Yes, you have every right to be outraged at the disgraceful treatment of children on America’s borders. But that does not give you the right to NOT be outraged by what America has done and is today still doing to children in, just to name a few places, Syria, Libya and Yemen. Be outraged, but don’t make it an echo chamber issue. Because if you do, you, too, are in a cage.
So if you see the wives of former presidents speak out about the child separation policies, ask yourself where they get the moral authority to speak out on such issues, after their husbands have bombed the crap out of many countries, killing many many children in the process. And don’t let’s get started about Hillary Clinton when she was Secretary of State.
Presently in Yemen, 20 million people depend on humanitarian aid, and the US are helping Saudi Arabia et al bomb the only port left through which that aid can reach them, to smithereens. 8.5 million Yemenis are already starving, and some 3 million of them are children. Where is your outrage over that?
Where is the outrage over the American and international treatment of Julian Assange, who has been in the Ecuador embassy in London for six years today? Where is it?
Don’t get coaxed into selective outrage by your news media, who like nothing better than to tell you what to be outraged by, and what not. If you allow that to happen, you have lost your freedom and your independence. Ask why they tell you a certain story at the moment they tell it. Ask why they tell it the way they do.
Yes, it has come to this. Every single story you read or hear needs to be scrutinized. Because there’s an agenda behind all of them, left, right or middle. And because the media have figured out that constantly driving you from one selective outrage to another is very profitable for them. Critical thought is not.
Yes, there are sociopaths in the Trump administration. But that’s nothing new. There have been sociopaths in every administration. It’s how our political systems work. Sh*t floats to the top.
Yes, US border policies have intensified. But whatever you think of that, migrants and refugees are not a new issue. Nor are the reasons why people flee their homes and communities. Whether it’s Africa or Central America, people flee because of what western governments, military and intelligence services have done to their homelands.
And until we stop doing that, they will keep coming. So much of our prosperity and power is derived directly from other people’s poverty and despair. So much of our wealth has been stolen from other people’s resources. If you want to be outraged at something or someone, start with yourself. Start thinking.
What is happening today is awful. But so many awful things happened in the past that you never showed outrage about. And yet these things are all inextricably linked. One leads to another.
America shouldn’t be outraged about Trump without being outraged about its entire political system, and all of its actors. Without that, outrage about Trump has no meaning, and will lead to nothing at all. Or rather, it will lead to a more divided country, full of people played for profit and political games.
The US invasion of Vietnam ended to a large extent because of protests in the streets. Perhaps that is what is needed once again. But the underlying issues, the ones that had led to the invasion in the first place, were not solved then. And that is what it is all about.
Nor is it an American problem per se. Europe is just as culpable. Children drowning, children in cages, what’s the difference, in the end it all comes from the same mindset. Which needs a radical reset. But what are the odds of that happening?
Our cultures are based on exploiting other peoples and nations, and then telling ourselves we deserve what we have. How are you going to change that? The only way to resolve the global refugee problem is to make sure people have a future where they are born. And the only thing we actually do is to make that impossible.
Today marks the sixth anniversary of Wikileaks founder Julian Assange’s effective house arrest in London. He cannot move around in public, because he fears he will be arrested and extradited to America — a daunting prospect, since a UN special rapporteur described Chelsea Manning’s treatment by that country’s justice system as torture. Assange is divisive. Hawks wish him nothing but misfortune and a stretch in jail. According to journalist John Pilger, a leaked official memo says: “Assange is going to make a nice bride in prison. Screw the terrorist. He’ll be eating cat food forever.” If you stand at the other end of the spectrum, Assange is a hero who revealed how our world really works.
Consequently, he has been relentlessly targeted. Hilary Clinton has contributed to this process, as Assange highlighted the Clintons’ links with Saudi Arabia and the multimillion donations that kingdom made to their foundation, after she, as secretary of state, sanctioned an $80bn Saudi arms deal. Assange remains, despite illegal efforts to revoke it, an Australian citizen, but he has not enjoyed the support a person who has not been charged with anything, much less convicted of anything, might expect from a democracy. These are indeed murky waters, but Assange’s ordeal reconfirms a truth: News is something someone, somewhere, does not want published. That’s why he is such a threat.
The UN spokesman said on Monday that tens of thousands of residents have fled the fighting along Yemen’s western coastline, where Yemeni fighters backed by a Saudi-led coalition are engaged in fierce battles with Iranian-backed Houthi rebels. Stephane Dujarric, the spokesman for the UN secretary-general, told reporters on Monday that about 5,200 families, or around 26,000 people, have fled the fighting and sought safety within their own districts or in other areas in Hodeida governorate. ‘‘The number is expected to increase as hostilities continue,’’ he said. Emirati troops, along with irregular and loyalist forces in Yemen, have been fighting against Houthis for Hodeida since Wednesday.
Coalition warplanes rained missiles and bombs on Houthi positions near Hodeida airport, in the city’s south. The offensive for Hodeida has faced criticism from international aid groups, who fear a protracted fight could force a shutdown of the city’s port and potentially tip millions into starvation. About 70 percent of Yemen’s food enters via the port, as well as the bulk of humanitarian aid and fuel supplies. Around two-thirds of the country’s population of 27 million relies on aid, and 8.4 million are already at risk of starving.
Rumors are again swirling of an impending false flag chemical weapons attack in Syria, just as they did shortly before the highly suspicious Douma case in April. Warnings from Syrian and Russian intelligence, as well as US war ship movements and an uptick in US funding for the Al Qaeda propaganda firm known as the White Helmets, give these warnings a fair bit of weight. Since the US war machine has both a known regime change agenda in Syria and an extensive history of using lies, propaganda and false flags to justify military interventionism, there’s no legitimate reason to give it the benefit of the doubt on this one. These warnings are worth taking seriously.
So some people are understandably nervous. The way things are set up now, it is technically possible for the jihadist factions inside Syria and their allied imperialist intelligence and defense agencies to keep targeting civilians with chemical weapons and blaming the Assad government for them until they pull one off that is so outrageous that it enables the mass media to manufacture public support for a full-scale assault on Damascus. This would benefit both the US-centralized empire which has been plotting regime change in Syria for decades and the violent Islamist extremists who seek control of the region. It also creates the very real probability of a direct military confrontation with Syria’s allies, including Russia.
But the appropriate response to the threat of a world war erupting in Syria is not really fear, if you think about it. The most appropriate response to this would be unmitigated, howling rage at the western sociopaths who created this situation in the first place.
Legendary global macro trader Paul Tudor Jones is warning that asset prices are too high. And furthermore, he’s concerned about what the next recession might look like. He shared his thoughts on Monday during a conversation with Goldman Sachs CEO Lloyd Blankfein as part of the firm’s “Talks at GS” series. The hedge fund billionaire, who rarely gives interviews or makes public comments on the markets, cautioned that across asset classes “you have to be thinking this is a highly dubious sustainable price.” Jones doesn’t think the low interest rates we have now due to easy monetary policy are sustainable over time. He said that interest rate policy is “crazy.” He further argued that the Trump administration’s stimulative fiscal policy isn’t sustainable either.
“You look at prices of stocks, real estate, anything,” he said. “We’re going to have to mean revert to a normal real rate of interest with a normal term premium that’s existed for 250 years. We’re going to have to get back to that. We’re going to have to get back to a sustainable fiscal policy and that probably means the price of assets goes down in the very long run.” In the short run, the market is “jacked up and ready to go,” he said. Blankfein added that it’s like “pouring lighter fluid on an already lit fire.” During the financial crisis, central banks had a lot of room to ease monetary policy and governments had more flexibility to push stimulative fiscal policy. Today, there’s less room and flexibility.
“The next recession is really frightening because we don’t have any stabilizers,” Jones said. “We’ll have monetary policy, which will exhaust really quickly, but we don’t have any fiscal stabilizers.”
President Donald Trump has requested the United States Trade Representative to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent. The new duties will go into effect “if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced,” the president said in a statement provided by the White House late on Monday. Beijing has pledged to fight back if Trump goes ahead with the new tariffs. U.S. stock index futures fell following the news, while Asian equity markets were mixed. It’s the latest development in escalating trade tensions between the world’s two largest economies.
On Friday, the U.S. announced a 25 percent tariff on up to $50 billion of Chinese products, prompting Chinese President Xi Jinping’s administration to respond witha 25 percent tariff on $34 billion of U.S. goods. “It’s one thing to retaliate with $50 billion here and $50 billion there but when the [U.S.] president trots out another $200 billion, that’s quite concerning,” Max Baucus, former U.S. ambassador to China under President Barack Obama, told CNBC. “This reminds me little bit of an old western … If there’s a gunfight trade war, somebody’s going to get hurt,” he continued: “Trump is going to have to find some way to back down and let China save face so that both sides can back down gradually and respectfully.”
Perhaps nobody knows what President Trump will do next, including President Trump, but right now it looks like he has successfully maneuvered China into a trade trap. The goal is to slow China’s economy such that military modernization slows and its economy cannot catch up with the United States. Meanwhile, implementation of this strategy is called “Beijing’s playbook” and the whole time President Trump speaks positively about Xi Jinping and China’s help in other areas. Bloomberg: Xi to Counter Trump Blow for Blow in Unwanted Trade War “The Chinese view this as an exercise in self-flagellation, meaning that the country that wins a trade war is the country that can endure most pain,” said Andrew Polk, co-founder of research firm Trivium China in Beijing. China “thinks it can outlast the U.S. They don’t have to worry about an election in November, let alone two years from now.”
This is the mistake autocrats always make about Western governments and the United States. They view the messy and inefficient political system (intentionally designed that way to protect liberty) as a weakness. They think politicians care more about elections than anything else. They see the difficulty in reaching consensus as a weakness. However, they miss the fact that democratic governments enjoy greater legitimacy. If the U.S. reaches a majority in favor of confronting China on trade, then President Trump has the far stronger political hand. Confronting China on trade raises President Trump’s popularity. His base and independent voters favor this policy. Democrats oppose him because he is Trump, but they would lose votes if the only issue in November was “Confront China on trade, yes or no?”
Let’s be clear: It’s not just Argentina. But Argentina is the most elegant example. The exodus of the hot money from emerging markets where cheap dollar-debts were used to fund pet projects and jack up leverage is – once again – in full swing. Cheap dollar-debt in emerging markets is an old sin that, like all old sins, is repeated endlessly. The outcome is always trouble. But during the act, it sure is a lot of fun for everyone. The exodus of the hot money is even gripping the non-basket-case emerging economies of Asia where it’s causing the worst indigestion since 2008.
Bloomberg: “Overseas funds are pulling out of six major Asian emerging equity markets at a pace unseen since the global financial crisis of 2008 – withdrawing $19 billion from India, Indonesia, the Philippines, South Korea, Taiwan, and Thailand so far this year.” While emerging markets shone in the first quarter, suggesting resilience to Federal Reserve tightening, that image has shattered over the past two months. With American money market funds now offering yields around 2% – where 10-year Treasuries were just last September – and prospects for more Fed hikes, the bar for heading into riskier assets has been raised.”
“It’s not a great set-up for emerging markets,” James Sullivan, head of Asia ex-Japan equities research at JPMorgan Chase, told Bloomberg. “We’ve still only priced in about two thirds of the US rate increases we expect to see over the next 12 months. So the Fed is continuing to get more hawkish, but the market still hasn’t caught up.” [..] “Dollar funding of emerging market economies has been in turmoil for months now,” Patel wrote – because yeah, the era of the cheap dollar is over, and investors should have figured that out two-and-a-half years ago when the Fed started hiking rates. But the market didn’t want to believe that the Fed would actually do it. And suddenly over the past two months, it downs on these geniuses that the Fed has actually been hiking rates and will continue to do so for some time.
Patel not only blamed the QE unwind but also the simultaneous and massive issuance of new Treasury debt by the US government to fund its ballooning deficits. This new issuance of Treasuries “will absorb such a large share of dollar liquidity that a crisis in the rest of the dollar bond markets is inevitable.”
[..] I wanted a Germany that was hegemonic and efficient, not authoritarian and caught up in a European Ponzi scheme. That was in 2013. Two years later, in March 2015, I wrote an article, while Greece’s finance minister, referring to the first and second bailout loans, of 2010 and 2012. Allow me to quote from it: “The fact is that Greece had no right to borrow from German – or any other European – taxpayers at a time when its public debt was unsustainable. Before Greece took on any loans, it should have initiated debt restructuring and undergone a partial default on debt owed to its private-sector creditors. But this “radical” argument was largely ignored at the time.
Similarly, European citizens should have demanded that their governments refuse even to consider transferring private losses to them. But they failed to do so, and the transfer was effected soon after. The result was the largest taxpayer-backed loan in history, provided on the condition that Greece pursue such strict austerity that its citizens have lost one-quarter of their incomes, making it impossible to repay private or public debts. The ensueing – and ongoing – humanitarian crisis has been tragic… Animosity among Europeans is at an all-time high, with Greeks and Germans, in particular, having descended to the point of moral grandstanding, mutual finger-pointing, and open antagonism. This toxic blame game benefits only Europe’s enemies.”
When French President Emmanuel Macron laid out a sweeping vision for eurozone reform last September, he spoke of “rebuilding Europe”, with a common budget for the euro nations and a single minister to oversee it all. The proposals he will discuss when he sits down with German Chancellor Angela Merkel outside Berlin on Tuesday will be far less ambitious, with deep differences between the two European powerhouses. Many economists agree with Macron that fundamental reforms are needed to strengthen the eurozone and insulate the single currency — the most potent symbol of Europe’s integration — from future crises, like the 2010-13 sovereign debt contagion that nearly tore the euro apart.
But Merkel has limited room to act due to political pressure at home, and is always at pains to ensure France and Germany aren’t pushing ahead with plans that have no deep backing from the rest of the European Union. Macron and Merkel will discuss a separate budget for the 19 countries that share the single currency but much smaller than he wanted. Then there are gaps in opinion over a fund to calm bond markets in a crisis and a backstop for the banking system. “Things are going in the right direction, but the proposals we’re getting from the Germans aren’t sufficient,” said a French official who acknowledged there were deep differences between the two sides.
A German official said there were still big questions about what sort of agreement Tuesday’s meeting would produce on the budget for the euro zone. The official said Merkel’s recent political troubles over migration policy could mean she is less inclined to make concessions to the French leader. Besides the disagreement between France and Germany, it is also the nature of negotiations between the eurozone countries that grand ideas get chipped away at until a compromise is reached that satisfies all parties.
“Where Germany has trading partners willing to borrow big to buy Mercedes and Beemers, the US has the world’s reserve currency, which acts as an unlimited credit card for our entitlement state and military/industrial empire.”
Europe is frequently held up as an example of how the rest of the world should behave on a variety of issues. But this comparison misses at least two things: First, “Europe” is actually a lot of different countries in a lot of different situations. Second, much of what seems to work over there only does so because it’s being financed with ever-increasing amounts of debt. For countries, as for individuals, borrowing money is fun at first but beyond a certain point becomes debilitating, as interest payments begin to crowd out everything else. That’s where a growing number of Europe’s failed states now find themselves, with overly-generous pensions and overly-restrictive labor laws making it virtually impossible to run a functioning market-based economy.
The result: Fewer good jobs and more frustrated voters – especially young ones who have seen only the downside of the current system – and the resulting rise of populist political parties that recognize the problems without offering coherent solutions, thus guaranteeing even more chaos in the future. As Today’s Wall Street Journal notes, in Italy and Greece, nearly a third of young adults not only aren’t working but aren’t enrolled in school or training. What are they doing? Apparently just sitting around and stewing about life’s injustice. As for where they’re sitting and stewing, in Greece, Italy and Spain it’s now normal for adults all the way into their 30s to live with their parents, largely because they can’t find work that pays enough to afford a house, car and other requirements of independent life.
As for Germany, which looks great by comparison, keep in mind that a big part of its economic outperformance is due to other EU countries borrowing huge amounts of money to buy German exports. When the latter run out of money – a point which is clearly coming – Germany suffers twice, once when it loses important customers and again when its banks, having lent trillions of euros to Italy, Spain, et al, have to eat those losses. But bad-mouthing Europe should not be seen as implicit praise of the US. We, like Germany, have an advantage that’s both unfair and temporary. Where Germany has trading partners willing to borrow big to buy Mercedes and Beemers, the US has the world’s reserve currency, which acts as an unlimited credit card for our entitlement state and military/industrial empire.
Spain’s new Socialist government is determined to remove the remains of Francisco Franco from a vast mausoleum near Madrid and turn it into a place of “reconciliation” for a country still coming to terms with the dictator’s legacy. “We don’t have a date yet, but the government will do it,” Prime Minister Pedro Sanchez said late Monday during his first television interview since being sworn in on June 2 after toppling his conservative predecessor Mariano Rajoy in a confidence vote. He recalled that a non-binding motion approved last year in parliament called for Franco’s remains to be exhumed from the massive Valley of the Fallen mausoleum some 50 kilometres (30 miles) northwest of Madrid and the site turned into a “memorial of the victims of fascism”.
“Spain can’t allow symbols that divide Spaniards. Something that is unimaginable in Germany or Italy, countries that also suffered fascist dictatorships, should also not be imaginable in our country,” Sanchez added. Earlier on Monday Socialist party spokesman Oscar Puente said the mausoleum should be transformed into a “place of reconciliation, of memory, for all Spaniards, and not of apology for the dictatorship.” Franco ruled Spain with an iron fist from the end of the country’s 1936-39 civil war until his death in 1975, when he was buried inside a basilica drilled into the side of a mountain at the Valley of the Fallen, one of Europe’s largest mass graves.
The desire to judge people’s motives rather than addressing their needs is a “British disease”. We have been suffering from it for hundreds of years, cycling endlessly through repeated cycles of generosity and harshness. Each cycle ends in public outrage and an abrupt reversal: but the memory eventually fades, and the disease reappears in a new form. In this post, I outline the tragic history of Britain’s repeated attempts to “categorise the poor”.
[..] worst of all, using rules and sanctions to compel the genuinely work-shy to work diverts attention and resources away from those who really need help. And it unfairly stigmatises the vast majority of those who are not working, or who are not working as many hours as we think they should, whether through unemployment, sickness or disability. Study after study has shown that in general, people want to work. The problem is that suitable jobs aren’t always available. And yet there remains a prevalent view, even among people who should know better, that people must be compelled to work, or to work harder, with harsh treatment. But today’s sanctions for those who won’t or can’t work are mild compared to the punishments of old: why should they be any more successful?
We would do better to concentrate our attention on helping those who genuinely want to work to find fulfilling, productive and well-paid jobs. And we should also stop trying to decide whether someone “deserves” social support. We have been trying to distinguish between the “deserving” and “undeserving” poor for eight hundred years, and we are no better able to make that judgement now than we were in the fourteenth century, or the sixteenth, or the nineteenth. It is time to give up this fruitless attempt to judge people’s motives. Simply provide everyone with a basic income so that they can afford to live, then let them get on with whatever they want to do.
More than 4,000 public buildings and spaces in England are being sold off every year, with more than 7,000 others at risk over the next five years, a charity has said. Locality says the majority of the sites being offloaded by local authorities are sold to private developers for the highest price, forever lost to communities around them. The charity wants the government to create a £200m-a-year community ownership fund for the next five years to help preserve the buildings and spaces for the use of local people. Tony Armstrong, its chief executive, said: “This is a sell-off on a massive scale. We know that many of the buildings being lost have valuable community uses.
“Everyone of us can think of a local public building or outside space we love and use, from libraries to lidos and town halls to youth centres. They are owned by the public and they’re being sold off for short-term gain to fill holes in council budgets. “Many hundreds of local community groups are stepping up and fighting for community ownership. But they urgently need support and help with startup costs if they are to compete with the commercial developers.” The Great British Sell Off report is published on Tuesday and is based on freedom of information requests sent to all 353 local authorities in England. Locality received 55 responses on the number of buildings and spaces sold between the financial years 2012-13 and 2016-17, as well as 127 replies about sites identified as surplus over the next five years, extrapolating the results to obtain national totals.
Mr. Peterson laid it out nicely: identity politics assigns everyone to ethnic, racial, and sexual groups, and all the human relations among them amount to never-ending battles for political power. Nothing else matters. Individuals especially don’t matter, only the group. And no group has abused its power more than European white men. This animating idea comes out of the mid-20th century “post-structural critical theorists” Jacques Derrida and Michel Foucault, whose Marxian views emerged conveniently at a time when women and non-white people were vying for departmental chairs in the college humanities and social science programs, and thus have two generations been indoctrinated.
