Aug 152019
 


Henri Matisse The terrace, St. Tropez 1904

 

US Yield Curve Inversion Highlights Recession Fears, Fed Dilemma (R.)
China: Paper Tiger (Jim Rickards)
Trade Wars and the Over-Valued Dollar (Hill)
Trump Ties China Trade Deal To ‘Humane’ Hong Kong Resolution (R.)
Autopsy Finds Jeffrey Epstein Had Several Broken Neck Bones (NYPost)
Jeffrey Epstein’s Body Claimed By Unidentified ‘Associate’ (NBC)
CEO Scott Borgerson Denies He’s Dating Epstein Pal Ghislaine Maxwell (NYPost)
UK Labour Vows To Bring Down PM Johnson And Delay Brexit (R.)
No Chance Of US-UK Deal If Northern Ireland Peace At Risk – Pelosi (G.)
Half of UK Farms Could Fail After No-Deal Brexit – Report (G.)
Gibraltar To Release Iranian Oil Tanker On Thursday (R.)
Scientists Find Micro Plastics Deep in Arctic Ice (R.)

 

 

It takes on average 18 months from a US yield-curve inversion to a recession.

US Yield Curve Inversion Highlights Recession Fears, Fed Dilemma (R.)

When the U.S. Federal Reserve cut interest rates last month for the first time in more than a decade, it signaled that further reductions in borrowing costs might not be needed. Bond markets vehemently disagree. Sliding bond yields and the inversion of a key part of the U.S. yield curve on Wednesday for the first time in 12 years show that bond investors have a far gloomier outlook for the U.S. and global economies than the U.S. central bank. “The rates market rarely lies and globally it looks like it’s expecting a day of reckoning,” said Tom di Galoma, a managing director at Seaport Global Holdings in New York.

Fears are also rising the Fed may not only be behind the curve in cutting rates, but that central banks may be running out of ammunition to stimulate growth as countries offset each other’s attempts to boost growth with looser fiscal policy. Worsening economic data, weak inflationary pressures, the escalating U.S.-China trade war and intensifying tensions between protesters in Hong Kong and the Chinese government have boosted demand for safe-haven debt, sending many European government bond yields deeper into negative territory while the longest-dated U.S. Treasury yields have fallen to record lows. The inversion of key parts of the Treasury yield curve, in which investors in short-term holdings get paid more than those in long-term ones, has historically been a reliable indicator of a coming recession.

On Wednesday, the yield on the U.S. 10-year Treasury note tipped 2.1 basis points below 2-year Treasury yields, the first time this spread has been negative since 2007, according to Refinitiv data. The inversion rattled investors already worried that a U.S.-China trade war might trigger a global recession and kill off a decade-long bull market on Wall Street. Major U.S. stock indexes were down about 2%.

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“The new “Cold War” is here. Get used to it.”

China: Paper Tiger (Jim Rickards)

[..] at $11,000 per capita GDP, China is stuck squarely in the “middle income trap” as defined by development economists. The path from low income (about $5,000 per capita) to middle-income (about $10,000 per capita) is fairly straightforward and mostly involves reduced corruption, direct foreign investment and migration from the countryside to cities to purse assembly-style jobs. The path from middle-income to high-income (about $20,000 per capita) is much more difficult and involves creation and deployment of high-technology and manufacture of high-value-added goods. Among developing economies (excluding oil producers), only Taiwan, Hong Kong, Singapore and South Korea have successfully made this transition since World War II.


All other developing economies in Latin America, Africa, South Asia and the Middle East including giants such as Brazil and Turkey remain stuck in the middle-income ranks. China remains reliant on assembly-style jobs and has shown no promise of breaking into the high-income ranks. In short, and despite enormous annual growth in the past twenty years, China remains fundamentally a poor country with limited ability to improve the well-being of its citizens much beyond what has already been achieved. [..] Trade wars with the U.S. are escalating, not diminishing as I warned from the start in early 2018.

Trump’s recent imposition of 10% tariffs on the remaining $300 billion of Chinese imports not currently tariffed (in addition to existing tariffs on $200 billion of Chinese imports) will slow the Chinese economy even further. China retaliated with a shock devaluation of the yuan below 7.00 to one dollar, a level that had previously been defended by the People’s Bank of China. Resorting to a currency war weapon to fight a trade war shows just how badly China is losing the trade war. But, this currency war counterattack will not be successful because it will incite more capital outflows from China.


The Chinese lost $1 trillion of hard currency reserves during the last round of capital flight (2014-2016) and will lose more now, despite tighter capital controls. The spike of bitcoin to $11,000 following the China devaluation is a symptom of Chinese people using bitcoin to avoid capital controls and get their money out of China. [..] lurking behind all of this is the coming debt crisis in China. About 25% of China’s reported growth the past ten years has come from wasted infrastructure investment (think “ghost cities”) funded with unpayable debt. China’s economy is a Ponzi scheme like the Madoff Plan and that debt pyramid is set to collapse.

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From last week, but a good reminder that different rules apply to the reserve currency.

Trade Wars and the Over-Valued Dollar (Hill)

President Trump and China are at it again—and both just upped the ante. Currency manipulation and an overvalued U.S. dollar have taken center stage in the news, thanks to Beijing devaluing its currency [last] Monday. Trump’s Treasury Department has countered by naming China a “currency manipulator.” But boiling the problem down to currency manipulation means the administration is fighting a previous war. And that highlights why the president lacks the strategic vision needed to keep up with newer global challenges. America’s trade problems have grown far more broad in recent years. Chronic global trade imbalances threaten the stability of the world economy. And that holds true whether these disruptions are caused by currency manipulation, trade barriers or global capital flows.

Designating China as a “currency manipulator” is long overdue. But it’s hardly a cure-all. It merely initiates consultations with the IMF. And it doesn’t necessarily provide leverage to solve core trade issues. What’s needed is an approach that addresses the fundamental causes of current trade imbalances. The problem does start with China, however, since Beijing just weakened its currency, the yuan, to its lowest level since 2008. This will likely neutralize the impact of new tariffs that the president announced in a tweet last week. China allowed its currency to fall by 2 percent in a mere 24 hours. That’s a significant drop, following an overall 11.4 percent decline since March of 2018.

Weakening the value of the yuan lowers the cost of Chinese goods in the U.S. market. And so, even though the president is attempting to raise the cost of imports through his new tariffs, their sticker price could still shrink. In the wider picture, Trump’s condo-selling mindset – in which he simply imposes more tariffs until Beijing agrees to a “deal” – is a poor means to address global trade imbalances. It’s not China’s intransigence that is overwhelming U.S. manufacturers; it’s an overvalued U.S dollar. There’s no doubt that China has long used predatory trade practices, such as dumping and illegal subsidies, to undercut U.S. manufacturers.

And Beijing has repeatedly intervened in currency markets to suppress the value of its currency—all to continue its job-killing trade surpluses with the United States. But China isn’t the only country that has played the currency game. Over the past two decades, Japan, South Korea and nearly 20 other countries in Asia and Europe have also bid up the price of the U.S. dollar to subsidize their own exports. And that has made U.S. goods increasingly uncompetitive in global markets—with the United States shedding five million manufacturing jobs and nearly 90,000 domestic factories in that time.

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Can the US sit still in case China invades Hong Kong? And what would such an invasion mean for the city’s status as a trade hub?

Trump Ties China Trade Deal To ‘Humane’ Hong Kong Resolution (R.)

President Donald Trump on Wednesday tied a U.S. trade deal with China to humane resolution of the weeks of protests wracking Hong Kong, hours after the State Department said it was “deeply concerned” about reports of movement of Chinese paramilitary forces along the Hong Kong border. The State Department warned that continued erosion of the territory’s autonomy put at risk the preferential status it enjoys under U.S. law. Trump, in his remarks on Twitter, appeared to suggest a personal meeting with Chinese President Xi Jinping to help resolve the crisis. “Of course China wants to make a deal. Let them work humanely with Hong Kong first!” Trump said on Twitter. “I have ZERO doubt that if President Xi wants to quickly and humanely solve the Hong Kong problem, he can do it. Personal meeting?”


Trump, who has been seeking a major deal to correct trade imbalances with China ahead of his 2020 reelection bid, has faced mounting criticism from Congress and elsewhere for not taking a stronger public line on Hong Kong and for his characterization of the protests earlier this month as “riots” that were a matter for China to deal with. In his tweets on Wednesday, Trump also said that his delay in 10% tariffs on more than $150 billion in Chinese imports to Dec. 15 from Sept. 1 “will be reciprocated” by China and the “much good will come from the short deferral to December.” His comment appeared to contradict senior officials in his administration, who said earlier that no concessions were made by Beijing in response to the delay announced on Tuesday.

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“..more common in strangulation murders than suicidal hangings..”

Autopsy Finds Jeffrey Epstein Had Several Broken Neck Bones (NYPost)

Jeffrey Epstein’s autopsy determined the convicted pedophile suffered multiple broken neck bones, according to a report. One of Epstein’s breaks was to the hyoid bone, an injury that experts told the Washington Post is more common in homicide victims. The discoveries were disclosed to the paper by two people familiar with the findings of the autopsy, which was completed on Sunday, but warranted more information by the Medical Examiner’s Office before they make a final cause of death ruling. “Today, a medical examiner performed the autopsy of Jeffrey Epstein,” said Chief Medical Examiner Dr. Barbara Sampson in a statement Sunday night.

“The ME’s determination is pending further information at this time. At the request of those representing the decedent, and with the awareness of the federal prosecutor, I allowed a private pathologist (Dr. Michael Baden) to observe the autopsy examination. This is routine practice.” Epstein was found dead of an apparent suicide in his cell at the Manhattan Correctional Center early Saturday. He was being held there without bail since his July arrest on sex trafficking charges. The Washington Post spoke to Jonathan Arden, president of the National Association of Medical Examiners, who said a broken hyoid bone — which is near the Adam’s apple — is more common in strangulation murders than suicidal hangings.

“If, hypothetically, the hyoid bone is broken, that would generally raise questions about strangulation, but it is not definitive and does not exclude suicidal hanging,” said Arden, who is not involved with the Epstein autopsy. Numerous studies were also cited by the paper that found hyoid bone breaks were found in the minority of suicidal hangings. One such study conducted from 2010 to 2013 that looked at suicidal hangings in India found that hyoid damage was present in just 16 of 264 cases.

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Bill Barr better get a grip on this. It’s turning into an absurdity.

Jeffrey Epstein’s Body Claimed By Unidentified ‘Associate’ (NBC)

Jeffrey Epstein’s body has been claimed from the New York City medical examiner’s office, a source close to the investigation told NBC News on Wednesday. Epstein, 66, was found dead by apparent suicide Saturday morning in his cell at the Metropolitan Correctional Center in Manhattan. The center’s warden has been temporarily reassigned, and the two guards assigned to watch Epstein have been placed on leave. Epstein wasn’t on suicide watch at the time of his death, multiple people familiar with the investigation have told NBC News. Attorney General William Barr has said that he was “appalled” by the development and that he has consulted with the Justice Department’s inspector general, who is also investigating. The person who claimed Epstein’s body was described only as an “Epstein associate.”

After Epstein was arrested last month on charges of sex trafficking of minors and conspiracy to engage in sex trafficking of minors, his attorneys asked U.S. District Judge Richard Berman to allow Epstein to post bond secured by a mortgage on his home in Manhattan. According to court documents, they said the bond would have been co-secured by his brother, Mark Epstein, and a friend identified as David Mitchell. Berman denied bond on July 18. About a week later, Epstein was found injured and in a fetal position in his cell, raising questions at the time of whether he had tried to kill himself. On Monday, Berman complained in a letter to the warden, Lamine N’Diaye, that the federal Bureau of Prisons still hasn’t explained what he called the July “incident.”

In a response later Monday, N’Diaye said that an internal investigation was completed on July 23 but that she couldn’t reveal any information because of the investigations into Epstein’s death on Saturday. On Tuesday, Justice Department officials confirmed that N’Diaye had been reassigned.


Painting said to be hanging in Epstein townhouse

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“..a property manager of an adjacent parcel of land said that Maxwell was living at Borgerson’s residence as recently as two weeks ago…”

CEO Scott Borgerson Denies He’s Dating Epstein Pal Ghislaine Maxwell (NYPost)

The man rumored to be dating Jeffrey Epstein’s former lover and alleged madam Ghislaine Maxwell has completely denied any romance between the pair. Maxwell has been reportedly living with tech CEO Scott Borgerson at his Manchester, Massachusetts home, according to the Daily Mail. But Borgerson called The Post Wednesday to insist he had been busy working abroad – and nobody has been at his home. He arrived back in the US late Wednesday, only to be met by a police escort, and said: “It’s pretty crazy, all of this just exploded. People keep asking me, but I am not dating Ghislaine, I’m home alone with my cat.” When asked about the status of his friendship with Maxwell now, Borgerson replied: “I don’t want to comment on that – would you want to talk about your friends?”


“I landed after a long flight and my phone went crazy, the first thing I did was call the local police to check my house.” Asked if he knew where Maxwell now is, Borgerson, a divorced dad, replied: “She’s not here, I have no idea where she is. “Nobody wants to be close to this radioactive situation.[..] The Post has been told that friends of Maxwell last saw her over the past month walking down a London street, but she has gone to ground. Borgerson refused to say whether Maxwell had ever stayed at his home. Despite this, NBC News reported on Wednesday that a property manager of an adjacent parcel of land said that Maxwell was living at Borgerson’s residence as recently as two weeks ago.

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Corbyn wants to be PM. But not a lot of MPs like him.

UK Labour Vows To Bring Down PM Johnson And Delay Brexit (R.)

The Labour Party has urged rebel MPs in the ruling Conservatives to help block a no-deal Brexit by bringing down Prime Minister Boris Johnson’s administration and allowing its leader Jeremy Corbyn to form a caretaker government. Johnson has promised to take Britain out of the European Union by Oct. 31, with or without a deal, setting the scene for a showdown in parliament where MPs are opposed to a divorce without a transition agreement. In a letter to opposition party leaders and several senior Conservatives opposed to a disorderly exit, Corbyn said his “strictly time-limited temporary government” would delay Brexit and hold a general election.


He said Labour would campaign in the election to hold a second referendum on the Brexit terms, including an option as to whether the country should remain in the bloc three years after it voted to leave. “This government has no mandate for No Deal, and the 2016 EU referendum provided no mandate for No Deal,” Corbyn said. “I therefore intend to table a vote of no confidence at the earliest opportunity when we can be confident of success.” A spokeswoman for Johnson’s Downing Street office said the choice was clear: “This government believes the people are the masters and votes should be respected, Jeremy Corbyn believes that the people are the servants and politicians can cancel public votes they don’t like.”

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Why is it Bolton who’s talking trade deals?

No Chance Of US-UK Deal If Northern Ireland Peace At Risk – Pelosi (G.)

There is no chance of Congress approving a US-UK trade agreement if Brexit undermines the Good Friday peace agreement in Northern Ireland, the speaker of the House of Representatives, Nancy Pelosi, has said. Pelosi was restating the entrenched position of congressional Democrats and many Republicans in the wake of remarks made by Donald Trump’s national security adviser, John Bolton, during a visit to London this week. Bolton had said that Britain and the US could sign interim, partial free trade deals, one sector at a time, which would go through the a fast track legislative process, to help the UK cope economically if there is a no-deal Brexit on 31 October.

In a statement on Wednesday, the House speaker, who commands a Democratic majority, warned that the Trump administration would not be able to sidestep congressional approval. “Whatever form it takes, Brexit cannot be allowed to imperil the Good Friday agreement, including the seamless border between the Irish Republic and Northern Ireland, especially now, as the first generation born into the hope of Good Friday 21 years ago comes into adulthood.” Pelosi said. “We cannot go back.” Bolton said the sectoral deals, focusing on industries such as car manufacturing, could be negotiated quickly, and insisted they would receive overwhelming bipartisan support in Congress.

