of distrust and illiquidity among trading partners. Leveraged buyouts fueled by bailouts and free money from the central bankers will continue to kill competition in America. Media, energy, pharmaceutical, finance and agriculture will all be controlled by impregnable monopolies (and Warren Buffett). It’s a pitiful sham and a godawful shame – a situation where Trump’s supporters will, in the not too distant future, turn on him after they’ve had their illusions shattered – but will it be too late? The creeping tide of kleptocracy will be appeased at every juncture. The vanishing middle class will cling to their guns and bibles – hoping for a miracle. They simply will not be able to believe that they could have been so wrong. The triumph of the will.

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The always colorful language of Albert Edwards.

Bond Traders Fear Yellen Is Planning A ‘St. Valentine’s Day Massacre’ (MW)

Is Federal Reserve Chairwoman Janet Yellen capable of conducting a bond-market bloodbath? That’s what some on Wall Street are wondering. Albert Edwards, market strategist at Société Générale and noted permabear, expects Yellen, who is set to deliver semiannual testimony to the Senate Banking Committee on Tuesday, will trigger a steep bond selloff by talking up the possibility that the central bank will raise interest rates in March. In a note, he refers to the possibility as “The St. Valentine’s Day Massacre,” a homage to the 1929 gangland murder of seven men in a garage in the Lincoln Park neighborhood on Chicago’s North Side. The killings were allegedly planned by famed mobster Al Capone, who was trying to wrest power away from Chicago’s Irish gangsters.

Edwards isn’t the only one who expects Yellen to remind investors that the central bank could raise interest rates at its next meeting for what would be the third time in a decade. “The market is bracing for the possibility that Yellen will talk up the chances of a rate increase in March,” said Guy LeBas, chief fixed income strategist at Janney. Treasury yields, which move inversely to prices, are on track to rise for the third straight day, a selloff that has largely been driven by these concerns, LeBas said. The yield on the 10-year Treasury note rose 3.6 basis points to 2.447%. But a March hike is still viewed as far from likely. Although the central bank back projected back in December that it would raise interest rates three times in 2017, investors have remained skeptical—probably because they’ve been burned by the Fed before.

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If Brainard leaves too, that makes five seats to fill with Yellen gone early next year.

Yellen Outlook ‘Irrelevant’ Because Trump Will Reshape Fed (CNBC)

With at least three vacancies expected on the Federal Reserve’s Board of Governors this year, the central bank may not be exempt from a Trump-led shakeup, strategist Mark Grant told CNBC on Monday. “The Fed of today is not going to be the Fed of tomorrow,” the chief strategist at Hilltop Securities told “Squawk Box.” Grant, who accurately predicted the Brexit vote and Donald Trump’s victory, said the president and Treasury Secretary nominee Steven Mnuchin will take advantage of filling key vacancies on the Fed board to further their agenda. Grant spoke a day ahead of Fed Chair Janet’s Yellen’s semiannual monetary report to the Senate. The Fed has said it expect to raise interest rates three times this year.

“I think what the Fed says at this point is, for all practical purposes, irrelevant, because Mr. Trump is going to be able to appoint three members of the Fed,” Grant said. “I think they’re going to be business people and the days of an academic, economist Fed are going to be over.” Removing academics from the Fed’s board remains a point of contention, but Grant said the Trump administration is likely to do so with the economic landscape and policy goals in mind. “I also believe that Trump and company, as I call them, know as they put in the infrastructure or the military expansion that there’s going to be a balance to the balance sheet, and … that the new people on the Fed are going to keep interest rates low,” Grant said. “So all this talk of a three interest rate or four interest rate hike, in my opinion, is baloney.”

On Friday, Fed Governor Daniel Tarullo announced plans to leave the board in April, creating a third vacancy. Danielle DiMartino Booth, author of “Fed Up: An Insider’s Take on Why the Federal Reserve Is Bad for America,” said that there is a high probability that board member Lael Brainard will also leave, creating yet another vacancy. She said Trump’s bold spending plan may require low interest rates (and, in turn, a more dovish Fed), but she wondered about whom the president would appoint to the board. “It’s really going to come down to whether or not he’s got the gumption to totally change the complexion of the Federal Reserve board, or if he steps back and says, ‘You know what, I’ve got to finance all this stuff, so I’m going to put more doves in.’ These are hard decisions,” she said.

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Fed insider Danielle DiMartino Booth’s new book Fed Up is here.

The Fed Is Bad For America – But Getting Rid Of It Isn’t The Answer (DDMB)

On September 20, 2005, Mark Olson did something ordinary that’s since proved to be extraordinary. Never heard of him? You’re not alone. Nevertheless, the banking expert had the gumption to lob a dissenting vote in his capacity as a governor on the Federal Reserve Board. He joined the estimable company of Edward “Ned” Gramlich, a fellow governor who dissented at the September 2002 Federal Open Market Committee meeting. Gramlich is best known for sounding an early warning on the subprime crisis, and being resolutely dismissed by Alan Greenspan. The two gentlemen represent central banking’s answer to the “Last of the Mohicans,” the sole two dissents that have been recorded by governors since 1995. And that’s a problem. At last check, ‘No” was not a four-letter word.

It’s no longer a secret that an abundance of anger is churning among many working men and women who feel they’ve been excluded by the current economic recovery and the longest span of job creation in postwar history. The funny thing about a sense of abandonment is that more often than not, anger follows. What too few Americans appreciate is how directly the inability to say “no” at the Fed has determined their station in life. But that’s just the case. The Fed directly impacts a slew of the most important decisions we make — the values we instill in our children, the things we buy and how they are financed and how we best prepare for what follows after a lifetime of laboring in the trenches.

Stop and think for a moment about the first time you discovered the miracle of compounding interest, that first bank statement that proved savings does pay. Can your children experience that same sensation? What about the roof over your head and the car you drive? Can you afford the payments or did you stretch to buy more than you could afford, out of sheer necessity? What about your mom and dad’s retirements? Do they say their prayers that the stock market will hang in there and that the safety of their bond holdings will protect them if that’s not the case? All of these dysfunctional dynamics lay at the feet of an academic-led Fed being hellbent on launching unconventional monetary policy with the false prerequisite that interest rates had to be zero before quantitative easing (QE) could be deployed.

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“The Republican Party is Norma Desmond’s house in Sunset Boulevard, starring Donald Trump as Max the Butler, working extra-hard to keep the illusions of yesteryear going.”

Made For Each Other (Jim Kunstler)

Don’t be fooled by the idiotic exertions of the Red team and the Blue team. They’re just playing a game of “Capture the Flag” on the deck of the Titanic. The ship is the techno-industrial economy. It’s going down because it has taken on too much water (debt), and the bilge pump (the oil industry) is losing its mojo. Neither faction understands what is happening, though they each have an elaborate delusional narrative to spin in the absence of any credible plan for adapting the life of our nation to the precipitating realities. The Blues and Reds are mirrors of each other’s illusions, and rage follows when illusions die, so watch out. Both factions are ready to blow up the country before they come to terms with what is coming down.

What’s coming down is the fruit of the gross mismanagement of our society since it became clear in the 1970s that we couldn’t keep living the way we do indefinitely — that is, in a 24/7 blue-light-special demolition derby. It’s amazing what you can accomplish with accounting fraud, but in the end it is an affront to reality, and reality has a way of dealing with punks like us. Reality has a magic trick of its own: it can make the mirage of false prosperity evaporate. That’s exactly what’s going to happen and it will happen because finance is the least grounded, most abstract, of the many systems we depend on. It runs on the sheer faith that parties can trust each other to meet obligations. When that conceit crumbles, and banks can’t trust other banks, credit relations seize up, money vanishes, and stuff stops working.

You can’t get any cash out of the ATM. The trucker with a load of avocados won’t make delivery to the supermarket because he knows he won’t be paid. The avocado grower will have to watch the rest of his crop rot. The supermarket shelves empty out. And you won’t have any guacamole. There are too many fault lines in the mighty edifice of our accounting fraud for the global banking system to keep limping along, to keep pretending it can meet its obligations. These fault lines run through the bond markets, the stock markets, the banks themselves at all levels, the government offices that pretend to regulate spending, the offices that affect to report economic data, the offices that neglect to regulate criminal misconduct, the corporate boards and C-suites, the insurance companies, the pension funds, the guarantors of mortgages, car loans, and college loans, and the ratings agencies.

The pervasive accounting fraud bleeds a criminal ethic into formerly legitimate enterprises like medicine and higher education, which become mere rackets, extracting maximum profits while skimping on delivery of the goods. All this is going to overwhelm Trump soon, and he will flounder trying to deal with a gargantuan mess. It will surely derail his wish to make America great again — a la 1962, with factories humming, and highways yet to build, and adventures in outer space, and a comforting sense of superiority over all the sad old battered empires abroad. I maintain it could get so bad so fast that Trump will be removed by a cadre of generals and intelligence officers who can’t stand to watch someone acting like Captain Queeg in the pilot house.

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Ann Pettifor’s new book is out too.

Democracies Must Reclaim Power Over The Production Of Money (Pettifor)

Today, the international monetary system is run by the equivalent of Goethe’s Sorcerer’s Apprentice. In the absence of the equivalent of the Sorcerer – regulatory democracy – financial risk-takers and fraudsters have, since 1971, periodically crashed the global economy and trashed the lives of millions of people. And let’s be clear: there is no such thing as effective global regulation. Ask the Bitcoiners – that is why they operate in the ‘dark web’. The question is this: who should control our socially constructed, publicly-backed financial institutions and relationships? Private, unaccountable, rent-seeking authority? Or public, democratic, regulatory authority? Policy and regulation requires boundaries. Pensions policy, criminal justice policies, taxation policies, policies for the protection of intellectual property – all require boundaries.

Finance capital abhors boundaries. Like the Sorcerer’s Apprentice, global financiers want to be free to use the magic of money creation to flood the global economy with ‘easy’ (if dear) money, and just as frequently to starve economies of any affordable finance. And they want to have ‘the freedom’ to do that in the absence of the Sorcerer – regulatory democracy. If we want to strengthen democracy, then we must subordinate bankers to their role as servants of the economy. Capital control over both inflows and outflows, is, and will always be a vital tool for doing so. In other words, if we really want to ‘take back control’ we will have to bring offshore capital back onshore. That is the only way to restore order to the domestic economy, but also to the global economy.

Second, monetary relationships must be carefully managed – by public, not private authority. Loans must primarily be deployed for productive employment and income-generating activity. Speculation leads to capital gains that can rise exponentially. But speculation can also lead to catastrophic losses. Loans for rent-seeking and speculation, gambling or betting, must be made inadmissible. Third, money lent must not be burdened by high, unpayable real rates of interest. Rates of interest for loans across the spectrum of lending – short- and long-term, in real terms, safe and risky – must, again, be managed by public, not private authority if they are to be sustainable and repayable, and if debt is not going to lead to systemic failure. Keynes explained how that could be done with his Liquidity Preference Theory, still profoundly relevant for policy-makers, & largely ignored by the economics profession.

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Remember: there can be no inflation without consumer spending going up. Prices may rise for other reasons, but that’s not the same.

China Factory Prices Surge Most Since 2011, Boosting Reflation (BBG)

China’s producer prices increased the most since 2011, with the world’s biggest exporter further lifting the outlook for global inflation. Producer price index rose 6.9% in January from a year earlier, compared with a median estimate of 6.5% in a Bloomberg survey and a 5.5% December gain. Consumer-price index climbed 2.5%, boosted by the week-long Lunar New Year holiday beginning in January this year, versus a 2.4% rise forecast by analysts. Producer prices for mining products surged 31% year-on-year while those for raw materials climbed 12.9%, the National Bureau of Statistics said Tuesday. China is again exporting inflation as factories increase prices after emerging from years of deflation. That fresh strength may moderate in coming months as year-ago comparisons gradually rise and Donald Trump’s policies add uncertainties to the global demand outlook.

Continued pressure for raw materials is forcing companies to increase prices, according to Tao Dong at Credit Suisse in Hong Kong. “Without strong demand, producers have limited space for price hikes,” he said. “But I see a wide range of price increases because the cost push is so severe.” Both consumer and producer inflation will peak soon, Julian Evans-Pritchard, an economist at Capital Economics in Singapore, wrote in a report. “Tighter monetary policy, slowing income growth and cooling property prices should keep broader price pressure contained over the medium-term,” he said. “The latest inflation data add to the case for a continued moderate tightening in monetary policy,” Tom Orlik, chief Asia economist at Bloomberg Intelligence in Beijing, wrote in a report.

“The central bank is likely to continue on that path in the months ahead, as policy makers lean against excess leverage, yuan weakness and capital outflows, and nascent inflationary pressure.” “We haven’t seen significant pass-through effect from PPI to CPI inflation yet, suggesting that the strong rebound in PPI inflation is a reflection of proactive fiscal policies,” Zhou Hao, an economist at Commerzbank in Singapore, wrote in a report. With the Communist Party Congress later this year, “local governments are keen to deliver decent growth figures. Against this backdrop, the infrastructure investment pipeline will remain solid.”

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It’s almost 2 years ago that I wrote Russia’s Central Bank Governor Is Way Smarter Than Ours. This is a pretty crazy story. Russian banking appears to take place in some kind of black hole, complete with event horizons.

Putin’s Central Banker Is on a Tear (BBG)

In Russia, Peresvet Bank had an edge no other big private financial institution could match. Its largest shareholder was the powerful Russian Orthodox Church. In a 2015 pitch to investors, Peresvet said the backing of the church and the bank s other big owner, Russia’s Chamber of Commerce and Industry, gave it a quasi-sovereign status. For more than two decades, big state companies stashed their cash with the bank, whose ponderous full name Joint Stock Commercial Bank for Charity and Spiritual Development of Fatherland suggested its grand standing. Even so, it took less than a month last fall for the bank, one of Russia’s 50 largest, to come undone and be taken over by the central bank. Peresvet was just the latest casualty in a financial purge presided over by Central Bank chief Elvira Nabiullina, a bookish economist who’s a favorite of Vladimir Putin.

The regulator closed almost 100 banks in 2016, and in a cleanup with few precedents, Nabiullina has shut almost 300 over the past three years. This may be only the beginning. There are about 600 banks left across the world’s largest country, but Fitch Ratings analyst Alexander Danilov, adjusting for population, calculates that as an emerging market Russia would be fine with about 1 in 10 of those. A warning from Fitch signaled Peresvet’s fall: Almost a tenth of its loans were to companies seemingly without real businesses. Then Russian media reported that the chief executive officer, Alexander Shvets, had disappeared. The bank issued denials and publicized positive comments from other analysts. But within days, as depositors clamored for their cash, the bank said it was “temporarily” limiting withdrawals. The regulator took control of the lender four days later.

As of late January the central bank was still trying to determine the scale of Peresvet’s financial woes. Nabiullina, 53, has emerged as one of Putin’s most influential economic advisers following a low-key government career that began in the 1990s, before the Russian leader’s rise to power. Soft-spoken and unassuming, she runs what in Russia is called a “megaregulator.” When it comes to the economics behind Putin’s overarching goal of restoring Russia’s place in the world, there’s no one more influential. As central bank governor, she’s in charge of a banking system whose weak links are an economic burden, driving up the cost of financing so badly needed in the face of stagnant growth. She’s also the chief guardian of Russia’s foreign currency reserves. Those holdings are more than just a tool of monetary policy; according to several senior officials, Putin views them as a vital safeguard of the country’s sovereignty. [..]