Well, if human relations are solely about power, than exercising power over others is all that matters. Hence, the key to identity politics: it’s all about coercion, making others do your will by threat of force and force itself. These days, the main threat is depriving heretics and apostates of their livelihood. That’s what happened to Brett Weinstein at Evergreen U in Washington State last year, and to Jordan Peterson himself at the U of Toronto, when he objected loudly and publicly to a new Canadian federal law that sought to punish citizens who refused to use the new menu of personal pronouns for the rapidly multiplying new gender categories (e.g. ze, zir, they, xem, nem, hir, nir….)
Both Weinstein and Peterson refused to be coerced and found themselves inadvertently leading a movement against the pervasive, creeping coercion of our time — which has now spread from the campuses into corporate life, with the HR departments working overtime to enforce thought among employees, because company profits are at stake (e.g. Starbucks day-off for “diversity and inclusion training”).
Fewer people sought asylum in the European Union last year, although numbers remain higher than before the arrival of 1 million people in 2015 triggered a political crisis that continues to divide Europe. Showing a sharp drop in asylum claims, the latest report from the EU’s asylum office was published on Monday after emergency talks in the German government over asylum policy and a bitter standoff between EU nations over a migrant rescue ship that eventually docked in Spain after being banned from Italy and Malta. The EU’s asylum office counted 728,470 applications for international protection in 2017, a 44% reduction on the 1.3m applications the previous year.
More than 1 million people entered the EU in 2015, many fleeing the war in Syria. Syria, Iraq and Afghanistan remain the most frequent countries of origin for asylum seekers, accounting for 29% of all claims. The downward trend of asylum claims continued in the first four months of 2018, the EU asylum office said, although numbers have still not returned to pre-crisis levels. About 460,000 people applied for asylum in EU countries in 2013. The fall in asylum applications reflects a sharp drop in people making the hazardous journey over the eastern Mediterranean to Greece and the central Mediterranean to Italy, although there has been an increase in people travelling from west Africa to Spain, albeit from a lower base.
Germany continues to receive more applications for asylum than any other country in Europe, with 222,560 claims in 2017, folowed by Italy, France and Greece. The UK was in fifth place, with 33,780 applications, accounting for 4.6% of all EU asylum claims. But the backlog remains high: 954,100 claims are awaiting a decision, including 443,640 in Germany, according to the EU asylum office.
This is something I’ve commented on many times. Like two months ago, when I wrote:
“As for Donald Trump, as much as we would like to engage in constructive criticism of the man and his government, we find we no longer can. The anti-Trump echo-chamber has turned so deafening that any intelligent debate about his policies is being drowned out amid the never ending flow of fake news and half truths and innuendo and empty smears that US media continue to spout. With a brief lull when the bombs fell on Syria.
Thank you, New York Times, WaPo, CNN, MSNBC. Thank you for killing the entire discussion, thank you for killing off journalism. There is a lot to say about Trump, much of it critical, but we can no longer open our mouths. Because we don’t want to be in the same camp as you. Life in the echo chamber has given us vertigo. We had to get out.”
Jim Kunstler thanked me for saying that. He very much feels the same way. Nothing has changed. They’re still at it, and we still can’t get a word in edgewise. I was thinking earlier today that the best the MSM can do to promote its own case is to praise Trump from time to time. Because that is the only way they could attract some ears and eyes from outside their echo chamber.
They won’t do it. Being negative about the US president makes them too much money. It leaves us with a situation in which the one half of America that reads and hears New York Times, WaPo, CNN, MSNBC has become fully isolated from the other half. Yes, this is risky. But this, too, will be blamed on Trump.
Meanwhile, border policies where children are forcefully separated form their parents need criticism and condemnation from all of the nation. But there is nobody left who can reach the entire nation. A year and a half of 24/7 unproven allegations about collusion with Russia has seen to that.
Therefore, when the Intercept wrote about a Human Rights Watch report last month in Obama’s Deportation Policy Was Even Worse Than We Thought, the MSM don’t cover it, because it doesn’t fit the narrative. But when Trump uses the same ICE machinery to scare potential immigrants away, it’s suddenly considered newsworthy.
Oh, and France uses the exact same scare tactics, going as far as ripping children’s soles from their shoes. We should all condemn these atrocities, and make them stop. But it’s not going to happen if you guys insist on making it an anti-Trump thing, because half the country won’t listen to any more of that.
Journalism and news media must be a force to unite a nation, not one that divides it simply because there’s -more- profit in that.
The neverending Trump innuendo reached another new high in the North Korea meeting, with the ‘media’ competing with each other to find yet another terrible mistake or intentional screw-up by the man who is President of all Americans (like it or not). A feeding frenzy on nothingburgers.
Trump was accused of hob-nobbing with dictators. Excuse me, but all US presidents have done that. He wasn’t being tough enough, he was giving far too much away with nothing in return. Well, that’s not how South Koreans see it, and this concerns them a whole lot more than a bunch of ‘reporters’ covering the beltway.
Truth is, Trump did a good job, everything went well, he put Kim Jong-un in a position where the latter will have to deliver on denuclearization, or face the -international- consequences. It is quite the achievement, but if you wake up every single morning looking for more bad things to say about someone, yes, chances are you miss the good things.
You’re also probably missing the Saudi, US-supported, attacks on Hodeidah, the port city that is Yemen’s last lifeline to the world, and the only chance millions of people have of escaping a famine not seen since the Middle Ages.
That is the kind of thing that should be on your front pages, and opening your news shows, not that North Korea happens to have a border with Russia nudge nudge wink wink, and Trump saluted some Korean general.
America needs real news and real journalism, and it needs it badly. Instead it has an increasingly divisive set of well-paid propagandists who break the country ever further apart. The OIG report that came out yesterday confirms this more and better than anything.
When the country’s own ‘intelligence’ conspires to influence the political process, while the media report on outside influence only, then yes, you have a problem. As I was writing earlier today, you have to wonder how many people will still be working at the FBI by the end of the year.
Something else I’ve said before: the only hope of survival the MSM have in the age of the interwebs is to be brutally honest and open. Real news and real journalism. Because simply spouting opinions is something they will be trumped on by the many many millions of people with social media accounts who already do that every day, anonymously, and for free.
The old media don’t stand a chance against that army. The only thing that can save them is the truth.
The EU is preparing punitive tariffs on iconic U.S. brands produced in key Republican constituencies, raising political pressure on President Donald Trump to ditch his plans for taxing steel and aluminum imports. Targeting $3.5 billion of American goods, the EU aims to apply a 25 percent tit-for-tat levy on a range of consumer, agricultural and steel products imported from the U.S. if Trump follows through on his tariff threat, according to a list drawn up by the European Commission and obtained by Bloomberg News. The list of targeted U.S. goods – including motorcycles, jeans and bourbon whiskey – sends a political message to Washington about the potential domestic economic costs of making good on the president’s threat.
Paul Ryan, Republican speaker of the House of Representatives, comes from the same state – Wisconsin – where motorbike maker Harley-Davidson is based. Earlier this week, Ryan said he was “extremely worried about the consequences of a trade war” and urged Trump to drop his tariff proposal. Other U.S. officials will also feel the pressure. Bourbon whiskey hails from Senate Majority Leader Mitch McConnell’s home state of Kentucky. San Francisco-based jeans maker Levi Strauss is headquartered in House Minority Leader Nancy Pelosi’s district. The EU’s retaliatory list targets imports from the U.S. of shirts, jeans, cosmetics, other consumer goods, motorbikes and pleasure boats worth around €1 billion; orange juice, bourbon whiskey, corn and other agricultural products totaling €951 million; and steel and other industrial products valued at €854 million.
The war of words between President Donald Trump and the EU could lead to some serious pressure on the German auto industry, one expert told CNBC. Trump threatened via Twitter on Saturday to hit back at any tariff measures from the European Union — floated in response to Trump’s recently announced global steel import tariffs — in kind. The billionaire businessman’s potential next target? European cars. And the biggest victim of them all may be Germany. “It would be quite severe if we were to face additional import duties to ship the cars into the U.S. — the Germans in particular are very, very exposed,” Arndt Ellinghorst, the head of global automotive research for advisory firm Evercore ISI, told CNBC Monday.
He noted the example of BMW, which sells about 350,000 cars in the U.S. annually, roughly 70% of which come from Europe. “That’s probably an $8 billion to $9 billion revenue stream, if you put a 5 to 10% additional cost on it, it would cost something like $400 million to $800 million. Some of that would be absorbed by the company, and some of it would have to be absorbed by the consumer in the U.S.” Ellinghorst did add that cars being shipped from the U.S. into Europe faced a 10% import duty while European cars into the U.S. faced a 2.5% import duty. “I think what the administration is talking about is to balance out this difference in tariffs to make it more of an equal playing ground for American and European carmakers,” he said.
Out of roughly six million cars exported by Europe in 2016, more than one million were absorbed by the U.S. — just over 16% — its largest country market by a wide margin. Meanwhile, of America’s $53.6 billion in car exports that same year, the value of its car exports into Europe was $11.8 billion, or roughly 22% of the total, according to the Observatory of Economic Complexity. The U.S. is the third-largest car exporter globally after Germany and Japan, accounting for 7.7% of total world exports. It ran a trade deficit of more than $151 billion overall with Europe in 2017.
TD Ameritrade’s Investor Movement Index – “designed to indicate the sentiment of retail investors” based on what they’re doing in their accounts and “how they are actually positioned in the markets” – plunged 23% in February to 5.95, the biggest month-over-month plunge in the history of the index, “as volatility returned to the market.” This comes after a 9% plunge of the index in January, the largest month-over-month plunge in three years, which occurred despite the final spurt of the rally that took the stock market indices to new highs on January 26. It’s as if retail investors, for once, smelled a rat. After which the sell-off started:
TDA Chief Market Strategist JJ Kinahan explained in an interview that TDA’s clients “didn’t want to be as exposed” in February to risk “as they were.” “What’s interesting is they were net buyers, and they were net buyers because of the February 9th move,” he said. “They bought a lot of stocks that day. But as the month went on, they just continued to sell those stocks back out, and then some. So it was a really interesting pattern that developed.” The stocks they bought had “lower beta than some of the stocks they sold,” he said. “So it was really and truly a risk-off trade. But the bigger part about it is they lightened up their exposure across the board. So one or two days truly of buying,… but after that, not only selling what they’d bought that day, but selling on top of it what they’d bought earlier” this year and last year.
Growth in global bond, real estate and money market funds continued to swell the world’s“shadow banking” sector, a watchdog that coordinates financial regulation for the G20 big economies said on Monday. The Financial Stability Board said its“narrow” measure of shadow banking activities that could pose a threat to stability, rose 7.6% to $45.2 trillion in 2016, the latest year for which figures have been collated. It represents 13% of total financial system assets in the 29 jurisdictions surveyed. Data from China and Luxembourg were included in the measure for the first time. “Non-bank financing provides a valuable alternative to bank financing and helps support real economic activity,” the FSB said in its report. Nevertheless, increased reliance on non-bank funding could give rise to new risks, it said.
The so-called shadow banking sector, made up of companies other than banks that provide financial services, has been treated with suspicion by some regulators since the financial crisis a decade ago. Still, it has some champions among policymakers who say it helps keep capital markets more liquid. The European Union actively courts participants to diversify away from heavy reliance on bank loans for EU companies. Apart from debt investment funds, the measure of shadow banking also includes the repurchase and debt securitization markets as well as hedge funds involved in credit. Faced with few rules in the past, sub-sectors like securitization are now regulated and seen to pose less risk to stability.
Open-ended bond funds, hedge funds that offer credit and money market funds account for 72% of the narrow measure, and grew by 11% in 2016. Regulators have asked funds to have safeguards in place for extreme market turbulence to avoid instability from fire sales of assets if many investors ask for their money back. The United States accounts for 31% of the narrow measure, followed by China with 16%, the Cayman Islands at 10% and Japan at 6%. A broader measure, which includes all financial firms that are not central banks, banks, pension funds or insurers, rose 8% to $99 trillion to represent 30% of global financial assets, its highest level since at least 2002, the FSB said.
China is relaxing rules governing how much banks must set aside to cover bad loans, people with knowledge of the matter said, a sign that regulators are comfortable the nation’s lenders are sound enough to extend additional credit and support the economy. The China Banking Regulatory Commission has issued a notice lowering the bad-loan coverage ratio to a minimum 120% from the previous 150%, the people said, asking not to be identified as the matter isn’t public. Relaxed bad-loan coverage rules will allow banks to extend more credit, supporting an economy the government expects to expand about 6.5% this year, a slower pace than in 2017. Additional lending from giants such as Industrial & Commercial Bank of China would also counter some of the effects on the economy of President Xi Jinping’s campaign to curb financial risk, one of the government’s top priorities.
The changes also indicate regulators are confident that they’ve come to grips with a bad-loan epidemic that plagued lenders over the past few years. In 2016, when problem loans at Chinese banks were on the rise, the CBRC resisted lobbying from the nation’s lenders to relax the provisioning thresholds. The timing of the CBRC move suggests that “nonperforming loans are not a problem,” analysts at Shenwan Hongyuan said in a research note. [..] According to the notice, the CBRC will differentiate the amount of provisions an individual bank must hold within the new band of 120% to 150%, based on the level of its capital, the accuracy of its loan classification policies and its proactiveness in handling nonperforming loans, the people said.
China’s banking industry has a bad loan coverage ratio above 180%, CBRC official Xiao Yuanqi said at a briefing last week, indicating banks have plenty of room to reduce provisions. As well as lowering the threshold, the CBRC notice said it will reduce the amount of provisions banks must hold against their total loan book, including healthy loans, to as low as 1.5% from the previous 2.5% minimum.
Premier Li Keqiang has an “impossible challenge” if he wants to slash China’s budget deficit target, deleverage the economy, and cut taxes, according to Pantheon Macroeconomics. Li on Monday said this year’s deficit goal was cut to 2.6% of gross domestic product, from 3%, the first reduction since 2012. At the same time, he pledged tax cuts of 800 billion yuan ($126 billion) for companies and individuals and set a 6.5% annual economic growth target – the same as last year’s target but slower than the actual performance of 6.9%. “These targets suggest tight monetary conditions and tight fiscal policy, with GDP growth holding up, despite an intensified deleveraging campaign,” said chief Asia economist Freya Beamish in London. “Something’s got to give. We reckon it’s fiscal policy, though monetary policy could also turn out on the easier side, with the yuan also set to weaken.”
[..] While China is aiming for a narrower official deficit, leaders still plan to expand the issuance of special purpose bonds, which are sold by local governments to finance items that aren’t included in the general public budget and not counted in the deficit ratio released annually. Local governments have used special bonds to help pay for highways, railroads and other construction projects in recent years, and the securities are designed to be covered by returns of the projects rather than general revenues. Special purpose bond issuance will jump to 1.35 trillion yuan this year to prioritize “supporting ongoing local projects to see them make steady progress,” the Finance Ministry said Monday. That’s up from 800 billion yuan in 2017 and 400 billion yuan in 2016.
The coming credit crisis in China is no secret. China has $1 trillion or more in bad debts waiting to explode. These bad debts permeate the economy. Some are incurred by Chinese provincial authorities trying to get around spending limitations imposed by Beijing. Some are straight commercial loans on bank balance sheets. Some are external dollar-denominated debts owed to foreign creditors. The most dangerous type of debt involves a daisy chain of insolvent corporations buying debt from each other. A single cash advance of $100 million can be passed from corporation to corporation in exchange for a new promissory note, used to extinguish an old unpayable promissory note. Repeated enough times, the $100 million can be used as window dressing to prop up $1 billion or even $2 billion of bad debts.
These kinds of accounting tricks will land you in jail in the U.S., but it’s an accepted practice in China as long as the corporate CEO is a “Princeling” (a politically connected Communist Party insider descended from the old guard) or an oligarch willing to pay bribes. This state of affairs has existed for years. The question investors keep asking is, “How long can this last?” How long can the daisy chain keep operating to gloss over a sea of bad debt and give the Chinese economy an appearance of good health? Well, the answer is the Ponzi will not likely last much longer. Even compliant Chinese regulators are starting to blow the whistle on bad loans and the banks that cover them up. So the good news is that China is starting to address the problem. The bad news is that if China gets serious about cleaning up bad debts, their growth will slow significantly and so will world economic growth.
That’s bad news for global stock markets. Essentially, China is on the horns of a dilemma with no good way out. On the one hand, China has driven growth for the past eight years with excessive credit, wasted infrastructure investment and Ponzi schemes like wealth management products (WMPs). The Chinese leadership knows this, but they had to keep the growth machine in high gear to create jobs for millions of migrants coming from the countryside to the city and to maintain jobs for the millions more already in the cities. The Communist Chinese leadership knew that a day of reckoning would come. The two ways to get rid of debt are deflation (which results in write-offs, bankruptcies and unemployment) or inflation (which results in theft of purchasing power, similar to a tax increase). Both alternatives are unacceptable to the Communists because they lack the political legitimacy to endure either unemployment or inflation. Either policy would cause social unrest and unleash revolutionary potential.
“Sex” and “Money” are probably two of the most powerful words in the English language. First, those two words got you to look at this article. They also sell products, books, and services from “How To Have Better Sex” to “How To Make More Money” — ostensibly so you can have more of the former. Unfortunately, they are also the two primary causes of divorce in the country today. But “happiness,” is also an interesting word because it is ultimately derived from the ability to obtain money and the lifestyle with which it will afford. Researchers at Purdue University recently studied data culled from across the globe and found that “happiness” doesn’t rise indefinitely with income. In fact, there were cut-off points at which more annual income had a negative effect on overall life satisfaction.
So, what’s that number? In the U.S., $65,000 was found to be the optimal income for “feeling” happy. In the U.S., despite higher levels of low income (now there’s an oxymoron), inflation-adjusted median incomes have remained virtually stagnant since 1998.
However, the chart above is grossly misleading because the income gains have only occurred in the Top 20% of income earners. For the bottom 80%, they are well short of the incomes needed to obtain “happiness.”
For most American “families”, who have to balance their living standards to their income, the “experience” of “happiness” is more of a function of “meeting obligations” each and every month. Today, more than ever, the walk to the end of the driveway has become a dreaded thing as bills loom large in the dark crevices of the mailbox. If they can meet those obligations, they are “happy.” If not, not so much.
In my opinion, what the study failed to capture was the “change” in what was required to achieve “perceived” happiness following the “financial crisis.” Just as with “The Great Depression,” individuals forever altered their feelings about banks, saving and investing after an entire generation had lost “everything.” It is the same today as sluggish wage growth has failed to keep up with the cost of living which has forced an entire generation into debt just to make ends meet. As the chart below shows, while savings spiked during the financial crisis, the rising cost of living for the bottom 80% has outpaced the median level of “disposable income” for that same group. As a consequence, the inability to “save” has continued.
[..] Not surprisingly, the “financial stress” in American households is leading to other factors which are fueling the “demographic” problem in the future. The equation is very simple – when individuals are stressed over finances they are less active sexually. This was shown in a recent study by the National Bureau of Economic Research. Ahead of the past three US recessions, the number of conceptions began to fall at least six months before the economy started to contract. As the FT notes, while previous research has shown how birth rates track economic cycles, the scientific study is the first to show that fertility declines are a leading indicator of recessions. [..] To the researchers’ surprise, they found that falls in conceptions were a far better leading indicator of recessions than many commonly used indicators such as consumer confidence, measures of uncertainty, and purchases of big-ticket items such as washing machines and cars.
In 2016, more than 310 million people and nearly 500 million tonnes of freight crossed the UK’s borders. If this continues to happen in a “frictionless” way after Brexit, the disturbances to the status quo in Ireland will be limited. If it doesn’t, hang on to your hats. Frictionless trade is the only condition under which Brexit can happen without inflicting a hard border on Ireland. It is almost certainly a political impossibility if the UK leaves the customs union. But even if it could somehow be agreed in principle, there is another enormous obstacle: the actual capacity of the British to handle it. On Friday, after Theresa May’s big set-piece speech on Brexit, the DUP leader Arlene Foster issued a glowing endorsement. She referred back to a paper issued by the UK government last August: “Those proposals can ensure there is no hard border between Northern Ireland and the Republic of Ireland after we exit the EU.”
Foster recognises how much unionism is staking on that document and on the ability of the UK’s bureaucracies to deploy technology to take the sting out of the potentially toxic irritant of the Irish Border. This forces us to consider something that would previously have been of little interest to Irish people: the recent and dismal history of the UK’s adventures in using digital technology to control its borders. In 2003, the British established a spanking new “e-borders” system which was meant to collect and analyse advance passenger information for people travelling into the UK. It had a generous timescale – the full programme was meant to be in place by 2011. In 2010, the Home Office admitted that e-borders was so useless it had to be abandoned. By then, it had spent £340 million (€380 million) on the programme.