“The ultimate end result is a comprehensive trade agreement covering all trading goods and services,” he said after meeting Boris Johnson and senior British officials on Monday. “But to get to that you could do it sector by sector, and you can do it in a modular fashion. In other words, you can carve out some areas where it might be possible to reach a bilateral agreement very quickly, very straightforwardly.”

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Most heavily subsidized.

Half of UK Farms Could Fail After No-Deal Brexit – Report (G.)

Campaigners for a second referendum are herding a flock of sheep down Whitehall to protest against the impact a no-deal Brexit could have on the farming community. According to a new report commissioned by the supporters of second poll, more than half of UK farms could go out of business if Britain crashes out of the EU on 31 October. Backed by the People’s Vote campaign and written by Dr Séan Rickard, former chief economist of the National Farmers’ Union, the report warns that 50% of farms could go under as the government would prioritise keeping down food prices for consumers ahead of protecting agricultural producers. To coincide with the report and launch of the Farmers for a People’s Vote group, campaigners are taking a small flock of sheep past the Cabinet Office where no-deal planning is taking place.

The report says the EU and all the countries with whom it has free-trade agreements would immediately apply tariffs and non-tariff barriers on food imports from the UK in the event of a no-deal Brexit. At the same time, UK tariffs on imports would be slashed or reduced to nothing. It argues: “The combination of the removal of support payments – only a proportion will be made up by enhanced environmental payments – and an adverse trading environment will render the majority of farm businesses unviable. By the mid-2020s a large proportion of farm businesses – 50% or more is not an unreasonable estimate – recognising that they face an unprofitable future will decide to cease trading.”

[..] In the event of a no deal Brexit, Rickard argued that many industries would suffer but agriculture would feel the most serious economic shock. “It is impossible to project the exact number of farmers who will go out of business”, he said. “What we do know is that over 40% of them will have no net income if the basic payment is removed. If at the same time the government removes all tariffs and so depresses prices, these two factors combined will render over 50% of farms in this country unviable. “The possibility of any compensation from the government going anywhere near offsetting this is remote because so many promises have been made to so many other sectors and not all can be fulfilled.”

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Bolton gone wrong.

Gibraltar To Release Iranian Oil Tanker On Thursday (R.)

The British territory of Gibraltar will on Thursday release an Iranian oil tanker seized by Royal Marines in the Mediterranean in July, the Sun newspaper reported, citing sources close to Gibraltar Chief Minister Fabian Picardo. Picardo would not apply to renew an order to detain Grace 1, the report said, adding that he is now satisfied that the oil tanker is no longer heading to Syria. Britain had said the vessel was violating European sanctions by taking oil to Syria, a charge Iran denies. “There is no reason to keep Grace 1 in Gibraltar a moment longer if we no longer believe it is in breach of sanctions against the Syrian regime,” the newspaper quoted a source close to Picardo as saying.

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Everywhere. Literally. If it’s deep in Arctic ice, it’s deep inside you too.

Scientists Find Micro Plastics Deep In Arctic Ice (R.)

Tiny pieces of plastic have been found in ice cores drilled in the Arctic by a U.S.-led team of scientists, underscoring the threat the growing form of pollution poses to marine life in even the remotest waters on the planet. The researchers used a helicopter to land on ice floes and retrieve the samples during an 18-day icebreaker expedition through the Northwest Passage, the hazardous route linking the Pacific and Atlantic oceans. “We had spent weeks looking out at what looks so much like pristine white sea ice floating out on the ocean,” said Jacob Strock, a graduate student researcher at the University of Rhode Island, who conducted an initial onboard analysis of the cores.


Microplastic found in ice core samples taken from the Northwest Passage. Northwest Passage Project/Camera: Duncan Clark via REUTERS

“When we look at it up close and we see that it’s all very, very visibly contaminated when you look at it with the right tools — it felt a little bit like a punch in the gut,” Strock told Reuters by telephone on Wednesday. Strock and his colleagues found the material trapped in ice taken from Lancaster Sound, an isolated stretch of water in the Canadian Arctic, which they had assumed might be relatively sheltered from drifting plastic pollution. The team drew 18 ice cores of up to 2 meters (6.5 feet) long from four locations and saw visible plastic beads and filaments of various shapes and sizes. “The plastic just jumped out in both its abundance and its scale,” said Brice Loose, an oceanographer at the University of Rhode Island and chief scientist of the expedition, known as the Northwest Passage Project.

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May 312019
 


 

Julian Assange Shows Psychological Torture Symptoms – UN Expert (G.)
Julian Assange Must Never Be Extradited (Matt Taibbi)
The Unrelenting State (Craig Murray)
Trump Announces Tariffs On Mexico Until ‘Immigration Problem Remedied’ (G.)
Futures, Peso Tumble As Trump Unleashes Tariffs On Mexico (ZH)
GOP Senator Grassley Blasts Trump Over Mexico Tariff Threat (Hill)
Russiagate Is #1 Threat To US National Security – Stephen Cohen (RT)
Malaysia PM Wants Evidence To Show Russia Shot Down MH17 (FMT)
Boeing Admits It ‘Fell Short’ On Safety Alert For 737 (BBC)
Yield-Curve Spaghetti (WS)
Ted Cruz, AOC Agree To Ban Former Congress Members From Becoming Lobbyists (G.)

 

 

Time is ticking away.

Julian Assange Shows Psychological Torture Symptoms – UN Expert (G.)

Julian Assange is showing all the symptoms associated with prolonged exposure to psychological torture and should not be extradited to the US, according to a senior UN expert who visited him in prison. Nils Melzer, UN’s special rapporteur on torture, is expected to make his appeal to the UK government on Friday. It comes after Assange, the co-founder of WikiLeaks, was said by his lawyers to be too ill to appear by video link for the latest court hearing of the case on Thursday. Assange has been moved to the health ward of Belmarsh prison, London, where he has been serving a 50-week sentence for skipping bail while fighting extradition to the US.

He is accused of violating the Espionage Act by publishing secret documents containing the names of confidential US military and diplomatic sources. After meeting Assange earlier this month in the company of medical experts who examined him, Melzer will say on Friday that he fears the Australian’s human rights could be seriously violated if he is extradited to the US and will condemn what he describes as the “deliberate and concerted abuse inflicted for years” on him. “Physically there were ailments but that side of things are being addressed by the prison health service and there was nothing urgent or dangerous in that way,” Melzer said.

“What was worrying was the psychological side and his constant anxiety. It was perceptible that he had a sense of being under threat from everyone. He understood what my function was but it’s more that he was extremely agitated and busy with his own thoughts. It was difficult to have a very structured conversation with him.” [..] The lawyer [..] said that his office had been approached by Assange’s lawyers in December. But he said that he was initially reluctant to do so, admitting he was affected by what he called the “prejudice” around the case.However, he began looking into the case again in March and, earlier this week, wrote letters to the foreign ministers of the US, the UK and Sweden.

“In the course of the past nine years, Mr Assange has been exposed to persistent, progressively severe abuse ranging from systematic judicial persecution and arbitrary confinement in the Ecuadorian embassy, to his oppressive isolation, harassment and surveillance inside the embassy, and from deliberate collective ridicule, insults and humiliation, to open instigation of violence and even repeated calls for his assassination,” Melzer will say on Friday. He added the UK authorities had contacted his Geneva office to indicate that the British government would be issuing a point-by-point rebuttal of the assertions made in his letter. [..] “In 20 years of work with victims of war, violence and political persecution I have never seen a group of democratic states ganging up to deliberately isolate, demonise and abuse a single individual for such a long time and with so little regard for human dignity and the rule of law.”

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I doubt Orwell ever knew how right he was.

Julian Assange Must Never Be Extradited (Matt Taibbi)

WikiLeaks founder Julian Assange today sits in the Belmarsh High Security prison in southeast London. Not just for his sake but for everyone’s, we now have to hope he’s never moved from there to America. The United States filed charges against Assange early last month. The case seemed to have been designed to assuage fears that speech freedoms or the press were being targeted. That specific offense was “computer hacking conspiracy” from back in 2010. The “crime” was absurdly thin, a claim that Assange agreed (but failed, apparently) to try to help Chelsea Manning develop an administrative password that could have helped her conceal identity as she downloaded secrets. One typewritten phrase, “No luck so far,” was the damning piece of evidence.

The troubling parts of that case lurked in the rest of the indictment, which seemed to sell normal journalistic activity as part of the offense. The government complained that Assange “took measures to conceal Manning as the source of the disclosure.” Prosecutors likewise said, “Assange encouraged Manning to provide information and records from departments and agencies of the United States.” The indictment stressed Assange/Manning were seeking “national defense information” that could be “used to the injury of the United States.” The indictment likewise noted that the pair had been guilty of transmitting such information to “any person not entitled to receive it.” It was these passages that made me nervous a month and a half ago, because they seemed to speak to a larger ambition.

Use of phrases like “national defense information” given to persons “not entitled to receive it” gave off a strong whiff of Britain’s Official Secrets Acts, America’s Defense Secrets Act of 1911 (which prohibited “national defense” information going to “those not entitled to receive it”) and our Espionage Act of 1917, which retained many of the same concepts. All of these laws were written in a way that plainly contradicted basic free speech protections. The Espionage Act was revised in 1950 by the McCarran Internal Security Act, sponsored by Nevada Senator Pat McGarran (who incidentally was said to be the inspiration for the corrupt “Senator Pat Geary” character in The Godfather). The change potentially removed a requirement that the person obtaining classified information had to have intent to harm the country.

There was a way to read the new law that criminalized what the Columbia Law Review back in 1973 (during the Pentagon Papers controversy) called the “mere retention” of classified material. This provision buried in subsection 793 of the Espionage Law has, since passage, been a ticking time bomb for journalism. The law seems clearly to permit the government to prosecute anyone who simply obtains or receives “national defense” information. This would place not only sources who steal and deliver such information at risk of prosecution, but also the journalists who receive and publish it. If the government ever decided to start using this tool to successfully prosecute reporters and publishers, we’d pretty quickly have no reporters and publishers.

I’m not exaggerating when I say virtually every reporter who’s ever done national security reporting has at some time or another looked at, or been told, or actually received copies of, “national defense” information they were technically “not entitled to receive.

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Britain employs torture. What do its own laws say about that?

The Unrelenting State (Craig Murray)

We are seriously worried about the condition of Julian Assange. He was too unwell to appear in court yesterday, and his Swedish lawyer, Per Samuelson, found him in a state where he was unable to conduct a conversation and give instructions. There are very definite physical symptoms, particularly rapid weight loss, and we are not satisfied that genuine and sufficient diagnostic efforts are being made to determine the underlying cause. Julian had been held for the last year in poor, highly confining and increasingly oppressive conditions in the Ecuadorean Embassy and his health was already deteriorating alarmingly before his expulsion and arrest.

A number of conditions, including dental abcesses, can have very serious consequences if long term untreated, and the continual refusal by the British government and latterly the Ecuadoreans to permit him access to adequate healthcare while a political asylee was a callous denial of basic human rights. I confess to feeling an amount of personal relief after his arrest that at least he would now get proper medical treatment. However there now seems to be no intention to provide that and indeed since he has been in Belmarsh his health problems have accelerated. I witnessed enough of the British state’s complicity in torture to know that this may be more than just the consequence of unintended neglect. That the most lucid man I know is now not capable of having a rational conversation is extremely alarming.

There is no rational reason that Assange needs to be kept in a high security facility for terrorists and violent offenders. We are seeing the motive behind his unprecedented lengthy imprisonment for jumping police bail when he entered political asylum. As a convicted prisoner, Assange can be kept in a worse regime than if he were merely on remand for his extradition proceedings. In particular, his access to his lawyers is extremely restricted and for a man facing major legal proceedings in the UK, USA and Sweden it is impossible, even were he healthy, for his lawyers to have sufficient time with him adequately to prepare his cases while he is under the restrictions placed on a convict. Of course we know from the fact that, within three hours of being dragged from the Ecuadorean Embassy, he was already convicted and sentenced to a lengthy prison term, that the state has no intention that his lawyers should be able to prepare.

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It’s like hammering in a nail with a pair of scissors.

Trump Announces Tariffs On Mexico Until ‘Immigration Problem Remedied’ (G.)

In a surprise announcement that could compromise a major trade deal, Donald Trump announced on Thursday that he is slapping a 5% tariff on all Mexican imports to pressure the country to do more to crack down on the surge of Central American migrants trying to cross the border. He said the percentage would gradually increase “until the Illegal Immigration problem is remedied”. Trump made the announcement by tweet after telling reporters earlier Thursday that he was planning “a major statement” that would be his “biggest” so far on the border. “On June 10th, the United States will impose a 5% Tariff on all goods coming into our Country from Mexico, until such time as illegal migrants coming through Mexico, and into our Country, STOP. The Tariff will gradually increase until the Illegal Immigration problem is remedied,” he wrote, “at which time the Tariffs will be removed.”


Mexico’s president, Andrés Manuel López Obrador, responded with a two-page letter to Trump on Thursday night. “The Statue of Liberty is not an empty symbol,” he said. “With all due respect, even though you have the right to say it, ‘make America great again’ is a fallacy because, until the end of times, and beyond national borders, universal justice and fraternity should prevail,” he wrote. Amlo, as the president is commonly called, offered his US counterpart history lessons on past periods of cordial US-Mexico relations. He also included details of his plans to develop Central America to stop migration and warned: “I don’t lack courage, I’m not a coward nor timid, rather, I act on principles.”

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“The only way the S&P 500 doesn’t sink massively today is if Trump rows back on this.”

Futures, Peso Tumble As Trump Unleashes Tariffs On Mexico (ZH)

Update 2: some borderline apocalyptic observations from Bloomberg markets live managing editor, Mark Cudmore who writes the following: “This Mexico tariff news is far worse than even the initial market reaction makes it out to be. The timing is almost immediate. Chaos for both companies and bureaucrats. No time for anyone to prepare or make contingencies. The only way the S&P 500 doesn’t sink massively today is if Trump rows back on this. The U.S. imported almost $350b worth of goods from Mexico in 2018. What makes it even worse again, if possible, is that so many traders were hoping Trump would soon take a more conciliatory trade zone because U.S. stocks have weakened. This is a black swan event for markets and people aren’t even registering. Maybe traders are all hoping there’s some mistake or that this won’t be implemented.”


Update 1: it’s going from bad to worse, with the White House warning that it will hike Mexico tariffs to 25% by October 1, if the border crisis persists, as Trump is activating a scorched earth approach whereby he will “punish” any offshore nation that he believes is transgressing, by imposing tariffs. Meanwhile, moments after Trump’s shock tweet, the Mexican deputy foreign minister Seade said that if President’s threat to impose tariffs is carried out, “it would be disastrous”, and Mexico would “respond strongly”, adding that “we will not remain with out arms folded” before the tariff deadline “to see if it is serious.”

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“Trade policy and border security are separate issues.”

GOP Senator Grassley Blasts Trump Over Mexico Tariff Threat (Hill)

Senate Finance Committee Chairman Chuck Grassley (R-Iowa) condemned President Trump’s new tariffs on Mexico late Thursday, calling the move a “misuse” of presidential tariff authority and cautioning the levies could derail passage of the United States-Mexico-Canada Agreement (USMCA). “Trade policy and border security are separate issues. This is a misuse of presidential tariff authority and counter to congressional intent,” Grassley said in a statement. The lawmaker cautioned that following through on Trump’s tariff threat “would seriously jeopardize passage of USMCA,” a revision of the North American Free Trade Agreement (NAFTA).


“I support nearly every one of President Trump’s immigration policies, but this is not one of them,” he added. Trump announced he would impose the tariffs to pressure Mexico to stop the flow of migrants into the U.S. via the southern border. [..] Grassley had previously threatened to derail Trump’s central trade achievement over continued steel and aluminum tariffs. Last week, Trump hinted that he had reached a deal to drop those tariffs, paving the way for the USMCA in the Senate.

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“This is the worst scandal in American history. It’s the worst, at least, since the Civil War.”