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The eurozone’s core problem: as soon as harder economic times come, the poorer countries are hit hardest. Solution: a transfer union like the US. But that will never be accepted in the EU, because it means giving up more sovereignty.

From Finland’s EuroThinkTank, h/t Mish

The Euro May Already Be Lost (ETT)

The 1st of January 2017 marked the 18th anniversary of the European common currency, the euro. Despite its success from 1999 to 2007, after 2008 the euro has become a burden for many of its members. For example, living standards in Italy and Greece are below the levels when they joined the euro. Finland is the only Nordic country using the euro and it is also the only Nordic country which has not yet recovered from the financial crash of 2008. There have been many proposals on how to fix the euro and the EMU, but they are politically unpopular and unrealistic. In this blog-entry, we will argue that the euro will almost surely fail; we just do not know the exact timing of its demise. The problem of the euro can be visualized in the development of the GDP per capita.

Germany has been successful in the Eurozone, while Greece and Italy have not. France is not doing well either. The jury is still out for Finland. The different growth paths are a symptom of a general problem that has haunted currency unions for centuries. Competitiveness and productivity develop at a different pace in different countries. Over time, this leads to large competitiveness differences among the members of a currency union. These differences do not usually pose a problem during economic booms because strengthening aggregate demand supports ailing fields of production. However, when a currency union faces an economic downturn or a crisis, falling aggregate demand hits less competitive industries and countries hard and the financing costs of less competitive countries jump. This is an asymmetric shock.

The detrimental effects of asymmetric shocks can be mitigated by transferring funds from prosperous to declining member states. When the dollar union of the US threatened to fall apart during the Great Depression, the federal government enacted federal income transfers from prosperous states to aid ailing ones. The federal budget also increased rapidly and, in practice, income transfers became permanent. The no bailout policy of crisis-hit states had already been enacted earlier. According to the ECB, competitiveness of the German economy has improved by around 19.3%, Greece’s competitiveness has improved by around 6.5%, France’s around 3.9%, Finland’s around 1.7% and Italy’s around 0.9% since 1999. Thus, for survival in its present form and size, the Eurozone needs a similar income transfer system, that is, a full political union as in the US.

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Meaningless numbers.

Greece To Exceed Its Primary Surplus Target In 2018 (R.)

Greece will have a primary surplus in the budget of 3.7% of GDP next year, exceeding the target of 3.5% agreed with its euro zone creditors, the European Commission forecast on Monday. The size of next year’s Greek primary surplus, which is the budget balance before debt-servicing costs, is a bone of contention between euro zone governments and the IMF, which believes it will be only 1.5%. A further disagreement between the two lenders to Greece is what surplus Athens will be able to maintain in the years after 2018. The higher the surplus and the longer it is kept the less is the need for any further debt relief to Greece.

The IMF insists Greek debt, which the Commission forecast on Monday would fall to 177.2% of GDP this year from 179.7% in 2016 and then decline again to 170.6% in 2018, is unsustainably high and that Greece must get debt relief. Germany and several other euro zone countries say that, if Greece does all the agreed reforms, then debt relief will not be necessary. The Commission forecast that Greek investment would triple to 12% of GDP this year and rise further to 14.2% of GDP next year as the economy expands 2.7% in 2017 and 3.1% in 2018 after years of recession. It also forecast Greek unemployment would fall to 22% of the workforce this year from 23.4% last year and decline further to 20.3% in 2018.

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If all else fails, sell your soul.

Greece Lines Up Rothchild For Debt Advisory Role As Bankruptcy Looms (IW)

Greece is reportedly planning to hire Rothschild as its debt adviser, replacing current adviser Lazard in the role, as it attempts to end a long-running stand off with creditors. According to the Financial Times, government officials in Greece hope to finalise the appointment before a gathering of euro-area finance ministers on 20 February. Unless Greece receives fresh funds it will not be able to make €7bn of debt payments due this July, including €2.1bn to private sector creditors. In the role, Rothschild will reportedly advise the country on negotiations with creditors, potential inclusion in the European Central Bank’s bond-buying programme, and the sale of Greek government bonds.

The deal would replace the Greek government’s current deal with Lazard, which guided the country through its original bailout in 2012. According to the FT, out of Greece’s €323bn of outstanding government debt just €36bn is owned by private investors who hold Greek bonds, while the rest is owned by sector creditors. Last week, yields on two-year Greek bonds rose to their highest level since June last year after the IMF and the EU failed to reach an agreement on how to lend the €7bn required by the country to avoid bankruptcy. The IMF refused to sign up to the aid programme unless the EU grants further debt relief to Greece. However, the head of the eurozone’s €500bn rescue fund has rejected this demand.

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Power to you, Chelsea.

To Those Who Kept Me Alive All These Years: Thank You (Chelsea Manning)

To those who have kept me alive for the past 6 years: minutes after President Obama announced the commutation of my sentence, the prison quickly moved me out of general population and into the restrictive housing unit where I am now held. I know that we are now physically separated, but we will never be apart and we are not alone. Recently, one of you asked me “Will you remember me?” I will remember you. How could I possibly forget? You taught me lessons I would have never learned otherwise. When I was afraid, you taught me how to keep going. When I was lost, you showed me the way. When I was numb, you taught me how to feel. When I was angry, you taught me how to chill out. When I was hateful, you taught me how to be compassionate. When I was distant, you taught me how to be close. When I was selfish, you taught me how to share.

Sometimes, it took me a while to learn many things. Other times, I would forget, and you would remind me. We were friends in a way few will ever understand. There was no room to be superficial. Instead, we bared it all. We could hide from our families and from the world outside, but we could never hide from each other. We argued, we bickered and we fought with each other. Sometimes, over absolutely nothing. But, we were always a family. We were always united. When the prison tried to break one of us, we all stood up. We looked out for each other. When they tried to divide us, and systematically discriminated against us, we embraced our diversity and pushed back. But, I also learned from all of you when to pick my battles. I grew up and grew connected because of the community you provided.

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I’ll get back to this soon. It’s good to see others address this issue too.

Lesbos Doctors Accuse NGOs Of Failing To Care For Refugees (K.)

State hospital doctors on the eastern Aegean island of Lesvos, which has been hard particularly hit by the refugee crisis, have complained that nongovernmental organizations receiving European Union funding to help migrants are not doing enough, resulting in them being forced to bear an excessive burden. In a statement released on Monday, the island’s union of state hospital doctors said the two refugee camps at Moria and Kara Tepe do not have any pediatricians, meaning that all sick children from the camps must be treated at local hospitals, which are seriously understaffed. Noting that the NGOs “get paid handsomely” by the EU to help refugees, the union claimed they had “totally failed to provide humane conditions for the refugees.” Several human rights groups have complained about conditions at Greek refugee camps, particularly Moria and Elliniko, in southern Athens.

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Dec 152016
 
 December 15, 2016  Posted by at 8:50 am Finance Tagged with: , , , , , , , , , ,  1 Response »
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William Henry Jackson Hand cart carry, Adirondacks, New York 1902


Dollar at 14-Year Peak as Fed Rejuvenates Trump Rally (R.)
Dollar Jumps as Fed Pulls the Trigger While Stocks, Debt Decline (BBG)
Fed Fallout Escalates: China Bond Market Crashes Most On Record (ZH)
Higher US Interest Rates Next Year Could Make Big Problems For China (CNBC)
Shadow Banking in China Appears to Have Made a Roaring Comeback (BBG)
Trump Meets With Tech Titans: “No Formal Chain Of Command Around Here” (CNBC)
Canada’s Gravity-Defying Household Debt Swells to C$2 Trillion (BBG)
EU Politicians Believe UK Post-Brexit Trade Deal Could Take Decade (G.)
Ex-UK Ambassador: Clinton Emails Leaked By “Disgusted” Dem. Whistleblower (DM)
US Accuses Vladimir Putin Of “Personal Involvement” In Election Hack (ZH)
Eurozone Suspends Short-Term Debt Relief for Greece (WSJ)
Greek Opposition Leader To Seek Backing In Brussels For Snap Polls (Kath.)

 

 

Moving fast. A lot of global debt gets much more expensive to pay off.

Dollar at 14-Year Peak as Fed Rejuvenates Trump Rally (R.)

The dollar rose to a 14-year peak against a basket of major currencies on Thursday after the Federal Reserve boosted the number of projected interest rate hikes for 2017, rejuvenating the month-long Trump rally and knocking emerging market currencies. The Fed’s 25 basis-point interest rate increase on Wednesday was widely anticipated by financial markets though they appeared to have been caught out by the central bank signal of three hikes in 2017, up from around two flagged at its September policy meeting. The relatively hawkish Fed stance came as U.S. president-elect Donald Trump takes over with promises to boost growth through tax cuts, spending and deregulation. “The rate hike projections for 2017 being increased to three shows that Fed’s board is having to factor in the impact of Trump’s policies,” said Junichi Ishikawa at IG Securities in Tokyo.

The dollar index extended its overnight rally and was up 0.5% at 102.270. It touched 102.620, its highest since January 2003. The euro was down 0.2% at $1.0512 after sliding to $1.0468, a trough not seen in 21 months. The greenback set a 10-month high of 117.860 yen early on Thursday and was last up 0.3% at 117.390. The allure of higher U.S. yields took a predictable toll on emerging Asian currencies. The Chinese yuan fell to its lowest levels in more than eight years, after the central bank set the daily mid-point at the lowest since mid 2008. Low-yielding currencies such as the Singapore dollar and Korean won came under pressure, as investors grew anxious over the risk of capital being sucked out of regional economies toward dollar-based assets.

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Yellen hiked rates and dotplot.

Dollar Jumps as Fed Pulls the Trigger While Stocks, Debt Decline (BBG)

The dollar rallied, while Treasury yields spiked as the Federal Reserve signaled a steeper path for in interest rates going forward after their first hike to borrowing costs in 2016. U.S. equities slumped the most since October. The greenback climbed to its strongest level in 10 months versus the yen, advancing against most of its major peers as as traders speculated that U.S. rates may be elevated faster than previously thought. Utilities and energy shares drove the S&P 500 Index down 0.8% as two-year Treasury yields soared to their highest level in seven years. The dollar’s gains sent oil tumbling as gold also retreated. Emerging-market currencies were among the biggest decliners, while Asian index futures diverged amid the yen’s drop.

“The bottom line is that this is more hawkish than the markets expected,” said Dennis Debusschere at Evercore ISI in New York. “I don’t think the shift higher in the dots was priced in. The consensus going in was that they’d wait until they had details of the fiscal program before they actually raised the rate forecast, and they did that before they saw the details.” What was only the second U.S. rate increase in a decade tied off a volatile year for markets, with investors whipsawed by ructions in Chinese trading, then the shock wins for Brexit and Donald Trump. The Fed moving further into tightening territory puts it at the vanguard of a shift globally from easing monetary policy toward an increased focus on fiscal stimulus.

After hiking by 25 basis points, the central bank said it expects three rate increases in 2017, up from two in its September forecasts. Speaking to reporters after the decision, Fed Chair Janet Yellen sought to downplay the significance of that change in the projections. “This is a very modest adjustment in the path of the federal funds rate,” Yellen said during the press conference. The decision to raise rates is “a vote of confidence in the economy,” she said, noting that some fed officials, but not all, incorporated the assumption of a change in fiscal policies when making their forecasts.

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“.. it appears the final bastion of safety has cracked”.

Fed Fallout Escalates: China Bond Market Crashes Most On Record (ZH)

After a bubblicious surge higher over the last few months (as China’s hot money swishes from one trending-higher market to another), China’s bond market is collapsing. As Chinese money-markets tighten into new year, yuan weakens, and capital outflows accelerate, so it appears the final bastion of safety has cracked. Chinese bond futures crashed overnight by the most on record, erasing in a week the gains of the last 18 months. The rally began in 2014, buoyed by slowing economic growth and a monetary-easing cycle that kicked off in November that year. Now that is over…

As Chinese liquidity pressures ripple up from the short-term repo markets…

Offshore Yuan has tumbled 5 handles since The Fed raised rates…

And Japanese stocks cannot hold a bid despite the weaker yen. It appears Janet’s message about Trump’s fiscal plan is starting to sink in.

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“They’re playing whack-a-mole constantly. They try to bring down one bubble, and something pops up somewhere else. They do that, and something comes up somewhere else..”

Higher US Interest Rates Next Year Could Make Big Problems For China (CNBC)

Rising interest rates in the United States have an obvious effect on the world’s biggest economy — but less obvious is the impact those rates could have on the second biggest. Higher interest rates in the United States could make it harder for China to manage its exploding debt, as the Asian giant increasingly depends on borrowing in order to keep growing — while simultaneously trying to block capital from fleeing for more fruitful shores in America. “If the Federal Reserve [keeps increasing] interest rates in the United States, the single biggest casualty of that this time is going to be China, because there’s so much money just waiting to leave” the country, said Ruchir Sharma at Morgan Stanley. Sharma spoke Tuesday evening as part of a panel at the Asia Society in New York.

Sharma pointed out that over the last year, China has moved from one bubble to another: commodities, stocks and, currently, real estate. That is not a sustainable way for China to grow, he said, especially considering that China’s “debt increase over the last five years has been 60 percentage points as a share of its economy.” “They’re playing whack-a-mole constantly. They try to bring down one bubble, and something pops up somewhere else. They do that, and something comes up somewhere else,” said Sharma, who noted that housing prices in China’s largest cities have increased between 30 and 50% over the last 18 months alone. Fed officials on Wednesday approved the first U.S. interest rate increase in a year. The 0.25 percentage point hike was widely expected, but the more aggressive pace for future increases outlined by the Fed — three next year instead of the two that were previously expected — was not.

Rising U.S. rates typically mean better yields for U.S. Treasurys and a stronger U.S. dollar. And indeed, both bond yields and the greenback immediately moved higher after Wednesday’s announcement. “I certainly think we could hit a 3 (percent on the 10-year Treasury yield) by the first quarter” of next year, Rick Rieder, CIO, global fixed income at BlackRock, told CNBC on Wednesday. The 10-year was last at 3% in January 2014. [..] the ability to keep financing its “massive debt binge” is impaired, Sharma said, if too much money bleeds out of the system. And China needs a lot of money — and more and more of it — to keep hitting the largely arbitrary 6% GDP growth rate that Beijing has mandated for the country. “Today in China, it’s taking $4 in debt to create a dollar of GDP growth,” said Sharma

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Oh no, it was never gone. It’s only been growing the whole time.

Shadow Banking in China Appears to Have Made a Roaring Comeback (BBG)

Time to don the tin hats? Chinese shadow-banking activity registered a surprise jump in November, throwing into sharp relief how policy makers are struggling to make good on their vow to rein in the runaway loan growth that threatens the stability of the financial sector. Often cast as one of the weakest links in the global financial system given the potential threat it poses to Asia’s largest economy, shadow credit – which consists of trust loans, entrusted loans and bank-acceptance bills –rose sharply to 479 billion yuan ($69 billion), after having dropped to 55 billion yuan in October. The surprise rebound may be a reaction to expectations for continuing yuan weakness as companies look to increase their local-currency liabilities at the expense of dollar-denominated obligations.

“Today’s surprising data will likely trigger some regulatory concerns,” David Qu, China economist at Australia & New Zealand Banking, wrote in a note to clients on Wednesday, citing the size and opacity of off-balance sheet lending from trust companies, brokerages, micro-lenders, pawn-shops and even real-estate companies. The rise could reflect “short-term speculation due to expectations of renminbi depreciation and producer-price inflation,” analysts at Nomura Holdings Inc, led by Zhao Yang, wrote in a report on Wednesday. Efforts to curtail shadow lending may exacerbate this month’s liquidity squeeze, as the yield on 10-year government bonds shoots up to 3.24% from 2.74% at the end of October – their highest level in more than a year.