The cancellation of the contract led to a legal settlement for another £150 million. The Home Office then spent another £303 million on a new programme, bringing expenditure to £830 million. In 2015, the National Audit Office reported that all of this expenditure “has failed, so far, to deliver the full vision” of what was supposed to be achieved. The current date for completion of the programme is 2019. The whole thing will have taken a mere 16 years. On the same timescale, the new post-Brexit systems on which the future of Ireland may hinge would be delivered in 2035. In 2015, 55 million UK customs declarations were made by 141,000 traders. Once Brexit happens, that will increase fivefold to 255 million. Leaving aside all the issues of political principle, this is the vast logistical challenge that will have to be dealt with if May and Foster are to get the Brexit they want.
Canada’s Fourth Quarter economic growth was 1.7% following positive signs of growth earlier in the year. This growth, however modest, is attributable to easy credit and the increased consumer spending. At this time, Canadian households are facing one the largest indebtedness when compared to most other countries. For every $1.00 of income, consumers owe $1.68. This is the highest income to debt ratio in the world. For low-income Canadian households, the $1.00 disposable income to $3.33 debt ratio is even worst. Canada, along with other nations, especially emerging markets are carrying records levels of consumer debts, may be facing a serious crash as further growth becomes unsustainable.
Canada combined deficit rose to $18.1 billion in 2016, from $12.9 billion in the previous year. Higher debts and increased spending are causing serious concerns that the Canadian economy is on an unsustainable economic path. A considerable portion of Canada’s future economic growth has been predicated on strengthening and improving the country’s infrastructure. However, Prime Minister Trudeau’s policies are destined to strangle potential economic growth by shifting C$7.2 billion allocated to infrastructure improvements to government programs such as gender equality hiring opportunities. According to the Conference Board of Canada’s Craig Alexander: “This isn’t a budget that’s about growth, as much as it’s about equality and breaking down barriers to opportunity.”
Canada appears to be stunting its own economic growth as a matter of policy. Three major infrastructure projects, The Northern Gateway pipeline ($7.9 billion), the Pacific Northwest LNG project ($36 billion), and possibly the Energy East pipeline ($15.7 billion) would have been instrumental in guaranteeing economic growth for decades to come. However, these have been stymied in favor of Trudeau’s economic egalitarian vision. As a result, investors have been abandoning certain projects. The last time Canada’s saw such heavy-handed government interference in its economy was during the presidency of Trudeau’s father, Pierre Trudeau.
Coinbase was slapped with a pair of lawsuits by disgruntled consumers, one alleging insider trading by employees at the giant digital currency exchange and the other accusing the company of failing to deliver cryptocurrencies to people who didn’t have accounts. The class-action suits come as Coinbase and other crypto startups are beefing up their staffs with regulatory experts to legitimize themselves as they prepare for government authorities to impose stricter rules. The first of the complaints filed in San Francisco federal court centers on Coinbase’s announcement in December that it would enable purchases of the bitcoin spinoff known as Bitcoin Cash. The customer who sued alleges that employees were tipped off a month in advance, allowing them to instantly swamp Coinbase with buy and sell orders and leaving other traders at a great disadvantage.
Coinbase CEO Brian Armstrong said at the time that the company would investigate an increase in the price of bitcoin cash in the hours before its Dec. 19 announcement and that any employee or contractor found to have violated internal policies would be terminated. “To date, neither Armstrong nor the company has disclosed the result of its purported investigation,” according to the March 1 lawsuit. In the other suit, two men claim that they were unable to redeem bitcoin that had been transferred to them through Coinbase via their email addresses in 2013. They allege that when they got reminder notices in February, they tried to recover the bitcoin only to discover that the links provided by Coinbase were broken. They accused the company of keeping their funds and say they want to represent “thousands” of other people in the same position.
“The situation in Yemen – today, right now, to the population of the country,” UN humanitarian chief Mark Lowcock told Al Jazeera last month, “looks like the apocalypse.” 150,000 people are thought to have starved to death in Yemen last year, with one child dying of starvation or preventable diseases every ten minutes, and another falling into extreme malnutrition every two minutes. The country is undergoing the world’s biggest cholera epidemic since records began with over one million now having contracted the disease, and new a diptheria epidemic “is going to spread like wildfire” according to Lowcock. “Unless the situation changes,” he concluded, “we’re going to have the world’s worst humanitarian disaster for 50 years”.
The cause is well known: the Saudi-led coalition’s bombardment and blockade of the country, with the full support of the US and UK, has destroyed over 50% of the country’s healthcare infrastructure, targeted water desalination plants, decimated transport routes and choked off essential imports, whilst the government all this is supposed to reinstall has blocked salaries of public sector workers across the majority of the country, leaving rubbish to go uncollected and sewage facilities to fall apart, and creating a public health crisis. A further eight million were cut off from clean water when the Saudi-led coalition blocked all fuel imports last November, forcing pumping stations to close.
[..] As of late January, fuel imports through the country’s main port Hodeidah were still being blocked, with cholera cases continuing to climb as a result. And on 23rd January, the UN reported that there are now 22.2 million Yemenis in need of humanitarian assistance – 3.4 million more than the previous year – with eight million on the brink of famine, an increase of one million since 2017.
It must be hard on The New York Times editors to set their hair on fire day after day in their effort to start World War Three. Today’s lead story, Russian Threat on Two Fronts Meets Strategic Void in the U.S., aims to keep ramping up twin hysterias over a new missile gap and fear of Russian “meddling” in the 2018 midterm elections. The Times’s world-view begins to look like the script of a Batman sequel with Vlad Putin cast in The Joker role of the cackling psychopath who must be stopped at all costs! America’s generals have switched on the Batman signal beacon, but Donald Trump in the role of the Caped Crusader, merely dithers and broods in the splendid isolation of his 1600 Penn Avenue Bat Cave, suffering yet another of his endless bipolar identity crises.
For God’s sake, The Times, shrieks, do something! The Russians are coming! (Gotham City’s Chief of Police Hillary said exactly that last week in a Tweet!) I think they misunderstood Mr. Putin’s recent message when he announced a new hypersonic missile technology that would, supposedly, cut through any imaginable US missile defense. The actual message, for the non mental defectives left in this drooling idiocracy of a republic, was as follows: Nuclear war remains unthinkable, so kindly stop thinking about it. Mr. Putin’s other strategic position is also misrepresented — actually, not even acknowledged — in Monday’s NYT propaganda blast, namely, to discourage the USA’s decades-long policy of regime change here, there, and everywhere on the planet, creating a debris trail of one failed state after another.
As a true-blue American, I must say these are two admirable propositions. Is it fatuous to add that atomic war is unlikely to benefit anyone? Or that the world has had enough of US military “meddling” in foreign lands? Of course the shopworn trope of Russian “meddling” in the 2016 election still occupies the center ring of the American political circus. Today’s Times story includes another clumsy attempt to set up expectations that the 2018 midterm elections will be hacked by Russia, in order to keep the hysteria at code-red level. As usual, the proposition assumes that the alleged 2016 hacking is both proven and significant when, going on two years, there is no evidence of hacking besides the obviously amateurish Facebook troll farm.
A British diver has captured shocking images of himself swimming through a sea of plastic rubbish off the coast of the Indonesian tourist resort of Bali. A short video posted by diver Rich Horner on his social media account and on YouTube shows the water densely strewn with plastic waste and yellowing food wrappers, the occasional tropical fish darting through the deluge. The footage was shot at a dive site called Manta Point, a cleaning station for the large rays on the island of Nusa Penida, about 20km from the popular Indonesian holiday island of Bali. In a Facebook post on 3 March Horner writes how the ocean currents had carried in a “lovely gift” of jellyfish and plankton, and also mounds and mounds of plastic.
“Plastic bags, plastic bottles, plastic cups, plastic sheets, plastic buckets, plastic sachets, plastic straws, plastic baskets, plastic bags, more plastic bags, plastic, plastic,” he says, “So much plastic!” The video shows Horner swimming through the mess for several minutes and also how the waste coagulated on the surface, mixing in with some organic matter to form a slick of floating rubbish. Manta Point is regularly frequented by numerous manta rays that visit the site to get cleaned of parasites by smaller fish, but the video shows just one lone manta in the background. “Surprise, surprise, there weren’t many mantas there at the cleaning station today…” notes Horner, “They mostly decided not to bother.”
Several weeks ago thousands across Bali took part in a mass clean up, in attempt to rid the island’s beaches, rivers and jungles of waste, and raise awareness about the harmful impacts of trash. Rich Horner said that while divers regularly see “a few clouds of plastic” in the rainy season, the slick he identified is the worst yet. Divers returned to the site the next day, he reports, by which time the slick had already moved on, “continuing on its journey, off into the Indian Ocean..”
The great credit party that’s taken yield premiums in major markets down around lowest in a decade is probably months away from an end, as central banks normalize monetary policy and the economic outlook softens, Societe Generale predicts. “We expect next year to be a transition year, when the ultra-low yield environment finally starts to lose its grip,” Societe Generale credit strategists Juan Esteban Valencia and Guy Stear wrote in a note. “The U.S. and the eurozone are heading for an economic slowdown in 2019, and given the rising levels of corporate leverage, this should have an impact on credit.” U.S. investment-grade bond premiums will widen by mid-2018, with European counterparts following suit, as credit markets price in the economic slowdown, they wrote.
“The sword falls in 2H,” they predicted in a report that recognized last year’s annual outlook proved too bearish. Societe Generale had anticipated political risk to hurt credit in 2017, but changed tack by March as that didn’t pan out. Now, with global premiums having fallen further, “credit looks very pricey indeed,” they wrote. “Emerging market and high-yield markets are the most alarming.”
Money manager Peter Schiff correctly predicted the financial meltdown in 2008. Now, 10 years later, what does Schiff see today? Schiff says, “I predicted a lot more than just the stock market going down back then. I predicted the financial crisis, but more importantly, I predicted what the government would do as a result of the financial crisis and what the consequences of that would be because that’s where we’re headed. The real crash I wrote about in my most recent book is still coming. . . . This is the third gigantic bubble that the Fed has inflated, and when this one pops, it’s not going to be ‘the third time is a charm.’ It’s going to be ‘three strikes and you’re out.’ I think this bubble is too big to pop. I think it’s the mother of all bubbles, and when it bursts, there is not a bigger one that the Fed is going to be able to inflate to mask these problems, meaning we can’t kick the can down the road anymore.”
This time, the crisis is going to hit everyone in the wallet. Schiff goes on to say, “I think the problem we are going to be confronted with is going to be much worse than a financial crisis. It is going to be a dollar crisis, and it is going to be a sovereign debt crisis where the bonds people are worried about are not some sub-prime mortgages. . . . It’s going to be the U.S. government that people are worried about and the solvency of the U.S. government and the Treasury bonds. If it’s a dollar crisis and people are worried about the dollar, the only thing worse than owning a dollar today is owning the promise of being paid in dollars in the future. I don’t think we have the courage to default and admit to our creditors that we don’t have the money and we can’t repay. I think we will create all the money that we need so we can pretend to repay, but what we end up doing is wiping out the debt with inflation.”
When the Q4 US resident population data is released, something that has not happened in the post WWII era will take place. The population of adults aged 15-64 years old will decline. This was not supposed to happen and will put an end to seven plus decades of continuous population growth which has meant a growing workforce, a growing consumer base, and growing tax base. A growing core US population, something considered as sacrosanct as the sun rising, will not happen. On a year over year basis, where there once were up to 3 million more homebuyers than the previous year, 3 million more car buyers than the year before, 3 million more potential customers…there will be likely be thousands fewer.
Many will assume this is a demographic issue of boomers exiting the working age population… but actually demographics is simply the early onset of a disease that will only progressively worsen. This is truly a population growth issue, not simply a demographic distribution problem. The economic system the US and world have adopted are dependent on perpetual growth on a quarter over quarter and year over year basis. Two negative quarters (or even zero growth) and a recession is called and all the Federal Reserve’s and federal governments tools are employed. Given the importance of growth, the most important factor in growing the economy is the rising demand represented by a growing population. But the US fertility rate has been negative for 45 years (chart below) meaning the native population (plus immigrants) have continually failed to replace themselves.
This means US population growth has simply been a story of immigration. And until 2000, N. America was the primary destination for the majority of the world’s immigrants. However, since ’00 and particularly since ’05, the migration patterns have significantly changed.
An almost two-year long study of the Chinese financial system by the International Monetary Fund found three major tensions that could derail the world’s second-largest economy. Those tensions emerged as China moves away from its role as the world’s factory to a more modern, consumer-driven economy, the IMF said. The financial sector is critical in facilitating that transition, but in the process it evolved into a more complicated and debt-laden system. “The system’s increasing complexity has sown financial stability risks,” the fund said in the 2017 China Financial Sector Stability Assessment report released on Thursday morning Asia hours. The report was a culmination of the fund’s several visits to China between October 2015 and September 2017.
The assessment is intended to identify key sources of systemic risk in the financial sector so that policies can be implemented to enhance resilience to shocks and problems that could spread across the globe. The first tension in China’s financial system, according to the IMF, is the rapid build-up in risky credit that was partly due to the strong political pressures banks face to keep non-viable companies open, rather than letting them fail. Such struggling firms have, in recent years, taken on more debt to achieve growth targets set by the authorities. The overall debt-to-GDP ratio in the Asian economic giant grew from around 180% in 2011 to 255.9% by the second quarter of 2017, data by the Bank for International Settlements showed. The rise coincided with a slowdown in productivity growth and pressures on asset quality in the banking system – increasing the risks faced by the Chinese economy.
The second tension identified by the IMF is that risky lending has moved away from banks to the less-regulated parts of the financial system, commonly known as the “shadow banking” sector. That adds to the complexity of the financial sector and makes it more difficult for authorities to supervise activities in the system, the IMF said. And the third issue identified by the international organization is that there’s been a rash of “moral hazard and excessive risk-taking” because of the mindset that the government will bail out troubled state-owned enterprises and local government financing vehicles. An example is the “implicit guarantees” that financial institutions offer when selling products to retail investors. That is a situation where the financial product sold are not guaranteed, but banks almost always compensate investors for principal losses by dipping into their own capital.
The People’s Bank of China, in response to the IMF assessment, said in a statement on its website that it disagrees with some points in the report but the fund’s recommendations are “highly relevant in the context of deepening financial reforms” in the country. One of the points the Chinese central bank said it disagrees with is the conclusion that many banks lack the ability to withstand shocks. The IMF’s stress tests found that 27 out of 33 banks studied were under-capitalized. But the PBOC said the Chinese financial system is resilient.
NiceHash, the marketplace for cloud-based mining of cryptocurrencies, said hackers breached its systems and stole an unknown amount of bitcoin from its virtual wallet. “We are working to verify the precise number of BTC taken,” the company said Wednesday in a statement on its Facebook page. It’s halting operations for 24 hours, it said. The venture’s main webpage showed a “maintenance” error message, linking to its social media accounts. NiceHash helps match people who can spare computing capacity with miners looking to solve complex math problems to obtain a variety of new coins. It later facilitates periodic payments to the service providers with bitcoin. A wallet address circulated by NiceHash users shows that more than $60 million of bitcoins might be affected, according to CoinDesk, the cryptocurrency research and news website.
President Donald Trump on Wednesday said that a government shutdown “could happen” as soon as Saturday. “It could happen,” Trump said during a Cabinet meeting at the White House, in response to a reporter’s question about the Friday deadline for a spending bill to fund the government. “The Democrats are really looking at something that could be very dangerous for our country,” Trump said. “They are looking at shutting down. They want to have illegal immigrants, in many cases people that we don’t want in our country, they want to have illegal immigrants pouring into our country, bringing with them crime, tremendous amounts of crime.” Congress has until midnight on Friday to approve a short-term spending package to keep the government open. Despite majorities in both chambers, Republicans will need Democratic votes to pass the bill.
House Minority Leader Nancy Pelosi, D-Calif., responded on Twitter to Trump’s comments saying: “President Trump is the only person talking about a government shutdown. Democrats are hopeful the President will be open to an agreement to address the urgent needs of the American people and keep government open.” What congressional Democrats want in exchange for supporting the spending bill are permanent protections for the nearly 800,000 young, undocumented immigrants currently living in the United States who were brought here as children, the so-called Dreamers. Earlier this year, Trump canceled an Obama-era protection policy for Dreamers, the Deferred Action for Childhood Arrivals program, or DACA. The president’s order gave Congress until March 2018 to pass a bill with DACA-like protections.
US President Donald Trump has called on Saudi Arabia to end its Yemen blockade immediately, citing humanitarian concerns. Mr Trump said in a statement that he has directed US officials to call Saudi Arabian leaders and request they “completely allow food, fuel, water and medicine to reach the Yemeni people.” He said Yemenis “desperately need it.” A Saudi-led coalition has been fighting to defeat the Iran-backed Houthis and Yemeni President Ali Abdullah Saleh’s forces in Yemen since March 2015 with the aim of reinstating the internationally recognized government of Mr Saleh’s successor, Abed Rabbo Mansour Hadi. The US has been supporting the coalition through weapons sales, some intelligence sharing, and refuelling capabilities for air operations.
Since the conflict began, at least 10,000 people have died as a result and 40,000 have been wounded, Al Jazeera reported. Mr Saleh was killed earlier this week after moving to switch allegiances in the bloody conflict, making the situation in the country unpredictable according to experts. [..] The Saudi-led coalition had imposed a blockade on the country last month after Houthi rebels fired a missile on the Saudi capital of Riyadh. It responded by sending a slew of missiles into Yemen’s capital Sanaa. The blockade was partially lifted at the Hudaya port of the international airport in Sanaa and the first aid shipments were allowed to enter the country just last week. In the meantime, aid groups were forced to buy their own fuel in order to assist with relief work.
If you were a Martian visitor just disembarked from of one of Elon Musk’s rocket ships and were therefore uninfected by earth-based fake news, the culprits in Washington’s witch-hunt de jure would be damn obvious. They include John Brennan, Jim Comey, Sally Yates, Peter Strzok and a passel of deep state operatives – all of whom baldly abused their offices. After Brennan had concocted the whole Russian election meddling meme to sully the Donald’s shocking election win, the latter three holdovers – functioning as a political fifth column in the new Administration – set a perjury trap designed to snare Mike Flynn as a first step in relitigating and reversing the voters’ verdict. The smoking gun on their guilt is so flamingly obvious that the ability of the Trump-hating media to ignore it is itself a wonder to behold.
After all, anyone fresh off Elon’s rocket ship would learn upon even cursory investigation of the matter that the National Security Agency (NSA) intercepts electronically every single communication of the Russian Ambassador with any person on US soil – whether by email, text or phone call. So the clear-minded visitor’s simple question would be: What do the transcripts say? In fact, a Martian visitor would also quickly understand that the entire world – friend, rival, foe and enemy, alike – already knows of NSA’s giant digital spying operation owing to Snowden’s leaks, and that therefore there are no “sources and methods” on the SIGINT (signals intelligence) front to protect. Accordingly, the disinterested Martian would undoubtedly insist: Declassify the NSA intercepts and publish them on Facebook (and, for old timers, on the front page of the New York Times) so that the truth would be known to all.
Of course, that would punch a deep hole in the entire RussiaGate witchhunt because NSA, in fact, did record Flynn’s late December conversations with Russian Ambassador Kislyak. And there was not a single word in them that related to alleged campaign collusion or otherwise inappropriate communications by the in-coming national security adviser to a newly-elected President who was three-weeks from inauguration. Indeed, as explained below, Mueller has effectively told us that Flynn’s communications with Kislyak were clean as a whistle.
The rise of Corporate Power was the fall of democracy. Over the long haul, US politics has revolved around a deep tension between democracy and an unrelenting drive for plunder, power and empire. Granted that our democracy has been seriously flawed and only rarely revolutionary, yet the democratic movements are the source of every good thing America has ever stood for. Since the mid-1970s, when the corporations fused with the state, a new imperial order emerged that killed what remained of representative democracy. Not only would corporations exercise public authority as only government once had, but government would coordinate and serve corporate activity. Power and profits became one and the same. Corporate power has replaced democracy with oligarchy and justice with a vast militarized penal system.
Instead of innovative production, they plunder people and planet. To achieve this new order, elections and the economy had to be drained of any remaining democratic content. Both Democrats and Republicans were eager to have at it. By the 1990s “Third Way” Democrats like Bill Clinton abandoned what was left of the New Deal to try to outdo the Republicans as the party of Wall Street. The Republicans pioneered election fraud on a national scale in 2000, 2004, and 2016; a lesson the Democrats learned all too well by the 2016 Primary. Neither major party wants election reform since free and fair elections would threaten the system itself. So-called private corporations like Facebook, Google and Twitter control information and manage the 1st Amendment.