Russiagate Is #1 Threat To US National Security – Stephen Cohen (RT)

The systemwide US Russophobia that reached its nadir with Russiagate has created a “catastrophe” for both domestic politics and foreign relations that threatens the future of the American system, professor Stephen Cohen tells RT. War with Russia could easily break out if the US insists on pursuing the policy of “demonization” that birthed Russiagate instead of returning to detente and cooperation, New York University professor emeritus of Russian history Stephen Cohen argues on Chris Hedges’ On Contact. While NATO deliberately antagonized post-Soviet Russia by expanding up to its borders, the US deployed missile defense systems along those borders after scrapping an arms treaty, leaving President Vladimir Putin devoid of “illusions” about the goodwill of the West – but armed with “nuclear missiles that can evade and elude any missile defense system.”


Cohen believes the conspiracy theory – which remains front-page news in US media despite being thoroughly discredited, both by independent investigators and last month by special counsel Robert Mueller’s report – is the work of the CIA and its former director, John Brennan, who are dead set against any kind of cooperation with Russia. Attorney General William Barr, who is investigating the FBI over how the 2016 counterintelligence probe began, should take a look at Brennan and his agency, Cohen says. “If our intelligence services are off the reservation to the point that they can first try to destroy a presidential candidate and then a president…we need to know it,” Cohen says. “This is the worst scandal in American history. It’s the worst, at least, since the Civil War.” And the damage wrought by this “catastrophe” hasn’t stopped at the US border.

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“We don’t know why we are excluded from the examination but from the very beginning, we see too much politics in it.”

Malaysia PM Wants Evidence To Show Russia Shot Down MH17 (FMT)

The Malaysian government wants strong evidence to show that Russia is responsible for the Malaysia Airlines flight MH17 tragedy in 2014, said Prime Minister Dr Mahathir Mohamad today. He said Malaysia accepted the investigation report of Holland but only up to the point where the plane was brought down by a missile made by Russia. Mahathir said while the government agreed that the plane was brought down by a Russian missile, it cannot be certain that the missile was launched by Russia. “They are accusing Russia but where is the evidence? We know the missile that brought down the plane is a Russian-type missile, but it could also be made in Ukraine. “You need strong evidence to show it was fired by the Russians.

“It could be by the rebels in Ukraine; it could be Ukrainian government because they too have the same missile,” he said during a dialogue and media conference with the Japanese Foreign Correspondents Club (FCCJ) here today. Mahathir said people of Russia are military people and they would know that MH17 is a passenger plane. “I don’t think a very highly disciplined party is responsible for launching the missile,” he said. The prime minister said Malaysia should also be involved in examining the black box as the plane belongs to Malaysia and there were Malaysian passengers. “We may not have the expertise but we can buy the expertise. For some reason, Malaysia was not allowed to check the black box to see what happened.

“We don’t know why we are excluded from the examination but from the very beginning, we see too much politics in it. “The idea was not to find out how this happened but seems to be concentrated on trying to pin it on the Russians. This is not a neutral kind of examination,” said Mahathir. “Had a neutral party examined and made the conclusion, Malaysia is willing to accept the findings but here we have parties with political interests in the matter,” he added.

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Why is the CEO still in office?

Boeing Admits It ‘Fell Short’ On Safety Alert For 737 (BBC)

Boeing has admitted it “fell short” when it failed to implement a safety alert system on the 737 Max. The aircraft was grounded globally in March after two crashes within months. Boeing boss Dennis Muilenburg said a mistake had been made in the software for a cockpit warning light called an “angle-of-attack (AOA) disagree alert”. He said: “We clearly fell short and the implementation of this angle-of-attack disagree alert was a mistake, right, we did not implement it properly.” In an interview with Norah O’Donnell of CBS News he said Boeing was now fixing the problem.


The alert could have notified pilots and maintenance crews that there was a problem early in the flight. One flight safety expert said if there had been an AOA disagree alert on board the Ethiopian airlines flight it “would have been the very first clue” for the pilots that something was wrong. Chris Brady, a pilot and author of The Boeing 737 Technical Guide said: “I’m fairly confident that the Ethiopian Airlines flight probably would not have crashed if they had had the AOA disagree alert” on the aircraft.

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“This is getting pretty nutty, when you think about it.”

Yield-Curve Spaghetti (WS)

On Thursday, the US Treasury yield curve sagged further in the middle, producing an ever more beautiful middle-age sag, so to speak, that first started taking shape late last year. The chart shows the yield curves on seven dates. Each line represents the yields from the 1-month yield on the left to the 30-year yield on the right, on that date. The steep green line coming up from the bottom represents the yields on December 14, 2016, when the Fed got serious about rate hikes — the steep slope, with short-term yields a lot lower than long-term yields, is what a yield curve in normal-ish times is supposed to look like. The beautifully sagging red line represents the yields today, May 30. The entire portion of the yield curve from the 3-year yield through the 10-year yield has now dropped by over 1 percentage point since the peak on November 8, 2018.

Some more standouts: The 3-year yield inched down to 2.00%, the lowest since January 2, 2018, forming the low point of the middle-age sag. On Nov 8, it was at 3.05%. The 10-year yield dipped to 2.22%, lowest since Sep 18, 2017, and below 1-year and shorter maturities; but it remains above the 2-year yield and in this cycle has not inverted with the 2-year yield yet. The 1-month yield ticked up to 2.37%, from 2.35% yesterday, which had been the bottom of its range, and as is to be expected, right in the middle of the Fed’s target range for the federal funds rate (2.25% -2.50%). The 6-month yield had been anchored since late October at round 2.5%, with only slight variations. It now too has dropped out of this range and hit 2.38% over the past two days but ticked up to 2.40% today. The 30-year yield dropped to 2.65%, the lowest since Nov 7, 2016. This is getting pretty nutty, when you think about it.

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AOC should be focusing all her energy on Assange.

Ted Cruz, AOC Agree To Ban Former Congress Members From Becoming Lobbyists (G.)

A conversation on Twitter has led to an unlikely collaboration between the Republican senator Ted Cruz and the Democratic representative Alexandria Ocasio-Cortez to pass legislation targeting lobbying by former members of Congress. The two lawmakers tweeted support of placing restrictions or a potential lifetime ban on former Congress members becoming lobbyists. The conversation began when Ocasio-Cortez tweeted a study from Public Citizen that found 60% of former Congress members had taken jobs influencing federal policy. “If you are a member of Congress and leave, you shouldn’t be allowed to turn right around and leverage your service for a lobbyist check,” she wrote.


Cruz retweeted Ocasio-Cortez, suggesting bipartisan legislation to fight the Washington political “swamp”. The Republican House representative Chip Roy tweeted that he would help Ocasio-Cortez spearhead the effort. She agreed to create a bipartisan team in the House while Cruz forms one in the Senate to write a ban. [..] Previous efforts to prevent lobbying from former congresspeople have been put forth but not passed, including a 2017 bill co-sponsored by the Republican senator Cory Gardner and the Democratic senators Michael Bennet and Al Franken. Also in 2017, Senator Jon Tester of Montana introduced legislation that would ban lawmakers from lobbying their former colleagues until five years after leaving office, but it failed to gain traction.

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Dec 042018
 


Sirkka-Liisa Konttinen Kendal Street, Byker, Newcastle 1969

 

Yield Curve: What Bond Market Most Feared Is Starting To Happen (CNBC)
UK Government Accused Of Holding Parliament In Contempt On Legal Advice (G.)
Four Million British Workers Live In Poverty (G.)
1.5 Million Demands For Second Referendum Handed To Downing Street (Ind.)
Europe’s Top Court To Rule On Whether The UK Can Cancel Brexit (CNBC)
‘Death Threats’ Halt France Protest Summit (BBC)
Mueller Withheld “Details That Would Exonerate Trump” (ZH)
Jerome Corsi Legal Ethics Complaint Against Robert Mueller (Klayman)
Manafort Tried to Broker Deal With Ecuador to Hand Assange Over to US (NYT)
Ford’s Restructuring Could Slash More Jobs Than GM’s – Morgan Stanley (MW)
Future Of Auto Industry Lies In Car Sharing – Chinese Execs (CNBC)
US-China Trade Talks: Forced Tech Transfers, Intellectual Property Theft (CNBC)
Bitcoin Drops 8% To Kick Off December (CNBC)
David Attenborough: Collapse Of Civilisation Is On The Horizon (G.)

 

 

Powell, Draghi and Kuroda to the rescue!

Yield Curve: What Bond Market Most Feared Is Starting To Happen (CNBC)

The bond market sees storm clouds on the horizon, despite the trade ceasefire between President Donald Trump and China. But not all strategists agree with the dire warnings, though they do note some unusual behavior. On Monday, the difference between the 10-year Treasury yield, at 2.97 percent, and the 2-year yield, at 2.82 percent, dramatically narrowed by 5 basis points, the biggest one day move since late March. Traders have been watching the difference between the yields on various Treasurys for months, along what is called the yield curve between the longer and shorter-term bonds.

And in this time, the longer duration 10-year yield has gotten closer and closer to the yield on the 2-year. If the two should flip, and the 2 -year yield actually rises above the benchmark 10-year, that inversion would be a signal of a recession. The two yields are currently just under 15 basis points apart, the narrowest since around the time they last inverted in June 2007. What’s worrisome for some is that on Monday, the difference between the yields on the 3-year and 5-year, and those of the 2-year and 5-year, inverted.

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Final warning.

UK Government Accused Of Holding Parliament In Contempt On Legal Advice (G.)

A senior minister is at risk of being suspended from the House of Commons after Labour and the Democratic Unionist party were allowed to submit an emergency motion accusing the government of holding parliament in contempt for failing to publish the full Brexit legal advice. John Bercow, the Speaker, allowed Labour, the DUP and four other opposition parties to lay down a motion that will be voted on Tuesday, immediately before before the start of the five-day debate on the Brexit deal. The motion, submitted late on Monday, calls on MPs to find “ministers in contempt for their failure to comply” and is signed by the shadow Brexit secretary, Sir Keir Starmer; the DUP’s Westminster leader, Nigel Dodds; and the Scottish National party, Liberal Democrats, Plaid Cymru and the Green party.

No penalty is spelled out in the motion, which is intended to act as a final warning, but Labour said that if it was passed on Tuesday and not still complied with then the party would seek further sanctions. The party indicated it would then seek to hold a senior minister – likely to be either the Cabinet Office minister, David Lidington, or the attorney general, Geoffrey Cox – in contempt and seek their suspension from the Commons. Bercow ruled in the evening that he would accept a contempt motion after the six parties wrote to him jointly complaining that the summary Brexit legal advice released on Monday did not comply with a Commons resolution agreed on 13 November.

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Holding Parliament in contempt is one thing, holding your people in contempt is another one altogether.

Four Million British Workers Live In Poverty (G.)

More than 500,000 British workers have been swept into working poverty over the past five years, according to a report that shows the number of people with a job but living below the breadline has risen faster than employment. In the latest sign that the link between entering work and making ends meet has become increasingly frayed in 21st-century Britain, the Joseph Rowntree Foundation (JRF) said that the number of workers in poverty hit 4 million last year, meaning about one in eight in the economy are now classified as working poor. Nearly all of the increase comes as growing numbers of working parents find it harder to earn enough money to pay for food, clothing and accommodation due to weak wage growth, an erosion of welfare support and tax credits and the rising cost of living.

Half a million more children have become trapped in poverty over the past five years as a direct consequence, reaching 4.1 million last year, the charity’s report added. It means that in a typical classroom of 30 children, nine would come from a household in poverty. Campbell Robb, chief executive of the JRF, said: “We are seeing a rising tide of child poverty as more parents are unable to make ends meet, despite working. This is unacceptable.” In the findings of JRF’s report, UK Poverty 2018, the number of children who slipped into poverty from a working family rose more steeply than at any time for 20 years.

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There is no time for a second round of talks even if the people demand it.

1.5 Million Demands For Second Referendum Handed To Downing Street (Ind.)

Campaigners for a new referendum have handed in petitions carrying almost 1.5 million names to Downing Street, demanding the British public be given a final say on the outcome of Brexit. The group representing The Independent’s Final Say campaign and the People’s Vote initiative handed over the petitions as Theresa May prepared for what is set to be a bruising five-day Commons debate on her Brexit deal. Pressure for a new referendum is increasing ahead of the vote that will come at the end of that debate next week, with the prime minister looking at a heavy personal defeat if MPs reject the deal she agreed with the EU. Anger over her deal increased on Monday, when the government published a legal paper confirming that under Ms May’s plan, the UK will be indefinitely locked in to the controversial ‘backstop’ arrangement.

Campaigners carrying EU flags and placards chanted calls for a new referendum as they met outside the Churchill War Rooms in Westminster, before marching to No10 to deliver the petitions on Monday morning. Conservative ex-cabinet minister Justine Greening said: “Britain has choices ahead of it. The key issue that we’re saying today, and that’s why we’re delivering a petition signed by a million people in this country, is that those choices are ones that should be made by the British people. “Parliament is gridlocked … This is no way to decide the most fundamental question facing Britain for the next 10, 20, 30, 40, 50 years.”

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Again dependent on Europe. Reuters headline just now: “Britain can revoke Brexit unilaterally, EU court adviser says”. Court decision expected to take a few more weeks.

Europe’s Top Court To Rule On Whether The UK Can Cancel Brexit (CNBC)

The legal advisor for the European Union’s top court will publish his opinion Tuesday on whether the U.K. can cancel Brexit without asking anybody else for permission. A group of Scottish lawmakers have sought a legal ruling on if and how the U.K.’s request under Article 50 to leave the European Union could be unilaterally revoked before the Brexit deadline of March 29, 2019. Article 50 allows a country to trigger the process that takes them out of Europe’s political and economic union. U.K. Prime Minister Theresa May invoked the exit clause in March 2017. Backed by a crowdfunding appeal, the case has been put together by a cross-party group of Scottish politicians, along with the high-profile barrister Jolyon Maugham QC.

The final ruling on whether Article 50 could be canceled without input from the EU’s other 27 countries will be granted by the Court of Justice of the European Union (CJEU). [..] The EU is worried that allowing a country to trigger Article 50 and then reverse the decision with no additional input could become a tool for those unsatisfied with the policies of Brussels. For the U.K. government and pro-Brexit politicians, there are likely concerns it could pave the way for a second referendum, giving the public an option of remaining in the EU.

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Macron is cornered. Many in France say he’s done.

‘Death Threats’ Halt France Protest Summit (BBC)

Protesters from France’s “gilet jaunes” (yellow vests) movement have pulled out of a meeting with PM Edouard Philippe scheduled for Tuesday. Some members of the group said they had received death threats from hardline protesters warning them not to enter into negotiations with the government. The PM is due to make a major statement possibly as early as Tuesday. The yellow vests oppose a controversial fuel tax but now reflect more widespread anger at the government. A spokeswoman for the movement, Jacline Mouraud, said: “The meeting today at Matignon [the prime minister’s office] has been cancelled in the face of threats.

“There are calls to prevent us from going. If I were to get on a train, I would run the risk of being recognised.” Three people have died since the unrest began and the resulting violence and vandalism – notably when statues were smashed at the Arc de Triomphe last Saturday – have been widely condemned. [..] The French president held an urgent security meeting on Monday. Ministers said that while no options had been ruled out, imposing a state of emergency had not been discussed during the talks. Mr Macron has also cancelled a planned trip to Serbia to concentrate on the crisis. Culture Minister Franck Riester told reporters that Mr Philippe would announce “a strong conciliatory gesture in the coming days”, without giving details. AFP news agency reports that the prime minister will announce a moratorium on fuel tax.

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Color me unsurprised.

Mueller Withheld “Details That Would Exonerate Trump” (ZH)

It appears that special counsel Robert Mueller withheld key information in its plea deal with Trump’s former attorney, Michael Cohen, which would exonerate Trump and undermine the entire purpose of the special counsel, according to Paul Sperry of RealClearInvestigations. Cohen pleaded guilty last week to lying to the Senate intelligence committee in 2017 about the Trump Organization’s plans to build a Trump Tower in Moscow – telling them under oath that negotiations he was conducting ended five months sooner than they actually did. Mueller, however, in his nine-page charging document filed with the court seen by Capitol Hill sources, failed to include the fact that Cohen had no direct contacts at the Kremlin – which undercuts any notion that the Trump campaign had a “backchannel” to Putin.