“If Chinese regulators start to restrict shadow banking activities, there may be spillover effects to the bond market due to liquidity tightening,” Qu adds, referring to the prospect that redemptions from wealth-management funds would force asset managers to trim their bond positions. Last month’s credit binge wasn’t confined to the shadow financial system. Total social finance, the broadest measure of new lending, expanded the most since March at 1.74 trillion yuan, up from 896.3 billion yuan in October. [..] The 11.8% increase on a year-on-year basis was driven by household lending growth, reflecting how property curbs have yet to kick in, as well as expansion in the shadow-banking sector.

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Tens of billions eating crow at that table. Trump knows exactly what Bezos, Cook etc. said about him not long ago. Eric Schmidt just about ran Hillary’s campaign.

Trump Meets With Tech Titans: “No Formal Chain Of Command Around Here” (CNBC)

A confab of tech titans had a “productive” meeting with President-elect Donald Trump at Trump Tower on Wednesday, Amazon CEO Jeff Bezos told CNBC, as Trump moved to mend fences with Silicon Valley before taking office in January. Apple, Alphabet, Microsoft, Amazon, Facebook, Intel, Oracle, IBM, Cisco and Tesla were among the C-suite executives in attendance, with Apple CEO Tim Cook and Tesla CEO Elon Musk expected to get private briefings, according to transition staff. During the campaign, Trump issued a number of barbs directed at Bezos and his businesses, but at the meeting both men appeared nothing but complimentary. “I found today’s meeting with the president-elect, his transition team, and tech leaders to be very productive,” Bezos said.

“I shared the view that the administration should make innovation one of its key pillars, which would create a huge number of jobs across the whole country, in all sectors, not just tech—agriculture, infrastructure, manufacturing—everywhere.” Though many tech leaders actively opposed his election, Trump said at the meeting he was interested in helping tech do well — and that the executives can call any time, since there’s no formal chain of command. “We want you to keep going with the incredible innovation,” Trump said. “There’s no one like you in the world….anything we can do to help this go along, we’re going to be there for you. You can call my people, call me — it makes no difference — we have no formal chain of command around here.”

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As someone commented on Twitter: “Carney’s baby is all grown up”.

Canada’s Gravity-Defying Household Debt Swells to C$2 Trillion (BBG)

The appetite for bank borrowing remained unabated in the third quarter, setting fresh records for total credit and mortgage borrowing, Statistics Canada reported Wednesday. The widely-followed ratio of household debt to after-tax income rose to another record high of almost 167%. The numbers will intensify concern among policy makers the economy has become over-reliant on bank borrowing, and is vulnerable to a housing downturn and rising interest rates. The latest report covers the three months before Finance Minister Bill Morneau tightened mortgage lending rules again in October, a move designed to discourage Vancouver and Toronto home buyers from signing larger mortgages than they could handle.

“Household indebtedness continues to defy gravity and remains the Achilles heel of the Canadian economy,” said Charles St-Arnaud at Nomura Securities, who has worked in Canada’s finance department and central bank. “Continued increase in yields and job losses remain the biggest risks.” Credit-market debt climbed to C$2.005 trillion ($1.53 trillion) from C$1.980 trillion in the prior quarter. Those obligations jumped by 1.3% in the third quarter, faster than the 0.9% gain in household income. Total consumer debt exceeded the size of Canada’s economy for a second straight quarter, accounting for 101.2% of gross domestic product in the July-to-September period. Debts have climbed alongside the Vancouver and Toronto housing boom, fueled by job growth and rock-bottom borrowing costs.

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Elections, anyone?

EU Politicians Believe UK Post-Brexit Trade Deal Could Take Decade (G.)

Europe’s politicians believe a trade deal with the UK could take up to a decade or more and could still fail in the final stages, Downing Street has been warned by the UK’s ambassador to the EU. Sir Ivan Rogers, who conducted David Cameron’s renegotiation with the EU prior to the referendum, is reported to have told the prime minister that European politicians expected that a deal would not be finalised until the early to mid-2020s, according to the BBC. That deal could still be rejected by any of the 27 national parliaments during the ratification process. It is understood Rogers was reporting back conversations he had had with European politicians, rather than giving his own advice to the British government. “It is wrong to suggest this is advice from our ambassador to the EU,” a Number 10 spokesman said. “Like all ambassadors, part of his role is to report the views of others.”

Former Tory minister Dominic Raab, a leave campaigner, said it was “reasonable to set out a worst-case scenario of five to 10 years to iron out all the detail of a trade deal.” He told BBC Radio 4’s Today programme: “The crucial question is whether we maintain barrier-free trade in the meantime, in which case there’s no real problem. I have to say it’s very unlikely in the interim that the EU would want to erect trade barriers.” The reports come after Brexit secretary, David Davis, told a select committee hearing that “everything is negotiable” within a year and a half of the formal article 50 notification in March. The deal would then take about six months to be agreed by European leaders, the European parliament and the British parliament, he said.

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Try these on for size: “Murray is a controversial figure who was removed from his post as a British ambassador amid allegations of misconduct.” Misconduct? Well: “Murray was a vocal critic of human rights abuses in Uzbekistan while serving as ambassador between 2002 and 2004, a stance that pitted him against the UK Foreign Office.”

Ex-UK Ambassador: Clinton Emails Leaked By “Disgusted” Dem. Whistleblower (DM)

A Wikileaks envoy today claims he personally received Clinton campaign emails in Washington D.C. after they were leaked by ‘disgusted’ whisteblowers – and not hacked by Russia. Craig Murray, former British ambassador to Uzbekistan and a close associate of Wikileaks founder Julian Assange, told Dailymail.com that he flew to Washington, D.C. for a clandestine hand-off with one of the email sources in September. ‘Neither of [the leaks] came from the Russians,’ said Murray in an interview with Dailymail.com on Tuesday. ‘The source had legal access to the information. The documents came from inside leaks, not hacks.’ His account contradicts directly the version of how thousands of Democratic emails were published before the election being advanced by U.S. intelligence.

Murray is a controversial figure who was removed from his post as a British ambassador amid allegations of misconduct. He was cleared of those but left the diplomatic service in acrimony. His links to Wikileaks are well known and while his account is likely to be seen as both unprovable and possibly biased, it is also the first intervention by Wikileaks since reports surfaced last week that the CIA believed Russia hacked the Clinton emails to help hand the election to Donald Trump. Murray’s claims about the origins of the Clinton campaign emails comes as U.S. intelligence officials are increasingly confident that Russian hackers infiltrated both the Democratic National Committee and the email account of top Clinton aide John Podesta. In Podesta’s case, his account appeared to have been compromised through a basic ‘phishing’ scheme, the New York Times reported on Wednesday.

U.S. intelligence officials have reportedly told members of Congress during classified briefings that they believe Russians passed the documents on to Wikileaks as part of an influence operation to swing the election in favor of Donald Trump. But Murray insisted that the DNC and Podesta emails published by Wikileaks did not come from the Russians, and were given to the whistleblowing group by Americans who had authorized access to the information. ‘Neither of [the leaks] came from the Russians,’ Murray said. ‘The source had legal access to the information. The documents came from inside leaks, not hacks.’ He said the leakers were motivated by ‘disgust at the corruption of the Clinton Foundation and the tilting of the primary election playing field against Bernie Sanders.’

‘I don’t understand why the CIA would say the information came from Russian hackers when they must know that isn’t true,’ he said. ‘Regardless of whether the Russians hacked into the DNC, the documents Wikileaks published did not come from that.’ Murray was a vocal critic of human rights abuses in Uzbekistan while serving as ambassador between 2002 and 2004, a stance that pitted him against the UK Foreign Office.

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“The former CIA official said the Obama administration may feel compelled to respond before it leaves office. “This whole thing has heated up so much,” he said. “I can very easily see them saying, `We can’t just say wow, this was terrible and there’s nothing we can do.'”

Well, if Obama is truly getting involved, he has 4 days in which to turn 37 Republican electors against Trump. As for the potential fallout, which may include various forms of social conflict should the Trump victory be overturned in the 11th hour at the Electoral College, then Putin will truly win as a result of what may then follow.

US Accuses Vladimir Putin Of “Personal Involvement” In Election Hack (ZH)

And just like that the narrative of Russia hacking the presidential election has escalated to the highest possible level, and has officially jumped the shark. Moments ago, following a month-long barrage of unsubstantiated stories in the press accusing the Russian government of indirectly hacking the US presidential election, which culminated with last night’s 8,000 word NYT expose, and which followed a schism between the FBI and CIA, in which the former disputed the latter’s “fuzzy and ambiguous” claims that Russia sought to influence the presidential elections, moments ago the NBC News reported that U.S. intelligence officials believe with “a high level of confidence” that Russian President Vladimir Putin became personally involved in the covert Russian campaign to interfere in the U.S. presidential election.

Perhaps because the official narrative has so far been unable to gather traction with the previous “shotgun approach” in which just “Russia” was accused of handing the election to Trump, four short days before the Electoral College vote, the narrative has changed and it now involves the very pinnacle of Russia’s government: the president himself. Citing two senior officials with direct access to the information, NBC reports that “new intelligence shows that Putin personally directed how hacked material from Democrats was leaked and otherwise used. The intelligence came from diplomatic sources and spies working for U.S. allies, the officials said.” So why did Putin hack a few million rust belt Americans into believing that their lives under Obama, and by extension Hillary, were bad enough that they demanded a change? NBC provides the following spoonfed logic:

Putin’s objectives were multifaceted, a high-level intelligence source told NBC News. What began as a “vendetta” against Hillary Clinton morphed into an effort to show corruption in American politics and to “split off key American allies by creating the image that [other countries] couldn’t depend on the U.S. to be a credible global leader anymore,” the official said.

Ultimately, the CIA has assessed, “the Russian government wanted to elect Donald Trump.” And this is where the latest turn in the story falls apart, because even NBC – which will blast this report on prime time TV to all America – admits “the FBI and other agencies don’t fully endorse that view”, but it adds “few officials would dispute that the Russian operation was intended to harm Clinton’s candidacy by leaking embarrassing emails about Democrats.”

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As I said, looks like Tsipras has had enough.

Eurozone Suspends Short-Term Debt Relief for Greece (WSJ)

Greece’s European creditors suspended proposed debt-relief measures for the country after the Greek government surprised them by announcing it would boost welfare benefits for low-income pensioners, a sign of escalating tensions over the country’s bailout. The moves come as Athens and its international creditors—which include the eurozone and the IMF—are struggling to conclude their latest review of the country’s rescue plan of as much as €86 billion ($92 billion) in loans. “The institutions have concluded that the actions of the Greek government appear to not be in line with our agreements,” a spokesman for Jeroen Dijsselbloem, the Dutch finance minister who presides over the group of his eurozone counterparts, said in a statement on Twitter.

“No unanimity now for implementing short-term debt measures,” he added. The step puts further pressure on Greece’s government, which is considering calling snap elections in 2017 as it grapples with slumping popularity and is losing hope of winning concessions on deeper debt relief or austerity from the eurozone and the IMF. Greece’s embattled Prime Minister Alexis Tsipras surprised Greeks and the country’s creditors last week with handouts that his government hadn’t previously discussed with bailout supervisors, which represent eurozone governments and the IMF. Mr. Tsipras promised 1.6 million pensioners a Christmas bonus of between €300 and €800. He also suspended a planned increase in sales tax for Aegean islands that have received large numbers of refugees from the Middle East and elsewhere.

Eurozone officials expressed frustration that the country’s creditors were not told in advance by Greece of its plans—widely seen as a lure to voters ahead of elections—and said the new measures would have to be assessed to determine whether they were in line with the country’s bailout commitments. “We will adhere to the [bailout] program to the letter, but whatever outperformance in revenue arises by following to the program, we will not ask anyone in order to give this money to those most in need,” Mr. Tsipras said Tuesday from the small island of Nisyros.

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Can you imagine the opposition in your country doing this? They would risk being persecuted for treason. In Europe, it’s the new normal. But he might as well ask Putin.

Greek Opposition Leader To Seek Backing In Brussels For Snap Polls (Kath.)

In talks with officials on the sidelines of a summit of the European People’s Party in Brussels that started Wednesday, conservative New Democracy leader Kyriakos Mitsotakis is to press his argument that Greece needs snap elections to sweep away the current leftist-led government and bring in a more reform-friendly administration. Mitsotakis is to meet Thursday with European Commission President Jean-Claude Juncker and European Economic and Monetary Affairs Commissioner Pierre Moscovici, among others.

ND sources are hoping that EU officials will welcome Mitsotakis’s call for political change, coming as it does just a few days after Prime Minister Alexis Tsipras unsettled the country’s creditors by announcing Christmas bonuses for thousands of pensioners and vowing to keep in place a value-added tax discount for remote islands that the government had promised its lenders to revoke. The meetings come as ND leads leftist SYRIZA by a wide margin in opinion polls. Mitsotakis’s argument is that snap polls would not be destabilizing, as they had been in January 2015, as ND is a reformist power compared to the SYRIZA coalition with Independent Greeks which the conservative party describes as “unreliable and opportunistic” in its policy-making.

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Dec 142016
 
 December 14, 2016  Posted by at 10:02 am Finance Tagged with: , , , , , , , , ,  5 Responses »
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Louise Rosskam General store in Lincoln, Vermont 1940


Janet Yellen Needs To Announce Her Resignation — Not A Rate Hike (Crudele)
Stephen Roach Flags Trade, China Under Trump, Tillerson (CNBC)
Trump May Be Turning China’s $1.16 Trillion Of Treasuries Into A Weapon (F.)
China To Fine Unnamed US Automaker For ‘Monopolistic Behavior’ (R.)
Top US Spy Agency Has Not Embraced CIA Assessment On Russia Hacking (R.)
Lavrov Hints ISIS Recapture Of Palmyra Orchestrated By US (R.)
There Is More Than One Truth To Tell In The Awful Story Of Aleppo (Fisk)
How To Make A Profit From Defeating Climate Change (Carney/Bloomberg)
Greece ‘Boxed In’ as EU and IMF Fight Over Nation’s Debt Relief Plan (G.)
Tsipras To Propose To EU Leaders That IMF Be Excluded (Kath.)
Crisis Leaves Greeks Gloomiest In Europe And Beyond (R.)
Final EPA Study Confirms Fracking Contaminates Drinking Water (EW)
A Crack In Antarctica Is Forming An Iceberg The Size Of Delaware (PopSci)

 

 

“Yellen is a lame-duck chair. And Trump is going to want to cook her goose. It isn’t going to be pheasant.”

Janet Yellen Needs To Announce Her Resignation — Not A Rate Hike (Crudele)

If Janet Yellen had any class, she wouldn’t just be announcing an interest rate hike this week – she would also be offering her resignation. Yellen was appointed chair of the Federal Reserve by President Obama in 2014. While most heads of government agencies will soon be offering their resignations to President-elect Donald Trump, the Fed is not a government agency. It’s an independent entity. Which means Yellen doesn’t have to resign. Her term as chair – which makes her, perhaps, the second-most powerful person in Washington — doesn’t end until January 2018. And even then, she can hang around as a mere board member – one of 14 – until 2024. So, although Yellen and her colleagues have screwed things up, they get to keep their jobs. And boy has the Fed screwed things up — both before and since the financial crisis that started in 2007. [..]