The corporate media now broadcast propaganda and play the role of censor once monopolized by the FBI and CIA. The migration of propaganda work to civilian organizations began under Ronald Reagan. While both major parties offer the people nothing beyond austerity and the worst kind of identity politics, the big banks like Goldman Sachs gained positions of real influence with both Republican and Democratic administrations and always with the Department of the Treasury and the Federal Reserve. Without pubic money and political protection the banking system — the headquarters of the mythical free market — could not function.
European Union privacy regulators have threatened to bring a legal challenge to a year-old EU-U.S. pact on the cross-border transfer of personal data if their concerns about its functioning and U.S. surveillance practices are not resolved by the autumn of 2018, they said in a report. The EU-U.S. Privacy Shield pact was agreed last year after the European Union’s highest court had struck down the previous Safe Harbour Principles agreement which allowed companies to transfer European citizens’ personal data to the United States, due to concerns about intrusive U.S. surveillance of online data. The Privacy Shield pact enables companies to easily conduct everyday cross-border data transfers in compliance with EU data protection rules.
“The WP29 (Article 29 Working Party) has identified a number of significant concerns that need to be addressed by both the (European) Commission and the U.S. authorities,” the regulators – known as the Article 29 Working Party – said in their report. The European Commission, which negotiated the Privacy Shield deal, conducted its first annual review in September and said it was satisfied with the way it was working. It did however ask Washington to improve it, including by strengthening the privacy protections contained in a controversial portion of the U.S. Foreign Intelligence Surveillance Act (FISA), known as Section 702. Section 702 allows the U.S. National Security Agency to collect digital communications from foreign suspects living outside the United States. It is due to expire on Dec. 31 in the absence of congressional action.
A series of positive factors for the Greek economy are attracting U.S. investors back to the embattled euro zone nation, a government minister told CNBC. “There are many American investors who are interested in participating in projects in Greece, because every clever investor would be interested in an economy that now starts to have positive growth rates,” Dimitris Tzanakopoulo, Greek minister of state and the government spokesperson, told CNBC Monday. Following a meeting between President Donald Trump and Greek Prime Minister Alexis Tsipras in October, there’s a renewed interest from the U.S. in shoring up its investments in Greece, especially in the energy sector.
Aside from a bounce back in economic growth, Tzanakopoulo said that Greece was “a pillar of stability in a region” and is winning back investors. “(The region) has many, many problems, wherever you look there’s destabilization, there is turbulence,” Tzanakopoulo said in his office in Athens. “We think we are one of the factors which will secure and guarantee stability in the region and this is something everybody knows, from the U.S. to our European partners,” he said. At the crossroads of Europe, Asia, and Africa, Greece is a key ally for many Western countries in the face of escalating tumult in Turkey and the rest of the Middle East.
The decision by the Migration Policy Ministry to expand and upgrade hot spots on Chios and Lesvos have cultivated a tense atmosphere, as critics say it will do nothing to ease pressure on the eastern Aegean islands and or to alleviate the situation of thousands of stranded refugees and migrants crammed in camps designed to hold far less people. Moreover, the onset of winter has made a bad situation even worse and the calls for authorities to accelerate asylum applications so as to transfer people to the mainland have become even louder. In the bid to deal with the deteriorating conditions, a team from Medecins Sans Frontiers (MSF) has, since last week, set up operations outside the Moria camp in Lesvos, offering assistance to those in need in cooperation with the Hellenic Center for Disease Control and Prevention (KEELPNO).
In a Facebook post, MSF said the harsh conditions and the cold are posing a serious threat to the health of the some 7,000 people that remain at the Moria hot spot. The group, which has called for the immediate transfer of those living at Moria to the mainland, has set up a mobile unit outside the camp to help children under the age of 16 and pregnant women. MSF is also distributing blankets, mattresses and other basic necessities as the situation, it said, is on the brink of a humanitarian crisis. At the same time, the Migration Policy Ministry is planning to transfer another 65 prefabricated huts to Moria in a bid to increase the camp’s capacity and to improve the living conditions of those that are still staying in summer tents. But the move is set to trigger more acrimony, as islanders and local authorities have said they do not agree with the expansion of the hot spot’s capacity.
Current predictions of climate change may significantly underestimate the speed and severity of global warming, according to a new study. Reappraisal of the models climate scientists use to determine future warming has revealed that less optimistic estimates are more realistic. The results suggest that the Paris Climate Agreement, which aims to keep global average temperatures from rising by 2C, may be overly ambitious. “Our study indicates that if emissions follow a commonly used business-as-usual scenario, there is a 93% chance that global warming will exceed 4C by the end of this century,” said Dr Ken Caldeira, an atmospheric scientist at the Carnegie Institution for Science, who co-authored the new study. This likelihood is an increase on past estimates, which placed it at 62%.
Climate models are vital tools for scientists attempting to understand the impacts of greenhouse-gas emissions. They are constructed using fundamental knowledge of physics and the world’s climate. But the climate system is incredibly complex, and as a result there is disagreement about how best to model key aspects of it. This means scientists have produced dozens of climate models predicting a range of different global warming outcomes resulting from greenhouse-gas emissions. Based on a “business-as-usual” scenario in which emissions continue at the same rate, climate models range in their predictions from a 3.2C increase in global temperatures to a 5.9C increase The new study, published in the journal Nature, sought to resolve this situation and establish whether the upper or lower estimates are more accurate.
To do this, Dr Caldeira and his collaborator Dr Patrick Brown reasoned that the most accurate models would be the ones that were best at simulating climate patterns in the recent past. “It makes sense that the models that do the best job at simulating today’s observations might be the models with the most reliable predictions,” said Dr Caldeira. Their conclusion was that models with higher estimates were more likely to be accurate, with the most likely degree of warming 0.5C higher than previous best estimates.
When China unveiled plans on Friday to end the implicit guarantees underpinning asset-management products worth trillions of dollars, it should have been a bombshell for the nation’s savers. But for Yolanda Yuan and other individual investors who’ve piled into AMPs issued by banks, insurers and securities firms, the government’s announcement was largely a non-event. The reason: they didn’t believe it. “I don’t think any big banks will dare to take the risk of allowing defaults on AMPs, as that will lead to a flood of fund redemptions,” said Yuan, a 29-year-old sales manager at a state-run financial company in Shanghai. She has about 100,000 yuan ($15,069) of personal savings in products covered by the new regulations.
Over the past 13 years, assets in Chinese AMPs have swelled from almost nothing to $15 trillion in large part due to one key assumption: that investors would be made whole no matter what happened to the products’ underlying assets. Authorities are now moving to quash that belief amid concern that rampant moral hazard is distorting market prices and making the financial system vulnerable to crises. Yuan’s enduring faith in implicit guarantees suggests the government’s task won’t be easy. It may ultimately require an AMP blowup for Chinese regulators to convince investors that they’re serious about the new rules, which are set to take effect in mid-2019. But a major product failure is risky: In a worst-case scenario, it could spark a destabilizing stampede out of AMPs, which have become a key source of funding for banks and other financial institutions.
It’s not clear that’s a chance Beijing is willing to take, despite last week’s rhetoric. “It’s very hard,” said David Loevinger, a former China specialist at the U.S. Treasury Department who now works at TCW Group in Los Angeles. “You have to show people that there are no longer guarantees. The only way to show it is to force investors to take losses. They have to see it to believe it.”
The banking regulator is concerned about the size of mortgages being taken on by homeowners, issuing a warning to both lenders and borrowers. Australian Prudential Regulation Authority chairman Wayne Byres on Tuesday said Australia’s household debt was high and would continue to rise, and that too many loans were still being approved above people’s ability to pay. “Household indebtedness is high. Perhaps more importantly, the trajectory is clearly for it to rise further,” Mr Byres told the Australian Securitisation Forum in Sydney. “Lenders need to be vigilant to ensure their policies and practices are both prudent and responsible. “In short, heightened risk requires heightened prudence by APRA but also – and preferably – by lenders and borrowers themselves.”
Mr Byres said APRA’s moves to limit investor and interest-only mortgages had worked, bringing growth in lending to property investors back into line with owner-occupier lending. APRA decreed in March that big banks should limit interest-only loans to 30% of new residential mortgages, on top of a 10% cap on investor lending growth. But Mr Byres said the size of loans being issued by the big banks was still an issue, with consumers vulnerable if historically low interest rates are lifted by the Reserve Bank of Australia. Mr Byres said there had been only a slight drop in the proportion of borrowers being granted loans six times the amount of their income – a level at which they would spend about half their net income on repayments if interest rates returned to their long-term average of about 7%.
Such leverage was far higher in Australia than in comparable markets such as the UK and Ireland, he said. That left considerable potential for banks to further tighten lending practices, Mr Byres said. “Aided by file reviews conducted by external auditors, we have confirmed there is more to do in this area to improve serviceability measures, particularly in relation to the assessment of living expenses and the identification of a borrower’s existing debts.” APRA’s move to limit investor lending has borne fruit, with interest-only lending accounting for about 23% of new lending in the three months to September 30, well below its 30% limit.
[..] at least the Democrats did attempt to finance the trillions in new tax credits and Medicaid costs generated by ObamaCare with some revenue raisers such as the medical device and insurance company taxes and the added levies on upper income earners and investment returns. Back in the day, in fact, this kind of “tax and spend” welfare statism is exactly what the Democrats stood for. And it was also the party’s political Achilles Heel because it enabled the GOP to periodically arouse the electorate on the dangers of “big government” and thereby obtain a resurgence in Washington’s corridors of political power. But after the break from the old-time fiscal religion of balanced budgets during the so-called Reagan Revolution in 1981, the GOP has slowly morphed into the “borrow and spend” party.
Indeed, as the historically ordained party of fiscal rectitude, the GOP’s apostasy has enabled two-party complicity in a mindless regime of fiscal kick-the-can since the turn of the century. That lapse, in turn, acutely aggravated an already perilous fiscal equation owing to the baby boom retirement wave and the Fed induced slowdown in the trend rate of economic growth (see below). In this context, it should be noted that the Senate bill is a farce insofar as it claims to be a middle class tax cut and growth stimulant – since it actually accomplishes neither. On a honestly reckoned basis (counting debt service and eliminating budget gimmicks), however, it would add $2.2 trillion of new debt over the next decade on top of the $12 trillion already built-in under current policy.
Accordingly, the Senate version of Trumpite “tax reform” would accelerate the public debt toward $35 trillion by 2027 or 140% of GDP. Yet all of this added red ink would be “wasted” on cuts for 150 million individual taxpayers that are written in disappearing ink (i.e. they lapse after 2025) and on misbegotten corporate rate cuts that will do virtually nothing for economic growth. Indeed, contrary to the old Washington saw about “wasting a good crisis” the Senate bill involves something more like creating a good crisis and wasting it, too.
[..] there has been one outlier, for the most part, which seemed to skirt around all the current chaos, relatively unscathed. That would be Silicon Valley and all its ancillary provinces aka “Disruptive Tech.” So far the coveted group known collectively as “FAANG” (e.g., Facebook™, Apple™, Amazon™, Netflix™, Google™) seems to have held the “barbarians at the gates” known as investors relatively at bay, or “stable” in their positions, if you will. What has been, anything but, is their cohort of IPO brethren that were supposed to have joined them. “The Valley” seems to fit nicely as a moniker for a now self-recognized nation-state, after-all, if you include the market cap of these and a few others (e.g., Tesla™ and more) their combined valuations rival those of sovereign nations.
For all intents and purposes one could say they’re already developing and embracing their own newly formed currency, aka “Bitcoin™.” All that’s needed would seem is proposing a charter, and recognition. And that’s why it’s all about to burst, in my opinion. All of it. Why? Just as there are always clues, it’s in the consistency of further developments, along with weighing any prior, coupling them with the current, then trying to extrapolate whether or not they still stand, or are valid. This is the work most people (especially those paraded across the sycophantic mainstream business/financial media) won’t do. And not doing so for many – as of today – will have ramifications, maybe for a lifetime. So what’s the “Why?” Of course, it’s only my opinion, but I stand behind it more fervently than ever before. And it is this…
“The Valley” (and its entire ancillary complex aka “the disruptor class”) is on the verge of receiving a wake up call, the likes, that may make the dot-com era look relatively “stable” in hindsight. To use the political as an analogy, let’s just say, I believe the newly formed “nation-state” of FAANG will have much more in common with the turmoil in Brazil, Spain, Venezuela, and a few others in the coming months as it continues to desperately cling to the mythical Utopia of magical creatures known as unicorns, and cash out riches known as IPO’s. That “Utopia” has already been found to be a Potemkin Village made of spreadsheet papier-mâché analysis and valuation metrics, not worth the digital paper they’re written on.
Angela Merkel has indicated that she would rather have fresh elections than try to rule in a minority government as the collapse of German coalition talks posed the most serious threat to her power since she became chancellor more than a decade ago. Merkel, who has headed three coalitions since 2005, said she was “very sceptical” about ruling in a minority government and suggested she would stand again as a candidate if elections were called in the new year, telling public broadcaster ARD she was “a woman who has responsibility and is prepared to take responsibility in the future”. Exploratory talks to form the next German government collapsed on Sunday night after the pro-business Free Democratic Party (FDP) walked out of marathon negotiations with Merkel’s Christian Democrats, its Bavarian sister party, the Christian Social Union (CSU), and the Green party.
Germany’s president had earlier urged political parties to resume efforts to a build a governing coalition following a meeting with Merkel. “I expect the parties to make the formation of a new government possible in the foreseeable future,” Frank-Walter Steinmeier said, adding that the parties had a responsibility that “cannot be simply given back to the voters.” Elections in September saw Merkel’s bloc poll first place but with a reduced share of the vote and with the FDP and Greens as its only plausible coalition partners. The collapse in the talks and possibility of fresh elections brings further uncertainty for the British government over Brexit, which had hoped that a strong German coalition, including the FDP, might help smooth the next phase of negotiations.
Italy has long prided itself for its quality of life – and with good reason. Italy may be only just recovering from a long economic crisis, but its citizens are healthier and live longer than those of most other countries in the world. It is perhaps no coincidence then that the Italian government is pioneering the use of welfare indicators in its budget process. As of this year, the finance ministry will produce official forecasts for 12 indicators, ranging from income inequality to CO2 emissions to obesity – the first country to do so in the EU and the G7. Measuring “la dolce vita” is a complex task, but one other countries should consider too. Growth will remain the main indicator to judge a country’s economic success because of its conciseness.
But, to the extent they can, it is hard to see why governments should not monitor the broader impact their policies have on the well-being of citizens. The push to go beyond GDP as a measure of welfare dates back at least to former U.S. presidential candidate Robert Kennedy. “The gross national product does not allow for the health of our children, the quality of their education or the joy of their play,” said Kennedy in a speech in 1968. Since then, economists have produced a long list of reports on well-being – the most famous of which was probably one by the Stiglitz-Sen-Fitoussi Commission set up by the French Government in 2008. Yet, so far this paperwork has produced little action: Governments still base their economic policy-making primarily on the basis of GDP.
There are very good reasons for continuing to do so. The choice of other welfare indicators is arbitrary and may be imprecise. In Italy, one of the biggest drivers of inequality is the gap between the young, whose incomes have fallen the most during the crisis, and the elderly and yet this is not included in the range of selected measures. There is also an issue of weighting: How will the Italian government decide which of the 12 indicators it has chosen is the most important? Finally, forecasting some variables such as “predatory crime” is bound to pose some serious headaches. Yet, this does not mean the principle is wrong. There may be cases when a government is willing to press ahead with a policy even if it reduces short-term growth because it produces benefits in terms of broader welfare.
The release of the so-called “Paradise Papers” touched off new scrutiny of how moguls, celebrities and politicians stash their cash in offshore tax havens. The practice, though, is hardly limited to the global elite. In fact, government documents show that local government officials have sent hundreds of billions of dollars of public sector workers’ retirement savings to a tiny archipelago most famous for white-sand beaches — and laws that shield investors from taxes. Operating outside the U.S. legal system, the offshore accounts in the Cayman Islands give Wall Street firms leeway to make complex international investments and to earn big fees off investors’ capital. But with offshore accounts featuring prominently in high-profile Ponzi schemes, some critics warn that the use of tax havens can endanger the retirement savings of millions of teachers, firefighters, cops and other public workers — a situation that could put taxpayers on the hook for losses if the investments go bust, or the money goes missing.
The tidal wave of cash has flowed from public pension systems into so-called “alternative investments”: private equity, hedge funds, venture capital firms and real estate. While many alternative investment firms operate in Lower Manhattan, more than a third of all the cash in those private funds flows through vehicles domiciled in the Caymans, according to Securities and Exchange Commission records reviewed by International Business Times. Those same records show that public pension plans, university endowments and other nonprofits have funneled a massive $1.8 trillion into alternative investments.
There is further evidence that Donald Trump’s occupation of the Oval Office has had a negative impact on his business empire, with new research showing that average room rates have fallen by as much as 63%at all but one of his 13 hotels. Hardest hit was Trump Las Vegas. The average cost of a two-night stay in a standard double room during January 2017, just before his inauguration, was priced at £637, according to analysis by FairFX, the currency provider. But a two-night break in January 2018, one year on, can be secured for just £237.
At Trump Turnberry, his Ayrshire golf hotel, the average cost of a two-night stay has fallen by 57%, from £498 to £215, while steep drops have also been found for stays at Trump Doral in Miami (down 53%), Trump Washington DC (down 52%), Trump Vancouver (down 48%), and Trump New York (down 32%). Only the president’s Irish hotel, Trump Doonbeg, has seen a rise in rates, from £334 to £357. “One year after Trump’s inauguration, prices for a weekend in one of his hotels have for the most part decreased,” said Ian Strafford-Taylor, FairFX CEO. “While big events, like the inauguration in Washington, will usually cause prices to rise in that city for a particular weekend, the decreases in other places suggest that it doesn’t necessarily pay to be president.”
It’s remarkable that whenever you read an article about Yemen in the mainstream media, the central role of Saudi Arabia and the United States in the tragedy is glossed over or completely ignored. A recent Washington Post article purporting to tell us “how things got so bad” explains to us that, “it’s a complicated story” involving “warring regional superpowers, terrorism, oil, and an impending climate catastrophe.” No, Washington Post, it’s simpler than that. The tragedy in Yemen is the result of foreign military intervention in the internal affairs of that country. It started with the “Arab Spring” which had all the fingerprints of State Department meddling, and it escalated with 2015’s unprovoked Saudi attack on the country to re-install Riyadh’s preferred leader.
Thousands of innocent civilians have been killed and millions more are at risk as starvation and cholera rage. We are told that US foreign policy should reflect American values. So how can Washington support Saudi Arabia – a tyrannical state with one of the worst human rights record on earth – as it commits by what any measure is a genocide against the Yemeni people? The UN undersecretary-general for humanitarian affairs warned just last week that Yemen faces “the largest famine the world has seen for many decades with millions of victims.” The Red Cross has just estimated that a million people are vulnerable in the cholera epidemic that rages through Yemen. And why is there a cholera epidemic? Because the Saudi government – with US support – has blocked every port of entry to prevent critical medicine from reaching suffering Yemenis.
This is not a war. It is cruel murder. The United States is backing Saudi aggression against Yemen by cooperating in every way with the Saudi military. Targeting, intelligence, weapons sales, and more. The US is a partner in Saudi Arabia’s Yemen crimes. Does holding hands with Saudi Arabia as it slaughters Yemeni children really reflect American values? Is anyone even paying attention?
Madrid is paving the way for Catalonia to be given the power to collect and manage its own taxes, similar to the system enjoyed by the autonomous Basque country, in an attempt to defuse the crisis over an illegal referendum on independence for the region. Senior sources in the Spanish government have told the Guardian that although there remains intense opposition within the ruling People’s party (PP) to any future referendum on self-determination, there is a renewed willingness to open discussions on a new fiscal pact under which Catalonia would have greater control of its finances. “If the Catalans ask for a fiscal pact, we are ready to discuss this,” one senior source said.
“The Basque country [in northern Spain] and Navarre collect their own taxes. They have their own system and there is a meeting between the Basque country and the central government and they decide how much they contribute to foreign policy and defence. It‘s a negotiation. Every five years. “We are open to discuss this, taking into account that the constitution of Spain also establishes solidarity [among the Spanish regions].” A fiscal pact was proposed in 2012 by Catalonia’s then president, Artur Mas, but the Spanish government blocked the move over concerns that it would be destabilising at a time when Spain appeared to be in dire economic peril. A cross-party commission on potential constitutional reform opened discussions last week on a new settlement between the Catalans and the Spanish government, with the support of the prime minister, Mariano Rajoy.