“On page 7 of the statement of criminal information filed against Cohen, which is separate from but related to the plea agreement, Mueller mentions that Cohen tried to email Russian President Vladimir Putin’s office on Jan. 14, 2016, and again on Jan. 16, 2016. But Mueller, who personally signed the document, omitted the fact that Cohen did not have any direct points of contact at the Kremlin, and had resorted to sending the emails to a general press mailbox. Sources who have seen these additional emails point out that this omitted information undercuts the idea of a “back channel” and thus the special counsel’s collusion case.” -RCI

Page 2 of the same charging document offers further evidence that there was no connection between the Trump campaign and the Kremlin; an August 2017 letter from Cohn to the Senate intelligence committee states that Trump “was never in contact with anyone about this [Moscow Project] proposal other than me,” an assertion which Mueller does not contest as false – which means that “prosecutors have tested its veracity through corroborating sources” and found it to be truthful, according to Sperry’s sources. Also unchallenged by Mueller is Cohen’s statement that he “ultimately determined that the proposal was not feasible and never agreed to make a trip to Russia.”

“Though Cohen may have lied to Congress about the dates,” one Hill investigator said, “it’s clear from personal messages he sent in 2015 and 2016 that the Trump Organization did not have formal lines of communication set up with Putin’s office or the Kremlin during the campaign. There was no secret ‘back channel.’” “So as far as collusion goes,” the source added, “the project is actually more exculpatory than incriminating for Trump and his campaign.” -RCI”

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Court document (PDF). For one thing, the Mueller team demands that Corsi keep any plea agreement secret and under seal, which would ‘criminally and civilly violate’ Corsi’s obligations as a securities dealer.

Jerome Corsi Legal Ethics Complaint Against Robert Mueller (Klayman)

On or about May 17, 2017, Robert Swan Mueller III (“Special Counsel Mueller”) was appointed as a Special Counsel for a limited purpose investigation as defined by the order of Deputy Attorney General Rod Rosenstein. A copy of Robert Mueller’s appointment as Special Counsel is attached as Exhibit A. Dr. Corsi has been investigated by Special Prosecutor Mueller and the attorneys whom he hired to serve as prosecutors under him [..] This Complaint concerns the politically-motivated criminal investigation of Dr. Corsi, an investigative journalist, whose activities are protected by the First Amendment to the U.S. Constitution.

Dr. Corsi has been threatened with immediate indictment by Mueller’s prosecutorial staff unless he testifies falsely against Roger Stone and/or President Donald Trump and his presidential campaign, among other false testimony. Dr. Corsi is placed in an impossible, no-win scenario and is in immediate legal jeopardy. If he were to lie under oath to testify as the Special Prosecutor and his prosecutorial staff demand, some later prosecutor could accuse Dr. Corsi of perjury and/or violating any plea deal. The Special Prosecutor and his prosecutorial staff have already accused Dr. Corsi of lying when Dr. Corsi is in fact telling the truth and told the truth. Either way, Dr. Corsi remains at risk of a perjury prosecution without the relief demanded. Dr. Corsi is being investigated for the “crime” of doing his job as a foreign policy and national security journalist.

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WikiLeaks: “Ecuador’s president Lenin Moreno tried to sell Assange to U.S. in exchange for cash loans as early as May 2017..”

Manafort Tried to Broker Deal With Ecuador to Hand Assange Over to US (NYT)

In mid-May 2017, Paul Manafort, facing intensifying pressure to settle debts and pay mounting legal bills, flew to Ecuador to offer his services to a potentially lucrative new client — the country’s incoming president, Lenín Moreno. Mr. Manafort made the trip mainly to see if he could broker a deal under which China would invest in Ecuador’s power system, possibly yielding a fat commission for Mr. Manafort. But the talks turned to a diplomatic sticking point between the United States and Ecuador: the fate of the WikiLeaks founder Julian Assange. In at least two meetings with Mr. Manafort, Mr. Moreno and his aides discussed their desire to rid themselves of Mr. Assange, who has been holed up in the Ecuadorean Embassy in London since 2012, in exchange for concessions like debt relief from the United States, according to three people familiar with the talks, the details of which have not been previously reported.

They said Mr. Manafort suggested he could help negotiate a deal for the handover of Mr. Assange to the United States, which has long investigated Mr. Assange for the disclosure of secret documents and which later filed charges against him that have not yet been made public. Within a couple of days of Mr. Manafort’s final meeting in Quito, Robert S. Mueller III was appointed as the special counsel to investigate Russian interference in the 2016 election and related matters, and it quickly became clear that Mr. Manafort was a primary target. His talks with Ecuador ended without any deals. Mr. Moreno’s team increasingly looked to resolve their Assange problem by turning to Russia.

In the months after Mr. Moreno took office, the Ecuadorean government granted citizenship to Mr. Assange and secretly pursued a plan to provide him a diplomatic post in Russia as a way to free him from confinement in the embassy in London. (That plan was ultimately dropped in the face of opposition from British authorities, who have said they will arrest Mr. Assange if he leaves the embassy.)

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10 years after Detroit bailouts, Ford too is in trouble. It’s industry wide.

Ford’s Restructuring Could Slash More Jobs Than GM’s – Morgan Stanley (MW)

Ford Motor Co.’s restructuring would be “more extensive” than GM’s and could involve laying off tens of thousands of employees around the world, analysts at Morgan Stanley said in a note Monday. The analysts used Ford’s planned expenses as part of their calculations and compared them to General Motors’s expenses in the latter’s planned restructuring announced last week. Regardless, Ford is likely “next in line” in announcing layoffs as GM’s move “reflects an industrywide phenomenon” with potentially larger cuts, the analysts said. Ford last October announced an $11 billion restructuring plan, with a cash cost around $7 billion, but has not provided any details yet.

GM is spending as much as $ 2 billion of cash (up to $3.8 billion of total charges) to close seven plants and lay off about 14,000 workers. “Extrapolated to Ford’s planned expenditure, this could imply 20 plants and up to (50,000) employees,” the Morgan Stanley analysts said. “Our estimate of Ford’s restructuring plan involves as many as (25,000) head count reductions globally.” “A large portion” of Ford’s restructuring actions will likely be focused on Ford Europe, they said.

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Might as well move to public transit then?! The Chinese don’t have a car dependent society like the US, they can take a wider view.

Future Of Auto Industry Lies In Car Sharing – Chinese Execs (CNBC)

Several Chinese auto and transportation industry leaders are preparing for a future in which people share cars, rather than own them individually. “(The new generation), they’re not interested in the ownership. They’re probably more interested in accessibility,” Freeman Shen, founder and CEO of Chinese electric car company WM Motor, said last week at CNBC’s East Tech West conference in the Nansha district of Guangzhou, China. Technological advances in the last several years have aided the rise of multibillion-dollar ride-hailing giants such as Uber and Didi. They, in turn, have challenged the traditional taxi driver system and cultivated a habit of on-demand car services for tens of millions of users globally despite ongoing safety concerns.

Traditional automakers, many already trying to navigate rising interest in the electric vehicle market, are paying close attention to the ride sharing trend. Notably, General Motors is testing the waters with its own rental program. In China, Feng Xing Ya, general manager of Guangzhou-based automaker GAC, also said the future of the auto industry lies in car sharing. “(It’s) a challenge for the auto industry because people may buy fewer cars,” Feng said in Mandarin, according to a CNBC translation, during a Nov. 27 conference session. Without giving much detail on a plan, Feng said he favored a strategy of entering — rather than avoiding — the car sharing economy, which he said can still generate a lot of income for a company.

However, such a rapid change in consumer tastes could give start-ups an advantage. Shen, formerly a director at Fiat Chrysler and Chinese automaker Geely, said traditional automakers are too focused on selling cars rather than improving user experiences. He said his company’s focus on software and newness to the market means he has everything to gain and little to lose from a shift to ride sharing.

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It’s about much more than tariffs.

US-China Trade Talks: Forced Tech Transfers, Intellectual Property Theft (CNBC)

Two contentious issues were notably downplayed in the deal between Donald Trump and Xi Jinping at the G-20 summit over the weekend: China’s alleged practice of forcing technology transfers and apparent theft of intellectual property from American companies. U.S. concerns over forced technology transfers in China, intellectual property violations and cyber-crime issues will likely become a central focus going forward, as trade negotiations between both countries continue, experts told CNBC on Monday. However, they added, a resolution may not be immediately forthcoming. “It is interesting to note that IP/cyber was only mentioned in paragraph four of the White House statement, reflecting Trump’s focus on trade deficits,” Steven Okun at McLarty Associates told CNBC on Monday.

“Still, this does not mean this is not core to the U.S. tariffs.” [..] One expert, however, said that downplaying those issues could reflect the reality of what to expect from ongoing negotiations — that there are no quick fixes to the complexities of forced technology transfers and intellectual property violations. “I have argued for some time that there is no quick resolution to these issues, so there is no simple win for the Trump Administration here,” Adam Posen, president of the Peterson Institute of International Economics said. “The downplaying could therefore be a welcome dose of realism from the Trump Administration about what to expect from negotiations.” Or, it could represent a desire to calm things down with China, he added. “Either way, this issue is not going to go away,” Posen told CNBC by email.

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Try the brave face.

Bitcoin Drops 8% To Kick Off December (CNBC)

Bitcoin is kicking off the last month of 2018 with another downward drop. After ending November deeply in the red, the world’s largest cryptocurrency fell as much as 8 percent on Monday to a low of $3,790.96, according to data from CoinDesk. At this time last year, bitcoin was beginning its climb to almost $20,000 and ended last December up 40 percent. It entered its hot streak just after Thanksgiving last year, surging in price largely because retail investors were buying in. But the tail end of this year has been a different story: Bitcoin is now down 73 percent since the beginning of January. Twenty-four-hour trading volumes are down 56 percent since Jan. 1, while the entire cryptocurrency market capitalization has fallen 80 percent.

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World ‘leaders’, no matter how much lip service they pay, are the very last people you should trust to bring about change. The statement by UN secretary general António Guterres says all you need to know on that. You can’t buy your way out of this one, but that’s the only trick they’ve learned. And their power depends on that. They’ll announce trillions in investment, and matters will only get worse. This is all about the production side of things, aimed at keeping consumption levels the same. But those have to come down drastically.

David Attenborough: Collapse Of Civilisation Is On The Horizon (G.)

The collapse of civilisation and the natural world is on the horizon, Sir David Attenborough has told the UN climate change summit in Poland. The naturalist was chosen to represent the world’s people in addressing delegates of almost 200 nations who are in Katowice to negotiate how to turn pledges made in the 2015 Paris climate deal into reality. As part of the UN’s people’s seat initiative, messages were gathered from all over the world to inform Attenborough’s address on Monday. “Right now we are facing a manmade disaster of global scale, our greatest threat in thousands of years: climate change,” he said. “If we don’t take action, the collapse of our civilisations and the extinction of much of the natural world is on the horizon.”

“Do you not see what is going on around you?” asks one young man in a video message played as part of a montage to the delegates. “We are already seeing increased impacts of climate change in China,” says a young woman. Another woman, standing outside a building burned down by a wildfire, says: “This used to be my home.” Attenborough said: “The world’s people have spoken. Time is running out. They want you, the decision-makers, to act now. Leaders of the world, you must lead. The continuation of civilisations and the natural world upon which we depend is in your hands.”

[..] António Guterres, the UN secretary general: “Climate change is running faster than we are and we must catch up sooner rather than later before it is too late,” he said. “For many, people, regions and even countries this is already a matter of life or death.” Guterres said the two-week summit was the most important since Paris and that it must deliver firm funding commitments. “We have a collective responsibility to invest in averting global climate chaos,” he said. He highlighted the opportunities of the green economy: “Climate action offers a compelling path to transform our world for the better. Governments and investors need to bet on the green economy, not the grey.”

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Jul 072018
 
 July 7, 2018  Posted by at 9:10 am Finance Tagged with: , , , , , , , , ,  4 Responses »


Claude Monet Water lilies 1904

 

Fed Discards Flattening Yield Curve as Recession Indicator (WS)
Theresa May Secures Approval From Cabinet To Negotiate Soft Brexit (G.)
Boris Johnson’s Gang Outgunned By Theresa May At Chequers (G.)
UK Government Has No Clue How To Execute Brexit Without Harm – Airbus CEO (G.)
Despite 213K Jobs Gain, Unemployment Up by 499K (Mish)
Russia Hikes Duties On US Imports, Pledges More Retaliation (R.)
US Border Agents Stop Canadian Fishermen In Disputed Waters Off Maine (G.)
More Ways Your Phone Is Spying On You (ZH)
Summer of Tough Love (Jim Kunstler)
Twitter Suspends Over 70 Million Accounts In Two Months (R.)
Tax Arbitrage Is An Issue (Setser)
Mainstream Politicians Short-Sighted, Don’t See World Changing – Grillo (RT)
Number Of Planes In The Sky To More Than Double In Next 20 Years (Ind.)
Pope Warns Earth Turning Into Vast Pile Of ‘Rubble, Deserts And Refuse’ (AP)

 

 

Seems like a risky gamble.

Fed Discards Flattening Yield Curve as Recession Indicator (WS)

In the minutes of the FOMC meeting on June 12 and 13, released this afternoon, there was a doozie, obscured somewhat by the dynamics of the rate hike plus the indication that there would be two more rate hikes this year, for a total of four, up from three at the prior meeting, with more hikes to come in 2019, along with other changes [..] But the doozie in the minutes was about the flattening “yield curve.” The yield curve is formed by Treasury yields of different maturities: normally, the two-year yield is quite a bit lower than the 10-year yield. Over the last several decades, each time the yield curve “inverted” – when the two-year yield ended up higher than the 10-year yield – a recession followed. The last time, the Financial Crisis followed.

So this has become a popular recession indicator that has cropped up a lot in the discussions of various Fed governors since last year. Today, the two-year yield closed at 2.55% and the 10-year yield at 2.84%. The spread between them was just 29 basis points, the lowest since before the Financial Crisis. The chart below shows the yield curves on December 14, 2016, when the Fed got serious about raising rates (black line); and today (red line). Note how the red line has “flattened” between the two-year and the 10-year markers, and how the spread has narrowed to just 29 basis points:

The chart below shows the two-year yield (black) and the 10-year yield (red) going back to 1992. Note how the spread has been narrowing in recent months.

The chart below tracks this spread for every day back to 2008. Today, the spread, at just 29 basis points, is the lowest since before the Financial Crisis:

There has been a lot of handwringing about this being an indicator that the next recession is nearing and that the Fed should back off with its rate hikes. But this Fed is getting seriously hawkish: In the minutes today, it revealed that instead of thinking about backing off with its rate hikes, it’s throwing out the flattening yield curve.

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She’s threatened to fire them. But Brexit looks less likely to happen by the day.

Theresa May Secures Approval From Cabinet To Negotiate Soft Brexit (G.)

Theresa May has secured approval to negotiate a soft Brexit deal with the European Union, signing up her fractious cabinet at a Chequers awayday to a controversial plan to match EU standards on food and goods. The prime minister released a statement following the critical afternoon session of the long-awaited summit that alarmed Tory hard Brexiters, in which she confirmed she had won over the cabinet to new customs arrangements ending political deadlock on the issue. May said the cabinet had “agreed our collective position for the future of our negotiations with the EU”. That included a proposal to “create a UK-EU free trade area which establishes a common rule book for industrial goods and agricultural products” after Brexit.

Tory Brexiters voiced concern at the agreement, while soft Brexiters expressed relief. Andrea Jenkyns, a hardline MP, complained that “British businesses will continue to be a rule taker from the EU” and said she would “pray” that the detail was not as bad as she feared. Heidi Allen, a moderate, said she was “pleased to report Theresa May has secured cabinet agreement for a sensible, soft Brexit”. On Thursday, when the common rule book proposal was first leaked, hardline Brexiter cabinet ministers and Conservative MPs voiced alarm that it could prevent the UK striking a trade deal with the US, which has different standards in goods and foods, such as allowing chickens to be washed in chlorine.