It’s clear that Trump doesn’t like Yellen. And she hasn’t said anything nice about the incoming president or his policies either. So the two aren’t likely to get along. Yellen has shown no inclination to give up her job even though Trump has lashed out at her. “I think the Fed is being totally controlled,” Trump said during a campaign stop at the Economic Club of New York. “They’re not raising rates. And they’re being controlled politically.” Welcome to reality, Mr. Trump. The Fed lost its independence four decades ago. And you’ll be trying to control it soon. Yellen has hit back at Trump, saying that his pledge to spend $1 trillion on infrastructure to help the economy was dangerous. She said that after Trump spent that much money, there “is not a lot of fiscal space should a shock to the economy occur.”

Yellen also continued to assert her preposterous notion that the “economy is operating close to full employment.” If true, why hasn’t she already raised interest rates vigorously? And why, if the economy was doing so well, did the election go so badly for the incumbents — the Democrats? The Fed boss understands economics better than Trump. The higher borrowing costs that are already being seen (and which the Fed will pile onto this week) will automatically cause government borrowing costs – and therefore, spending – to increase and make US debt levels much worse. How much worse? That depends on how high rates go and how reluctant the Chinese are to continue to lend us money, especially now that Trump has picked a fight with Beijing. Yellen is a lame-duck chair. And Trump is going to want to cook her goose. It isn’t going to be pheasant.

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Few people in the west know China the way Roach does.

Stephen Roach Flags Trade, China Under Trump, Tillerson (CNBC)

Stock markets are euphoric after Donald Trump’s victory as pundits bet on U.S. economic growth based on the president-elect’s stimulus plans, but be aware of trade deficits and funding U.S. consumption, said Yale economist and noted author on China, Stephen Roach. “Given the overall savings of the U.S., that spells bigger trade deficits and for a president who is clearly raising some protectionist flags at a time when our trade deficits are going to widen, that’s a big disconnect,” Roach, a former chairman of Morgan Stanley Asia and chief economist, told CNBC’s “Squawk Box”. “The idea of larger trade deficits colliding with protectionist shifts in policy is a very worrisome development for the U.S. and for the broader global economy,” added Roach.

Roach’s comments come against a background of Trump having campaigned on remedying a wide trade gap in favor of Beijing that he said was spurred by moves to artificially weaken the yuan and restrict entry into home markets. He has also angered China by taking a congratulatory phone call from Taiwan President Tsai Ing-wen and calling into question the foundations of the “One China” policy. China is the world’s top holder of U.S Treasurys, and any major change in that stance would have broad macroeconomic impact. “The deeper question is less about the integrity of the leadership skills he can bring to the job, but how much scope for action he will have in the Trump administration … (after) Mr Trump has made some very strong statements about a number of critical foreign policy issues,” said Roach.

Roach also commented broadly on issues that will have to be resolved in the early phase of a Trump administration, including how a U.S. savings shortfall will be financed, suggesting choices of higher interest rates or a weak dollar as possibilities. He also expects a reassessment of Trump’s economic policies and outcomes in late 2017. As for Trump’s goals to shore up the battered manufacturing industries, Roach said Americans will have to pay a price for penalizing offshore operations. “As they bring those activities home, the cost of goods sold, the prices that go to American families who are hard strapped who voted for Mr. Trump, those prices are going to go up … We can’t have it both ways,”he said.

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Only, the author doesn’t really say how.

Trump May Be Turning China’s $1.16 Trillion Of Treasuries Into A Weapon (F.)

When Donald Trump talks about China devaluing its currency it’s difficult for investors to figure out exactly what he’s trying to convey. China, in fact, is trying to strengthen its own currency against the dollar as part of an effort to prevent capital from leaving the country. It leaves people uncertain whether Trump–who has access to people who know the capital markets and can point out his mistake–simply misunderstands what’s happening in global capital markets, or if he’s picking a fight with China. Trump’s decision to take a phone call Dec. 2 from Taiwan’s President, Tsai Ing-wen, sent off alarms in Beijing, and leaders there appear to be moving toward the conclusion that Trump is picking a fight. Trump’s response that the longstanding U.S. “one China” policy may be a bargaining chip in potential trade negotiations made matters worse.

China subsequently sent a bomber capable of carrying a nuclear payload outside its borders over the contested South China Sea in a show of force aimed at expressing displeasure with Trump’s posture. China held $1.16 trillion of U.S. government debt as of September, according to the most recent data available from the Treasury. That’s down by $100 billion from the year before. During that period Treasuries have actually rallied, with the benchmark 10-year note yield falling to 1.60% from 1.99%. China’s reduction in holdings didn’t hurt the bond market, as the economic stresses that led them to allocate cash away from Treasuries led other investors to seek out safety in the debt. China is well-positioned to use the bond market to show its displeasure with the U.S. in a manner that would be more than symbolic: it could sell more Treasuries. For the President-elect, who has plans to borrow to pay to ramp up infrastructure spending, that could cause real pain. The 10-year note yield has risen to a two-year high of 2.49% up from 1.88% on election day.

For more than a decade, politicians have expressed concern that China and other foreign government could use their significant stakes in Treasuries against the U.S. by dumping them on the market. Such a move would potentially drive borrowing costs throughout the U.S. sharply higher. Bond market conventional wisdom has been that this would be unlikely because it would reduce the value of the seller’s remaining reserves, weakening it’s own capital bulwarks against a future crisis. Trump’s pugnacity mixed with his seeming willingness to ignore facts contrary to his argument make it hard to assess his motives, which may scramble conventional thinking and raise the risks of an unorthodox response from China.

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Let the games begin.

China To Fine Unnamed US Automaker For ‘Monopolistic Behavior’ (R.)

China will soon slap a penalty on an unnamed U.S. automaker for monopolistic behavior, the official China Daily newspaper reported on Wednesday, quoting a senior state planning official. News of the penalty comes at a sensitive time for China-U.S. relations after U.S. president-elect Donald Trump called into question a long-standing U.S. policy of acknowledging that Taiwan is part of “one China”. Beijing maintains that self-ruled Taiwan is a wayward province of China and has never renounced the use of force to take it back. Investigators found the U.S. company had instructed distributors to fix prices starting in 2014, Zhang Handong, director of the National Development and Reform Commission’s price supervision bureau, was quoted as saying.

In an exclusive interview with the newspaper, Zhang said no one should “read anything improper” into the timing or target of the penalty. China, the world’s largest auto market, has become crucial to the strategies of car companies around the world, including major U.S. players General Motors and Ford. “We are unaware of the issue,” said Mark Truby, Ford’s chief spokesman for its Asia-Pacific operations. In a statement, GM said: “GM fully respects local laws and regulations wherever we operate. We do not comment on media speculation.”

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There’s just so much borrowing going on. And that was never the Chinese way.

Just Another Chinese Cash Crunch, But Bigger (BBG)

In markets where investors are highly leveraged, things tend to happen slowly at first, then fast. China is having one of those moments, and as with the 2008 crisis, it can’t be pinned on one event. On Monday, the Shanghai Composite Index sank 2.5%, then extended that decline Tuesday before rebounding to close little changed. The one-year government note yield rose 7 basis points to 2.72%, on top of Monday’s 15 basis-point increase. The root cause may be banks. There’s clearly a liquidity squeeze on Chinese lenders. Nothing new there: Financial institutions tend to face higher demand for cash in December, and this year that’s been exacerbated because Chinese New Year falls early – the holiday, when many people withdraw deposits to buy gifts and travel, begins Jan. 28.

Perhaps more important, banks also want to boost the deposits they can account for as of Dec. 31, when they close their books. Financial institutions struggled to meet a loan-to-deposit ratio ceiling of 75%, and that cap was scrapped in June. None of the banks wants to show that the amount they lend is completely disconnected from what they have in the coffers, however. Which may explain why short-term deposit rates are far higher than longer-term ones. In simple terms, this is a seasonal cash crunch. The issue is that this time it’s on steroids, because it comes after several months when the People’s Bank of China increased short-term rates. This boosted funding costs for wealth-management products and for investors using leverage to buy everything from stocks to bonds to iron ore. As some of the trades begin to offer negative returns, these investors are selling.

Curiously, Hong Kong is going through a similar issue because of the impending Federal Reserve rate increase. Then the vicious circle of leverage begins: Assets being sold drop below agreed levels, triggering margin calls – or the requirement that someone borrowing money to buy securities post more cash to back up the loan. To meet those calls, investors sell more of their securities, putting further pressure on prices and prompting new margin calls. The slump in Chinese stocks last year was exacerbated by just such a dynamic. Investors must now hope that China has learned the lesson from that rout and will use its pension funds to steady the market. Otherwise, if this selloff really is the result of a liquidity squeeze, it’s unlikely to stop before February, when people return from the holiday.

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And neither has the FBI.

Top US Spy Agency Has Not Embraced CIA Assessment On Russia Hacking (R.)

The overseers of the U.S. intelligence community have not embraced a CIA assessment that Russian cyber attacks were aimed at helping Republican President-elect Donald Trump win the 2016 election, three American officials said on Monday. While the Office of the Director of National Intelligence (ODNI) does not dispute the CIA’s analysis of Russian hacking operations, it has not endorsed their assessment because of a lack of conclusive evidence that Moscow intended to boost Trump over Democratic opponent Hillary Clinton, said the officials, who declined to be named. The position of the ODNI, which oversees the 17 agency-strong U.S. intelligence community, could give Trump fresh ammunition to dispute the CIA assessment, which he rejected as “ridiculous” in weekend remarks, and press his assertion that no evidence implicates Russia in the cyber attacks.

Trump’s rejection of the CIA’s judgment marks the latest in a string of disputes over Russia’s international conduct that have erupted between the president-elect and the intelligence community he will soon command. “ODNI is not arguing that the agency (CIA) is wrong, only that they can’t prove intent,” said one of the three U.S. officials. “Of course they can’t, absent agents in on the decision-making in Moscow.” The FBI, whose evidentiary standards require it to make cases that can stand up in court, declined to accept the CIA’s analysis – a deductive assessment of the available intelligence – for the same reason, the three officials said. [..] In October, the U.S. government formally accused Russia of a campaign of cyber attacks against American political organizations ahead of the Nov. 8 presidential election. President Barack Obama has said he warned Vladimir Putin about consequences for the attacks.

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That’s quite the claim. Especially since all western reporting contradicts even the possibility.

Lavrov Hints ISIS Recapture Of Palmyra Orchestrated By US (R.)

Foreign Minister Sergei Lavrov said talks with the United States on Syria were at a dead end, and Islamic State’s advance to Palmyra may have been staged by the United States and its regional allies to allow Syrian rebels in Aleppo a respite. During a visit to Belgrade, Lavrov said Russia was ready to quickly negotiate with the United States the opening of corridors for the pullout of rebels from Aleppo, but said these would have to be agreed before any ceasefire happened. “Our American colleagues do, so to speak, agree with that, and from Dec. 3 when we met John Kerry in Rome they supported such a concept and even gave us their approval on paper,” Lavrov told reporters at a news conference with his Serbian counterpart on Monday.

“But after three days they revoked that agreement and returned to their old, dead-end position which comprises this: Before the agreement on corridors there has to be a truce… as I understand, this would just mean the rebels would get a break,” he said. Earlier in the day, a military source said the Syrian army was on the verge of announcing victory in its battle to retake rebel-held eastern Aleppo. The Syrian army made new advances on Monday after taking the Sheikh Saeed district, leaving rebels trapped in a tiny part of the city. Lavrov also said he believed that Islamic State’s seizure of Palmyra might have been engineered by the U.S.-led coalition to divert attention from Aleppo. “That leads us to a thought – and I am sincerely hoping I am wrong, that this is all orchestrated, coordinated to give a break to those bandits that are in eastern Aleppo,” he said.

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Robert Fisk suggests Lavrov may be on to something.

There Is More Than One Truth To Tell In The Awful Story Of Aleppo (Fisk)

[..] it’s time to tell the other truth: that many of the “rebels” whom we in the West have been supporting – and which our preposterous Prime Minister Theresa May indirectly blessed when she grovelled to the Gulf head-choppers last week – are among the cruellest and most ruthless of fighters in the Middle East. And while we have been tut-tutting at the frightfulness of Isis during the siege of Mosul (an event all too similar to Aleppo, although you wouldn’t think so from reading our narrative of the story), we have been willfully ignoring the behaviour of the rebels of Aleppo. Only a few weeks ago, I interviewed one of the very first Muslim families to flee eastern Aleppo during a ceasefire. The father had just been told that his brother was to be executed by the rebels because he crossed the frontline with his wife and son.

He condemned the rebels for closing the schools and putting weapons close to hospitals. And he was no pro-regime stooge; he even admired Isis for their good behaviour in the early days of the siege. Around the same time, Syrian soldiers were privately expressing their belief to me that the Americans would allow Isis to leave Mosul to again attack the regime in Syria. An American general had actually expressed his fear that Iraqi Shiite militiamen might prevent Isis from fleeing across the Iraqi border to Syria. Well, so it came to pass. In three vast columns of suicide trucks and thousands of armed supporters, Isis has just swarmed across the desert from Mosul in Iraq, and from Raqqa and Deir ez-Zour in eastern Syria to seize the beautiful city of Palmyra all over again.

It is highly instructive to look at our reporting of these two parallel events. Almost every headline today speaks of the “fall” of Aleppo to the Syrian army – when in any other circumstances, we would have surely said that the army had “recaptured” it from the “rebels” – while Isis was reported to have “recaptured” Palmyra when (given their own murderous behaviour) we should surely have announced that the Roman city had “fallen” once more under their grotesque rule. Words matter. These are the men – our “chaps”, I suppose, if we keep to the current jihadi narrative – who after their first occupation of the city last year beheaded the 82-year-old scholar who tried to protect the Roman treasures and then placed his spectacles back on his decapitated head.

By their own admission, the Russians flew 64 bombing sorties against the Isis attackers outside Palmyra. But given the huge columns of dust thrown up by the Isis convoys, why didn’t the American air force join in the bombardment of their greatest enemy? But no: for some reason, the US satellites and drones and intelligence just didn’t spot them – any more than they did when Isis drove identical convoys of suicide trucks to seize Palmyra when they first took the city in May 2015. There’s no doubting what a setback Palmyra represents for both the Syrian army and the Russians – however symbolic rather than military. Syrian officers told me in Palmyra earlier this year that Isis would never be allowed to return. There was a Russian military base in the city. Russian aircraft flew overhead. A Russian orchestra had just played in the Roman ruins to celebrate Palmyra’s liberation.

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The craziest thing I’ve seen in a long time.

How To Make A Profit From Defeating Climate Change (Carney/Bloomberg)

From rising sea levels to more severe storms and more intense droughts, climate change will present serious risks to, and create major opportunities for, nearly every industry. Citizens, consumers, businesses, governments, and international organisations are all taking action. And entrepreneurs are developing disruptive technologies that will create and destroy value. The challenge is that investors currently don’t have the information they need to respond to these developments. This must change if financial markets are going to do what they do best: allocate capital to manage risks and seize new opportunities. Without the necessary information, market adjustments to climate change will be incomplete, late and potentially destabilising.

Public policy, consumer demand and technological innovation are driving a shift towards a low-carbon economy. Which companies and industries are most, and least, dependent on fossil fuels? And who stands ready to provide resilient and sustainable infrastructure? Which financial institutions are best positioned to gain and which to lose? In every case, which firms have the governance, resources and the strategy to manage, and profit from, these major shifts? We believe that financial disclosure is essential to a market-based solution to climate change. A properly functioning market will price in the risks associated with climate change and reward firms that mitigate them. As its impact becomes more commonplace and public policy responses more active, climate change has become a material risk that isn’t properly disclosed.