Year in, year out since 2010, the number of children at risk of poverty is continuously increasing in Greece. With 37.5%, Greece is tops among members of the eurozone and third after Romania and Bulgaria within the European union. Four in 10 children aged up to 17 years old in Greece are at risk of poverty or social exclusion, Europe’s statistical agency Eurostat has found, putting the crisis-hit country at the top of the eurozone child poverty scale. In its report published on Monday and using 2016 data, Eurostat reported that with 37.5% of children facing the threat of poverty, Greece has the highest rate of at-risk children in the eurozone and the third highest in the European Union, behind Romania (49.2%) and Bulgaria (45.6%). At the opposite end of the scale, the lowest shares of children at risk of poverty or social exclusion were recorded in Denmark (13.8%), Finland (14.7%) and Slovenia (14.9%), ahead of the Czech Republic (17.4%) and the Netherlands (17.6%).
Greece also saw the highest rise in the number of at-risk children in the period between 2010 and 2016, growing 8.8% from a pre-crisis level of 28.7%. Cyprus also saw a spike of 7.8%, followed by Sweden (5.4%) and Italy (1.1%). In total in 2016, 24.8 million children in the EU, or 26.4% of the population aged up to 17 years old, were at risk of poverty or social exclusion. This means that the children were living in households with at least one of the following three conditions: at-risk-of-poverty after social transfers (income poverty), severely materially deprived or with very low work intensity. The proportion of children at risk of poverty or social exclusion in the EU has slightly decreased over the years, from 27.5% in 2010 to 26.4% in 2016, Eurostat reported.
The first online foreclosures, set to start on November 29, will concern the assets of individuals or enterprises with debts of €500,000 or more (in some cases over €2 million). Villas, large buildings, historic buildings with one owner, plots of land, professional facilities and even parking spaces are among the assets slated to go under the electronic hammer as of end-November, when the online process finally begins. The amount of debts banks are seeking from these foreclosures comes to tens of millions of euros and concerns loans issued between 2005 and the outbreak of the crisis, when credit flowed handsomely.
Such is the case of one property with a single owner that will be auctioned for that individual’s debts of over €1.5 million to two systemic banks. The amount banks hope to claim is just €100,000, as it is common practice that the starting price is far smaller than the actual debt. The banks have vowed not to auction the homes of vulnerable groups or families without any other assets, but bank sources cannot rule out any exceptions made either intentionally or not, as 98% of debtors have failed to update their property details.
The European Commission ordered Greece on Monday to recover up to €55 million in state aid from Hellenic Defense Systems (HDS), a largely state-owned company that makes defense-related products. Greece granted a number of support measures between 2004 and 2011 including a direct grant of €10 million, a capital increase of €158 million and state guarantees for loans of up to €942 million. The Commission said in a statement that its investigation had concluded that the vast majority of Greek measures fell outside the scope of EU state aid control because they served Greek security interests. However, some measures worth up to €55 million did amount to illegal state aid because they supported the HDS’s civil activities, which include small pistols, explosives for construction and fireworks.
A steady increase in ocean temperatures — nearly 3 degrees Fahrenheit in recent decades — was all it took to doom the once-luxuriant giant kelp forests of eastern Australia and Tasmania: Thick canopies that once covered much of the region’s coastal sea surface have wilted in intolerably warm and nutrient-poor water. Then, a warm-water sea urchin species moved in. Voracious grazers, the invaders have mowed down much of the remaining vegetation and, over vast areas, have formed what scientists call urchin barrens, bleak marine environments largely devoid of life. Today, more than 95 percent of eastern Tasmania’s kelp forests — luxuriant marine environments that provide food and shelter for species at all levels of the food web — are gone.
With the water still warming rapidly and the long-spine urchin spreading southward in the favorable conditions, researchers see little hope of saving the vanishing ecosystem. “Our giant kelp forests are now a tiny fraction of their former glory,” says Craig Johnson, a researcher at the University of Tasmania’s Institute for Marine and Antarctic Studies. “This ecosystem used to be a major iconic feature of eastern Tasmania, and it no longer is.” The Tasmanian saga is just one of many examples of how climate change and other environmental shifts are driving worldwide losses of giant kelp, a brown algae whose strands can grow to 100 feet.
In western Australia, increases in ocean temperatures, accentuated by an extreme spike in 2011, have killed vast beds of an important native kelp, Ecklonia radiata. In southern Norway, ocean temperatures have exceeded the threshold for sugar kelp — Saccharina latissima — which has died en masse since the late 1990s and largely been replaced by thick mats of turf algae, which stifles kelp recovery. In western Europe, the warming Atlantic Ocean poses a serious threat to coastal beds of Laminaria digitata kelp, and researchers have predicted “extirpation of the species as early as the first half of the 21st century” in parts of France, Denmark, and southern England.
The Committee For A Responsible Budget penned after the passage of the tax bill: “The House approved debt-financed tax cuts based on predictions of magical economic growth that defy history and all credible analyses. Tax reform should grow the economy and not add to the debt. Unfortunately, lawmakers are assuming faster economic growth will pay for that debt increase when there is no evidence it will cover more than a fraction of the tax bill’s costs. The last time Congress added 10-figures worth of tax cuts to the debt in 2001, it blew a hole in the budget and helped erase our surpluses — despite claims that economic growth would cover the cost.The growth fairy did not appear then, and it would be unwise to assume she will this time around.” Read that again. Despite claiming to be “fiscally conservative,” what is so amazing is that Republicans are considering doing this when debt is at the highest level in history and climbing.
When the “Reagan” tax cuts of were passed, debt was less than 50% of GDP, inflation and interest rates were high and falling, and the economy was just recovering from back to back recessions. When the “Bush” tax cuts were passed, debt to GDP was only slightly higher than under Reagan but despite the tax cuts, the economy slid into a recession compounded by the “dot.com” bust. Currently, debt is 104% of GDP — higher than any time in history, the economy has been in a 9-year expansion at the lowest rate of growth on record, and interest rates and inflation are low with the Fed hiking rates and reducing monetary support. The situation currently is much more like Bush versus Reagan. Lastly, despite the continuing “talking points” that “tax cuts” spur economic growth and will pay for themselves over time….there is no evidence to support that claim.
When Mt. Gox, the world’s largest bitcoin trading exchange, collapsed in early 2014, more than 24,000 customers around the world lost access to hundreds of millions of dollars’ worth of cryptocurrency and cash. More than three years later, with the price of bitcoin skyrocketing to more than $7,000, not a single customer has recouped a single cent, crypto or otherwise. It’s not clear when they will. The failed exchange has become stuck in a morass of litigation – a Russian doll of bankruptcies in Japan and New Zealand, four in all, plus lawsuits in the United States and competing claims from creditors. And although the Mt. Gox bankruptcy trustee recovered digital currency now worth more than $1.6 billion, under Japanese law the exchange’s customers likely will recover only a fraction of that.
Kim Nilsson, a Swedish software developer who had more than a dozen bitcoins at Mt. Gox, isn’t optimistic of a payout soon. “It’s a legal twilight zone,” he says. “I wouldn’t be surprised if it took several years more.” There are few better examples of the dangers of investing in cryptocurrencies than Mt. Gox. As Reuters reported in September, cryptocurrency exchanges – where digital coins are bought, sold and stored – are largely unregulated and have become magnets for fraud and deception. At least 10 of them have closed, often after thefts, leaving customers without their funds. In all, more than 980,000 bitcoins have been stolen from exchanges since 2011 – two-thirds of those from Mt. Gox. Today, all of the stolen coins would be worth more than $6 billion, Reuters has calculated.
Mt. Gox is one of the few collapsed exchanges that ended up in bankruptcy court; some just vanished. But the problem for Mt. Gox’s thousands of creditors is that under Japanese bankruptcy law, their claims were valued at the market price of bitcoin in April 2014 just before the Tokyo District Court ordered the exchange be liquidated. At that time, one bitcoin was worth $483. On the basis of the April 2014 value, the claims ultimately approved were fixed at 45.6 billion Japanese yen, currently about $400 million. Based on the current price of bitcoin, Mt. Gox’s bankruptcy trustee is sitting on enough cash to repay creditors whose claims have been approved more than three times that amount, according to Reuters’ calculation. But that likely won’t happen, according to two Japanese bankruptcy attorneys.
In Japan, by law any funds left over in a bankrupt company’s estate after creditors have been paid go to shareholders. Mt. Gox is 88% owned by a Japanese company called Tibanne. And Mark Karpeles, a 32-year-old French software engineer and Mt. Gox’s former chief executive, owns 100% of Tibanne. Karpeles is currently on trial in Tokyo, accused of embezzling money from Mt. Gox and manipulating its data, as well as breach of trust. He has pleaded not guilty to the charges, some of which carry sentences of up to 10 years. He served nearly a year in jail following his arrest in August 2015.[..] In a three-hour interview, Karpeles told Reuters he doesn’t want the money. The main reason: He expects he would be inundated with lawsuits. He says he already is facing about a half dozen. “I don’t want to be the beneficiary of this,” he said. “I don’t really need money. I work, I get by.”
Given its natural resource-based economy, Canada is a boom and bust kind of place. This year, the country has enjoyed a significant boom. Thanks to a government stimulus program, rising corporate capital expenditures and consumer spending, Canada’s GDP growth has been nothing short of spectacular in 2017. According to Statistics Canada, the latest reading for year-over-year GDP growth is a healthy 3.5% (as of August 2017). While this is stronger than all major developed countries, growth is decelerating from its most recent peak in May 2017 (when GDP growth was an astounding 4.7%). A visual overview of historical GDP growth is shown below for reference:
Following the crude oil bust in the second quarter of 2014, Canadian growth rates cratered. While the country avoided a technical recession, the economic outlook was poor until early 2016. After crude oil returned to a bull market in the first quarter of 2016, the fortunes of the country turned. Given limited growth in 2015, the economy had no problem delivering 2%+ year-over-year growth rates in 2016. As a substantial stimulus program ramped up government spending in 2017, growth rates have continued to accelerate this year. While Canada has delivered exceptional growth in the last two years, the future outlook is much more challenging.
Beyond the issue of base effects (mathematically, year-over-year GDP growth will be much tougher next year), key sectors including the oil & gas industry and Canadian real estate look ripe for a downturn. As WTI crude strengthens beyond $55, crude oil is clearly in a bull market today. Looking at figures from the International Energy Agency, global demand growth continues to run ahead of supply growth. Thus the ongoing bull market is supported by fundamentals. Thanks to the impact of hurricanes and infrastructure bottlenecks in 2017, US shale hasn’t entirely fulfilled its role as the global ‘swing producer’ this year. The dynamics of supply growth versus demand growth are shown below:
One of the biggest puzzles about our current predicament with fake news and the weaponisation of social media is why the folks who built this technology are so taken aback by what has happened. Exhibit A is the founder of Facebook, Mark Zuckerberg, whose political education I recently chronicled. But he’s not alone. In fact I’d say he is quite representative of many of the biggest movers and shakers in the tech world. We have a burgeoning genre of “OMG, what have we done?” angst coming from former Facebook and Google employees who have begun to realise that the cool stuff they worked on might have had, well, antisocial consequences.
Put simply, what Google and Facebook have built is a pair of amazingly sophisticated, computer-driven engines for extracting users’ personal information and data trails, refining them for sale to advertisers in high-speed data-trading auctions that are entirely unregulated and opaque to everyone except the companies themselves. The purpose of this infrastructure was to enable companies to target people with carefully customised commercial messages and, as far as we know, they are pretty good at that. (Though some advertisers are beginning to wonder if these systems are quite as good as Google and Facebook claim.) And in doing this, Zuckerberg, Google co-founders Larry Page and Sergey Brin and co wrote themselves licences to print money and build insanely profitable companies.
It never seems to have occurred to them that their advertising engines could also be used to deliver precisely targeted ideological and political messages to voters. Hence the obvious question: how could such smart people be so stupid? The cynical answer is they knew about the potential dark side all along and didn’t care, because to acknowledge it might have undermined the aforementioned licences to print money. Which is another way of saying that most tech leaders are sociopaths. Personally I think that’s unlikely, although among their number are some very peculiar characters: one thinks, for example, of Paypal co-founder Peter Thiel – Trump’s favourite techie; and Travis Kalanick, the founder of Uber. So what else could explain the astonishing naivety of the tech crowd? My hunch is it has something to do with their educational backgrounds.
Take the Google co-founders. Sergey Brin studied mathematics and computer science. His partner, Larry Page, studied engineering and computer science. Zuckerberg dropped out of Harvard, where he was studying psychology and computer science, but seems to have been more interested in the latter. Now mathematics, engineering and computer science are wonderful disciplines – intellectually demanding and fulfilling. And they are economically vital for any advanced society. But mastering them teaches students very little about society or history – or indeed about human nature. As a consequence, the new masters of our universe are people who are essentially only half-educated. They have had no exposure to the humanities or the social sciences, the academic disciplines that aim to provide some understanding of how society works, of history and of the roles that beliefs, philosophies, laws, norms, religion and customs play in the evolution of human culture.
They have revolutionised the way we live, but are US tech giants the new robber barons of the 21st century, banking billions in profit while short-changing the public by paying only a pittance in tax? With public coffers still strained years after the worst of the debt crisis, EU leaders have agreed to tackle the question, spurred on by French President Emmanuel Macron who has slammed the likes of Google, Facebook and Apple as the “freeloaders of the modern world”. As recently as March, five of the world’s top 10 valued companies were Silicon Valley behemoths: Apple, Google’s Alphabet, Microsoft, Amazon and Facebook. (Germany’s SAP was Europe’s biggest and 56th on the global list). But tax rules today are designed for yesterday’s economy when US multinationals -such as General Motors, IBM or McDonald’s- entered countries loudly, with new factories, jobs and more taxes for the taking.
These firms had what tax specialists call “permanent establishment”, when companies showed a clear physical presence measured and taxed through tangible, real world assets. But today in most EU nations, the US tech titans exist almost exclusively in the virtual world, their services piped through apps to smart phones and tablets from designers and data servers oceans away. Ghost-like, Silicon Valley has turned Europe’s economies upside down, but often with just a skeleton staff and some office space in markets with millions of users or customers. According to EU law, to operate across Europe, multinationals have almost total liberty to choose a home country of their choosing. Not surprisingly, they choose small, low tax nations such as Ireland, the Netherlands or Luxembourg. Thus, it is through Ireland that Facebook draws its wealth from millions of accounts across Europe.
There are 33 million accounts in France and 31 million in Germany, according to recent data. While users enjoy the platform, Facebook tracks likes, comments and page views and sells the data to companies who then target consumers. But unlike the economy of old, Facebook sells its data to French companies not from France but from a great, nation-less elsewhere, with no phone number, address or physical “presence” for a customer who probably cares little. It is in states like Ireland, whose official tax rate of 12.5% is the lowest in Europe, that the giants have parked their EU headquarters and book profits from revenues made across the bloc. Indeed, actual revenues from advertising are minimal in France and Germany, but at Facebook HQ Ireland they grew to 7.9 billion euros, even though the vast majority does not come from the tiny EU island-nation of a mere 2.5 million users.
Fall behind on your student loan payments, lose your job. Few people realize that the loans they take out to pay for their education could eventually derail their careers. But in 19 states, government agencies can seize state-issued professional licenses from residents who default on their educational debts. Another state, South Dakota, suspends driver’s licenses, making it nearly impossible for people to get to work. As debt levels rise, creditors are taking increasingly tough actions to chase people who fall behind on student loans. Going after professional licenses stands out as especially punitive. Firefighters, nurses, teachers, lawyers, massage therapists, barbers, psychologists and real estate brokers have all had their credentials suspended or revoked.
Determining the number of people who have lost their licenses is impossible because many state agencies and licensing boards don’t track the information. Public records requests by The New York Times identified at least 8,700 cases in which licenses were taken away or put at risk of suspension in recent years, although that tally almost certainly understates the true number. [..] With student debt levels soaring — the loans are now the largest source of household debt outside of mortgages — so are defaults. Lenders have always pursued delinquent borrowers: by filing lawsuits, garnishing their wages, putting liens on their property and seizing tax refunds. Blocking licenses is a more aggressive weapon, and states are using it on behalf of themselves and the federal government.
Proponents of the little-known state licensing laws say they are in taxpayers’ interest. Many student loans are backed by guarantees by the state or federal government, which foot the bills if borrowers default. Faced with losing their licenses, the reasoning goes, debtors will find the money. But critics from both parties say the laws shove some borrowers off a financial cliff.
China’s frenzied construction of subway systems in cities all over the country may be easing, amid reports funding has been pulled for some projects as Beijing pushes to rein in debt levels. The National Development and Reform Commission, China’s top economic planning body, is revising a 2003 policy on subway development, Caixin reported on Saturday. The NDRC wants to “raise the bar” for approving local rail projects amid growing concern over a debt-driven infrastructure boom, the financial magazine said, citing sources that it didn’t identify. Population levels, as well as the economy and fiscal conditions of Chinese cities seeking permission for subway projects will be more closely scrutinized, Caixin said. Subway construction is a constant presence in China’s cities, with streets torn up to build the capacity needed to transport the swelling ranks of urban commuters.
Beijing alone has been testing three lines: a driverless subway, a maglev train, and a tram to be launched in the city’s western suburbs at the end of the year, the official Xinhua News Agency reported in September. But investment in the sector appears to be tapering off, just as China’s leaders make reining in financial risks a top priority. Fixed-asset investment in rail transportation has slowed almost to a standstill in 2017, increasing just 0.4% in January-October from a year earlier, statistics bureau data show. That’s down from 3.5% growth in the first four months of the year. Private rail transport investment – which makes up a tiny share of an industry that’s dominated by state-backed enterprises – slumped 58.6% January-October from a year earlier.
Scientists have warned there could be a big increase in numbers of devastating earthquakes around the world next year. They believe variations in the speed of Earth’s rotation could trigger intense seismic activity, particularly in heavily populated tropical regions. Although such fluctuations in rotation are small – changing the length of the day by a millisecond – they could still be implicated in the release of vast amounts of underground energy, it is argued. The link between Earth’s rotation and seismic activity was highlighted last month in a paper by Roger Bilham of the University of Colorado in Boulder and Rebecca Bendick of the University of Montana in Missoula presented at the annual meeting of the Geological Society of America.
“The correlation between Earth’s rotation and earthquake activity is strong and suggests there is going to be an increase in numbers of intense earthquakes next year,” Bilham told the Observer last week. In their study, Bilham and Bendick looked at earthquakes of magnitude 7 and greater that had occurred since 1900. “Major earthquakes have been well recorded for more than a century and that gives us a good record to study,” said Bilham. They found five periods when there had been significantly higher numbers of large earthquakes compared with other times. “In these periods, there were between 25 to 30 intense earthquakes a year,” said Bilham. “The rest of the time the average figure was around 15 major earthquakes a year.”
The researchers searched to find correlations between these periods of intense seismic activity and other factors and discovered that when Earth’s rotation decreased slightly it was followed by periods of increased numbers of intense earthquakes. “The rotation of the Earth does change slightly – by a millisecond a day sometimes – and that can be measured very accurately by atomic clocks,” said Bilham. Bilham and Bendick found that there had been periods of around five years when Earth’s rotation slowed by such an amount several times over the past century and a half. Crucially, these periods were followed by periods when the numbers of intense earthquakes increased. “It is straightforward,” said Bilham. “The Earth is offering us a five-year heads-up on future earthquakes.”
Even before this year’s devastating hurricane season, the team of demographers I work with at Penn State and the Puerto Rico Institute of Statistics had predicted that the population of Puerto Rico would decline over the next few decades. Have Hurricanes Irma and María accelerated this trend? Slowing population decline is central to the economic recovery plan drafted by the Puerto Rican government in March of this year. If migration off the island accelerates, it is likely that the government of Puerto Rico will face even greater challenges in meeting that plan’s milestones. Preliminary data from the Puerto Rican Diaspora Study, which I recently concluded, can help shed light on how many Puerto Ricans who have fled the island might return home – and how many are gone for good.
In the two months since María made landfall, Puerto Ricans have left the island in even higher numbers than before. Recent commercial flight passenger data indicate that between Sept. 20, the day Hurricane María made landfall, and Nov. 7, approximately 100,000 people left Puerto Rico. That number exceeds the 89,000 people who left island during all of 2015 and increases by the day. Lack of access to power, drinking water and health care are pushing people out. Recent forecasts of migration out of Puerto Rico from the Center for Puerto Rican Studies at CUNY suggest that, because of Hurricane María, the island may lose up to 470,335 residents, or 14% of its current population, by 2020. This would represent a doubling of migration off the island compared to previous years.