But May was able to release the text of a three-page agreed statement before cabinet, following a relatively undramatic day of discussions, sat down for dinner to listen to No 10 communications chiefs make a presentation on how to sell the new proposals. Michel Barnier, the EU’s chief Brexit negotiator, appeared to react warmly to the proposals, noting in a tweet that the “Chequers discussion on future to be welcomed. I look forward to white paper. We will assess proposals to see if they are workable and realistic”. The prime minister made clear that she expected ministers would be sacked if they did not remain in line with her soft Brexit blueprint.

She wrote to Tory MPs to explain her plans and included a clear warning about discipline: “As we developed our policy on Brexit, I have allowed cabinet colleagues to express their individual views. Agreement on this proposal marks the point where that is no longer the case and collective responsibility is now fully restored.”

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It doesn’t matter one bit unless the EU agrees.

Boris Johnson’s Gang Outgunned By Theresa May At Chequers (G.)

Theresa May has won the battle with her Brexiter rebels in the cabinet, but the war will be a long one. She gambled that the Brexit purists – those who gathered on the eve of the Chequers summit at the Foreign Office with Boris Johnson – would be outgunned at Chequers when the full cabinet was assembled. The choreography was impressive – May locked her ministers inside the Buckinghamshire retreat without their phones or special advisers. The final agreement – sent out on behalf of “HM government” came to journalists an hour before advisers had even seen it – and before they could get in contact with their ministers to know what concessions had been made. Within the hour, out came a letter to Conservative MPs warning the days of debate over the government’s Brexit position were over.

“Collective responsibility is now fully restored,” May warned. The deal clinched with her most difficult members of her cabinet, architects of the leave campaign such as Johnson and Michael Gove, gave May the leverage to demand similarly hardline MPs get in line. Downing Street has been briefing in a strident tone, practically daring hard Brexiter ministers to give it all up to walk down the Chequers drive. The numbers that will matter now are those in her parliamentary party. Some will express predictable fury, though in the hours since the deal was reached, Jacob Rees-Mogg was telling MPs to keep their powder dry. Key will be whether this is a deal that can win over mainstream backbenchers.

In recent weeks, a number of Conservative MPs had begun to express frustration that the prime minister was not prepared to face down one side of her party and lead. [..] On Monday, the prime minister will address the 1922 committee of backbenchers, though the timing of the summit means angry MPs will have the weekend to either cool off or come to the boil. “I’ll wait to see if this collective responsibility lasts the weekend,” another MP said. Perhaps just as crucially there are still some concerns about the future deal for UK services, around 80% of the UK economy. The agreement states the UK would “strike different arrangements for services, where it is in our interests to have regulatory flexibility, recognising the UK and the EU will not have current levels of access to each other’s markets”.

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And that’s the whole point.

UK Government Has No Clue How To Execute Brexit Without Harm – Airbus CEO (G.)

The chief executive of Airbus has accused the government of having “no clue” on how to leave the EU without harming the economy, as the prime minister aimed at uniting the cabinet behind a Brexit plan. The criticism from the aerospace firm, which employs 14,000 people in the UK, is the strongest intervention yet from the business community on the risk of a hard Brexit and came in the same week that Jaguar Land Rover, Britain’s largest carmaker, warned its were under threat. Speaking at a briefing in London before the Farnborough air show later this month, the Airbus chief executive, Tom Enders, said: “The sun is shining brightly on the UK, the English team is progressing towards the [World Cup] final, the RAF is preparing to celebrate its centenary and Her Majesty’s government still has no clue, no consensus on how to execute Brexit without severe harm.”

Enders said Airbus, a Franco-German group that supports a further 100,000 UK jobs in its supply chain, was wary of all types of Brexit, including a worst-case no-deal scenario. “Rest assured that we are taking first preparations as we speak in order to mitigate consequences from whatever Brexit scenario may follow,” he said. “Brexit in whatever form, soft or hard, light or clean, whatever you call it, will be damaging for industry, for our industry and damaging for the UK, whatever the outcome will be.”

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600,000 more looking for a job. Out of 95 million not in labor force. All new jobs are part-time. Full-time jobs fell.

Despite 213K Jobs Gain, Unemployment Up by 499K (Mish)

Today’s establishment survey shows jobs rose by 213,000. Revisions were positive. The unemployment rate rose from 3.8% to 4.0% as the labor force rose by 601,000. More people are starting to look for jobs but employment only rose by 102,000. Nonfarm wage growth was +0.2% vs an Econoday consensus of +0.3%. The Phillips’ curve is a joke, but it’s still widely believed. The change in total nonfarm payroll employment for April was revised up from +159,000 to +175,000, and the change for May was revised up from +223,000 to +244,000. With these revisions, employment gains in April and May combined were 37,000 more than previously reported

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Putin meets Trump in 9 days.

Russia Hikes Duties On US Imports, Pledges More Retaliation (R.)

Russia said on Friday it was imposing additional import duties on some U.S. industrial goods after the United States slapped tariffs on steel and aluminum imports, and warned that more retaliatory steps could be in the pipeline. The economy ministry said Russia would impose extra tariffs on some goods from the United States for which there are Russian-made substitutes.The extra duties of 25 to 40 percent will apply to imports of fiber optics and equipment for road construction, the oil and gas industries and metal processing and mining.

The ministry said the measures, signed by Russian Prime Minister Dmitry Medvedev, were intended to compensate for $87.6 million of damage suffered by Russian export-focused companies as a result of the U.S. metals tariffs. The U.S. tariff hike will cost an overall $537.6 million and Russia has the right to impose more compensatory measures in the future, the economy ministry said.

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Feels like Python.

US Border Agents Stop Canadian Fishermen In Disputed Waters Off Maine (G.)

Canada’s government is investigating reports that US border patrol officers have intercepted and questioned crew members on more than 20 Canadian vessels in disputed waters off the coast of Maine. The reports have thrust a longstanding territorial dispute between the two countries into the spotlight; since the late 1700s tensions have simmered over a pair of tiny, treeless islands that sit between Maine and the Canadian province of New Brunswick. Primarily inhabited by nesting puffins, the islands of North Rock and Machias Seal remain the only disputed lands between US and Canada, with both claiming sovereign jurisdiction over the islands and their surrounding waters.

As a result, the area has long hosted lobster fisherman from both sides of the border. The question of jurisdiction flared up recently after the Grand Manan Fishermen’s Association said a Canadian vessel had been stopped by US border patrol while fishing in the waters near Machias Seal Island in late June. “He informed them he was a Canadian vessel legally fishing in Canadian waters,” wrote Laurence Cook of the association on Facebook. He said he was “not surprised to see the Americans trying to push people around”, describing them as “typical American bullies.”

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In ways we didn’t yet know.

More Ways Your Phone Is Spying On You (ZH)

For years, conspiracy theories about smart phones listening to users without their permission to show them advertisements have abounded. While some researchers have shown this could happen, a first of its kind study just found something far more insidious. Academics at Northeastern University have just proven that your phone is recording your screen – as in taking video – and uploading it to third parties. For the last year, Elleen Pan, Jingjing Ren, Martina Lindorfer, Christo Wilson, and David Choffnes ran an experiment involving more than 17,000 of the most popular Android apps using ten different phones. Their findings were alarming, to say the least.

As Gizmodo points out, during the study, the researchers started to see that screenshots and video recordings of what people were doing in apps were being sent to third-party domains. For example, when one of the phones used an app from GoPuff, a delivery start-up for people who have sudden cravings for junk food, the interaction with the app was recorded and sent to a domain affiliated with Appsee, a mobile analytics company. The video included a screen where you could enter personal information – in this case, their zip code.

GoPuff did not disclose in its terms of use that its app was recording users screens and uploading this data to a third party. What’s more, when they were contacted by the researchers GoPuff merely added a disclosure to their policy acknowledging that “ApSee” might receive users PII. The fact that these apps can record your screen without you knowing and use this data is chilling. It illustrates how easy it would be for a malicious actor to be able to look at your private messages, personal information, passwords, photos, and videos. None of this is stopped by your phone’s security either as it is a function built into the apps and you don’t have an option to disallow it.

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“Mr. Mueller will come up with someone to indict on something, even if it’s ninety-seven ham sandwiches.”

Summer of Tough Love (Jim Kunstler)

The blowup of the bond and stock markets later this year will put to a gloomy rest the ludicrous notion that America has been enjoying a great economic boom. It’s actually been an engineered hallucination, thanks to the global monetary authorities applying the magic of limitless credit to a bad habit of credulous speculation. The central banks have launched a program of so-called “quantitative tightening (QT)” — an idiotic phrase meant to counterpoise the equally fatuous “quantitative easing (QE),” PhD economist-speak for grotesque interference in the bond markets — that will choke down the credit supply at exactly the moment that governments and giant corporations need new loans to pay the interest on old loans. The trajectory there is obvious.

The big question, of course — hardly ever asked in the public arena — is what that will do to currencies, i.e., money. It can really only go two ways: either make money very scarce, in which case a lot of people and enterprises go broke, or, if the monetary authorities respond to the predicament by enabling a return to bottomless credit issuance, the money will become worthless — they’ll be plenty of it, but it won’t buy much. Such a turn of events will make an already-unhinged nation fly apart. [..] Oh, yes, there is also that Hieronymus Bosch Garden of Earthly Delights known as the Mueller Investigation, with its dreary outposts in the executive suite of the FBI, and all the tangled mysteries entailed there.

Mr. Mueller will come up with someone to indict on something, even if it’s ninety-seven ham sandwiches. I suspect Mr. Trump will manage to dump Attorney General Jeff Sessions and Deputy AG Rod Rosenstein. And then the pardons will fly, like so many winged demons flapping from the mouth of Hades. Constitutional crisis may be too mild a word for what ensues. By holiday time in early winter, much will clarified about the actual direction of the country. By then, the “Walk Away” movement may even include the obdurate shills at CNN and The New York Times, and the Intellectual-Yet-Idiots on the college campuses. And the Golden Golem of Greatness will lie upended in the swamp that he just didn’t try hard enough to drain.

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How many fake accounts do they have?

Twitter Suspends Over 70 Million Accounts In Two Months (R.)

Twitter Inc suspended more than one million accounts a day in recent months to reduce the flow of misinformation on the platform, the Washington Post reported. Twitter and other social media platforms such as Facebook Inc have been under scrutiny by U.S. lawmakers and international regulators for doing too little to prevent the spread of false content. The companies have been taking steps such as deleting user accounts, introducing updates and actively monitoring content to help users avoid being a victim to fake content. Twitter suspended more than 70 million accounts in May and June, and the pace has continued in July, the Post reported on Friday, citing data it obtained.

“It’s hard to believe that 70 million accounts were affected when Twitter has only 336 million monthly active users (MAU),” Wedbush analyst Michael Pachter said. Twitter’s MAU is expected to grow nearly 3 percent to 337.06 in the second quarter, according to Thomson Reuters I/B/E/S. “My guess is that a large number of these suspended accounts were dormant … it should have little impact on the company,” Pachter told Reuters. If the 70 million were mostly active accounts, the affected accounts would have been “screaming bloody murder”, added the analyst.

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Tax havens.

Tax Arbitrage Is An Issue (Setser)

The impact of the U.S. tax reform on the U.S. trade balance was a hot item of debate last December. There was an argument that reducing the headline tax rate—and creating an even lower tax for the export of intangibles—would reduce the incentive for firms to book profits abroad in offshore tax centers. Booking those profits at home would raise U.S. services exports—while the service “exports” of countries like Ireland and Luxembourg (really re-exports of intellectual property created in the U.S) would fall. This would have no overall effect on the balance of payments. The rise in the recorded exports of intellectual property from the U.S. would be offset by a fall in the offshore income of U.S. firms.

For example, Google (U.S.) would show a bigger profit as offshore sales would be booked as exports of IP held in the U.S. (a service export) while Google (Bermuda) would show a smaller profit —and that would translate both into a smaller trade deficit and a smaller surplus on foreign direct investment income.* But shifting paper profits around would bring down the measured trade deficit—a potential win for Trump. It is obviously too soon to assess the full impact of the tax reform. But it isn’t too soon to start looking for some clues. The q1 balance of payments data doesn’t suggest that firms have lost their appetite for booking profits abroad, or their appetite for booking the bulk of their offshore profits in low tax jurisdictions. This shouldn’t be a surprise—the lowest rate in the new U.S. tax code is the new global minimum rate on intangibles.

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The existing “ideologies have outlived their usefulness,” Grillo said. “There are just good and bad ideas..”

Mainstream Politicians Short-Sighted, Don’t See World Changing – Grillo (RT)

Mainstream political parties have outlived their purpose as they cannot adapt to the changes in the political system and are out of step with the voters, Beppe Grillo, the founder of the Italian Five Star Movement (M5S), said. “The world of the old politics and old political parties,” which expect the people to trust them with defending the public interests, is “slowly dying out,” Grillo, a former Italian satirist and activist, told Ex-Ecuador President Rafael Correa during the “Conversations with Correa” show on RT Spanish. People are no more willing to just blindly follow some political forces, they are much more informed now, they seek for information in the internet and want to form their own opinions, he explained.

“The world is changing at a fantastic speed. However, the current generation of politicians does not feel these changes. They just do not see it,” Grillo said, adding that the politicians are oriented “on a short-term horizon.” Meanwhile, the society, particularly the young people, is no longer attracted by the ideas propagated by the mainstream parties. The existing “ideologies have outlived their usefulness,” Grillo said. “There are just good and bad ideas,” he added, explaining that “they are not divided into ‘right’ and ‘left’ anymore.” The self-described anti-establishment activist then criticized the mainstream politicians for hiding their own inability to adapt behind the warnings about the perceived threat of populism.

As for the populism, I am proud to be a populist, if the word ‘populus’ (the people) is still of some importance,” Grillo told Correa. “Our goal is to reach out to people, to encourage them to think for themselves, to give them instruments to fulfill their own ideas,” he added. He agreed with Correa’s statement that the so-called “anti-populism” is what really poses a threat to the modern society as it seeks to keep the system unchanged. He particularly agreed that “anti-populism” is in fact a “means of attack” as it sees everything that challenges the system as populism and seeks to clamp it down.

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It’s going to be so annoying people will stop flying.

Number Of Planes In The Sky To More Than Double In Next 20 Years (Ind.)

The number of aircraft in the skies will more than double by 2037, according to the latest Global Market Forecast by Airbus. The Toulouse-based plane maker says half the present 21,450 aircraft flying will still be aloft in 20 years. With 37,390 new planes predicted to take off, the world’s total will increase by 123 per cent to 47,990. The expected total number of aircraft is 11.3 per cent higher than it was in the last big forecast by Airbus, a year ago. The vast majority of the new planes will be smaller, narrow-bodied jets. More than three-quarters of deliveries will be from the Airbus A320 and Boeing 737 families, or aircraft of a similar scale from other manufacturers.

Assuming the 737 is still being made in 2037, it will be the most enduring aircraft in aviation history, having first flown 70-years earlier. Of the 28,550 predicted new narrow-bodied planes, one of Airbus’s leading hopes is the A321 NEO, a re-engined version of an aircraft that attracted little attention when it was launched as a stretched A320 in the early 1990s. The latest version can hold up to 244 passengers, and the long-range variant can fly 4,600 miles – the distance from Manchester to Seattle. The economics of the A321 are very tempting to 21st-century airlines, particularly for “long, thin” routes.

[..] Last month, Eamonn Brennan, director general of the air-traffic provider, Eurocontrol, warned: “On our most likely scenario, there won’t be enough capacity for approximately 1.5 million flights or 160 million passengers in 2040. “Many airports will become much busier, with higher delays. By 2040, 16 airports will be highly congested operating at close to capacity for much of the day, up from six airports today. “As a result of this congestion the number of passengers delayed by between one and two hours will grow from around 50,000 each day now to around 470,000 a day in 2040.”

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You’re going to need a lot tougher words than that.