In response to a G20 request to consider the financial stability risks, the Financial Stability Board created a taskforce on climate-related financial disclosures. Its purpose is to develop voluntary, consistent disclosures to help investors, lenders and insurance underwriters manage material climate risks. As befits a solution by the market for the market, the taskforce is led by members of the private sector from across the G20, including major companies, large investors, global banks and insurers. After a year of intensive work and widespread consultation its recommendations are now publicly available. They concentrate on the practical, material disclosures most relevant to investors and creditors and which can be compiled by all companies that raise capital as well as financial institutions.

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Poul Thomsen was always a disgrace.

Greece ‘Boxed In’ as EU and IMF Fight Over Nation’s Debt Relief Plan (G.)

The row over how to stabilise the indebted Greek economy has resurfaced with renewed vigour after the European Union on Tuesday angrily rejected charges by the IMF that its current rescue programme is “not credible”. The spectre of the country’s economic crisis flaring up again deepened as the extent of the differences between creditors was laid bare. Caught in the middle, Athens also ratcheted up the rhetoric, as its finance minister told the Guardian that the IMF was “economising with the truth”. “Greece is being boxed into a corner,” said Euclid Tsakalotos, claiming that the country was under intense pressure to specify new austerity measures that made “no economic or political sense”. The war of words intensified after the IMF issued a 1,300-word statement distancing itself from the economic policies underpinning the nation’s latest bailout.

The adjustment programme agreed last summer in exchange for €86bn (£72bn) worth of rescue loans – a plan the IMF has so far refused to support – was based on measures that were “unfriendly to growth”, wrote Poul Thomsen, who directs the IMF’s European department, and Maurice Obstfeld, its chief economist. “It is not the IMF that is demanding more austerity,” the officials argued in a blog published late on Monday. “If Greece agrees with its European partners on ambitious fiscal targets, don’t criticise the IMF … when we ask to see the measures required to make such targets credible.” Athens, they said, had agreed to achieve a budget surplus – where state tax income exceeds expenditure – of 3.5% of GDP once the bailout expired in 2018, a feat that was not feasible without further cuts, said the IMF.

On Tuesday, the European commission hit back, insisting that the economic fundamentals were not only sound, but working. “The European institutions consider that the policies of the ESM program are sound and if fully implemented can return Greece to sustainable growth and can allow Greece to regain market access,” said commission spokeswoman Annika Breidthardt. The plan, she added, had undergone “several parts of scrutiny”, and even the European court of auditors had provided feedback, which had been taken into account. [..] Hopes of a political breakthrough are now resting on meetings Tsipras will have later this week with German and French leaders. But on past form, lenders are unlikely to yield, and Greek officials are now worrying that the row could be the precursor of the IMF pulling out of the programme altogether.

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“s it likely when around 45% of pensioners receive monthly payments below the poverty line of €665, and almost 4 million people, that is more than a third of the population, have been classed as being at risk of poverty or social exclusion, that Greece’s main problem is that pensions and tax credit allowances are too generous?”

Tsipras To Propose To EU Leaders That IMF Be Excluded (Kath.)

Prime Minister Alexis Tsipras is to suggest to European counterparts this week that the IMF should be left out of the Greek program, sources have told Kathimerini. Tsipras is expected to sound out Francois Hollande, who he is due to hold talks with Wednesday, and Angela Merkel, with whom he will have a working lunch on Friday, about the idea of the Fund no longer having a role in Greece’s bailout. If an agreement cannot be reached on this proposal, Tsipras will put forward the possibility of the IMF retaining just a technical role in the program. Athens believes that the political cost of the Fund remaining on board has become too high after the latest spat between the government and the organization, which flared up as the institutions returned to the Greek capital for further talks aimed at completing the bailout review.

The talks resumed under a cloud after the IMF’s European director Poul Thomsen and head of research Maurice Obstfeld published a blog post on Monday night in which they denied that the Fund was responsible for asking Greece to adopt more austerity measures and claimed that the country’s pensions and tax benefits are still too generous. Finance Minister Euclid Tsakalotos confronted the IMF mission chief Delia Velculescu over the blog post when talks between the Greek government and the institutions resumed in Athens Tuesday. Velculescu is said to have assured the Greek minister that the IMF did not want to make negotiations harder but simply to express its view.

A little earlier, Tsakalotos had publicly countered the claims made by the IMF officials in their article. “In effect [the Fund] is arguing for Greek pensioners and poorer wage earners to make further economies, while it economizes on the truth,” he told The Guardian. “Greek expenditure on both pensions and other subsidies is about 70% of the EU average and 52% of that of Germany. Is it likely when around 45% of pensioners receive monthly payments below the poverty line of €665, and almost 4 million people, that is more than a third of the population, have been classed as being at risk of poverty or social exclusion, that Greece’s main problem is that pensions and tax credit allowances are too generous?” he added.

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But of course they are short on anti-depressants too.

Crisis Leaves Greeks Gloomiest In Europe And Beyond (R.)

Greece’s debt crisis has made its population the unhappiest not only in western Europe but also in comparison with people in some former Communist countries, a study showed on Tuesday. The “Life in Transition” survey conducted by the European Bank for Reconstruction and Development (EBRD) and the World Bank has questioned households across a broad region since 1991 as the Cold War came to an end, but Greece was included for the first time this year. Over 92% of Greeks said the debt crisis had affected them, with 76% of households suffering reduced income due to wage or pension cuts, job losses, delayed or suspended pay or fewer working hours.

Only one in 10 Greeks were satisfied with their financial situation and only 24% with life overall, compared with 72% in Germany and 42% in Italy, the two western European countries used as comparisons. The figure was 48% in post-communist countries. Austerity measures demanded by international creditors have been tough on Greeks. Pensions, for example, have been reduced by about a third since the crisis began in 2009. Only 16% of the respondents in Greece saw their situation improving over the next four years, compared with 48% in post-communist countries and 35 and 23% in Germany and Italy, respectively. “This signals that, despite the recent political changes and attempts at economic reforms that have taken place in the country, Greeks do not see their situation improving for the foreseeable future”, the report said.

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So that stops all fracking, right?!

Final EPA Study Confirms Fracking Contaminates Drinking Water (EW)

The U.S. Environmental Protection Agency (EPA) has released its widely anticipated final report on hydraulic fracturing, or fracking, confirming that the controversial drilling process indeed impacts drinking water “under some circumstances.” Notably, the report also removes the EPA’s misleading line that fracking has not led to “widespread, systemic impacts on drinking water resources.”The report, done at the request of Congress, provides scientific evidence that hydraulic fracturing activities can impact drinking water resources in the United States under some circumstances,” the agency stated in a media advisory. This conclusion is a major reversal from the EPA’s June 2015 pro-fracking draft report. That specific “widespread, systemic” line baffled many experts, scientists and landowners who—despite the egregious headlines—saw clear evidence of fracking-related contamination in water samples.

Conversely, the EPA’s top line encouraged Big Oil and Gas to push for more drilling around the globe. But as it turns out, a damning exposé from Marketplace and APM Reports revealed last month that top EPA officials made critical, last-minute alterations to the agency’s draft report and corresponding press materials to soft-pedal clear evidence of fracking’s ill effects on the environment and public health. Thomas Burke, EPA deputy assistant administrator and science advisor, discussed the agency’s final report released Tuesday. “There are instances when hyrdofracking has impacted drinking water resources. That’s an important conclusion, an important consideration for moving forward,” Burke told reporters today, according to The Hill. Regarding the EPA’s contentious “national, systemic conclusion,” Burke said, “that’s a different question that this study does not have adequate evidence to really make a conclusive, quantified statement.”

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Small state, but big chunk of ice.

A Crack In Antarctica Is Forming An Iceberg The Size Of Delaware (PopSci)

An iceberg the size of Delaware is starting to break away from Antarctica. It began with a small crack, but has now grown 70 miles long and more than 300 feet wide. When it reaches the edges of the ice sheet, the state-sized chunk will drift away into the sea. The crack is a third of a mile deep—reaching all the way to the sea below. It’s a relatively new rift in the ice sheet, called Larsen C, but is following in its icy brethren’s footsteps: Larsen A and B both broke away from the main Antarctic sheet in the last two decades in much the same way. All three began with clefts in the ice and eventually floated away to disintegrate. That dramatic a cleft is unusual—it’s more common for ice sheets to slowly break up along the edges and fall in smaller chunks. Only in the last half century has it become common for the Antarctic to form these dramatic fault lines, and scientists say global warming is likely to blame.

NASA has been monitoring the Larsen ice sheets since Larsen A broke off in 1995. Larsen B followed it in 2002, and Larsen C is expected to go the same way soon. Operation IceBridge has surveyed the polar ice caps annually for the past eight years as a way to track changes in the glaciers and ice sheets. The MIDAS Project, a U.K.-based research group, first reported the Larsen C rift in 2014 and has kept a watchful eye on it ever since. [..] The more than 2,400 square miles that is likely to break away from Larsen C will only be about 12% of the ice sheet’s total area. But once that part comes loose, the MIDAS Project predicts that the rest of the sheet could become unstable and completely disintegrate. The crack is growing steadily and shows no signs of stopping, though the break won’t happen immediately. It takes much longer for ice sheets to break up—unlike many human relationships, this one will last through the holiday season.


A rare ice crack not formed by that squirrel from the Ice Age movies – NASA/John Sonntag

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Dec 072016
 
 December 7, 2016  Posted by at 10:17 am Finance Tagged with: , , , , , , , , ,  2 Responses »
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Harris&Ewing Washington snow scenes 1924


Trump: US Must End ‘Destructive Cycle of Intervention and Chaos’ (VoA)
‘Chances Of Italy Staying In Euro For Next 5 Years Below 30%’ (Ind.)
Italian Interior Minister Sees New Elections In February (R.)
‘A Landscape of Exhaustion and Moral Decay’ (G.)
Is Janet Yellen Trying To Screw Donald Trump? (Miller)
Trump’s Air Force One Tweet Was A Brilliant Move (CNBC)
The Equation That Explains It All (Mark St.Cyr)
China Admits “Economic Downturn Just Beginning” (ZH)
China’s Big Savers Are Racking Up More Debt (BBG)
Australia’s Economy Shrinks 0.5%, Most in Eight Years (BBG)
John Key Was Known As The Smiling Assassin. And People Still Liked Him (G.)
Europe’s Still Dithering Over Greece (BBG)
Christmas Spirit Lacking In Greek Bailout Wrangles (R.)
Polar Bear Numbers To Plunge A Third As Sea Ice Melts (AFP)

 

 

If he pulls this off, it’s the biggest thing that’s happened in the US for many decades.

Trump: US Must End ‘Destructive Cycle of Intervention and Chaos’ (VoA)

U.S. President-elect Donald Trump returned Tuesday to his vision of a non-interventionist foreign policy for the United States, saying as he did during his campaign, that he does not want to have American forces fighting “in areas that we shouldn’t be fighting in.” Speaking during a “thank you” rally for his supporters in Fayetteville, North Carolina, Trump said instead his focus will be on defeating terrorists, including the Islamic State group. “We will stop racing to topple foreign regimes that we know nothing about, that we shouldn’t be involved with,” Trump said. He said the U.S. must end what he called a “destructive cycle of intervention and chaos.” Trump pledged to build up the military, but said the purpose would be to project strength, not aggression. After questioning frequently during his campaign whether NATO and other allies were pulling their weight Trump said Tuesday he wants to strengthen “old friendships” and seek new ones.

At the same rally, Trump formally announced he has chosen retired Marine General James Mattis as his nominee for secretary of defense. “Under his leadership, such an important position, we will rebuild our military and alliances, destroy terrorists, face our enemies head on and make America safe again,” Trump said. Michael O’Hanlon, a senior defense expert at the Brookings Institution, called Mattis “one of the best read, best informed and most experienced generals of his generation.” Mattis has served as the head of U.S. Central Command, which carries out U.S. operations in the Middle East, and the Supreme Allied Commander of NATO forces. The retired general will need a congressional waiver in order to be confirmed as secretary of defense. Mattis would otherwise be ineligible to serve because of a law that requires a seven-year wait for former members of the military to serve in the post. He has been retired for less than four years.

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Bold.

‘Chances Of Italy Staying In Euro For Next 5 Years Below 30%’ (Ind.)

The political turmoil set off by the Italian referendum result could endanger the euro, a German business group has warned. Ulrich Grillo, the head of the Federation of German Industries, said that the German industry is worried about the consequences of the referendum, which prompted Premier Minister Matteo Renzi to announce his resignation on Monday. “The risks of a new political instability for economic development, the financial markets and the currency union are increasing further,” he said. Douglas McWilliams from the Centre for Economics and Business Researcg (CEBR), a leading economics consultancy, said it estimated the chances of Italy staying in the Euro for the next five years had fallen below 30% following the vote.

“There is no doubt that Italy could stay in the euro if it were prepared to pay the price of virtually zero growth and depressed consumer spending for another five years or so. But that is asking a lot of an increasingly impatient electorate. We think the chances of their sustaining this policy are below 30%,” he said. German’s foreign minister also expressed concerns about the result, which prompted Prime Minister Matteo Renzi to resign. Speaking during a visit to Greece, Frank-Walter Steinmeier said that while the result of the Italian referendum on constitutional reform was “not the end of the world,” it was also “not a positive development in the case of the general crisis in Europe.”

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After the laws are changed?

Italian Interior Minister Sees New Elections In February (R.)

Italy could have an election as early as February, a minister in Prime Minister Matteo Renzi’s outgoing government said on Tuesday, speaking after talking to Renzi. The comments will add to growing support for a quick vote as the only way to avoid protracted political limbo in Italy following Sunday’s “No” vote on Renzi’s constitutional reforms. Renzi announced he would step down after his heavy defeat. President Sergio Mattarella told him to stay on until parliament had approved the 2017 budget, expected later this week. Then, the president said, Renzi could tender his resignation. Before the referendum, most commentators, and financial markets, assumed that even if Renzi lost and resigned, a temporary unelected government would be installed to tide Italy over until the end of parliament’s term in 2018.

But a chorus of comments from party chiefs suggests consensus may be growing for an early vote in spring. “I forecast there will be the will to go to elections in February,” Interior Minister Angelino Alfano, the head of a small centre-right party that is a crucial part of Renzi’s ruling coalition, told Corriere della Sera daily on Tuesday. Significantly, Alfano said he made his forecast after discussing the issue with Renzi. Renzi is still leader of the centre-left Democratic Party (PD), which has the largest number of parliamentarians, so it is unlikely any new government could be formed without his backing.

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The 1860s that Mark Carney referred to. Well, or today.

‘A Landscape of Exhaustion and Moral Decay’ (G.)

When Mark Carney insisted in a speech at Liverpool John Moores University that the conditions through which we are now living are “exactly the same” as those that British citizens endured during the “lost decade” of the 1860s, he was taking a bit of rhetorical licence. The past is never simply the present dressed up in funny clothes, and the analogy between today’s painful realities and those of 150 years ago doesn’t quite hold. And yet, the governor of the Bank of England had a point. When Overend Gurney collapsed in 1866, it undid once and for all the sense that, give or take a few individual misfortunes, capitalism was a moral force that rewarded skill and hard work. Toppling under a mountain of unsecured debt, the joint stock bank dragged down 200 businesses and a broad tranche of private investors with it, from courtiers to grocers.