Around 600 African migrants were rescued off the coast of Spain in 24 hours, a sea rescue patrol said Saturday. The Guardia Civil and Salvamento Maritimo rescue service added that operations to recover further migrants were still under way. Spain is the third busiest gateway for migrants arriving in Europe, but far behind Italy and Greece. However, the number of people arriving by sea in Spain has nearly tripled over the last year to 17,687. Many Africans undertaking the long route to Europe are choosing to avoid crossing danger-ridden Libya to get to Italy along the so-called central Mediterranean route, and choosing instead to get there via Morocco and Spain.
On Saturday, most of the migrants arrived in the south-eastern region of Murcia, where 431 people aboard 41 makeshift boats were discovered. Patrols found more than 110 people in the Alboran Sea, between Morocco and Spain’s Andalusian coast. Operations were also conducted in the Strait of Gibraltar, recovering 48 people on four makeshift boats. The rescues were carried out by the Navy, the Guardia Civil police and Salvamento Maritimo. According to the International Organization for Migration (IOM) close to 160,000 people have made the dangerous crossing to Europe this year and almost 3,000 more died or went missing while trying.
More than a year after the UK government pledged to transfer hundreds of child refugees from Greece, the first unaccompanied minor from the country will arrive in London this week. However the 15-year-old Syrian is described by experts as profoundly traumatised because of the delay and has recently attempted to take his own life. Fourteen months have elapsed since the boy was first identified by the Home Office as especially vulnerable and eligible for immediate transfer. It has also emerged that Hammersmith and Fulham council in west London told the Home Office a year ago that it had a place for the teenager, but officials did not act on the offer – a decision that charities say has caused “irreversible damage” to the child, who has lost contact with his family in Syria.
Giannoula Kefala, the council’s principal social worker, said: “From my perspective, the impasse and likely irreversible harm already caused to this extremely vulnerable child is unbearably disturbing.” Kefala said that last December she informed the Home Office of her intention to travel to Greece to assess the boy. “It is absolutely clear from my visit that the long delay has caused this child terrible harm, and that it has been apparent for a long time that the available resources in Greece cannot cater for this child’s needs. Recent hospital records make clear that the ongoing uncertainty is having a devastating impact.” The teenager is currently on heavy psychiatric medication, which worries his doctor but which is believed to be necessary to prevent a fatal outcome.
Until last Monday the youngster was being detained in a police cell with no access to medical professionals, and forced to sleep on a mattress on the floor. On 22 October, police said the boy, after repeated self-harming, had made a suicide attempt and was at “imminent risk of killing himself”. Kefala said she was concerned the boy could die.
With reception centers for migrants on the Aegean islands reaching breaking point, local authorities on Lesvos go on strike on Monday to draw attention to the problem. The island’s mayor, Spyros Galinos, called the general strike last week, noting that the rising migrant population “has fueled insecurity among citizens.” Authorities on Lesvos want the government to move migrants from seriously overcrowded facilities on the islands to the mainland. Around 16,000 migrants have been relocated to the mainland since October last year, but more transfers are needed as dozens continue to reach the islands daily even as the pace of returns to Turkey remains slow. Concerns are also growing about hundreds of migrants living in tents around the reception centers amid worsening weather conditions. The Interior Ministry has said that measures to deal with the winter months will be implemented in phases through the end of December.
More than 50,000 children in Yemen are expected to die by the end of the year as a result of disease and starvation caused by the stalemated war in the country, Save the Children has warned. Seven million people are on the brink of famine in the country, which is in the grips of the largest cholera outbreak in modern history. An estimated 130 Yemeni children are dying every day and an estimated 400,000 children will need treatment for acute malnutrition this year, the charity said. “These deaths are as senseless as they are preventable,” said Tamer Kirolos, Save the Children’s country director for Yemen. “They mean more than a hundred mothers grieving for the death of a child, day after day.”
Eighteen-month-old Nadhira from the Bani Qais district of Hajja, northern Yemen, is suffering from severe acute malnutrition and respiratory diseases. Her mother saved the family’s income for three days to afford to take her to Hajja city for treatment, but her condition deteriorated once again after they were left unable to afford the medicine. “I worry about my family’s food and medicine when they get sick. I want my daughter to live: she’s my biggest concern now. I wish my daughter recovers from her sickness soon,” her mother Shaika said.
The charity has warned the death toll as a result of starvation and disease could be even higher, as the calculations were made before Saudi Arabia tightened a blockade on rebel-held parts of the country in response to a missile fired from rebel territory towards Riyadh international airport this month. The blockade has closed the major entry ports of Hodeidah and Saleef, as well as the airport in the capital Sanaa, which has severely hindered the access of food and aid.
As the equity bull market has climbed into rarefied air, investors have continuously come up with new ways to rationalize the rally. Right now, they like to cite earnings growth, which has expanded for several quarters after a prolonged rough patch. They also frequently mention interest rates that, despite hawkish signals from central banks, have remained low, supplying the market with a seemingly endless supply of cheap money. On the other side of the spectrum, John Hussman, the president of the Hussman Investment Trust and a former economics professor, thinks that the investment community is unwisely ignoring the most stretched valuations in history on the heels of a nearly 300% bull market run. Ever the outspoken bear, Hussman says investors are being willfully ignorant, which has stocks at risk of a drop that could reach 63% and send the market spiraling into a full decade of negative returns.
It wouldn’t be the first time in history this has happened. But Hussman thinks this crash will be different, because the reasons for market instability are “purely psychological” this time around, according to a recent blog post. At the root of Hussman’s pessimistic market view are stock valuations that look historically stretched by a handful of measures. According to his preferred valuation metric — the ratio of non-financial market cap to corporate gross value-added (Market Cap/GVA) — stocks are more expensive than they were in 1929 and 2000, periods that immediately preceded major market selloffs. “US equity market valuations at the most offensive levels in history,” he wrote in his November monthly note. “We expect that more extreme valuations will only be met by more severe losses.”
Those losses won’t just include the 63% plunge referenced above – it’ll also be accompanied by a longer 10 to 12 year period over which the S&P 500 will fall, says Hussman. He cites the chart below, which shows how closely 12-year expected returns for the benchmark have historically tracked Market Cap/GVA, which is shown in inverted fashion. Note that the expected trajectory for Market Cap/GVA shows the S&P 500 veering into negative territory. The psychology behind the market’s willingness to accept lofty stock valuations stems from the flawed rationale that prices are justified by low interest rates, says Hussman. To him, the US economy is growing too slowly for this to be true, and that any belief to the contrary gives people false confidence.
Millions of Americans are living on the edge. One in five households has zero or negative wealth, according to a report released this week by the Institute for Policy Studies, a progressive think tank based in Washington, D.C. What’s more, an even greater share of African-American (30%) and Latino (27%) households are “underwater” financially. The combined impact of $1 trillion in credit-card debt, $1.4 trillion in student loan debt, and stagnant wages are taking a toll. U.S. homes have regained value since the Great Recession, but many households have not. “Millions of American families struggle with zero or negative wealth, meaning they owe more than they own,” the report found. “This means that they have nothing to fall back on if an unexpected expense comes up like a broken down car or illness.” And inequality could get worse through new tax cuts for the wealthy.
President Trump’s tax proposals won’t give America’s middle class the reprieve they need to grow their wealth and recover from the financial crash, said Josh Hoxie, who heads up the Project on Opportunity and Taxation at the Institute for Policy Studies. A recent analysis by the Joint Committee on Taxation concluded that taxes would decline for all income groups, with the biggest percentage-point decline for millionaires. After-tax income would rise by nearly 7% for households earning over $1 million per year, compared to less than 2% for those earning between $50,001 and $1 million, as MarketWatch recently reported. And less than 1% for those earning less than $50,000, according to Ernie Tedeschi, an economist at Evercore IS investment banking advisory firm who worked in the Treasury Department under President Obama.
Looking at private income, such as earnings and dividends, and government benefits like Social Security, the income of families near the top increased roughly 90% from 1963 to 2016, while the income of families at the bottom rose less than 10%, according to a separate report released last month by the Urban Institute, a nonprofit policy group based in Washington, D.C., while most other groups have been left behind. And that gap between rich and poor is only going to get worse, Hoxie said. The wealthiest 25 individuals in the U.S., including co-founder Bill Gates, Amazon CEO Jeff Bezos and Facebook CEO Mark Zuckerberg, own $1 trillion in combined assets. These 25 — a group equivalent to the active roster of a major league baseball team — hold more wealth than the bottom 56% of the U.S. population.
Between the FAANG quintet and China’s rivaling BAT companies, gains in the world’s top technology shares are nearing a whopping $1.7 trillion in market value this year. That’s more than Canada’s entire economy, and exceeds the worth of Germany’s biggest 30 companies put together. The eight tech giants – Facebook, Amazon, Apple, Netflix and Google parent Alphabet, as well as their Asian peers Baidu, Alibaba and Tencent – have amassed as much money in 2017 as PIMCO, one of the world’s biggest fund managers, has done in about 46 years. While the stocks have seen a meteoric rise this year, their combined market value came off highs last week amid a global selloff in which the year’s high flyers had a bigger retreat. A recent breakdown in the correlation between high-yield bonds and the tech-heavy Nasdaq 100 Index suggests the slide in junk may spread further.
Bitcoin plunged as the cancellation of a technology upgrade prompted some users to switch out of the cryptocurrency, spooking speculators who had profited from a more than 800% surge this year. The cryptocurrency has dropped 9.5% since late Friday, extending its slide from last week’s record to as much as 29%, according to data compiled by Coinmarketcap.com and Bloomberg. Bitcoin cash, a rival that split from the original bitcoin in August, has jumped nearly 40% since Friday. Bitcoin cash is gaining popularity because of its larger block size, a characteristic that makes transactions cheaper and faster than the original. When a faction of the cryptocurrency community canceled plans to increase bitcoin’s block size on Wednesday – a move that would have created another offshoot – some supporters of bigger blocks rallied around bitcoin cash.
The resulting volatility has been extreme even by bitcoin’s wild standards and comes amid growing interest in cryptocurrencies among regulators, banks and fund managers. While skeptics have called bitcoin’s rapid advance a bubble, it has become too big for many on Wall Street to ignore. Even after shrinking by as much as $38 billion since Wednesday, bitcoin boasts a market value of $101 billion. Supporters of bitcoin’s technology upgrade “are now switching support to bitcoin cash,” said Mike Kayamori, head of Tokyo-based Quoine, the world’s second most-active bitcoin exchange over the past day. “There’s a panic about what’s happening. People shouldn’t panic. Just hold on to both coins until we see how it plays out.”
The path to draining the swamp is a circuitous one but, in my mind, it’s hard to argue where things are headed. They are not headed towards confrontation with Iran but actually the opposite. The most rabidly anti-Iranian segment of the Saudi Royal house is impoverished and imprisoned. CNN will be sold and go out of business to allow for the Time-Warner/AT&T merger. Jeff Zucker is out. Add another scalp to Steve Bannon’s belt along with Harvey Weinstein, Kevin Spacey and so many to come. Will the vestiges of the neoconservative establishment in the U.S. and Israel continue to sabre-rattle and try to undermine what is happening? Yes.
They’ve been doing that since the day Trump was elected just over a year ago, but it hasn’t stopped the momentum. Why? Because Putin was on the job outmaneuvering them at every turn. Trump made a deal with the neocons back in August to cede them control of foreign policy and, in effect, outsourced cleaning up the Middle East to Putin. But, predictably they also didn’t follow through with their end of the bargain. Trump learned, like Putin did, the John McCain’s of the world don’t keep to their deals. They are ‘not agreement capable.’ And, as such, since the last failure to repeal Obamacare Trump has gone after every pillar of support these people had. It will end with Hillary Clinton’s indictment. But in the meantime it will look like the world is on the brink of world war.
The China Beige Book, CBB, says that China had been covering up and smoothing over problems related to weak growth and excessive debt in order to provide a calm face to the world in advance of the National Congress of the Communist Party of China, which took place last month. CBB also makes it clear that the much-touted “rebalancing” of the Chinese economy away from investment and manufacturing toward consumption and spending has not occurred. Instead China has doubled down on excess capacity in coal, steel and manufacturing and has continued its policy of wasteful investment fueled with unpayable debt. It’s become obvious that the first cracks are starting to appear in China’s Great Wall of Debt. The Chinese debt binge of the past 10 years is a well-known story.
Chinese corporations have incurred dollar-denominated debts in the hundreds of billions of dollars, most of which are unpayable without subsidies from Beijing. China’s debt-to-equity ratio is over 300%, far worse than America’s (which is also dangerously high) and comparable to that of Japan and other all-star debtors. China’s trillion-dollar wealth management product (WMP) market is basically a Ponzi scheme. New WMPs are used to redeem maturing WMPs, while most of the market is simply rolled over because the underlying real estate and infrastructure projects cannot possibly repay their debts. A lot of corporate lending is simply one company lending to another, which in turns lends to another, giving the outward appearance of every company holding good assets, but in which none of the companies can actually pay its creditors.
It’s an accounting game with no real money behind it and no chance of repayment. All of this is well-known. What is not known is when it will end. When will confidence be lost in such a way that the entire debt house of cards crumbles? When will a geopolitical shock or natural disaster trigger a loss of confidence that ignites a financial panic? There was little prospect of this in the past year because President Xi Jinping was keeping a lid on trouble before the recently concluded National Congress of the Communist Party of China. With the congress behind him, Xi is ready to undertake reform of the financial system, which means shutting down insolvent companies and banks. Now the first bankruptcies have begun to appear.
The tensions in Theresa May’s government intensified on Sunday night ahead of this week’s vital votes on the Brexit bill, as ministers accused Boris Johnson and Michael Gove of sending an “Orwellian” set of secret demands to No 10. As an increasingly weakened prime minister faces the possibility of parliamentary defeats on the bill, government colleagues have said they are aghast at the language used by the foreign secretary and the environment secretary in a joint private letter. The leaked letter – a remarkable show of unity from two ministers who infamously fell out during last year’s leadership campaign – appeared to be designed to push May decisively towards a hard Brexit and limit the influence of former remainers. It complained of “insufficient energy” on Brexit in some parts of the government and insisted any transition period must end in June 2021 – a veiled attack on the chancellor, Philip Hammond.
They urged the prime minister to ensure members of her top team fall behind their Brexit plans by “clarifying their minds” and called for them to “internalise the logic”. But the leak drew a bitter response from supporters of a soft Brexit, who suggested that May would now be forced to either discipline the pair or further weaken her position, which has already been tested by the recent resignations of Priti Patel and Michael Fallon and continuing pressure on Johnson and Damian Green. One cabinet minister told the Guardian: “It is not surprising that they [Gove and Johnson] would express their view. But what is surprising is that they would write this down and use this kind of language in a letter to the prime minister. “Some have described it as Orwellian, and it is. It is not helpful when people try and press their views in untransparent way.”
More than a third of home owners trying to sell their house have been forced to reduce their asking price, with the number of price cuts at their highest level since 2012, according to Rightmove. Traditionally house sellers are often forced to cut asking prices in the pre-Christmas period but this year the nation appears to be holding a collective autumn sale, said the property website. Rightmove, which claims to list 90% of the houses being sold in the UK, said 37% of current sellers had dropped their asking price, with a typical 0.8% or £2,392 price reduction. It also warned that those who recently put their property on the market were being too optimistic by not discounting by more. The mass price cut will be seen as further evidence that the market has slowed dramatically, particularly in London where prices have been falling.
Last week the Royal Institution of Chartered Surveyors said the overall UK property market had stalled. Rics also warned that it expected the market to remain subdued in the coming months as sales stay flat or fall in most regions. Rightmove director, Miles Shipside, said the slowdown in the housing market, the recent interest rate rise and the prediction that further rises were on the horizon suggested bigger reductions in house prices in the near future. “Given that the market has been price-sensitive for a while and a five-year high proportion of sellers are slashing their prices, some sellers and their agents are over-pricing. These sellers may well be asking themselves if they could have saved some time and stress by pricing a lot more conservatively at the start.”
The burning of fossil fuels around the world is set to hit a record high in 2017, climate scientists have warned, following three years of flat growth that raised hopes that a peak in global emissions had been reached. The expected jump in the carbon emissions that drive global warming is a “giant leap backwards for humankind”, according to some scientists. However, other experts said they were not alarmed, saying fluctuations in emissions are to be expected and that big polluters such as China are acting to cut emissions. Global emissions need to reach their peak by 2020 and then start falling quickly in order to have a realistic chance of keeping global warming below the 2C danger limit, according to leading scientists. Whether the anticipated increase in CO2 emissions in 2017 is just a blip that is followed by a falling trend, or is the start of a worrying upward trend, remains to be seen.
Much will depend on the fast implementation of the global climate deal sealed in Paris in 2015 and this is the focus of the UN summit of the world’s countries in Bonn, Germany this week. The nations must make significant progress in turning the aspirations of the Paris deal into reality, as the action pledged to date would see at least 3C of warming and increasing extreme weather impacts around the world. The 12th annual Global Carbon Budget report published on Monday is produced by 76 of the world’s leading emissions experts from 57 research institutions and estimates that global carbon emissions from fossil fuels will have risen by 2% by the end of 2017, a significant rise.
“Global CO2 emissions appear to be going up strongly once again after a three-year stable period. This is very disappointing,” said Prof Corinne Le Quéré, director of the Tyndall Centre for Climate Change Research at the UK’s University of East Anglia and who led the new research. “The urgency for reducing emissions means they should really be already decreasing now.” “There was a big push to sign the Paris agreement on climate change but there is a feeling that not very much has happened since, a bit of slackening,” she said. “What happens after 2017 is very open and depends on how much effort countries are going to make. It is time to take really seriously the implementation of the Paris agreement.” She said the hurricanes and floods seen in 2017 were “a window into the future”.
In early 2016, agri-business giant Monsanto faced a decision that would prove pivotal in what since has become a sprawling herbicide crisis, with millions of acres of crops damaged. Monsanto had readied new genetically modified soybeans seeds. They were engineered for use with a powerful new weed-killer that contained a chemical called dicamba but aimed to control the substance’s main shortcoming: a tendency to drift into neighboring farmers’ fields and kill vegetation. The company had to choose whether to immediately start selling the seeds or wait for the U.S. Environmental Protection Agency (EPA) to sign off on the safety of the companion herbicide. The firm stood to lose a lot of money by waiting.
Because Monsanto had bred the dicamba-resistant trait into its entire stock of soybeans, the only alternative would have been “to not sell a single soybean in the United States” that year, Monsanto Vice President of Global Strategy Scott Partridge told Reuters in an interview. Betting on a quick approval, Monsanto sold the seeds, and farmers planted a million acres of the genetically modified soybeans in 2016. But the EPA’s deliberations on the weed-killer dragged on for another 11 months because of concerns about dicamba’s historical drift problems. That delay left farmers who bought the seeds with no matching herbicide and three bad alternatives: Hire workers to pull weeds; use the less-effective herbicide glyphosate; or illegally spray an older version of dicamba at the risk of damage to nearby farms.
The resulting rash of illegal spraying that year damaged 42,000 acres of crops in Missouri, among the hardest hit areas, as well as swaths of crops in nine other states, according to an August 2016 advisory from the U.S. Environmental Protection Agency. The damage this year has covered 3.6 million acres in 25 states, according to Kevin Bradley, a University of Missouri weed scientist who has tracked dicamba damage reports and produced estimates cited by the EPA. The episode highlights a hole in a U.S regulatory system that has separate agencies approving genetically modified seeds and their matching herbicides.
Monsanto has blamed farmers for the illegal spraying and argued it could not have foreseen that the disjointed approval process would set off a crop-damage crisis. But a Reuters review of regulatory records and interviews with crop scientists shows that Monsanto was repeatedly warned by crop scientists, starting as far back as 2011, of the dangers of releasing a dicamba-resistant seed without an accompanying herbicide designed to reduce drift to nearby farms.
When it comes to the herbicide dicamba, farmers in the southern state of Arkansas are not lacking for strong opinions. “Farmers need it desperately,” said Perry Galloway. “If I get dicamba on (my products), I can’t sell anything,” responded Shawn Peebles. The two men know each other well, living just miles apart in the towns of Gregory and Augusta, in a corner of the state where cotton and soybean fields reach to the horizon and homes are often miles from the nearest neighbor. But they disagree profoundly on the use of dicamba. Last year the agro-chemical giant Monsanto began selling soy and cotton seeds genetically modified to tolerate the herbicide. The chemical product has been used to great effect against a weed that plagues the region, Palmer amaranth, or pigweed – especially since it became resistant to another herbicide, glyphosate, which has become highly controversial in Europe over its effects on human health.