Pope Warns Earth Turning Into Vast Pile Of ‘Rubble, Deserts And Refuse’ (AP)

Pope Francis urged governments on Friday to make good on their commitments to curb global warming, warning that climate change, continued unsustainable development and rampant consumption threatens to turn the Earth into a vast pile of “rubble, deserts and refuse”. Francis made the appeal at a Vatican conference marking the third anniversary of his landmark environmental encyclical “Praise Be.” The document, meant to spur action at the 2015 Paris climate conference, called for a paradigm shift in humanity’s relationship with Mother Nature. In his remarks, Francis urged governments to honor their Paris commitments and said institutions such as the IMF and World Bank had important roles to play in encouraging reforms promoting sustainable development.

“There is a real danger that we will leave future generations only rubble, deserts and refuse,” he warned. The Paris accord, reached by 195 countries, seeks to avoid some of the worst effects of climate change by curbing global greenhouse gas emissions via individual, non-binding national plans. President Donald Trump has said the US will pull out of the accord negotiated by his predecessor unless he can get a better deal. Friday’s conference was the latest in a series of Vatican initiatives meant to impress a sense of urgency about global warming and the threat it poses in particular to the world’s poorest and most marginalised people. Recently, Francis invited oil executives and investors to the Vatican for a closed-door conference where he urged them to find alternatives to fossil fuels. He warned climate change was a challenge of “epochal proportions”.

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May 022018
 


Brassaï The Sun King 1930

 

There’s a New Curve in Town and It’s Flashing Red (BBG)
Trump Says Kim Summit Details To Be Unveiled Within Days (AFP)
Apple Delivers Best-Ever Second Quarter Despite Sales Worries (G.)
More Evidence Emerges That Apple Is Killing iPhone X – Analyst (CNBC)
Nissan Shocks With 28% Sales Plunge (BBG)
The Biggest Player in the History of the World (Alistair Crooke)
Debt Is The Great Threat To China’s Development (Michael Hudson)
China’s Petro-Yuan Isn’t Dislodging the Dollar Yet (Barron’s)
China Weakens Its Currency Before US Trade Talks Begin (BBG)
Europeans Cast Doubt On Israel’s Claims About Iran Nuclear Breaches (G.)
Inside Theresa May’s Brexit War Cabinet, Tory Battles Rage (BBG)
UK Home Office ‘Mistakenly Deported 7,000 Foreign Students’ (Ind.)
Theresa May Vetoed Cabinet Pleas Over Visas For NHS Doctors (St.)
OECD Calls For Even Tighter Greek Fiscal Policy To Bolster Growth (K.)
Greece’s Debt Deal To Show How Europe Treats Its Less Fortunate Nations (CNBC)
Facebook’s Dating App Finally Makes Privacy Invasion Sexy (G.)
More Than 90% Of Air Pollution Deaths Occur In Poorer Countries (Ind.)

 

 

The trouble is in corporate bonds.

There’s a New Curve in Town and It’s Flashing Red (BBG)

The private sector may hold the real clues to recession risk. While the flattening U.S. yield curve – the difference between short- and longer-dated Treasuries – has been closely-watched as a potential indicator of a looming contraction, investors might do better to watch a measure of the cost of private credit, according to Charles Gave of Gavekal Capital. An inverted yield curve is thought to signal the “market rate of interest,” (shorter-term rates) exceeding the “natural rate of interest” (longer government rates), but may not be a good proxy for economic activity given that the government can always borrow, Gave said.

Instead, he suggests looking at the corporate credit market. Here, the U.S. economy’s natural rate could be represented by the yield of a longer-dated, seasoned industrial bond rated Baa by Moody’s, and the market rate by the prime lending rate charged by U.S. banks. “The private sector yield curve reading stands at zero, or right on the threshold where trouble can be expected to begin,” Gave wrote in a note published on Tuesday. “Should this spread move into negative territory, I would expect a financial accident to occur outside of the U.S., a U.S. recession, or possibly both.” Either a U.S. recession has taken place within a year of the private sector yield curve inverting, or a “financial accident” has occurred in other economies with currency links to the greenback, according to Gave’s data.

Prime rates below the natural rate of corporate credit have allowed banks to generate “artificial” money, kept “zombie” companies alive, and enabled other corporates to engage in “financial engineering” predicated on cheap borrowing costs that risk toppling over if the curve inverts, Gave said.

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Trump wants to meet in the DMZ. Reportedly, White House officials want Singapore or Mongolia.

Trump Says Kim Summit Details To Be Unveiled Within Days (AFP)

US President Donald Trump seemed pleased Tuesday by a suggestion he should get the Nobel Peace Prize for his upcoming summit with North Korean leader Kim Jong Un, promising that a time and place for the historic meeting will soon be announced. “Nobel Peace Prize? I think President Moon was very nice when he suggested it,” Trump said, referring to South Korean President Moon Jae-in. “The main thing, I want to get peace. It was a big problem and I think it’s going to work out well,” he told reporters in the Oval Office. Trump has proposed holding the summit at the truce village in the Demilitarized Zone separating the two Koreas, adding that two or three locations were under consideration.

“We’re setting up meetings right now and I think it’s probably going to be announced over the next couple of days, location and date,” Trump said. The summit, which has come together rapidly after months of tense saber-rattling over the North’s nuclear and missile programs, would be the first ever between a US president and a leader of North Korea. On Monday, Moon had demurred when asked about the prospect of winning the Nobel Peace Prize, suggesting Trump should get it instead. “President Trump can take the Nobel prize. All we need to take is peace,” he said. Trump said it was “very generous of President Moon of South Korea to make that statement and I appreciate it but the main thing is to get it done.” “I want to get it done,” he added.

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Apple has become a capital allocation venture.

Apple Delivers Best-Ever Second Quarter Despite Sales Worries (G.)

Apple on Tuesday shook off worries that its $1,000 iPhone had failed to live up to the hype – but sales of the world’s most valuable company’s most valuable product are slowing, and Apple has announced a plan to buy its way out of trouble. Releasing its latest quarterly report, Apple announced it had sold 52.2m iPhones in the quarter ending 31 March, at an average price of $728.54. Sales were up 3% compared to last year and slightly lower than analysts had expected, but numbers beat the gloomiest forecasts and were enough to deliver Apple its best second quarter ever, with revenues of over $61bn. That beat the record of $58bn set in 2015.

“We’re thrilled to report our best March quarter ever, with strong revenue growth in iPhone, services and wearables,” said Tim Cook, Apple’s chief executive officer. “We are very bullish on Apple’s future,” Cook told analysts after the news broke. Apple sold 9.11m iPads and 4.08m Macs over the quarter. Analysts had worried that the high-priced iPhone X would dent sales. The results came after Apple suppliers including AMS and Taiwan Semiconductors have reported slowing revenues in a sign seen by analysts as proof of shaky demand for iPhone X.

The company announced it would be adding $100bn to its stock buyback programme, plus a 16% increase in its quarterly dividend. Taking advantage of the Trump administration’s new tax laws, Apple is in the process of repatriating the majority of the $252bn in profits it currently holds overseas. The buyback helped Apple’s shares rise over 5% in after-hours trading. The company’s stock has risen by about 80% in the past two years, setting it on course to battle Amazon to become the first company to be valued at $1tn. But Apple’s share price has stumbled recently as fears about slowing iPhone sales took their toll.

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These reports about the ‘second tier’ just won’t stop.

More Evidence Emerges That Apple Is Killing iPhone X – Analyst (CNBC)

More earnings reports from companies linked to Apple have resulted in further evidence that the technology giant could be winding down or stopping production of the iPhone X. Nasdaq-listed Cognex is the latest company to provide clues that Apple may be going down this path. It reported first quarter earnings on Monday that were up 22% year-on-year, a slowdown from the 40% growth seen in the first quarter of 2017. On top of that, guidance for second quarter revenue of between $200 million and $210 million was below Wall Street expectations, according to Neil Campling, co-head of the global thematic group at Mirabaud Securities.

Cognex sells technology that assists factories that assemble the iPhone. Apple’s supply chain relies on this technology to get the OLED screen on the iPhone X fitted perfectly. Campling told CNBC on Tuesday that Apple accounts for about 20% of Cognex revenues, so the slowdown can be attributed to Apple killing off the iPhone X. “Cognex results provide further evidence that the smartphone cycle has turned south, the OLED overcapacity bites and Apple’s iPhone X is over,” Campling wrote in a note Tuesday. “If Apple is stepping back from the iPhone X production cycle, then Cognex is lead indicator of when that is taking place,” the analyst said in a follow-up phone call with CNBC.

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Remember Japanese cars?

Nissan Shocks With 28% Sales Plunge (BBG)

Nissan’s U.S. sales plunged last month, shocking some analysts and dragging on what was otherwise a strong April for auto demand. The Japanese automaker’s deliveries declined 28% in April, with almost every model in the Nissan and Infiniti lineups falling. Nissan shares fell as much as 1.8% in Tokyo trading Wednesday. While Ford and Fiat Chrysler beat analysts’ estimates, their shares reversed gains after Nissan’s report. “Our eyes are bugging out here,” Michelle Krebs, senior analyst for researcher Autotrader, said of the Nissan’s numbers. “They’ve been very heavy with rental-car sales and rich incentives. It looks like they’re pulling back.”

Automakers were going to have a difficult time reporting sales gains in April due to a quirk of the calendar. There were two fewer selling days – which excludes Sundays and holidays – last month than a year ago. So while almost all major carmakers posted declining deliveries, as analysts expected, the annualized sales rate accelerated to 17.1 million, according to researcher Autodata. Calculating the annualized sales pace, which topped last April’s 17 million, is becoming more difficult. General Motors announced last month that it would report U.S. sales only on a quarterly basis, complicating efforts to gauge the health of the world’s most lucrative auto market.

Sales of the Altima sedan, usually Nissan’s top car, dropped by almost half compared with a year ago. And the company’s leading sport utility vehicle, the Rogue, dropped 15%. While deliveries to both retail and fleet customers declined, the automaker expects that its results will improve when the new Kicks crossover and redesigned Altima reach dealers, spokesman Chris Keeffe said.

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Perhaps.

The Biggest Player in the History of the World (Alistair Crooke)

Xi Jinping lies at the apex of the Chinese political system. His influence now permeates at every level. He is the most powerful leader since Chairman Mao. Kevin Rudd (former PM of Australia and longtime student of China) notes, “none of this is for the faint-hearted … Xi has grown up in Chinese party politics as conducted at the highest levels. Through his father, Xi Zhongxun … he has been through a “masterclass” of not only how to survive it, but also on how to prevail within it. For these reasons, he has proven himself to be the most formidable politician of his age. He has succeeded in pre-empting, outflanking, outmanoeuvring, and then removing each of his political adversaries. The polite term for this is power consolidation. In that, he has certainly succeeded”.

And here is the rub: the world which Xi envisions is wholly incompatible with Washington’s priorities. Xi is not only more powerful than any predecessor other than Mao, he knows it, and intends to make his mark on world history. One that equates, or even surpasses, that of Mao. Lee Kuan Yew, who before his death in 2015, was the world’s premier China-watcher, had a pointed answer about China’s stunning trajectory over the past 40 years: “The size of China’s displacement of the world balance is such that the world must find a new balance. It is not possible to pretend that this is just another big player. This is the biggest player in the history of the world.”

[..] Made in China 2025 is a broad industrial policy that is receiving massive state R & D funding ($232 billion in 2016), including an explicit potential dual-use integration into military innovation. Its main aim, besides improving productivity, is to make China the world’s ‘tech leader’, and for China to become 70% self-sufficient in key materials and components. This may be well-known in theory, but perhaps the move towards self-sufficiency by both China and Russia suggests something more stark. These states are moving away from the classic liberal trade model to an economic model based on autonomy, and a state-led economy (such as advocated by economists like Friedrich List, before becoming eclipsed by the prevalence of Adam Smith-ian thinking).

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Very long essay from Hudson. Always good.

Debt Is The Great Threat To China’s Development (Michael Hudson)

Subjecting economies to austerity, economic shrinkage, emigration, shorter life spans and hence depopulation, it is at the root of the 2008 debt legacy and the fate of the Baltic states, Ireland, Greece and the rest of southern Europe, as it was earlier the financial dynamic of Third World countries in the 1960s through 1990s under IMF austerity programs. When public policy is turned over to creditors, they use their power for is asset stripping, insisting that all debts must be paid without regard for how this destroys the economy at large. China has managed to avoid this dynamic. But to the extent that it sends its students to study in U.S. and European business schools, they are taught the tactics of asset stripping instead of capital formation – how to be extractive, not productive.

They are taught that privatization is more desirable than public ownership, and that financialization creates wealth faster than it creates a debt burden. The product of such education therefore is not knowledge but ignorance and a distortion of good policy analysis. Baltic austerity is applauded as the “Baltic Miracle,” not as demographic collapse and economic shrinkage. The experience of post-Soviet economies when neoliberals were given a free hand after 1991 provides an object lesson. Much the same fate has befallen Greece, along with the rising indebtedness of other economies to foreign bondholders and to their own rentierclass operating out of capital-flight centers. Economies are obliged to suspend democratic government policy in favor of emergency creditor control.

The slow economic crash and debt deflation of these economies is depicted as a result of “market choice.” It turns out to be a “choice” for economic stagnation. All this is rationalized by the economic theory taught in Western economics departments and business schools. Such education is an indoctrination in stupidity – the kind of tunnel vision that Thorstein Veblen called the “trained incapacity” to understand how economies really work.

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“The trade in renminbi is still a minuscule part of the world currency market..”

China’s Petro-Yuan Isn’t Dislodging the Dollar Yet (Barron’s)

The timing seemed perfect. On March 26, four days after the Trump administration called for new tariffs on $50 billion worth of Chinese imports, Beijing launched an oil-futures contract denominated in yuan. The move seemed logical enough. China surpassed the U.S. as the world’s top oil importer last year, so why not start paying in its own currency? But against the backdrop of a brewing trade war, the newly born “petro-yuan” took on the aspect of a nuclear option, at least to Washington’s many ill-wishers around the globe. China’s initiative would put an end to dollar dominance of the $2 trillion annual oil trade, and thus its hegemony as a global reserve currency, so the argument ran. “Petro-Yuan to Kneecap Petro-Dollar,” crowed a headline from Russian state news service RT.

In fact, the petro-yuan is off to a slow start, and the greenback looks destined to remain almighty for a while yet. The reason is contradictions within China, which wants to play a new global role that is co-equal with the U.S. but maintain the old economic controls that got it there. Chinese exchanges have already co-opted much of the global trade in copper and other basic metals. But China is itself a leading copper producer, and volumes in the metal are one-twentieth the size of oil markets. To grab serious real estate from the petrodollar, the yuan would have to be freely convertible on the order of the greenback, euro, or yen—which it assuredly is not. “The trade in renminbi is still a minuscule part of the world currency market,” says Prakash Sharma, China research director for commodities consultant Wood Mackenzie, using an alternative name for the national coin.

“Paying for oil in Chinese currency looks nearly impossible at this stage.” Beijing authorities seemed bent on convertibility until 2015, when a stock market panic in China spurred some $700 billion in capital flight—from families pouring into Western real estate to corporations snapping up overseas acquisitions. The nation’s reserves shrank to a mere $3.3 trillion, and the yuan fell 10% against the dollar over 18 months. President Xi Jinping’s bureaucrats reacted decisively, limiting individuals to $50,000 a year in currency exchange and informally reeling in corporate globalization. “The events of 2015-16 were quite a surprise to the authorities,” says Jens Nordvig, CEO of FX consultant Exante Data. “They nearly lost control of the currency.”

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Because the US will demand it strengthen it.