As with the Northern Rock crisis in 2007, there were queues of panicky investors lining the streets. More profoundly, now came a dawning realisation that bad things could happen to good people. Thanks to the publication of Charles Darwin’s Origin of Species in 1859, the universe increasingly seemed not only godless but, what was perhaps even worse, indifferent to the sufferings of ordinary folk. The shock of 1866 was doubly hard because, for the previous 15 years, Britain had been sailing on a sea of prosperity and confidence. In 1851, the Great Exhibition had showcased the nation’s position as “the workshop of the world”, the great exporter of industrial goods and technological know-how to the four corners of the globe. Business was thriving, the social discontent of the “hungry” 1840s had receded, and this was, to use the coinage of the historian WL Burn, the “age of equipoise”, a serene and sunny upland of prosperity and social cohesion.

Increasingly, though, there were worrying signs that Britain could not hold on to its trading pre-eminence for much longer. Germany and the United States were playing industrial catch-up, and would soon be making everything from saucepans to spanners more cheaply and better than we ever could. What’s more, with global transport systems stretching further as each year passed, Britain’s grain, and even its dairy and meat produce, would soon be supplied from as far away as Australia and Canada. Domestic farming was about to go into a decline from which, some historians suggest, it has never recovered.

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Stockman at the head of the Fed would be diffferent…

Is Janet Yellen Trying To Screw Donald Trump? (Miller)

[..] But will Yellen’s gambit plunge us into a recession is the question. Just because Wall Street is gorging on high returns doesn’t mean the economy is sound. For eight years and running, the Fed has kept interest rates near zero% in an attempt to spark investment and borrowing. Unemployment has gradually shrunk during the Obama years, yet the workforce participation rate remains low by modern standards. Prior to Election Day, two-thirds of Americans were anxious about their economic future. Stock traders are popping the bubbly while middle America drinks the warm beer of worry. If you’re still in the dark as to why Trump stole the Rust Belt from Hillary, you need not look further than that. Fear aside, Trump’s election has been an Advil to the ongoing economic headache felt by most Americans.

Eight years of Obama’s big spending combined with ultra low interest rates has done precious little to shore up their optimism. Retirees on fixed income can’t get a yield on their savings. Millennials earning a salary for the first time in their life have little incentive to put money away. So you might think: Hey, maybe Yellen’s hinting about raising interest rates is a good thing! Sure, it might cause the S&P 500 to dip. But it’s about time Grandma got a return on her CDs. I’m very skeptical. Interest rates most definitely need to rise, but Yellen’s timing is suspicious. Trump, despite his admiration for low borrowing rates (and debt refinancing), has accused Yellen of keeping the lid on interest rates in order to boost Obama’s legacy. He told CNBC in September that rates were “staying at zero because [Yellen’s] obviously political and she’s doing what Obama wants her to do.” In another interview with Reuters, Trump explained with perfect Trumpian simplicity, “They’re keeping rates down because they don’t want everything else to go down.”

Yellen wasn’t happy about the charges. She fired back at a press conference, saying, “We do not discuss politics at our meetings, and we do not take politics into account in our decisions.” Uh huh. And I’m the Archbishop of Canterbury. [..] What the Fed, serving as America’s central bank, does is balance the money supply to reflect market conditions. When the market is roaring, it’s time to cut off the money spigot so as to rein in inflation. When things are sluggish, pouring cash into the economy is supposed to gin up activity. There are all kinds of ins and outs and what-have-yous involved in the process, including convoluted accounting techniques. But long mythologized story short, the tinkers at the Fed are supposed to act on behalf of the economy, and not the elected shysters in Washington. Every macro-econ student learns that faux civics lesson the first week of class.

[..] A few choices off the top of my head: finance writer and all-around mensch Jim Grant, former Director of the Office of Management and Budget David Stockman, commodity guru Jim Rogers, or former congressional representative and arch-Fed-critic Ron Paul.

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Brilliant is a big word, but the use of Twitter is interesting.

Trump’s Air Force One Tweet Was A Brilliant Move (CNBC)

Another day, another provocative tweet from President-elect Donald Trump. This time, he went after Boeing and the cost of the new Air Force One replacement program. But while the target was different, the goal of Trump’s twitter use remains the same: It’s his negotiating tool and, just as importantly, an instant link to public support that no president has ever been able to use before. But why this tweet and comments and why now? As few people knew before now, the Air Force is actually currently in negotiations with Boeing on the final costs of the two new Air Force One jets it hopes to buy and have in service by 2024. The source of Trump’s $4 billion cost figure in his tweet is not so clear, but the last publicly reported estimate was at $3 billion with costs still rising.

Sure, there are a lot of spending programs that cost more that Trump could target. But are there many more that are as easy for all the voters to understand? Air Force One is an iconic jet that we all know exists and almost everyone can picture quickly in their minds. Our social media/short attention span media culture makes this issue absolutely perfect for Trump to single out on Twitter. And it looks like it may have already worked. About two hours after the tweet, Boeing delivered the following statement: “We are currently under contract for $170 million to help determine the capabilities of these complex military aircraft that serves the unique requirements of the President of the United States. We look forward to working with the U.S. Air Force on subsequent phases of the program allowing us to deliver the best planes for the President at the best value for the American taxpayer.”

Yes, that “at the best value” phrase at the end of the statement says it all. Who knows exactly how much the Trump tweet just saved the American taxpayers? But considering that it cost him and us nothing for him to send it, even a few hundred grand looks like a big net windfall. And that’s not the only reason why the use of Twitter remains crucial to Trump. Every President of the United States has had the option to use public opinion to promote his agenda, but none before Trump has had an established and instantaneous link with his supporters like he has with Twitter. In the past, the best a president could do was go on national TV and make a long speech. That’s tortuous compared to the quick bang Trump gets by tweeting directly to his 16 million-plus followers and the tens of millions more who instantly hear about his tweets from the news media.

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“..we need more financial chaos (A) To make even more all time “market” highs (C)..”

The Equation That Explains It All (Mark St.Cyr)

If you were just woken from some form of suspended animation from let’s say 2010 (ancient economic history in today’s terms) then informed of the current state of global political affairs and upheavals, U.S. employment (95+million not,) global currency gyrations, interest rates at not only 0% but some -0%, threats of escalating wars, threats of major confrontational war, GDP of the major global economies not only contracting, but below statistical stagnant, governments, as well as central banks with balance sheets of debt calculated in $TRILLIONS, some in the 10’s of, all financed at near or below 0%, and the Fed is only about a week away from raising rates into the teeth of what can only be called “uncertainty,” and much, much more. (There isn’t enough time, or digital ink to list them all.)

Nobody would be surprised if your first reaction based on your prior acumen (the ancient history of 7 years ago whether it be in stocks, business, or both) would to become immediately concerned that whatever portfolio, or wealth you may have had in the markets, may be worth far less today than when you were first put to sleep. And probably becoming ever smaller as you thought about what you might need to do next in order to preserve any that may be left. That is, till someone explained to you the markets you went to sleep knowing of – are no longer – and the reality of the markets today you could never have dreamed up. Even if they let you sleep another decade or longer. Today, the markets you once knew of are better described as the “markets.”

To clear up any confusion as to how, or why, the “markets” can now be at “never before seen in the history of mankind highs” once again after the resounding “NO” vote in Italy, where the entire E.U. experiment is now seriously undermined, and falling apart in real-time (Brexit first, Italy will surely now vote next, etc., etc,) [here] is the calculation that explains it all. For under the rules of: If A = B and B = C, then A = C, you now have the magical formula to understand with Einstein like surety today’s ‘markets.” If you have any doubt to the soundness of this expression, consider the following: If a financial crisis appears (A) The central banks will intervene (B) If the central banks intervene (B) The “markets” go up (C) Thus, we need more financial chaos (A) To make even more all time “market” highs (C)

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“..the decrease reflects Chinese economic downturn, which is just now beginning and will last a long time since China has passed its economic boom period in which many problems were hidden..”

China Admits “Economic Downturn Just Beginning” (ZH)

In what may be the most direct admission that China’s economy is about to grind to a deflationary halt, today China’s Global Times, a newspaper which is seen as a propaganda companion to the official People’s Daily, revealed data showing this year’s proposed salary guidelines according to which there is a broad wage growth declines in virtually every single province on the mainland, which according to the Chinese publication “confirms the country is experiencing an economic slowdown.” Salary guidelines are issued by local governments as a reference to help firms decide how much they should increase their employees’ salaries. They are based on labor market conditions and economic growth, among other factors.

Global Times notes that compared to 2015 salary guidelines, wages in 2016 have grown at a slower rate in virtually all 19 provinces and regions that have so far published their annual guidelines for firms. Northeast China’s Heilongjiang Province has not released salary guidelines for years as the region has been experiencing a recession and therefore wages are not generally increasing. Seventeen provinces have seen a decrease in salary standards, including North China’s Hebei Province, South China’s Hainan Province, Northwest China’s Xinjiang Uyghur Autonomous Region and East China’s Jiangxi Province. The only increases were seen in Southwest China’s Guizhou Province and Beijing Municipality.

“2016’s guidelines have seen a slowing of salary growth after years of increases, which means that the speed of wage growth has surpassed economic growth since China’s labor contract law was adopted in 2007,” Wang Jiangsong, a professor at the China Institute of Industrial Relations, told the Global Times on Tuesday. Confirming that the only way for Chinese wage growth is down, Wang Jiangsong, a professor at the China Institute of Industrial Relations, told the Global Times that “since China’s labor contract law was adopted in 2007, wage increases have surpassed economic growth.” He said the slowdown reflects China’s economic downturn. It also means that local workers will not be happy.

But more troubling was Wang’s next admission: “the decrease reflects Chinese economic downturn, which is just now beginning and will last a long time since China has passed its economic boom period in which many problems were hidden but now those problems will gradually surface.” In short, declining wage growth, with aggregate 2016 demand driven by the biggest credit impulse and expansion in Chinese history. To all those who truly believe in the global reflation these, we wish you the best of luck.

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The shadow banking system gets bigger, not smaller. That should worry Xi to no end.

China’s Big Savers Are Racking Up More Debt (BBG)

China’s savers, who sock away cash like almost no one else in the world, are racking up more debt as borrowing options proliferate. 94% of consumers used a credit or loan in the past year, up from 85% two years ago, according to a survey by market researcher Mintel Group. Peer-to-peer lending via online lenders jumped, while car loans and mortgages nearly doubled, the poll showed. “Huo zai dang xia”, or living in the moment, is the new buzzword. It’s especially prevalent among consumers in their 20s, according to Aaron Guo, a senior analyst for Mintel in Shanghai. “Compared with their parents’ generation, who tend to save more and are sometimes thrifty, youngsters are willing to spend more on products with special features or tailored services,” he said.

That’s a profound shift in attitudes for a nation where saving has long been the bedrock principle of personal financial management and a prerequisite for big milestones like cars, homes and kids. Deposits stand at 59.6 trillion yuan ($8.67 trillion), People’s Bank of China data show. The newfound willingness to borrow from the future to enjoy the present could help support consumption in coming years and nudge the nation’s rebalancing away from old traditional drivers. China’s GDP rose 6.7% in the third quarter from a year earlier on the back of resilient retail sales, which expanded 10.3% in the year to date. The borrowing could be just getting started. China’s household outstanding loans will continue to rise at a rate of 14% for the following five years and exceed 60 trillion yuan by 2021, the Mintel report said.

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Presented as a one-off.

Australia’s Economy Shrinks 0.5%, Most in Eight Years (BBG)

While Australia’s economy shrunk last quarter, it’s probably more of a red flag than a precursor to recession. One of only four quarterly contractions in the past 25 years, the so-called ‘lucky country’ is unlikely to suffer a second consecutive slump — just as in those prior periods. But it’s a wake-up call for lawmakers that recent political timidity and gridlock is unsustainable, as is reliance on monetary policy to support growth with a 1.5% interest rate that may not even fall further. A growing chorus of high-profile economists and international institutions are calling on Australia to follow U.K. and U.S. plans to use infrastructure stimulus, particularly with global borrowing costs so low. But the government has made clear its priority is returning the budget to balance as it seeks to protect a prized AAA credit rating.

Wednesday’s report showed:
• GDP fell 0.5% from previous quarter, when it gained a revised 0.6%
• Decline was driven by slump in construction and government spending
• Result was worst since depths of global financial crisis at the end of 2008 and well below economists’ estimates of a 0.1% drop
• The economy grew 1.8% from a year earlier, compared with a forecast 2.2% gain
• Australian dollar fell almost half a U.S. cent on the data

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Nice put-down of a wanker of a man.“He pulled ponytails instead of grabbing pussies.” Does New Zealand have any competent people in politics?

John Key Was Known As The Smiling Assassin. And People Still Liked Him (G.)

John Key’s legacy will not be defined by great policy achievements; it’s his success as the model of a neoliberal leader – a poster boy for trickle-down economics – that he will be remembered for. Key presided over increasing and gross social inequality with all the glibness of the banker who was known as the “smiling assassin” in his Merrill Lynch days. And people still liked him. In this regard, Key was like a Tony Blair of the South Seas: a certain level of personal charisma and a socially inclusive façade allowed both Key and Blair to sell the nasty side of neoliberalism. Compared with the likes of Donald Trump in the United States and Tony Abbott in Australia, Key was socially moderate in ways that many thought – and hoped – Malcolm Turnbull would have been before he capitulated to the far right of his party on refugees, marriage equality and climate change.

Key was more inclusive, and less divisive. He pulled ponytails instead of grabbing pussies. Key supported marriage equality in New Zealand and, as far as race is concerned, Key’s National party entered into a coalition government with the Maori party not once, but twice. Like Blair, Key had the Teflon gene. Despite ignoring public preferences not to privatise state-owned enterprises (2-1 against in a referendum), increasing the GST during the global financial crisis, and more or less ignoring New Zealand’s chronic child poverty because he blames the victims, none of it stuck. What did stick with Key was his reputation as a smart-money guy who was also likeable, self-effacing and wouldn’t look out of place having a beer with regular folks. Never mind the hundreds of thousands of children living under the poverty line in New Zealand – a country of 4 million – and him brushing off the recommendations of the government panel charged with improving their lot; Key was seen as a good guy and a safe pair of hands.

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It’s time for the international press, including Bloomberg, to stop dithering around the topic and tell Brussels to stop this disgrace.

Europe’s Still Dithering Over Greece (BBG)

This week, the European Union’s finance ministers granted some new debt relief to Greece. The new “short-term” measures are better than nothing – but they’re less than a convincing solution to a problem that has dragged on far too long. The deal, sketched out and agreed to in principle earlier this year, should help the Greek government convince voters to keep accepting much-needed domestic reform. That’s good. It isn’t enough, though, to put the country’s debts and budget plans on a sustainable footing. That’s why the International Monetary Fund, whose support will be necessary to achieve that larger goal, isn’t yet on board. After years of muddling through, the issue still isn’t resolved. In the approach to the latest talks, French Finance Minister Michel Sapin acknowledged that “Greece has made huge efforts. This is the first Greek government in a long time that has implemented its commitments.”

He said it was vital that Europe respond by recognizing its obligation to help ease the country’s debt burden, both as a reward and to encourage further improvements in the business climate. All true. Greece can’t be accused of doing nothing to help itself. The banking system has stabilized after three bouts of recapitalization, and deposits are returning, albeit slowly. The economy is growing modestly. The country posted a primary budget surplus for the first 10 months of this year. State asset sales are proceeding slowly but surely. These efforts justify extending the repayment schedule and swapping some floating-rate debt to fixed payments at the current low rates, as announced. But the expected reduction in Greece’s debts relative to its economic output by 20 percentage points through 2060 is far too timid – while the idea that Greece can achieve an annual primary budget surplus of 3.5% of output throughout the coming decade is a fantasy.