The problem with dicamba is that it vaporizes easily and is carried by the wind, often spreading to nearby farm fields – with varying effects. Facing a surge in complaints, authorities in Arkansas early this summer imposed an urgent ban on the product’s sale. The state is now poised to ban its use between April 16 and October 31, covering the period after plants have emerged from the soil and when climatic conditions favor dicamba’s dispersal.
Abdulaziz al-Husseinya lies skeletal and appears lifeless in a hospital in Yemen’s western port city of Hodeidah. At the age of nine, he weighs less than one and a half stone, and is one of hundreds of thousands of children in the country suffering from acute malnutrition. Seven million people are on on the brink of famine in war-torn Yemen, which was already in the grip of the world’s worst cholera outbreak when coalition forces led by Saudi Arabia tightened its blockade on the country last week, stemming vital aid flows. Al-Thawra hospital, where Abdulaziz is being treated, is reeling under the pressure of more than two years of conflict between the Saudi-led coalition and Iranian-allied Houthi rebels. Its corridors are packed, with patients now coming from five surrounding governorates to wait elbow-to-elbow for treatment.
Less than 45% of the country’s medical facilities are still operating – most have closed due to fighting or a lack of funds, or have been bombed by coalition airstrikes. As a result, Al-Thawra is treating some 2,500 people a day, compared to 700 before the conflict escalated in March 2015. [..] Aid agencies are now warning that Yemen’s already catastrophic humanitarian crisis could soon become a “nightmare scenario” if Saudi Arabia does not ease the blockade of the country’s land, sea and air ports – a move that the kingdom insists is necessary after Houthi rebels fired a ballistic missile towards Riyadh’s international airport this month. United Nations humanitarian flights have been cancelled for the past week and the International Committee of the Red Cross (ICRC), along with Médecins Sans Frontières (MSF), have been prevented from flying vital medical assistance into the country.
More than 20 million Yemenis – over 70% of the population – are in need of humanitarian assistance that is being blocked. Following international pressure, the major ports of Aden and Mukalla were reopened last week for commercial traffic and food supplies, along with land border crossings to neighbouring Oman and Saudi Arabia, but humanitarian aid and aid agency workers remained barred from entering the country on Sunday. UN aid chief Mark Lowcock has said if the restrictions remain, Yemen will face “the largest famine the world has seen for many decades, with millions of victims”.
Anecdote: “The most common example is a ball sitting atop a hill,” she said, polished accent, hint of condescension. “Locally stable, but one nudge and it’s all over.” She drove terribly fast, discussing Minsky Moments; the idea that persistent stability breeds instability. “Naturally each cycle is different in key respects, and that’s because you’re far better at preventing past problems from recurring than new ones from arising.” I smiled, amused, insulted. “Despite knowing this all too well, you humans remain inexplicably fixated on the rearview mirror. And this blinds you to all manner of hazards ahead.”
She initiated a few perfect turns of the Tesla, dodging a squirrel or two, tumbling, unhurt. “The source of instability in this cycle is your dissatisfaction with ultra-low bond yields.” $8trln of sovereign debt carries a negative yield, still our central bankers buy. “You should logically respond to this historic rise in valuations across asset classes with a reduction in your expectations for future returns.” I nodded. “But instead you respond with indignation.” So I explained to her that without robust growth and a compounding stream of uninterrupted 7.5% returns, our entitlement systems will implode. They probably will anyway. And lacking the stomach for an honest accounting of this predicament, we prefer to pretend it doesn’t exist.
“Is this humor or sarcasm?” she asked. “Both,” I answered. “Fascinating, anyhow, you then demand that we algorithms produce mathematically impossible returns. So we apply leverage, which makes nearly anything possible, even at valuations that are 99th percentile in all of human history. The more leverage we apply, the more stable your system appears. The flatter your hilltop. Naturally, we ensure that today’s leverage looks different from yesterday’s disaster, recognizing your powerful aversion to repeating recent mistakes.” And I stared out the window, lost in thought, fall’s kaleidoscope whizzing by.
An anti-corruption probe that has purged Saudi Arabian royals, ministers and businessmen appeared to be widening on Monday after the founder of one of the kingdom’s biggest travel companies was reportedly detained. Shares in Al Tayyar Travel plunged 10 percent in the opening minutes of trade after the company quoted media reports as saying Nasser bin Aqeel al-Tayyar, who is still a board member, had been held by authorities. The company gave no details but online economic news service SABQ, which is close to the government, reported Tayyar had been detained in an investigation by a new anti-corruption body headed by Crown Prince Mohammed bin Salman.
Dozens of people have been detained in the crackdown, which has consolidated Prince Mohammed’s power while alarming much of the traditional business establishment. Billionaire Prince Alwaleed bin Talal, Saudi Arabia’s best-known international investor, is also being held, officials said at the weekend. The front page of Okaz, a leading Saudi newspaper, challenged businessmen on Monday to reveal the sources of their assets, asking: “Where did you get this?” in a bright red headline. Pan-Arab newspaper Al-Asharq Al-Awsat reported that a no-fly list had been drawn up and security forces in some Saudi airports were barring owners of private jets from taking off without a permit.
Among those detained are 11 princes, four ministers and tens of former ministers, according to Saudi officials. The allegations against the men include money laundering, bribery, extorting officials and taking advantage of public office for personal gain, a Saudi official told Reuters. Those accusations could not be independently verified and family members of those detained could not be reached. A royal decree on Saturday said the crackdown was in response to “exploitation by some of the weak souls who have put their own interests above the public interest, in order to, illicitly, accrue money”.
The Saudi-led coalition battling Shiite Huthi rebels in Yemen closed the country’s air, sea and land borders Monday and accused Iran of being behind a weekend missile attack on Riyadh, saying it “may amount to an act of war”. Saudi Arabia intercepted and destroyed the ballistic missile, which was launched from Yemen as rebels appeared to escalate hostilities, near Riyadh’s international airport on Saturday. The missile was the first aimed by the Shiite rebels at the heart of the Saudi capital, underscoring the growing threat posed by the raging conflict. “The leadership of the coalition forces therefore considers this… a blatant military aggression by the Iranian regime which may amount to an act of war,” the official Saudi news agency SPA said in a statement.
Smouldering debris landed inside the King Khalid International Airport, just north of Riyadh, after the missile was shot down but authorities reported no major damage or loss of life. Yemen’s complex war pits the Saudi-backed government of President Abedrabbo Mansour Hadi against former president Ali Abdullah Saleh and his Iran-backed Huthi rebel allies. The Saudi statement said that the borders were being closed “to fill the gaps in the inspection procedures which enable the continued smuggling of missiles and military equipment to the Huthi militias loyal to Iran in Yemen”. Despite the temporary closure of the air, sea and land ports, Saudi would protect “the entry and exit of relief and humanitarian personnel”. “The coalition… affirms the kingdom’s right to respond to Iran at the appropriate time and in the appropriate form,” it added.
The world’s biggest businesses, heads of state and global figures in politics, entertainment and sport who have sheltered their wealth in secretive tax havens are being revealed this week in a major new investigation into Britain’s offshore empires. The details come from a leak of 13.4m files that expose the global environments in which tax abuses can thrive – and the complex and seemingly artificial ways the wealthiest corporations can legally protect their wealth. The material, which has come from two offshore service providers and the company registries of 19 tax havens, was obtained by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists with partners including the Guardian, the BBC and the New York Times. The project has been called the Paradise Papers. It reveals:
• Millions of pounds from the Queen’s private estate has been invested in a Cayman Islands fund – and some of her money went to a retailer accused of exploiting poor families and vulnerable people. • Extensive offshore dealings by Donald Trump’s cabinet members, advisers and donors, including substantial payments from a firm co-owned by Vladimir Putin’s son-in-law to the shipping group of the US commerce secretary, Wilbur Ross. • How Twitter and Facebook received hundreds of millions of dollars in investments that can be traced back to Russian state financial institutions. • The tax-avoiding Cayman Islands trust managed by the Canadian prime minister Justin Trudeau’s chief moneyman. • A previously unknown $450m offshore trust that has sheltered the wealth of Lord Ashcroft.
• Aggressive tax avoidance by multinational corporations, including Nike and Apple.• How some of the biggest names in the film and TV industries protect their wealth with an array of offshore schemes. • The billions in tax refunds by the Isle of Man and Malta to the owners of private jets and luxury yachts.• The secret loan and alliance used by the London-listed multinational Glencore in its efforts to secure lucrative mining rights in the Democratic Republic of the Congo. •The complex offshore webs used by two Russian billionaires to buy stakes in Arsenal and Everton football clubs.
The disclosures will put pressure on world leaders, including Trump and the British prime minister, Theresa May, who have both pledged to curb aggressive tax avoidance schemes. The publication of this investigation, for which more than 380 journalists have spent a year combing through data that stretches back 70 years, comes at a time of growing global income inequality. Meanwhile, multinational companies are shifting a growing share of profits offshore – €600bn in the last year alone – the leading economist Gabriel Zucman will reveal in a study to be published later this week. “Tax havens are one of the key engines of the rise in global inequality,” he said. “As inequality rises, offshore tax evasion is becoming an elite sport.”
The offshore finance industry puts trillions of dollars worldwide beyond the taxman’s reach. Bringing it to heel is like taming a cat; not just a normal moggy – a thankless task in itself – but a Cheshire Cat: nebulous, hard to pin down, disappearing and reappearing when it likes. No-one can actually agree on what a tax haven is. Or even on the name: one person’s tax haven is another’s “offshore financial centre”. No-one can agree on how many there are. Nor on exactly how much money is stashed offshore. No statistics are fully reliable. And this suits those who operate in offshore finance, from the owner of the wealth to the lawyer or accountant middlemen who manage the funds, to the often sun-kissed beaches of the jurisdictions where they are secluded or pass through. The industry’s key word is privacy. Or secrecy – a word it doesn’t like so much.
One adage cited by the taxation author and expert Nicholas Shaxson sums it up: “Those who know don’t talk. And those who talk don’t know.” But do we really not know how much is stashed offshore? A report this September, co-authored by the economist Gabriel Zucman, estimates about 10% of global GDP – the way we measure the size of the world’s economy – is held offshore, about $7.8tn (£6tn) . The Boston Consulting Group reported it last year at about $10tn. If you are thinking, wow, that’s bigger than Japan’s economy, you’d be right. But if you want a real wow, try $36tn – the estimate offered by James Henry, author of the book Blood Bankers. That’s twice as big as the US economy.
But no-one really knows. And here’s another wow. Remember the slogan “we are the 99%” coined by the Occupy movement to lambast the top 1% of the population for their disproportionate share of wealth? Well, the Zucman report says 80% of all offshore cash is owned by 0.1% of the richest households, with 50% held by the top 0.01%. So if you read this and are thinking, if you can’t beat them… quite frankly, it’s unlikely you will ever join them.
Millions of pounds from the Queen’s private estate has been invested in a Cayman Islands fund as part of an offshore portfolio that has never before been disclosed, according to documents revealed in an investigation into offshore tax havens. Files from a substantial leak show for the first time how the Queen, through the Duchy of Lancaster, has held and still holds investments via funds that have put money into an array of businesses, including the off-licence chain Threshers, and the retailer BrightHouse, which has been criticised for exploiting thousands of poor families and vulnerable people. The duchy admitted it had no idea about its 12-year investment in BrightHouse until approached by the Guardian and other partners in an international project called the Paradise Papers.
Though the duchy characterised its stake in BrightHouse as negligible, it would not disclose the size of its original 2005 investment, which coincided with a boom in the company’s value. BrightHouse has since been accused of overcharging customers, and using hard sell tactics on people with mental health problems and learning disabilities. Last month, it was ordered to pay £14.8m in compensation to 249,000 customers. Critics are likely to ask why the Queen had money in there in the first place, and the duchy may face awkward questions about whether there was enough oversight and management of the Queen’s “onward investments” to ensure they remained ethical. The duchy has also disclosed investments in “a few overseas funds”, including one in Ireland, and will be under pressure to give details of where the money is being held.
Seven years of cuts to tax credits and universal credit have hugely eroded their role in supposedly rewarding people for working, leaving many families thousands of pounds a year worse off, a study has concluded. Ministers’ promises that the systems would benefit families for taking on more work had effectively been broken because of the cuts, according to the report by the Child Poverty Action Group (CPAG) and the Institute for Public Policy Research thinktank. The study, titled Austerity Generation, details what it says are the huge numbers of families with children pushed into poverty due to cuts and freezes to benefits, as well as measures such as the new two-child limit for payments. It calls for the chancellor, Philip Hammond, to tackle the issue in next month’s budget by restoring previous levels of universal credit work allowances, the amount of monthly income that can be earned without penalty. These were cut in April 2016.
It also seeks a pension-style triple lock of the child benefit and child credit element of universal credit, ensuring it kept pace with prices and earnings. This alone, the report argues, would keep 600,000 children out of poverty. Introduced in 2003, working tax credits are intended to top up low earnings. It is among a series of benefits replaced by universal credit, which is gradually being rolled out nationally and is intended to incentivise working. But, according to the report, cuts have eroded much of this effect for families. It calculates that a couple with two young children, one working full-time and the other part-time on the national living wage, will lose more than £1,200 a year due to universal credit cuts. Another example given is that of a single parent with two young children who starts work at 12 hours a week on the national living wage and will have an effective hourly wage of £4.18, as opposed to £5.01 before the cuts.
Britain’s economy would be “booming” if not for Brexit, the Governor of the Bank of England has said. Mark Carney said businesses were waiting for the outcome of Theresa May’s negotiations with the EU before making investment decisions, which was slowing down economic growth. He said the bank’s predictions for foreign investment in Britain was now 20 per cent lower than they estimated in the month before the referendum. Speaking to Peston on Sunday, he said: “Since the referendum, what we’re seeing is that business investment has picked up, but it hasn’t picked up to any of the extent that one would have expected given how strong the world is, how easy financial conditions are, how high profitability is and how little spare capacity they have. Despite acknowledging the strength of economy, Mr Carney warned: “It should really be booming, but it’s just growing.
“I think we know why that’s the case, because they’re waiting to see the nature of the deal with the European Union. “It’s the most important investment destination and [businesses] need to know transition and end state, everybody knows this, the government knows it and is working on it, UK businesses know it and the Europeans know it.” Asked if the economy would take a hit if the UK left the EU without a Brexit deal, he said: “In the short term, without question, if we have materially less access (to the EU’s single market) than we have now, this economy is going to need to reorient and during that period of time it will weigh on growth.” He added that in the event of a bad Brexit deal, the bank would not be able to cut future interest rates because of that inflationary pressure.
Most European businesses plan to cut back orders from British suppliers because of the slow progress of Brexit talks, a survey of company managers showed on Monday. 63% of non-British European companies expect to move some of their supply chain out of Britain, up from 44 percent in May, the Chartered Institute of Procurement and Supply (CIPS) said. With only 17 months left until Britain is due to exit the EU, the lack of clear progress in the negotiations has raised fears among executives of an abrupt departure with no transition. Monday’s survey raised the prospect of disruption for British manufacturers with EU clients. On Sunday, the Confederation of British Industry said almost two in three British firms will have implemented Brexit contingency plans by March if Britain and the rest of the EU have not struck a transitional deal by then.
Britain and the EU said last week they were ready to speed up talks, but CIPS said it was already too late for scores of businesses that look likely to be dropped by European customers. “British businesses simply cannot put their suppliers and customers on hold while the negotiators get their act together,” said Gerry Walsh, CIPS’ group CEO. “The lack of clarity coming from both sides is already shaping the British economy of the future – and it does not fill businesses with confidence.” British finance minister Philip Hammond said last month that a transition deal needed to be struck by early 2018. CIPS said a fifth of British businesses were struggling to secure contracts that extend beyond March 2019, the date Britain is due to leave the EU.
Labour is to warn ministers on Monday that they risk being held in contempt of parliament if they do not immediately release dozens of papers outlining the economic impact of Brexit. The government conceded last week that it had to publish the 58 studies covering various parts of the economy after the move was supported in a Labour opposition motion that was passed unanimously on Wednesday. While normal opposition motions are advisory, Labour presented this one as a “humble address”, a rare and antiquated procedure which the Speaker, John Bercow, advised was usually seen as binding. The leader of the Commons, Andrea Leadsom, said on Thursday that the government accepted the motion as binding, and that “the information will be forthcoming”.
However, she gave no timescale – the government has previously said it will respond to opposition motions within 12 weeks – and indicated some elements of the papers would need to be redacted to avoid “disclosing information that could harm the national interest”. The Labour motion called for the papers to be released immediately to the Brexit select committee, which has a majority of Conservative MPs, and which would then decide what elements should not be published more widely. The shadow Brexit secretary, Keir Starmer, has warned that Labour will refer the matter to Bercow over possible contempt if the studies are not passed to the committee before parliament’s one-week recess begins on Tuesday.
The parliamentary rulebook, known as Erskine May after its 19th-century author, says actions that obstruct or impede the Commons “in the performance of its functions, or are offences against its authority or dignity, such as disobedience to its legitimate commands” be can viewed as contempt. MPs held in contempt can be asked to apologise, suspended or even expelled by their fellows. Offenders can also theoretically be confined to a room in the Big Ben clock tower, although this power has not been used since 1880.
China’s shadow banking sector, estimated by some analysts to be worth 122.8 trillion yuan ($18.5 trillion), stopped growing in the first half of the year as issuance of wealth management products declined, according to Moody’s Investors Service. For the first time since 2012, China’s gross domestic product grew faster than shadow banking assets in the six-month period, Moody’s said in a statement Monday. Following last month’s Communist Party Congress, further regulation will continue to rein in shadow banking and address some of the key systemic imbalances, Moody’s said. While Moody’s assessment offers some evidence that China’s crackdown on shadow financing is starting to bite, authorities continue to sound the alarm on high debt levels.
In an article on the People’s Bank of China’s website late Saturday, Governor Zhou Xiaochuan pointed to latent risks that are “hidden, complex, sudden, contagious and hazardous.” Government, household and corporate debt adds up to about 260 percent of the economy, according to Bloomberg Intelligence. Moody’s said that shadow banking assets accounted for 83 percent of GDP on June 30, down from a peak of 87 percent in 2016. Michael Taylor, the company’s chief credit officer for the Asia-Pacific region, said “core shadow banking activity,” including entrusted loans, trust loans, and undiscounted bankers’ acceptances, continues to expand even as regulation has had an effect.
A Belgian judge has released the ousted Catalan leader, Carles Puigdemont, and four of his ministers under certain conditions after a hearing lasting more than 10 hours. Puigdemont, who faces charges of misuse of public funds, disobedience and breach of trust relating to the secessionist campaign, turned himself in to Belgian police earlier on Sunday. The judge decided to grant them conditional release late in the evening pending a ruling by a court within the next 15 days whether to execute the European arrest warrant issued by Spain. The five have been told they must not leave the country and stay in a fixed address. “The request made by the Brussels’ Prosecutor’s Office for the provisional release of all persons sought has been granted by the investigative judge,” a statement from the federal prosecutor’s office said.
On Friday, the Spanish government had issued European arrest warrants against Puigdemont, Antoni Comín, Clara Ponsatí, Meritxell Serret and Lluís Puig for trying to “illegally change the organisation of the state through a secessionist process that ignores the constitution”. The formal charges, punishable by 30 years in prison, are rebellion, sedition, embezzlement of public funds and disobedience to authority, for their role in organising the referendum on Catalan independence on 1 October. The secessionist politicians fled to Belgium on Monday after the Spanish authorities removed Puigdemont and his cabinet from office for pushing ahead with a declaration of independence following an illegal referendum. From his self-imposed exile, Puigdemont claimed he would not receive a fair trial in Spain but promised to cooperate with the Belgian justice system.
[..] In a sign of the growing headache the crisis is causing the Belgian coalition government, the country’s deputy prime minister, Jan Jambon, from the Flemish nationalist party, questioned Spain’s handling of the crisis in Catalonia and suggested the EU should intervene. “When the police hit people, we can still ask questions,” he said. “When the Spanish state has locked two opinion leaders, I have questions. And now the Spanish government will act in the place of a democratically elected government? “Members of a government are put in prison. What have they done wrong? Simply apply the mandate they received from their constituents.”