China Weakens Its Currency Before US Trade Talks Begin (BBG)

China weakened its daily currency fixing by more than traders and analysts had expected before high-ranking U.S. officials arrive in the country to discuss trade issues. The People’s Bank of China cut the reference level to 6.3670 per dollar, weaker than the average estimate of 6.3610 in Bloomberg survey of 21 traders and analysts. The deviation is the biggest since Feb. 7 and continues a pattern set in April when the fixing was weaker than expected on all but one day, according to Bloomberg calculations. “The move in the fixing today is aggressive,” said Ken Cheung at Mizuho Bank in Hong Kong. “China may want to weaken the yuan pre-emptively before the trade talks with the U.S., so that they have room to strengthen the currency” if needed, Cheung said, adding that policy makers may also be keen to arrest the yuan’s advance against a basket of peers.

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Netanyahu plays games with his credibility.

Europeans Cast Doubt On Israel’s Claims About Iran Nuclear Breaches (G.)

European leaders have pushed back against Israel’s claims that it has new evidence showing that Iran is breaching the nuclear deal with the west which was signed in 2015. The US secretary of state, Mike Pompeo, hailed the Israeli claims as significant, as the 12 May deadline approached for the US president, Donald Trump, to decide whether to pull out of the deal. But Pompeo declined to say whether they represented proof that Iran was violating the deal. The overall initial view in European capitals was that the documents did reveal new material about the scale of Iran’s programme prior to 2015 but that there was nothing showing a subsequent breach of the deal.

The French foreign ministry said that the details needed to be “studied and evaluated” but that the Israeli claims reinforced the need for continuation of the deal – which entails Iran accepting nuclear inspections in return for a loosening of economic sanctions. “The pertinence of the deal is reinforced by the details presented by Israel,” a statement said. “All activity linked to the development of a nuclear weapon is permanently forbidden by the deal.” [..] In a bid to push back against Israel, the EU’s foreign affairs chief, Federica Mogherini, said Netanyahu’s allegations had “not put into question” Tehran’s compliance with the deal and that the International Atomic Energy Authority (IAEA) had produced 10 reports saying Iran had met its commitments.

“The International Atomic Energy Authority is the only impartial international organisation in charge of monitoring Iran’s nuclear commitments,” Mogherini said. “If any country has information of non compliance of any kind it should address this information to the proper legitimate and recognised mechanism.” The IAEA said a report by its director in 2015 “stated that the agency had no credible indications of activities in Iran relevant to the development of a nuclear explosive device after 2009”, and that the IAEA’s board of governors “declared that its consideration of this issue was closed”. A German government spokesman said it would analyse the Israeli documents, but added that the JCPOA had unprecedentedly strong monitoring mechanisms. The spokesman said: “It is clear that the international community had doubts that Iran was pursuing an exclusively peaceful nuclear programme. That is why the nuclear agreement was reached in 2015.”

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Britain better get rid of all these people.

Inside Theresa May’s Brexit War Cabinet, Tory Battles Rage (BBG)

The prime minister and her inner circle refer to it simply as “The SN.” To everyone else it is Theresa May’s “Brexit war cabinet,” the group of senior ministers who set the U.K.’s course out of the European Union. These eleven Cabinet members meet regularly in closely-guarded privacy to decide the detail of Brexit policies. On Wednesday afternoon, they convene once again to address an explosive question that could blow up May’s government. What to do about the Irish border and the future customs arrangements between the U.K. and the EU? Unless a satisfactory answer can be found soon, it could be enough to derail the negotiations entirely, forcing Britain out of the bloc with no meaningful deal at all.

The key to understanding the dynamic in the room had been that half of them campaigned to stay in the EU during the 2016 referendum, while the other five voted to leave — with the premier herself having the deciding vote. All that changed this week. Until she resigned as Home Secretary on Sunday, Amber Rudd was among the loudest voices in favor of keeping close ties to the EU. She’s been replaced by Sajid Javid, who is far closer to the pro-Brexit lobby, although he did – reluctantly – campaign for Remain two years ago.

Also on the pro-EU side are Chancellor of the Exchequer Philip Hammond and Business Secretary Greg Clark — both have been keeping low profiles of late. Pro-Brexit ministers are led by Foreign Secretary Boris Johnson and Environment Secretary Michael Gove, both figureheads of the Leave campaign.

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They deported tens of thousands of students. On the basis of a questionable test.

UK Home Office ‘Mistakenly Deported 7,000 Foreign Students’ (Ind.)

The government may have mistakenly deported more than 7,000 foreign students after falsely accusing them of cheating in English language tests. Most of the students were not allowed to appeal the Home Office decision; nor were theyt able to obtain evidence against them, or given the opportunity to prove the proficiency in English Some were detained by immigration officials, lost their jobs, and were left homeless as a result, despite being in the UK legally, the Financial Times reported. The students’ treatment has been blamed on the “hostile environment” policy introduced by Theresa May during her time as home secretary.

The approach, which aims to push illegal immigrants to leave Britain by making their lives difficult, led to the Windrush scandal that forced Ms May’s successor Amber Rudd to resign. The foreign students were targeted by the Home Office after an investigation by the BBC’s Panorama in 2014 exposed systematic cheating at some colleges where candidates sat the Test of English for International Communication (TOEIC). The test is one of several that overseas students can sit to prove their English language proficiency, a visa requirement. After the Panorama broadcast, the government asked the US-based company which runs the test to analyse sound files to investigate whether studies had been enlisting proxies to sit the tests for them.

The firm, English Testing Services, identified 33,725 “invalid” tests taken by students it was confident confident had cheated. The students’ visas were revoked and they were told to leave the country. Another 22,694 test results were classed as “questionable”, meaning the students who sat them were invited for an interview before any action was taken against them.

By the end of 2016, the Home Office had revoked the visas of nearly 36,000 students who took the test. However, when ETS’s automated voice analysis was checked against human analysis, its computer programme was found to be wrong in 20% of cases, meaning that more than 7,000 students were likely to have been wrongly accused of cheating. [..] Immigration barrister Patrick Lewis, who represented several students in successfully appealing their deportation, told the Financial Times: “The highly questionable quality of the evidence upon which these accusations have been based and the lack of any effective judicial oversight have given rise to some of the greatest injustices that I have encountered in over 20 years of practice.”

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NHS is 10,000 doctors short, patients dying on trolleys in hallways.

Theresa May Vetoed Cabinet Pleas Over Visas For NHS Doctors (St.)

Theresa May faces a new immigration crisis after it emerged that she overruled Cabinet ministers pleading for more doctors from overseas to fill empty NHS posts. At least three government departments lobbied for a relaxation of visa rules to let in desperately needed doctors as well as specialist staff sought by businesses, the Evening Standard has learned. The issue erupted on Friday when several NHS trusts went public about fears that patient safety was being put at risk by doctor shortages. The crisis came as then home secretary Amber Rudd was fighting for her political life over the Windrush scandal — but No 10’s hard line meant her hands were tied.

Sources have disclosed that Downing Street was lobbied for several months before the NHS went public to allow a relaxation of the rules. Health Secretary Jeremy Hunt and Ms Rudd are understood to be among those urging No 10 to lift the quota for special cases such as NHS doctors. At the same time Business Secretary Greg Clark was pressing for more exceptions to help firms cope with specialist skills shortages. A Whitehall source said Mrs May “absolutely refused to budge” when asked to lift the cap in recent months. “I think Jeremy and Amber were on the same page on this but No 10 were in a different place entirely,” said a separate source.

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No, really, these people DO understand the effect will be the opposite of what they claim.

OECD Calls For Even Tighter Greek Fiscal Policy To Bolster Growth (K.)

Greece needs to further extend its real age of retirement and to abolish all kinds of tax exemptions, the Organization for Economic Cooperation and Development (OECD) has recommended in a report published on Monday, so that the growth rate accelerates, fiscal revenues expand and the national debt becomes sustainable. Although the report, presented in Athens on the occasion of OECD Secretary-General Angel Gurria’s visit, does speak of a return to growth, it undercuts the official forecast for a 2.3% economic expansion this year, pointing instead to a 2% increase. It adds that a series of reforms could considerably strengthen gross domestic product in the future.

According to the OECD, a four-year rise in the real age of retirement up to 2030 (instead of the already scheduled three-year rise to the age of 65 by the same year) will boost GDP by 10.4 percent points (against 7.5 points with the scheduled extension). The modernization of the public administration and the improvement of the justice system up to OECD standards by 2030 would have an even greater impact, the report says. That would signify a GDP impact of 25.6 percent points, compared to the current plans for a 14.7 percent-point increase.

The organization further recommends new reforms in the commodity markets so that they reach up to Belgium’s level by 2020, and an increase in family benefits to meet the European Union average by 2025. In total, the reforms the OECD has proposed would bolster GDP by 46.1 percent points or almost 100 billion euros per year, against 25.4 percent points projected by the currently planned reforms. Those proposed reforms would also cut the national debt to just 100% of GDP by 2060, the report projects.

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It’s about political control, not finance.

Greece’s Debt Deal To Show How Europe Treats Its Less Fortunate Nations (CNBC)

Speaking in the Bulgarian capital of Sofia last week, European Commissioner for Economic and Financial Affairs Pierre Moscovici told me the EU believes its models may be more accurate, but argued that the best way to win an IMF buy-in would be to agree on a debt repayment mechanism first proposed by his countrymen — and one of his successors as French finance minister — Bruno Le Maire. Macron’s finance chief told me separately that he hoped to win over opponents to his plan, a “growth adjustment mechanism” that would automatically link future debt repayments to Greece’s relative economic success: Athens would repay larger installments if its economy expands quickly, and reduce payments if it slows, a process that its proponents claim provides market participants with greater clarity and transparency.

Arrayed against the French plan is the desire on the part of authorities in countries like Germany, the Netherlands, Finland and Austria to maintain a degree of political control over Greece’s required repayments. This might mean the size and scope of future repayments could be assessed by national parliaments, rather than automatically calculated based on factors like GDP growth. The publicly espoused view in Berlin is that such an approach would force the Greeks to continue with their structural reforms and austerity measures that have helped transform what was a 15% budget deficit in 2009 into a recent surplus.

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“Who better to entrust with the most intimate parts of our lives than Mark Zuckerberg, the king of privacy?”

Facebook’s Dating App Finally Makes Privacy Invasion Sexy (G.)

Thank God Facebook is finally offering a dating app. Who better to entrust with the most intimate parts of our lives than Mark Zuckerberg, the king of privacy? I assume Zuck will be building it off of one of the early projects that established him as a wunderkind: FaceMash. You may remember it – it’s the one where he hacked into campus websites, collecting pictures that allowed Harvard students to rank each other by hotness. With Facebook dating, the FaceMash dream is at last becoming reality. This should make it easy for Facebook’s hottest people – if there are any left; my understanding is most hot people have migrated to Instagram – to match with equally attractive people, leaving the rest of us trolls and gnomes to mingle with each other.

And after a few months, you can bet the data will leak, offering us all an opportunity to find out, based on rigorous computer analyses, how hot we are. I’m a four at best, you’re a seven. But those numbers won’t be based just on looks. What this app has over Tinder is its existing knowledge of every facet of our lives. Romance is, of course, transactional, and Zuckerberg can finally determine a precise formula based on the value each person brings to a potential match. How much money does it take to compensate for suboptimal physical attractiveness? How often do I have to post about working out to balance out my penchant for Ben and Jerry’s? How often do you have to donate to charities to make up for the fact that you bought an alarming amount of toilet paper on Amazon last month?

Then there’s the possibility that Facebook engagement could come into play. Will active users get more profile views than those of us who have largely abandoned the site? Would that mean we’re more likely to end up on dates with the kind of person who posts constantly on Facebook? Sign me up.

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7 million per year. That’s just a start.

More Than 90% Of Air Pollution Deaths Occur In Poorer Countries (Ind.)

Air pollution is involved in the deaths of around seven million people every year, with the vast majority of fatalities taking place in poorer countries. The latest figures released by the World Health Organisation (WHO) show that nine out of 10 people are breathing air containing dangerous levels of pollutants. These results largely echo those released in another global air pollution report in April, and experts have once again pointed to the particular burden falling on the world’s most vulnerable people. “Air pollution threatens us all, but the poorest and most marginalised people bear the brunt of the burden,” said Dr Tedros Adhanom Ghebreyesus, director-general of WHO.

The new figures come as reports emerge concerning residents of Mongolia’s capital, Ulaanbaatar, drinking “oxygen cocktails” in an effort to ward off the harmful effects of air pollution. Ranked by Unicef as the most polluted capital city in the world, Ulaanbaatar is one of the many Asian and African cities highlighted as particularly susceptible to the toxic effects of air pollution by WHO. According to Dr Maria Neira, who leads public health efforts at WHO, many of the world’s megacities – such as Beijing, Delhi and Jakarta – exceed guideline levels for air quality by more than five times.

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Apr 212018
 
 April 21, 2018  Posted by at 9:00 am Finance Tagged with: , , , , , , , , , , , ,  1 Response »


James McNeill Whistler Morning Glories 1869

 

A US Recession Ahead? Fed Policymakers Say Not To Worry (R.)
If Treasuries Reach 3%, That Would Be Big (BBG)
Kim Jong-Un Halts Nuclear & Missile Tests, Shuts Down Testing Site (RT)
DNC Sues Russia, Trump, Wikileaks For Conspiring To Hurt Hillary in 2016 (ZH)
DNC Lawsuit Against WikiLeaks a Serious Threat to Press Freedom (IC)
Trump To “Counter” DNC Lawsuit (ZH)
Comey Memos Probed By DOJ For Classified Info Leaks (ZH)
Wells Fargo’s $1 Billion Pact Gives U.S. Power to Fire Managers (BBG)
IMF’s Thomsen Proposes Broadening Greek Tax Base (K.)
Windrush: When Even Legal Residents Face Deportation (Atlantic)

 

 

The illusion of control. Watch the hand.

A US Recession Ahead? Fed Policymakers Say Not To Worry (R.)

As the gap between short- and long-term borrowing costs hovers near its lowest in more than 10 years, speculation has risen over whether the so-called yield curve is signaling that a recession could be around the corner. Not to worry, two influential Federal Reserve policymakers said on Friday. Another, whose views are typically outside the mainstream at the Fed, disagreed. Growth prospects look pretty strong, which is why the Fed is raising short-term interest rates, the two sanguine policymakers explained. Those rate hikes, they said, are in and of themselves acting to flatten the yield curve. In addition, they argued, the curve will likely steepen as the U.S. government runs a bigger deficit and issues more debt.

The calming comments, from the New York Fed’s incoming chief John Williams and from Chicago Fed President Charles Evans in back-to-back but separate appearances, appeared calculated to allay concern about a potential slowdown ahead. “The yield curve is not nearly as much of a concern as I might have pointed to a couple months ago,” Evans said in Chicago after a speech, in response to a reporter’s question. Williams, who will leave his current job as San Francisco Fed president in June to take over at the New York Fed, also said he expects the Fed’s shrinking balance sheet will help steepen the curve by putting upward pressure on longer-term rates.

In January the U.S. Congress passed a budget deal that boosts U.S. government spending, following a December tax package that slashes corporate tax rates. Both changes are expected to lead to an increase in government borrowing in coming years. The Fed policymakers reason that a bigger supply of debt should put downward pressure on Treasury prices and deliver a corresponding lift to yields. “We’ve got more fiscal debt in train in the U.S. That has to be funded,” and will likely push up long rates and steepen the yield curve, Evans said. At their March meeting, Fed officials “generally agreed that the current degree of flatness of the yield curve was not unusual by historical standards,” according to the meeting minutes.

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Where the Fed loses control.

If Treasuries Reach 3%, That Would Be Big (BBG)

The global bond market’s primary benchmark, the 10-year U.S. Treasury yield, is knocking on the door of 3 percent, a level it hasn’t topped in more than four years. That’s more than just a nice round number. Higher yields make the burden of everything from mortgages to student loans and car payments even heavier. Some market gurus see it as a turning point with effects that could be felt for years — and not just in bonds. With the Federal Reserve signaling interest rates are going up even more, investors in riskier assets like stocks and high-yield debt are left to wonder if this is how their post-recession party ends.