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This is why we are raising funds for Greece (see top of this page). So the poor can have a little bit better Christmas. And a little better prospect for the new year. To counter the devastation unleashed by the EU.

Christmas Spirit Lacking In Greek Bailout Wrangles (R.)

Greece thanked creditors for modest debt relief on St. Nicholas Day in Brussels but did not hide disappointment it won’t get the Christmas gift it wants – a pass on the latest phase of its bailout programme. Athens has been hoping fellow euro zone governments will approve a second review of its third bailout, granted in August last year, before year’s end. A government spokesman said on Tuesday it did not yet rule that out. But others, not least German Finance Minister Wolfgang Schaeuble, made clear that is highly unlikely after a Eurogroup meeting on Monday that revealed differences over how well Greece has done in meeting reform commitments. That left Greece and its allies among its EU partners annoyed at stalemate.

Athens wants to clear the review in order to be able to take advantage of selling bonds to the ECB’s quantitative easing scheme. “We could have got this done by the end of the year but the Germans are not moving,” one EU source said. “Greece has done a lot … We haven’t been so strict in other programmes.” A senior EU official involved in Monday’s talks described them as “useless” in terms of furthering agreement, according to another EU source. Ministers were at odds too on budget targets to set Greece after the bailout regime ends in 2018 – conditions important in persuading the IMF to join in lending. [..] The Eurogroup did agree to a series of short-term adjustments to the structure of Greek debt that will smooth out humps in repayments and should reduce its costs in the long run.

Government spokesman Dimitris Tzanakopoulos called that a “significant success”. But he said Athens still wanted Schaeuble and the IMF to scale back demands for more belt-tightening. “They must stop insisting on continuing a policy of extreme austerity which has been proven destructive for society and also economically ineffective,” he said. Schaeuble made clear he will not be swayed by pleas to forgo economic reforms which, he insisted, were for Greece’s own good.

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Note the effects of chemicals on populations.

Polar Bear Numbers To Plunge A Third As Sea Ice Melts (AFP)

Polar bear numbers could drop a third by mid-century, according to the first systematic assessment, released on Wednesday, of how dwindling Arctic sea ice affects the world’s largest bear. There is a 70% chance that the global polar bear population – estimated at 26,000 – will decline by more than 30% over the next 35 years, a period corresponding to three generations, the study found. Other assessments have reached similar conclusions, notably a recent review by the International Union for the Conservation of Nature (IUCN), which tracks endangered species on its Red List. The IUCN classified the sea-faring polar bear – a.k.a. Ursus maritimus – as “vulnerable”, or at high risk of extinction in the wild.

But the new study, published in the Royal Society’s Biology Letters, is the most comprehensive to date, combining 35 years of satellite data on Arctic sea ice with all known shifts in 19 distinct polar bears groupings scattered across four ecological zones in the Arctic. [..] Researchers led by Eric Regehr of the US Fish and Wildlife Service in Anchorage, Alaska projected three population scenarios out to mid-century, and all of them were bad news for the snow-white carnivores. The first assumed a proportional decline in sea ice and polar bears. Despite year-to-year fluctuations, long-term trends are unmistakable: the ten lowest Arctic ice extents over the satellite record have all occurred since 2007.

The record low of 3.41 million square kilometres (1.32 million square miles) in 2012 was 44% below the 1981-2010 average. This week, the US National Snow and Ice Data Center reported that sea ice extent in October and November was the lowest ever registered for both months. [..] Unfortunately, polar bears face other threats besides a habitat radically altered by the release of heat-trapping greenhouse gases. In the 1980s and 1990s, females and pups were found to have accumulated high levels of toxic PCPs in their tissue and organs. The manmade chemicals – used for decades and banned in many countries in the late 1970s – worked their way up through the food chain, becoming more concentrated along the way.

But a new study, published last week in the Royal Society’s Proceedings B, suggested that declines in some polar bear populations stemmed from contaminated males rendered sterile by the chemicals. “PCB concentrations in the Arctic have levelled off,” said lead author Viola Pavlova, a scientist at the Institute of Hydrobiology in the Czech Republic. “Unfortunately, many other manmade chemicals that are also endocrine disruptors occur in the Arctic and could act similarly,” she told AFP.

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Dec 062016
 
 December 6, 2016  Posted by at 10:01 am Finance Tagged with: , , , , , , , , , , ,  1 Response »
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John M. Fox Midtown Dealers Corp. and Hudson showroom, Broadway at W. 62nd Street, NY 1947


Mark Carney: World Is Facing The “First Lost Decade Since The 1860s” (BBG)
Trump Must Fire Janet Yellen – First Thing! (Stockman)
Matteo Renzi’s Resignation Temporarily ‘Frozen’ By Italian President (G.)
Italian Bank Shares Slump as Renzi Loss Adds to Uncertainty (BBG)
Italy Already Requested Monte Dei Paschi Bailout Before Referendum (R.)
Could Renzi’s Exit Lead To An Italian Bank Rescue? (G.)
How Italy Became This Century’s ‘Sick Man Of Europe’ (G.)
Standing Rock Is A Modern-Day Indian War. This Time Indians Are Winning (G.)
Trump Advisors Aim To Privatize Oil-Rich Indian Reservations (R.)
Naked Capitalism Demands Retraction, Apology Over WaPo Fake News Story (NC)
Russia Remains The Only Target Country Of NATO’s Nuclear Weapons (SC)
The Deepening Deep State (Jim Kunstler)
Eurozone Agrees Debt Relief For Greece Amid IMF Row (AFP)
Greek Home Sellers Getting Paid In Banks Abroad (Kath.)
Greek Court Rejects Extradition Of 3 Turkish Officers Accused Of Coup (AFP)

 

 

But he had nothing to do with it!

Mark Carney: World Is Facing The “First Lost Decade Since The 1860s” (BBG)

Mark Carney launched a defense of globalization and set out a manifesto for central bankers and governments to boost growth and make the world economy more equal. The Bank of England Governor said they must acknowledge that gains from trade and technology haven’t been felt by all, improve the balance of monetary and fiscal policy, and move to a more inclusive model where “everyone has a stake in globalization.” Carney’s speech in Liverpool, England, comes amid rising disquiet about the state of the world economy and political status quo that helped propel Donald Trump to victory in the U.S. presidential election and boost support for the U.K.’s exit from the European Union.

Trump isn’t right to favor more protectionist policies in response to globalization, Carney said in a television interview broadcast after his speech. The answer is to “redistribute some of the benefits of trade” and ensure that workers are able to acquire new skills. “Weak income growth has focused growing attention on its distribution,” Carney said in the speech. “Inequalities which might have been tolerated during generalized prosperity are felt more acutely when economies stagnate.” Describing the world as facing the “first lost decade since the 1860s,” the BOE governor said public support for open markets is under threat and rejecting them would be a “tragedy, but is a possibility.”

Carney also defended the central bank’s current policy stance. The BOE has faced criticism from politicians after officials took measures including cutting interest rates and expanding asset purchases in August to support the economy after Britain’s June vote to leave the EU. “Low rates are not the caprice of central bankers, but rather the consequence of powerful global forces, including debt, demographics and distribution,” he said, adding that they helped to prevent a deeper economic downturn.

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“Essentially, the United States is held to be a closed economy resembling a giant bathtub.” Stockman says the Trump team have contacted him.

Trump Must Fire Janet Yellen – First Thing! (Stockman)

The Keynesian statists at the Fed think the devastating financial busts we’ve suffered since 1987 were due to a mix of too much investor exuberance, too much deregulation, a one-time housing mania and a smattering of Wall Street greed and corruption, too. And that’s not to overlook some of the more far-fetched reasons for the two big financial meltdowns of this century. Foremost among these is the Greenspan-Bernanke fairy tale that Chinese workers making under $1 per hour were saving too much money, thereby causing low global mortgage rates and a runaway housing boom in America! Needless to say, not only are these rationalizations completely bogus; but so is the entire underlying rationale for Keynesian monetary central planning.

The claim that market capitalism is chronically and destructively unstable and that the business cycle needs constant management and stimulus by the state and its central banking branch is belied by the historical facts. Every economic setback of modern times, including the foundation events of the Great Depression — was caused by the state. The catalyst was either inflationary war finance or central bank fueled credit expansion, not the deficiencies or inherent instabilities’ of market capitalism. Nevertheless, the Fed’s model robs the millions of workers, entrepreneurs, investors and savers who comprise the ground level economy and the billions of supply-side prices for labor and capital through which they interact and ultimately generate output, income and wealth.

Instead, the Fed focuses on the macroeconomic aggregates as the key to achieving its so-called dual mandate of stable prices and maximum employment. Essentially, the United States is held to be a closed economy resembling a giant bathtub. In the pursuit of “full employment,” the central bank’s job is to keep it pumped full to the brim with “aggregate demand.” But the domestic macroeconomic aggregates of employment and inflation cannot be measured on an accurate and timely basis. Neither can they be reliably and directly influenced by the crude tools of the central bank, such as pegging the money market rate, manipulating the yield curve via QE, levitating Wall Street animal spirits via wealth-effects and various forms of open-mouth intervention such as “forward guidance.”

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The president picking favorites. Dangerous at this stage. Italy’s had technocrat ‘caretakers’ before, and that didn’t go well. But everything to keep M5S out of power, including new changes to election laws.

Matteo Renzi’s Resignation Temporarily ‘Frozen’ By Italian President (G.)

Matteo Renzi will remain in office for at least a week after Italy’s head of state asked the centre-left prime minister to “freeze” his resignation temporarily until the senate passed a 2017 budget. Renzi met Sergio Mattarella on Monday at the presidential palace – the Quirinale – in order to formally submit his resignation following a stunning defeat in a referendum on Sunday. Renzi was expected to step down immediately but his departure could now be delayed until Christmas. Mattarella signalled that he will not call snap elections in response to the referendum results, putting him on a collision course with populist and rightwing parties that want a new poll to be called right away.

The Sicilian head of state said he believed it was important for Italy’s institutions to respect “commitments and deadlines”, and that they worked hard to find solutions that were worthy of the “demands of the time”. While the president must always appear to be independent of political allegiances, his comments were taken as a clear sign that he believed the current government needed to fulfil its obligation to not only pass a budget but also make changes to an election law that has been put in flux by the referendum results. Renzi’s months-long campaign to convince Italians to vote yes and overhaul the constitution and parliament was roundly rejected by 59.1% of voters on Sunday, on a turnout of 68%.

The high interest in the plebiscite did not escape Mattarella, who said it was a “testament to a solid democracy [and] an impassioned country capable of active participation”. Mattarella’s call for “serenity” after Italy was plunged into political chaos by the vote may have assuaged worries in Europe about what Renzi’s defeat signified for Europe, Italy’s fragile banking system, and the future of the euro. Germany’s foreign minister, Frank-Walter Steinmeier, said the result was a “concern”, while finance minister Wolfgang Schäuble said Italy ought to continue on an economic path that had been adopted by Renzi. The results, however, were celebrated by French far-right candidate Marine Le Pen who said that, with the no win, Italians joined the British in turning their backs on “absurd European policies which are plunging the continent into poverty”.


Wikipedia

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Oh well, everything else went up…

Italian Bank Shares Slump as Renzi Loss Adds to Uncertainty (BBG)

UniCredit and Banca Monte dei Paschi di Siena fell along with most Italian bank shares after Prime Minister Matteo Renzi’s decision to resign added to uncertainty about their plans for shoring up their finances. Monte Paschi will decide within the next few days whether it will proceed with a planned capital increase, people with knowledge of the matter said. The underwriters, who met with the bank’s executives on Monday, are still waiting for a formal commitment from possible anchor investors, the people said, asking to not be identified because the matter is private. Potential investors are seeking more time to review the political situation after the referendum, according to the people. Italy’s political vacuum threatens to usher in a period of uncertainty that may weigh on plans to reduce a pile of bad loans estimated at €360 billion.

UniCredit and Monte Paschi are among banks looking to raise capital as part of overhauls to clean up their balance sheets and strengthen profitability. UniCredit CEO Jean Pierre Mustier said he’s not worried that market volatility will compromise a strategic plan due next week, just as Renzi prepares to step down. “The events overnight won’t change our strategy,” he said on Monday, without elaborating on the changes ahead. Mustier is trying to restore confidence in a systemically important lender after a slide in its share price eroded more than 60% of the company’s market value this year. Italy’s biggest bank was trading 2.9% lower at 5:24 p.m. in Milan, while Monte Paschi was down 4.2%, after falling as much as 7.5% earlier Monday. Italy’s biggest bank plans to raise as much as €13 billion through a combination of asset sales and a stock offering.

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Italy will have to bail out banks, but doesn’t want EU rules to force it to victimize its own citizens, who hold a huge amount of bank bonds. Maybe they should let Beppe have a go at this.

Italy Already Requested Monte Dei Paschi Bailout Before Referendum (R.)

Italy is discussing with the European Commission the terms of a state bailout of ailing bank Monte dei Paschi that has already been requested and could be launched next week if needed, Italian daily Corriere della Sera reported on Friday. Italy’s third-largest bank needs to raise €5 billion by the end of the year to plug a capital shortfall identified by ECB stress tests or face the risk of being wound down. Quoting sources with knowledge of the matter, Corriere said that Italy had already filed a request to launch a public recapitalization of Monte dei Paschi as early as next week. The newspaper reported that the Commission was willing to limit the burden on shareholders and subordinated bondholders and it was being discussed to what extent retail investors who held subordinated bonds could be spared.

The bank’s finance chief Francesco Mele said this week that the Commission was expected to agree that only shareholders and junior bondholders share the bank’s losses before Monte dei Paschi is given any state aid. New EU rules on state aid to banks require investors to take a hit before lenders tap public money, but a lighter version of the rules can apply in cases such as Monte dei Paschi’s. Sources told Reuters last week that authorities would apply EU rules with flexibility with regard to a Monte dei Paschi bailout to avoid damage to the entire Italian banking system. A debt-to-equity swap aimed at reducing the size of a share sale ends on Friday, with Monte dei Paschi planning to launch its share issue after Italy’s referendum on constitutional reform this Sunday.

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Yup, Draghi.

Could Renzi’s Exit Lead To An Italian Bank Rescue? (G.)

Investors’ ability to look on the bright side on political turmoil is remarkable. In the case of Italy, the departure of Matteo Renzi, the market-friendly centre-left prime minister, was followed quickly by the thought that the crisis in the country’s banking system may, counterintuitively, become easier to address. That wasn’t last week’s theory, of course. Back then, Renzi’s survival was seen as critical to encouraging private sector investors to cough up billions of euros of new capital to refinance the likes of Banca Monte dei Paschi di Siena and UniCredit. This week’s silver lining theory holds that a political vacuum isn’t so bad if it prods the ECBand the eurozone authorities to take a flexible approach to Italy’s banking mess.

Ireland’s finance minister, Michael Noonan, captured the new mood: “The president of the ECB, Mario Draghi, is Italian and I can’t envisage a situation in which the ECB under Mario Draghi will let the Italian banks get into difficulty.” He’s probably right. It seems quite possible that, if MPS struggles to get its required €5bn (£4.2bn) from big private sector investors such as Qatar’s sovereign wealth fund, the bank could be nationalised with ways found to compensate ordinary savers who hold bonds that would be wiped out. A wipeout of senior bondholders is meant to be an essential requirement of state bailouts in the eurozone these days. It causes problems in Italy because so many bondholders are retail savers.