No matter how much you earn, getting by is still a struggle for most people these days. 78% of full-time workers said they live paycheck to paycheck, up from 75% last year, according to a recent report from CareerBuilder. Overall, 71% of all U.S. workers said they’re now in debt, up from 68% a year ago, CareerBuilder said. While 46% said their debt is manageable, 56% said they were in over their heads. About 56% also save $100 or less each month, according to CareerBuilder. The job-hunting site polled over 2,000 hiring and human resource managers and more than 3,000 full-time employees between May and June.
Most financial experts recommend stashing at least a six-month cushion in an emergency fund to cover anything from a dental bill to a car repair — and more if you are the sole breadwinner in your family or in business for yourself. While household income has grown over the past decade, it has failed to keep up with the increased cost-of-living over the same period. Even those making over six figures said they struggle to make ends meet, the report said. Nearly 1 in 10 of those making $100,000 or more said they usually or always live paycheck to paycheck, and 59% of those in that salary range said they were in the red.
Henry Paulson. Hank. Remember him? Of the crisis in 2008, he said: “Where I come from, if someone takes a risk and they’re going to make the profit from that risk, they shouldn’t have the taxpayer pay for the losses.” Quite the wisdom one expects from the 74th US Secretary of the Treasury. Yet, as Paulson played pass the parcel with the rest of us, it was he who unwrapped the final layer when the music stopped, and discovered that the prize within was a grenade. Understandable, therefore, that he offered a second opinion somewhat in contrast to his first: “It’s better to have the taxpayer pay for the losses than have the United States of America become an economic wasteland. If the financial system collapses, it’s really, really hard to put it back together again.”
Well, it did, and it was. Two years after the fall of Lehman Brothers, former Federal Reserve chairman Alan Greenspan was still reflecting on the solution. “There are two fundamental reforms we need — to get adequate capital and… far higher levels of enforcements of… fraud statutes.” So what progress has been made in the efforts to reduce the risks of another crisis? Not enough. In a letter this year to Bank of England’s Governor, Mark Carney, (in his capacity as chairman of the Financial Stability Board), the Senior Supervisors Group reported that “firms’ progress toward consistent, timely, and accurate reporting of top counterparty exposures fails to meet supervisory expectations”. It said there is still too little reform, and too little essential knowledge of counterparty risk.
But what of Greenspan’s assertions of criminal behaviour in financial markets? Again, no change. Market manipulation is not a conspiracy theory. The Bank of Japan has manoeuvred its bond market to a point where bond futures no longer trade. Its interventions have distorted free-market pricing mechanisms to the point that risk is virtually impossible to quantify. But the most pressing concern is the behaviour of central banks, which had previously appeared a solid safe haven.
The signs are everywhere for those willing to look: something has changed beneath the surface of complacent faith in permanent growth. This is more intuitive than quantitative, but my gut feeling is that the economy just stumbled off a cliff. Neither the cliff edge nor the fatal misstep are visible yet; both remain in the shadows of the intangible foundation of the economy: trust, animal spirits, faith in authorities’ management, etc. Since credit expansion is the lifeblood of the global economy, let’s look at credit expansion. Courtesy of Market Daily Briefing, here is a chart of total credit in the U.S. and a chart of the%age increase of credit. Notice the difference between credit expansion in 1990 – 2008 and the expansion of 2009 – 2017. Credit expanded by a monumental $40+ trillion in 1990 – 2008 without any monetary easing (QE) or zero-interest rate policy (ZIRP). The expansion of 2009 – 2017 required 8 long years of massive monetary/fiscal stimulus and ZIRP.
This chart of credit change (%) reveal just how lackluster the current expansion of credit has been, despite unprecedented trillions of stimulus pumped into the financial sector.
Back in the real world, have you noticed a slowing of animal spirits borrowing and spending? Have you tightened up your household budget recently, or witnessed cutbacks in the spending habits of friends and family? Have you noticed retail parking lots aren’t very full nowadays, and once-full cafes now have empty tables? According to the conventional economic statistics, everything’s going great: there are millions of job openings, unemployment is near historic lows, GDP is expanding nicely and of course, everyone’s favorite signifier of wonderfulness, the stock market, is hovering near all-time highs.
The possibility that the real economy just stumbled off a cliff creates instant cognitive dissonance, as the official narrative is the economy is expanding slowly but surely and everything is nominal: there’s plenty of everything, from oil/gas to consumer credit to jobs to student loans. Nonetheless, I feel a disturbance in the Force: once credit expansion slows or ceases, the economy will roll over into recession, as wages have been stagnant for the past 17 years, and the bottom 95% of households can only spend more if they borrow more.
A brief convergence this year in the dollar value of the balance sheets of the Federal Reserve, the European Central Bank and the Bank of Japan has passed and the trio are now set to take very different paths. After all three touched $4.5 trillion in April, they’ve split, mostly due to a rally in the euro and strength in the yen. With expectations that Janet Yellen may begin whittling away at the Fed’s balance sheet in the next few months, and the BOJ set to carry on with its unprecedented asset purchases, the Japanese central bank may find itself carrying something approaching double the load of its American counterpart two years from now. The ECB’s picture is much more difficult to discern, and investors will be listening intently on Friday when Mario Draghi speaks at the annual Jackson Hole summit of central bankers in Wyoming. With Europe’s recovery gathering pace, officials may start talks this fall about a strategy for 2018 that could include gradually reducing net purchases to zero.
When it comes to the size of the balance sheets relative to the economies of the U.S., Europe and Japan, Haruhiko Kuroda’s BOJ is already the uncontested heavyweight, and will keep extending its lead. The BOJ doesn’t expect to hit its 2% inflation target until sometime around the fiscal year starting in April 2019, dictating the need for hefty asset purchases for years to come. This divergence has big implications for the central banks the next time crisis threatens the global economy. The Fed and the ECB are likely to have more room to dive back into asset purchases or cut interest rates, while the BOJ may find itself pinned down unless it can find a way out of its current predicament before the next problem comes along.
The world’s top central bankers gather in Jackson Hole, their confidence bolstered by a sustained return to economic growth that may eventually allow the European Central Bank and the Bank of Japan to follow the Federal Reserve in winding down their crisis-era policies. Yet in one key area, none of the world’s central banks has found the answer. Inflation remains well below their 2% targets, stoking a debate about whether they are missing signals of a less than healthy economy and the need for a slower path of “rate normalization”, or that they simply don’t understand how inflation works in a globalized world. In Japan, officials have researched behavioral causes, wondering whether businesses and families are just slower to react to economic signals than thought. European officials have blamed slow-moving union wage contracts and online shopping, while U.S. policymakers have cited a lengthy sequence of “one-offs” in pricing from oil to cellphones to prescription drugs.
In each case the response of policymakers has been the same: wait it out and talk confidently about inflation’s return, as the Fed has put it since 2013, over “the medium term”. “Yes, our models aren’t perfect… Certainly the fact that we have had some low inflation readings is something that we take very seriously,” said Cleveland Fed President Loretta Mester. Yet Mester is convinced the problem is not a weakening economy, but changes in how businesses set prices – a supply side issue she says leaves her comfortable pressing ahead with slow but steady interest rate increases. Not everyone is convinced by Mester’s approach. Concerns over the significance of a recent slide in inflation have renewed questions about whether a global tightening of monetary policy can proceed, with U.S. investors betting the Fed will have to hold off on more rate changes until later next year.
[..] The use of inflation targeting has been an important innovation in central banking, rooted in theories of how public expectations, central bank communication and other factors shape economic behavior. It was a recognition that how policymakers talked about inflation, and what households believed, would in part determine the outcome. But the developed world’s alignment around a 2% target has become a headache as much as a policy guide, with central banks trying to estimate and regulate something they acknowledge they don’t fully understand. Bank of Japan consultants have puzzled over whether people shop and save as if they fully see the future, or whether they look at the past and only slowly adapt to change. If the latter, then what central banks say is less important. [..] “Look, inflation is hard to forecast,” Mester said in an interview with Reuters, noting that the most elaborate models don’t do much better than simply saying inflation will be 2% and leaving it at that.
Amazon’s plans to cut prices at Whole Foods is great news for shoppers, but not so much for Federal Reserve officials wondering whether they’ll ever hit their 2% inflation target. A low unemployment rate is supposed to boost inflation, or so the economic theory goes. One possible reason it’s not happening, according to the minutes of the central bank’s latest meeting in July: “Restraints on pricing power from global developments and from innovations to business models spurred by advances in technology.” Chicago Fed President Charles Evans earlier this month mused that “people are utilizing newer technologies, competition is emerging from unexpected places – not necessarily your nearest competitor but somebody else – and that could lead to reduced margins and downward price pressure for some period of time.”
An interesting thing happened on the way to World Domination, uhh, I mean “Stability” – the data quit cooperating with the Federal Reserve’s carefully devised plan. Just recently the Federal Reserve quit updating their carefully constructed “Labor Market Conditions Index” which failed to support their ongoing claims of improving employment conditions. The chart below is the last iteration before it was discontinued which showed a clear deterioration in underlying strength.
The problem for the Fed in making the decision to discontinue their own Labor Market Conditions Index, which is likely providing a more accurate picture of the real conditions, is being forced to remain tied to an outdated U-3 employment index. As noted recently by Morningside Hill:
“There is sufficient evidence to suggest the Bureau of Labor Statistics (BLS) calculation method has been systemically overstating the number of jobs created, especially in the current economic cycle. Furthermore, the BLS has failed to account for the rise in part-time and contractual work arrangements, while all evidence points to a significant and rapid increase in the so-called contingent workforce as full-time jobs are being replaced by part-time positions, resulting in double and triple counting of jobs via the Establishment Survey. Lastly, a full 93% of the new jobs reported since 2008 and 40% of the jobs in 2016 alone were added through the business birth and death model – a highly controversial model which is not supported by the data. On the contrary, all data on establishment births and deaths point to an ongoing decrease in entrepreneurship.”
This last point was something I have addressed many times previously, the chart below shows the actual employment roles in the U.S. when stripping out the Birth/Death Adjustment model. With such a large overstatement of actual employment, the flawed model does support the idea of a tight labor market.
Unfortunately, despite arguments to the contrary, there is little support for why the bulk of Americans that should be working, simply aren’t.
Ever since the banks plunged the western world into economic chaos, we have been told that only cuts offer economic salvation. When the Conservatives and the Lib Dems formed their austerity coalition in 2010, they told the electorate – in apocalyptic tones – that without George Osborne’s scalpel, Britain would go the way of Greece. The economically illiterate metaphor of a household budget was relentlessly deployed – you shouldn’t spend more if you’re personally in debt, so why should the nation? – to popularise an ideologically driven fallacy. But now, thanks to Portugal, we know how flawed the austerity experiment enforced across Europe was. Portugal was one of the European nations hardest hit by the economic crisis. After a bailout by a troika including the IMF, creditors demanded stringent austerity measures that were enthusiastically implemented by Lisbon’s then conservative government.
Utilities were privatised, VAT raised, a surtax imposed on incomes, public sector pay and pensions slashed and benefits cut, and the working day was extended. In a two-year period, education spending suffered a devastating 23% cut. Health services and social security suffered too. The human consequences were dire. Unemployment peaked at 17.5% in 2013; in 2012, there was a 41% jump in company bankruptcies; and poverty increased. All this was necessary to cure the overspending disease, went the logic. At the end of 2015, this experiment came to an end. A new socialist government – with the support of more radical leftwing parties – assumed office. The prime minister, António Costa, pledged to “turn the page on austerity”: it had sent the country back three decades, he said. The government’s opponents predicted disaster – “voodoo economics”, they called it.
Perhaps another bailout would be triggered, leading to recession and even steeper cuts. There was a precedent, after all: Syriza had been elected in Greece just months earlier, and eurozone authorities were in no mood to allow this experiment to succeed. How could Portugal possibly avoid its own Greek tragedy? The economic rationale of the new Portuguese government was clear. Cuts suppressed demand: for a genuine recovery, demand had to be boosted. The government pledged to increase the minimum wage, reverse regressive tax increases, return public sector wages and pensions to their pre-crisis levels – the salaries of many had plummeted by 30% – and reintroduce four cancelled public holidays. Social security for poorer families was increased, while a luxury charge was imposed on homes worth over €600,000 (£550,000).
The promised disaster did not materialise. By the autumn of 2016 – a year after taking power – the government could boast of sustained economic growth, and a 13% jump in corporate investment. And this year, figures showed the deficit had more than halved, to 2.1% – lower than at any time since the return of democracy four decades ago. Indeed, this is the first time Portugal has ever met eurozone fiscal rules.
A Nobel economics laureate, Sir Christopher Pissarides, has hit out at Germany’s refusal to increase its domestic state spending in order to help entrench the eurozone’s recovery. Speaking at the Lindau meetings in Germany on Wednesday, Sir Christopher said that despite the bounce back in the single currency zone in recent months after years of crisis, the Continent’s largest economy was still exerting a damaging and unnecessary drag. “German fiscal policy is not at all what some countries still need,” he said, arguing that demand across the single currency zone was still too low. “Why is there no demand? Because of German fiscal policies! There is austerity, there is low infrastructure spending and therefore companies are hesitating [on] investment.” “Where is expansion going to come from? It’s going to come from the surplus countries spending more. Germany has a bigger surplus even than China, they should spend it in the European economy.”
The German government is running a fiscal budget surplus and its current account surplus (the difference between its total national spending and total national income) of $294bn in 2016 has drawn criticism from a host of economic bodies, including the IMF, for similar reasons as those advanced by Sir Christopher. Sir Christopher, who was awarded the Nobel in 2010 for his theoretical breakthroughs on labour market analysis, said that countries such as Spain had pushed through major and necessary job market reforms in 2010 and 2011 in the teeth of its sovereign debt crisis. The official headline Spanish unemployment rate currently stands at 17.3%, down from a 2013 peak of 27%. But Sir Christopher said it should be falling faster and that higher German state spending would help. “It’s certainly the case that if the European economy as a whole expanded faster we would see faster positive results from these [labour market] reforms,” he said.
European countries are poised to begin the process of returning refugees to Greece, as migrants seeking reunification with their family members – mostly in Germany – step up protests in Athens. In a move decried by human rights groups, EU states will send back asylum seekers who first sought refuge in Greece, despite the nation being enmeshed in its worst economic crisis in modern times. Germany has made nearly 400 resettlement requests, according to officials in Berlin and sources in Athens’ leftist-led government. The UK, France, the Netherlands and Norway have also asked that asylum seekers be returned to Greece. Greece’s migration minister told the Guardian the first returns were expected imminently.
“The paperwork has begun and we expect returns to begin over the next month,” said Yannis Mouzalas. “It will start with a symbolic number as an act of friendship [towards other EU nations]. Greece has already accepted so many [refugees], it has come under such pressure, that to accept more would be absurd, a joke if it weren’t such a tragedy.” Mouzalas said he had no idea where the returnees would be placed or whether they would ever leave Greece. “I don’t know where they will go. It could be Athens, it could be Thebes … they are accommodated in an apartment scheme,” he said. “Whatever [happens], conditions will be good, they have improved greatly and will meet EU criteria.”
[..] On Monday a reported 330 migrant arrivals were registered on Greece’s eastern Aegean isles, piling the pressure on overcrowded and vastly overstretched reception centres in Lesvos, Chios, Kos, Leros and Samos. An estimated 14,335 people are currently in limbo in accommodation centres on the Greek islands, according to figures released by the country’s interior ministry on Thursday. Conditions in the centres are described as deplorable, and protests and riots are commonplace. Human Rights Watch recently said self-harm and suicide attempts along with aggression, anxiety and depression were all on the rise. Local services complain about being unable to cope.
Ten thousand people have died. The world’s largest cholera epidemic is raging, with more than 530,000 suspected cases and 2,000 related deaths. Millions more people are starving. Yet the lack of press attention on Yemen’s conflict has led it to be described as the “forgotten war”. The scant media coverage is not without reason, or wholly because the general public is too cold-hearted to care. It is very hard to get into Yemen. The risks for the few foreign journalists who gain access are significant. And the Saudi-led coalition waging war in the country is doing its best to make it difficult, if not impossible, to report from the area. Working in Sana’a as a fixer for journalists since the start of the uprisings of the so-called Arab Spring in 2011 has sometimes felt like the most difficult job in the world.
When a Saudi-led coalition started bombing Yemen in support of its president, Abdrabbuh Mansour Hadi, in March 2015, it became even harder. With control of the airspace, last summer they closed Sana’a airport. The capital had been the main route into Yemen. Whether deliberately or coincidentally, in doing so, the coalition prevented press access. The media blackout came to the fore last month, when the Saudi-led coalition turned away an extraordinary, non-commercial UN flight with three BBC journalists on board. The team – including experienced correspondent Orla Guerin – had all the necessary paperwork. Aviation sources told Reuters that the journalists’ presence was the reason the flight was not allowed to land. The refusal to allow the press to enter Yemen by air forced them to find an alternative route into the country – a 13-hour sea crossing.
A Babylonian clay tablet dating back 3,700 years has been identified as the world’s oldest and most accurate trigonometric table, suggesting the Babylonians beat the ancient Greeks to the invention of trigonometry by over 1,000 years. The tablet, known as Plimpton 322, was discovered in the early 1900s in what is now southern Iraq, but researchers have always been baffled about what its purpose was. Thanks to a team from the University of New South Wales (UNSW) in Australia, the mystery may have been solved. More than that, the Babylonian method of calculating trigonometric values could have something to teach mathematicians today. “Our research reveals that Plimpton 322 describes the shapes of right-angle triangles using a novel kind of trigonometry based on ratios, not angles and circles,” says one of the researchers, Daniel Mansfield.
“It is a fascinating mathematical work that demonstrates undoubted genius.” Experts established early on that Plimpton 322 showed a list of Pythagorean triples, sets of numbers that fit trigonometry models for calculating the sides of a right-angled triangle. The big debate has been about what those triples were actually for. Are they just a series of exercises for teaching, for example? Or are they something more profound? Babylonian mathematics used a base 60 or sexagesimal system (like the minute markers on a clock face), rather than the base 10 or decimal system we use today. By applying Babylonian mathematical models, the researchers were able to show that the tablet would originally have had 6 columns and 38 rows. They also show how the mathematicians of the time could’ve used the Babylonian system to come up with the numbers on the tablet.
The researchers suggest that the tablet may well have been used by ancient scribes to make calculations for building palaces, temples, and canals. But if the new study is right, then the Greek astronomer Hipparchus, who lived about 120 BC, is not the father of trigonometry that he’s long been regarded as. Scholars date the tablet to around 1822-1762 BC. What’s more, because of the way the Babylonians did their maths and geometry, it’s the most accurate trigonometric table as well as the oldest. The reason is that a sexagesimal system has more exact fractions than a decimal system, which means less rounding up. Whereas only two numbers can divide 10 with nothing left over – 2 and 5 – a base 60 system has far more. Cleaner fractions means fewer approximations and more accurate maths, and the researchers suggest we can learn from it today.
Hurricane Harvey is following the perfect recipe to be a monster storm, meteorologists say. Warm water. Check. Calm air at 40,000 feet high. Check. Slow speed to dump maximum rain. Check. University of Miami senior hurricane researcher Brian McNoldy said Harvey combines the worst attributes of nasty recent Texas storms: The devastating storm surge of Hurricane Ike in 2008; the winds of Category 4 Hurricane Brett in 1999 and days upon days of heavy rain of Tropical Storm Allison in 2001. Rainfall is forecast to be as high as 35 inches through next Wednesday in some areas. Deadly storm surge — the push inwards of abnormally high ocean water above regular tides — could reach 12 feet, the National Hurricane Center warned, calling Harvey life-threatening. Harvey’s forecast path is the type that keeps it stronger longer with devastating rain and storm-force wind lasting for several days, not hours.
“It’s a very dangerous storm,” National Weather Service Director Louis Uccellini told AP. “It does have all the ingredients it needs to intensify. And we’re seeing that intensification occur quite rapidly.” Warm water is the fuel for hurricanes. It’s where storms get their energy. Water needs to be about 79 degrees (26 Celsius) or higher to sustain a hurricane, McNoldy said. Harvey is over part of the Gulf of Mexico where the water is about 87 degrees or 2 degrees above normal for this time of year, said Jeff Masters, a former hurricane hunter meteorologist and meteorology director of Weather Underground. A crucial factor is something called ocean heat content. It’s not just how warm the surface water is but how deep it goes. And Harvey is over an area where warm enough water goes about 330 feet (100 meters) deep, which is a very large amount of heat content, McNoldy said.
“It can sit there and spin and have plenty of warm water to work with,” McNoldy said. If winds at 40,000 feet high are strong in the wrong direction it can decapitate a hurricane. Strong winds high up remove the heat and moisture that hurricanes need near their center and also distort the shape. But the wind up there is weak so Harvey “is free to go nuts basically,” McNoldy said.