But the eurozone’s capacity to bend its own rules is legendary: compensation for some bondholders, even if that is supposed to be a no-no, might be deemed a price worth paying after Renzi’s exit. Yet would that really be a cause for celebration? Only if the health of the Italian banking system is addressed once and for all. But it seems far more likely that a weak Italian government and reluctant eurozone authorities will serve up only half a solution – one big enough to get through the current crisis but insufficient to allow a proper cleansing of the bad loans in the system, which are estimated to stand at €360bn.

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Italy has a lot of small enterprises, often family owned. That doesn’t fit today’s globalization model (not competitive enough). But globalization is over anyway. The country had better save what’s left of its business model, because it’s ideal for a post-centralized world.

How Italy Became This Century’s ‘Sick Man Of Europe’ (G.)

On New Year’s Day in 2002, Italians gathered in Rome to throw their lire into the Trevi fountain. There were celebrations as Italians took possession of the new euro notes and coins that became legal tender as the clocks struck midnight. But hopes that the advent of the single currency would provide a fresh start for Italy’s economy were misplaced. The growth performance of the eurozone as a whole has been poor, but Italy’s has been dismal. Greece and Spain at least had booms before their painful busts; Germany and France have managed to claw back the ground lost in the deep recession of 2008-09. But national output per head in Italy is only 4% higher than it was 15 years ago. The economy is still smaller than it was in 2008.

Unemployment is at 11.6%, labour market participation is low, and its birthrate in 2014 was the lowest since the modern Italian state was founded in 1861. If there was a contest for the unwanted title of the sick man of Europe in the 21st century, Italy would walk it. The eurozone’s third biggest economy has one central problem: the goods and services it produces are more expensive than those of its rivals. This lack of competitiveness means that it has suffered the biggest drop in export market share of any developed country. There are three reasons for this. Firstly, Italy’s manufacturing sector has traditionally been dominated by small companies, many of them family-owned. These businesses have been reluctant to invest, poor at innovation, and were slow to take advantage of the the new information technology when it came on stream in the 1990s.

Productivity has increased less rapidly than in Germany or France. Secondly, Italy has tended to specialise in low-cost manufactured goods, a segment of the global economy that has been dominated by China since it gained membership of the World Trade Organisation in 2001. Italy’s competitiveness problem is not new. Since the second world war, it has tended to have higher costs and higher inflation than rival countries. But up until it joined the euro, Italy was able to restore competitiveness by devaluing the lire, which made exports cheaper. With that option no longer available, Matteo Renzi has been trying a different approach: structural reforms of Italy’s labour market.

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A bit overdone this, but not entirely.

Standing Rock Is A Modern-Day Indian War. This Time Indians Are Winning (G.)

As Indigenous peoples faced off against armed police and tanks near the Standing Rock Sioux reservation in Dakota, theirs wasn’t just a battle over a pipeline. It was a battle over a story that could define the future of America. The Obama administration’s decision yesterday to refuse the Dakota Access pipeline permission to complete its construction has now shaken up that story. Its old version was that Indigenous peoples have always been in the way of progress, their interests a nuisance or threat, their treaties a discardable artifact. In that story, the American heroes forged on these high plains of the west were never the Indians: they were the gold-diggers or gamblers, the cowboys or cavalry.

But over the past months, it became impossible to watch peaceful Indigenous people and supporters attacked by snarling dogs, maced, and shot with rubber bullets and water cannons in freezing conditions, and still see in them a threat. It was impossible to look upon these young Indigenous men and women, in jingle dresses or on horseback, and not observe the courage that America desperately needs. It was impossible to listen to the cry of their slogan and not hear a rallying vision for all of us: Water is Life. Along the snowy banks of the Missouri river, a new story is being painfully birthed. It tells us that frontiers must at some point close. That endless taking must become care-taking.

And that Indigenous rights, cast aside for too long, are a key to protecting land and water and preventing climate chaos. America is waking up to new heroes. This is not high-minded romanticism. It is hard-bitten reality. All over the world, there are massive pools of fossil fuels—and the infrastructure to rip and ship it—concentrated in the traditional territories of Indigenous peoples. This rush for extreme energy on their lands was never a new crisis for them—it was only the latest stage in a very old colonial pillage.

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Seems ridiculous, but he has support from various tribes and leaders.

Trump Advisors Aim To Privatize Oil-Rich Indian Reservations (R.)

Native American reservations cover just 2% of the United States, but they may contain about a fifth of the nation’s oil and gas, along with vast coal reserves. Now, a group of advisors to President-elect Donald Trump on Native American issues wants to free those resources from what they call a suffocating federal bureaucracy that holds title to 56 million acres of tribal lands, two chairmen of the coalition told Reuters in exclusive interviews. The group proposes to put those lands into private ownership – a politically explosive idea that could upend more than century of policy designed to preserve Indian tribes on U.S.-owned reservations, which are governed by tribal leaders as sovereign nations.

The tribes have rights to use the land, but they do not own it. They can drill it and reap the profits, but only under regulations that are far more burdensome than those applied to private property. “We should take tribal land away from public treatment,” said Markwayne Mullin, a Republican U.S. Representative from Oklahoma and a Cherokee tribe member who is co-chairing Trump’s Native American Affairs Coalition. “As long as we can do it without unintended consequences, I think we will have broad support around Indian country.” [..] The plan dovetails with Trump’s larger aim of slashing regulation to boost energy production. It could deeply divide Native American leaders, who hold a range of opinions on the proper balance between development and conservation.

The proposed path to deregulated drilling – privatizing reservations – could prove even more divisive. Many Native Americans view such efforts as a violation of tribal self-determination and culture. “Our spiritual leaders are opposed to the privatization of our lands, which means the commoditization of the nature, water, air we hold sacred,” said Tom Goldtooth, a member of both the Navajo and the Dakota tribes who runs the Indigenous Environmental Network. “Privatization has been the goal since colonization – to strip Native Nations of their sovereignty.” Reservations governed by the U.S. Bureau of Indian Affairs are intended in part to keep Native American lands off the private real estate market, preventing sales to non-Indians.

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Go Yves!

Naked Capitalism Demands Retraction, Apology Over WaPo Fake News Story (NC)

As the lawyers like to say, res ipsa loquitur. Please tweet and circulate this letter widely. You will notice that our attorney Jim Moody is a seasoned litigator who has won cases before the Supreme Court. He has considerable experience in First Amendment and defamation actions. Past high profile representations include Westomoreland v. CBS and defending Linda Tripp. I also hope, particularly for those of you who don’t regularly visit Naked Capitalism, that you’ll check out our related pieces that give more color to how the fact the Washington Post was taken for a ride by inept propagandists, particularly our introduction to our spoof PropOrNot.org site, which uses the PropOrNot project as an example of sorely deficient propaganda and shows where it went wrong, or the humor site itself. Be sure not to miss its FAQ.

We have another post today that describes how the few things that are verifiable on the PropOrNot site don’t pan out, as in the organization is not simply a group of inept propagandists but also appears to deal solely in fabrications. If the site is flagrantly false with respect to things that can be checked, why pray tell did the Washington Post and its fellow useful idiots in the mainstream media validate and amplify its message? Strong claims demand strong proofs, yet the Post appeared content to give a megaphone to people who make stuff up with abandon. No wonder the members of PropOrNot hide as much as they can about what they are up to; more transparency would expose their work to be a tissue of lies.

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NATO expands in multiple dimensions.

Russia Remains The Only Target Country Of NATO’s Nuclear Weapons (SC)

For many years before the 2016 Warsaw summit, NATO had been deploying aircraft all round Europe that were capable of delivering nuclear weapons against Russia. The only difference in recent times is that NATO, as recorded by Arms Control in June 2016, «is beefing up its nuclear posture. Polish F-16s participated for the first time on the sidelines of a NATO nuclear strike exercise at the end of 2014. As a clear signal to Russian President Vladimir Putin, four B-52 bombers flew a nuclear strike mission over the North Pole and the North Sea in a bomber exercise in April 2015. Although these planes did not have nuclear weapons on board, they were equipped to carry 80 nuclear air-launched cruise missiles».

It goes further than that, because NATO’s most recent nuclear-associated deployments to the Baltic have involved aircraft from Belgium’s 10th Tactical Wing which is based at Kleine Brogel Air Base and flies US-supplied F-16 nuclear-capable strike aircraft. NATO reported that four of them are currently conducting missions from Ämari Air Base in Estonia, in order «to guard the Baltic skies against unauthorised overflights» and that their duties included «intercepting Russian aircraft flying in international airspace at the Baltic borders». According to NATO, the Mission of the 10th Tactical Wing is «to generate air power effects in the full operational spectrum by putting into action the best combat ready people and equipment to execute or support both conventional and nuclear operations in a joint, national or multinational environment, anytime and anywhere, in the most proficient, safe and efficient manner».

So it sends four of 10 Wing’s nuclear-capable F-16s, flown by nuclear-delivery trained pilots to Estonia to guard the Baltic skies. In Bulgaria, Estonia, Hungary, Latvia, Lithuania, Poland, Romania and Slovakia the Alliance has established «NATO Force Integration Units» which are advanced military headquarters whose Mission is «to improve cooperation and coordination between NATO and national forces, and prepare and support exercises and any deployments needed». The relentless expansion of US-NATO forces right up to Russia’s borders continues apace, with formation of a «new standing Joint Logistic Support Group Headquarters, to support deployed forces».

NATO is on a war footing, and has made it clear that «nuclear weapons are a core component of the Alliance’s overall capabilities». The Belgian F-16 deployments, deliberately and provocatively in a most sensitive area on Russia’s borders, together with creation of advanced military control organisations in eight countries, have been authorised and greeted with approval by western governments whose citizens have little understanding that the west’s policy of confrontation is increasing tension day by day. Russia has no intention of invading any of the Baltic nations, or, indeed, any other country. It has no interest whatever in becoming engaged in conflict that could result only in vast expenditure, no territorial gain of any value, and destruction of much-valued trade and other commercial arrangements.

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“..these newspapers and their handmaidens on TV, were far less concerned as to whether the leaked information was true or not..”

The Deepening Deep State (Jim Kunstler)

Pretty obviously, the struggle between mainstream news and Web news climaxed over the election, with the mainstream overwhelmingly pimping for Hillary, and then having a nervous breakdown when she lost. Desperate to explain the loss, the two leading old-line newspapers, The New York Times and The Washington Post, ran with the Russia-Hacks-Election story — because only Satanic intervention could explain the fall of Ms. It’s-My-Turn / I’m-With-Her. Thus, the story went, Russia hacked the Democratic National Committee (DNC), gave the hacked emails to Wikileaks, and sabotaged not only Hillary herself but the livelihoods of every myrmidon in the American Deep State termite mound, an unforgivable act.

Also interestingly, these newspapers and their handmaidens on TV, were far less concerned as to whether the leaked information was true or not — e.g. the Clinton Foundation donors’ influence-peddling around arms deals made in the State Department; the DNC’s campaign to undermine Bernie Sanders in the primaries; DNC temporary chair (and CNN employee) Donna Brazille conveying debate questions to HRC; the content of HRC’s quarter-million-dollar speeches to Wall Street banks. All of that turned out to be true, of course. Then, a few weeks after the election, the US House of Representatives passed H.R. 6393, the Intelligence Authorization Act for Fiscal Year 2017. Blogger Ronald Thomas West reports:

“Section 501 calls for the government to “counter active measures by Russia to exert covert influence … carried out in coordination with, or at the behest of, political leaders or the security services of the Russian Federation and the role of the Russian Federation has been hidden or not acknowledged publicly.”

The measure has not been passed by the Senate or signed into law yet, and the holiday recess may prevent that. But it is easy to see how it would empower the Deep State to shut down whichever websites they happened to not like. My reference to the Deep State might even imply to some readers that I’m infected by the paranoia virus. But I’m simply talking about the massive “security” and surveillance matrix that has unquestionably expanded since the 9/11 airplane attacks, creating a gigantic NSA superstructure above and beyond the Central Intelligence Agency, the Department of Defense’s DIA, and the hoary old FBI.

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They will continue to demand a full hand for every finger given. A road to nowhere for Greece.

Eurozone Agrees Debt Relief For Greece Amid IMF Row (AFP)

Eurozone finance ministers on Monday approved new debt relief measures to relieve Greece’s colossal debt mountain in the wake of its huge €86 billion bailout, but at levels far short of those demanded by the IMF. “The Eurogroup endorsed today the full set of short-term measures” including extending the repayment period and an adjustment to interest rates, the eurozone’s 19 finance ministers said in a statement. The ministers accorded Athens the small measures to reduce Greece’s debt as a reward for completing the latest round of reforms demanded in the country’s massive bailout programme – its third since 2010. “We will start implementing them in the next weeks,” said Klaus Regling, the head of the European Stability Mechanism, the eurozone’s bailout fund.

However the ministers refused to officially sign off on the bailout’s second review as expected, telling Athens that there still remained a few open questions on Greece’s reform efforts. The talks were marred by a row with the IMF, as Europe and the fund remain as far apart as ever on the level of need for debt relief measures. This is a crucial demand for the fund to back the bailout programme in which for now it plays only a technical role. The hardline stance on debt relief by the ministers, led by Germany’s powerful Wolfgang Schaeuble, comes as key elections approach next year in Germany and the Netherlands, where bailout fatigue is running rife with voters.

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Capital flight in thinly veiled disguise.

Greek Home Sellers Getting Paid In Banks Abroad (Kath.)

The bulk of transactions concerning Greek real estate acquired by foreign nationals are conducted outside the domestic banking system, making it even harder to get a clear idea of the situation in the Greek residential properties market, particularly as regards holiday homes. Estate agents who mainly work with foreign buyers say that the majority of sellers in agreed transactions ask for the money to be deposited in banks abroad. Sellers are even prepared to travel abroad themselves, with contracts in hand, in order to open a bank account.

“After the imposition of the capital controls [at end-June 2015], the cases of sellers requesting that money be deposited abroad have multiplied. Of course such transactions are entirely legitimate and taxed in Greece, but the revenues remain in other countries,” says Yiannis Ploumis, general director at the Ploumis-Sotiropoulos estate agency, which specializes in the luxury property market. That way, the funds paid by foreign property buyers do not enter the Greek credit system or the local economy in general. This trend concerns virtually the entire construction sector, as well as private owners, especially those selling houses of significant value, as transactions of €50,000-100,000 hardly ever lead sellers to open a new bank account abroad.

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More on this today.

Greek Court Rejects Extradition Of 3 Turkish Officers Accused Of Coup (AFP)

A Greek court on Monday rejected the extradition of three military officers demanded by Turkey over their alleged involvement in July’s failed coup, a judicial source said. The decision outraged Ankara, which has arrested tens of thousands of people as part of a wide-ranging crackdown since the attempted putsch. “Greece is in the NATO alliance with Turkey and is a NATO ally. Our expectation is that the Greek government make every effort to return” those individuals to Turkey, Defence Minister Fikri Isik said. The Greek court determined that the three men – out of a total eight officers seeking asylum in Greece – faced threats to their personal safety if returned to Turkey.

It also deemed that Turkish authorities have not provided sufficient evidence tying them to the coup attempt against President Recep Tayyip Erdogan, the source said. The court is expected to decide the fate of the other five officers on Tuesday. Turkey may still appeal the case, and any final decision to extradite rests with the Greek minister of justice. The two Turkish commanders, four captains and two sergeants requested asylum in Greece after landing a military helicopter in the northern city of Alexandroupoli shortly after the attempted government takeover in mid-July. The officers are currently appealing against a Greek refusal to grant them asylum in September.

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