1. What’s so important about yield? A bond’s yield is a measure of the return an investor can expect from buying it. It’s determined by the bond’s interest rate and the price paid for it. For instance, buying a security that pays a fixed 2 percent (the “coupon”) at face value (known as “par”) results in a yield of 2 percent. Buying it at a cheaper price would raise the yield for the investor, while paying a premium would reduce the overall yield. (Maybe the most confusing aspect of the bond market to outsiders is the inverse relationship between price and yield.)

2. How do you determine the benchmark 10-year yield?In the $14.9 trillion Treasuries market, the benchmark is based on the most recently auctioned 10-year security (known as the “on-the-run”). It’s the best measure because it tends to have a price close to par and a coupon close to the current yield. On Friday, the 10-year yield closed at 2.96 percent.

3. Why are yields going up?The Fed is raising its short-term lending rate as the U.S. economy strengthens, after holding it near-zero in the wake of the financial crisis. The three rate hikes last year pushed up two- and five-year Treasury yields in particular, but they’ve also affected 10-year yields as central bankers expect more boosts this year. Another reason: inflation is showing signs of picking up, which erodes the value of bonds’ fixed payments and leads investors to demand higher yields.

4. Why is 3 percent a milestone?Since 2011, it’s been touched only twice, briefly, in 2013 and early 2014, before a bond bull market drove yields to record lows. But 3 percent has also been cited by prominent fixed-income investors like Jeffrey Gundlach at DoubleLine Capital and Scott Minerd at Guggenheim Partners as critical to determining whether the three-decade bull market in bonds is at an end. In the mind of analysts who look at market patterns, once the yield breaks much beyond the 3.05 percent, to levels last reached in 2011, that threshold could flip to a floor from a ceiling.

5. Why does it matter?The 10-year Treasury yield is a global benchmark for borrowing costs. Corporations will have to pay more to issue debt, which they’ve done cheaply in recent years. So will state and local governments, which could jeopardize investments in public infrastructure. Homeowners will face higher mortgage rates (or lose out on refinancing at a lower cost). Taking out loans for cars or college could also become more expensive.

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A Nobel Peace Prize.

Kim Jong-Un Halts Nuclear & Missile Tests, Shuts Down Testing Site (RT)

North Korea’s nuclear and ballistic missile programs have allowed it to secure strategic stability and peace, so there is no need for additional missile and nuclear tests anymore, Kim Jong-un has proclaimed. “From April 21, 2018, nuclear tests and intercontinental ballistic missile tests will be discontinued,” the Korean Central News Agency cited Kim as saying at a plenary meeting of the central committee of the ruling Worker’s Party of Korea (WPK). Furthermore, since North Korea’s nuclear test center has “completed” its mission, it “will be discarded in order to ensure the transparency of the nuclear test suspension,” KCNA reported.

Announcing the new course, the ruling party has declared that North Korea “will never use nuclear weapons, unless there is nuclear threat or nuclear provocation to our country, and in no case we will proliferate nuclear weapons and nuclear technology.” In the announcement, North Korea noted that the “suspension of nuclear testing is an important process for global nuclear disarmament.” Therefore, North Korea is willing to join international denuclearization efforts. North Korea’s last major missile test took place on November 29. Pyongyang announced at the time that it had tested a new type of intercontinental ballistic missile known as the Hwasong-15 that could reach the entire continental United States.

US President Donald Trump, who has traded insults and threats with Kim since taking office, tweeted that the latest decision by Pyongyang is “good news for North Korea and the world,” calling it “big progress.” China has also hailed the move, expressing hope that Pyongyang will continue towards the path of denuclearization and “political settlement” on the Korean Peninsula. “Denuclearization of the peninsula and lasting peace in the region are in line with the common interests of the people of the peninsula,” the Chinese Foreign Ministry said in a statement on Saturday.

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Have they really thought this through?

DNC Sues Russia, Trump, Wikileaks For Conspiring To Hurt Hillary in 2016 (ZH)

Did The Democrats’ “The Russians did it” narrative just jump the shark? The Washingtoin Post reports that The Democratic National Committee filed a multimillion-dollar lawsuit Friday against the Russian government, the Trump campaign and the WikiLeaks organization alleging a far-reaching conspiracy to disrupt the 2016 campaign and tilt the election to Donald Trump. The lawsuit alleges that in addition to the Russian Federation, the General Staff of the Armed Forces of the Russian Federation, Wikileaks and Guccifer 2.0, top Trump campaign officials, including Donald Trump Jr, Roger Stone, Jared Kushner, Paul Manafort and pretty much everyone else who has been mentioned in the same paragraph as Trump….

… conspired with the Russian government and its military spy agency to hurt Democratic presidential nominee Hillary Clinton and help Trump by hacking the computer networks of the Democratic Party and disseminating stolen material found there. [..] The suit filed today seeks millions of dollars in compensation to offset damage it claims the party suffered from the hacks. The DNC argues that the cyberattack undermined its ability to communicate with voters, collect donations and operate effectively as its employees faced personal harassment and, in some cases, death threats.

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And Julian Assange is not allowed to see this. Let alone defend himself. A pattern in his life.

DNC Lawsuit Against WikiLeaks a Serious Threat to Press Freedom (IC)

The Democratic National Committee (DNC) filed a lawsuit this afternoon in a Manhattan federal court against the Russian Government, the Trump campaign and various individuals it alleges participated in the plot to hack its email servers and disseminate the contents as part of the 2016 election. The DNC also sued WikiLeaks for its role in publishing the hacked materials, though it does not allege that WikiLeaks participated in the hacking or even knew in advance about it; its sole role, according to the DNC’s lawsuit, was publishing the hacked emails.

The DNC’s suit, as it pertains to WikiLeaks, poses a grave threat to press freedom. The theory of the suit – that WikiLeaks is liable for damages it caused when it “willfully and intentionally disclosed” the DNC’s communications (paragraph 183) – would mean that any media outlet that publishes misappropriated documents or emails (exactly what media outlets quite often do) could be sued by the entity or person about which they are reporting, or even theoretically prosecuted for it, or that any media outlet releasing an internal campaign memo is guilty of “economic espionage” (paragraph 170).

It is extremely common for media outlets to publish or report on materials that are stolen, hacked, or otherwise obtained in violation of the law. In October, 2016 – one month before the election – someone mailed a copy of Donald Trump’s 1995 tax returns to the New York Times, which published parts of it even though it is illegal to disclose someone’s tax returns without the taxpayer’s permission; in March, 2017, MSNBC’s Rachel Maddow did the same thing with Trump’s 2005 tax returns.

In April, 2016, the Washington Post obtained and published a confidential internal memo from the Trump campaign. Media outlets constantly publish private companies’ internal documents. Just three weeks ago, BuzzFeed obtained and published a secret Facebook memo outlining the company’s internal business strategies, the contents of which were covered by most major media outlets. Some of the most important stories in contemporary journalism have come from media outlets obtaining and publishing materials that were taken without authorization or even in violation of the law. Both the New York Times and Washington Post published thousands of pages from the top secret Pentagon Papers after Daniel Ellsberg took them without authorization from the Pentagon – and they won the right to publish them in the U.S. Supreme Court.

The Guardian and the Washington Post won the 2014 Pulitzer Prize for Public Service for publishing and reporting on huge numbers of top secret documents taken by Edward Snowden from the NSA. The Guardian, the New York Times, and numerous papers from around the world broke multiple stories by publishing classified classified documents downloaded by Chelsea Manning without authorization and sent to WikiLeaks. In 2016, more than 100 newspapers from around the world published and reported on millions of private financial documents known as the “Panama Papers,” which were taken without authorization from one of the world’s biggest offshore law firms and revealed the personal finances of people around the world.

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Did the DNC see this coming, and is that why they sued first?

Trump To “Counter” DNC Lawsuit (ZH)

President Trump is eager to go head-to-head with the DNC which filed a multimillion-dollar lawsuit on Friday against several parties, including the Russian government, the Trump campaign and the WikiLeaks organization – alleging a “far-reaching conspiracy to disrupt the 2016 campaign and tilt the election to Donald Trump.” Hours after the Washington Post broke the news of the lawsuit, Trump tweeted “Just heard the Campaign was sued by the Obstructionist Democrats. This can be good news in that we will now counter for the DNC server that they refused to give to the FBI,” referring to the DNC email breach. Trump also mentioned “the Debbie Wasserman Schultz Servers and Documents held by the Pakistani mystery man and Clinton Emails.”

The “Pakistani mystery man” is a clear reference to former DNC CHair Debbie Wasserman Schultz’s longtime IT employee and personal friend, Imran Awan – whose father, claims a Daily Caller source, transferred a USB drive to the former head of a Pakistani intelligence agency – Rehman Malik. Malik denies the charge. Of note, the DNC would not allow the FBI to inspect their servers which were supposedly hacked by the Russians – instead relying on private security firm Crowdstrike. Meanwhile, the “Wasserman Schultz Servers” Trump mentions is likely in reference to the stolen House Democratic Caucus server – which Imran Awan had been funneling information onto when it disappeared shortly after the House Inspector General concluded that the server may have been “used for nefarious purposes.”

Imran Awan, his wife Hina Alvi and several other associates ran IT operations for at least 60 Congressional Democrats over the past decade, along with the House Democratic Caucus – giving them access to emails and computer data from around 800 lawmakers and staffers – including the highly classified materials reviewed by the House Intelligence Committee.

Napolitano: He was arrested for some financial crime – that’s the tip of the iceberg. The real allegation against him is that he had access to the emails of every member of congress and he sold what he found in there. What did he sell, and to whom did he sell it? That’s what the FBI wants to know. This may be a very, very serious national security situation.

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“..all of Comey’s memos – all of them, were classified at the time they were written, and they remain classified.”

Comey Memos Probed By DOJ For Classified Info Leaks (ZH)

The Department of Justice (DOJ) inspector general is now conducting an investigation into classification issues concerning the “Comey memos” leaked to the New York Times by former FBI Director James Comey. Sources tell the Wall St. Journal that at least two of the memos which Comey leaked to his “good friend,” Columbia Law Professor Daniel Richman, contained information that officials now consider classified – prompting the review by the Office of the Inspector General, headed by Michael Horowitz. “Of those two memos, Mr. Comey himself redacted elements of one that he knew to be classified to protect secrets before he handed the documents over to his friend. He determined at the time that another memo contained no classified information, but after he left the Federal Bureau of Investigation, bureau officials upgraded it to “confidential,” the lowest level of classification.” -WSJ

Comey told Congressional investigators that he considered the memos to be personal rather than government documents. The memos – leaked through Richman, were a major catalyst in Deputy Attorney General Rod Rosenstein’s decision to appoint former FBI Director Robert Mueller as special counsel to investigate Russian interference in the 2016 US election. While Richman told CNN “No memo was given to me that was marked ‘classified,’ and James Comey told Congressional investigators he tried to “write it in such a way that I don’t include anything that would trigger a classification,” it appears the FBI’s chief FOIA officer disagrees.

We previously reported that Senator Chuck Grassley (R-IA) said four of the 7 Comey memos he reviewed were “marked classified” at the “Secret” or “Confidential” level – however in January the FBI’s chief FOIA officer reportedly told Judicial Watch – in a signed declaration, that every single Comey memo was classified at the time. “We have a sworn declaration from David Hardy who is the chief FOIA officer of the FBI that we obtained just in the last few days, and in that sworn declaration, Mr. Hardy says that all of Comey’s memos – all of them, were classified at the time they were written, and they remain classified.” -Chris Farrell, Judicial Watch

Therefore, Farrell points out, Comey mishandled national defense information when he “knowingly and willfully” leaked them to his friend at Columbia University. It’s also mishandling of national defense information, which is a crime. So it’s clear that Mr. Comey not only authored those documents, but then knowingly and willfully leaked them to persons unauthorized, which is in and of itself a national security crime. Mr. Comey should have been read his rights back on June 8th when he testified before the Senate. Farrell told Lou Dobbs “Recently retired and active duty FBI agents have told me – and it’s several of them, they consider Comey to be a dirty cop.”

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“Wells Fargo fined twenty days worth of net income sounds a lot less daunting than $1 billion..”

Wells Fargo’s $1 Billion Pact Gives U.S. Power to Fire Managers (BBG)

Wells Fargo’s $1 billion fine won’t close the book on fallout from its consumer scandals. The nation’s third-largest bank submitted to an unprecedented order Friday that would give the Office of the Comptroller of the Currency the right to remove some of the lender’s executives or board members. That comes on top of the penalties Wells Fargo will pay to settle U.S. probes into mistreatment of consumers, the largest sanction of a U.S. bank under President Donald Trump. The OCC said it “reserves the right to take additional supervisory action, including imposing business restrictions and making changes to executive officers or members of the bank’s board of directors.” The agency could also veto potential executive candidates.

The bank will pay $500 million in penalties each to the OCC and the Consumer Financial Protection Bureau, according to a statement Friday. Wells Fargo warned shareholders last week it would soon face a fine of that size, which it will book retroactively in the first quarter. The bank remains under a Federal Reserve penalty that bans growth in total assets. “CEOs who hoped the Trump administration would be universally lenient regulators missed the difference between a dislike for rules that stifle innovation and employment and a dislike for rules against wrongdoing,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business.

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Squeezing that stone for all he’s worth.

IMF’s Thomsen Proposes Broadening Greek Tax Base (K.)

Poul Thomsen, director of the International Monetary Fund’s European department, on Friday spoke in favor of broadening Greece’s tax base though he stopped short of determining whether the IMF would call for reductions to the tax-free threshold (due to come into effect in January 2020) to apply a year in advance. Speaking in Washington, where the IMF is holding its Spring Meetings, Thomsen said that raising taxes had played a large part in the country’s fiscal adjustment in recent years but that Greece must find a way of meeting fiscal targets that is “growth-friendly.” The IMF will not impose any specific policies, he said but proposed a “discussion” about the timing of tax reforms.

As regards the Fund’s potential role in Greece’s third international bailout, which expires in August, he said at least one bailout review must be carried out before a decision can be made as well as agreement to lighten Greece’s debt. “Time is running short for us to be able to activate the program,” he said. A discussion on debt measures is likely to take place at the next meeting of eurozone finance ministers, scheduled for April 27 in Sofia. Talks there will also focus on a growth plan that the government has presented to bailout auditors. Finance Minister Euclid Tsakalotos on Friday met in Washington with European Economic and Monetary Affairs Commissioner Pierre Moscovici, Eurogroup Chairman Mario Centeno and European Central Bank President Mario Draghi and is to meet Thomsen and IMF chief Christine Lagarde on Saturday.

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If this doesn’t bring down the government, Britain has a whale of a problem. And no excuses. May suddenly offering them money now, after being exposed, is perhaps the worst part of it. You can’t buy off blatant racism with taxpayer money. And those taxpayers should let that be known, very loudly. Or they’re just as guilty.

Windrush: When Even Legal Residents Face Deportation (Atlantic)

In the aftermath of World War II, the British government invited thousands of people from Caribbean countries in the British Commonwealth to immigrate to the United Kingdom and help address the war-torn country’s labor shortages. Now, nearly 70 years later, many of those same people, now elderly, are having their legal status in the country questioned and are facing deportation. Though the deportation threats date as far back as October, the crisis burst into wider view this week after Caribbean diplomats representing a dozen Commonwealth nations chastised the U.K. government publicly. “This is about people saying, as they said 70 years ago, ‘Go back home.’ It is not good enough for people who gave their lives to this country to be treated like this,” Guy Hewitt, the high commissioner from Barbados to the U.K., said at a gathering of the diplomats.

The migrants are known as the “Windrush generation,” named for the HMT Empire Windrush that brought the first group of them to the U.K. in June 1948. Of the half a million people who immigrated to the U.K. from the Commonwealth between then and 1971, an estimated 50,000 lack the proper documentation to prove it. In a meeting with Caribbean leaders on Tuesday, U.K. Prime Minister Theresa May apologized “for any anxiety that has been caused” and promised no deportations would take place. Still, such assurances won’t necessarily convince those who remain skeptical of the U.K.’s strict immigration policies—ones May herself championed when she served as home secretary between 2010 and 2016.

During that time, May sought to meet then-Prime Minister David Cameron’s goal of reducing net immigration to the tens of thousands by making the U.K. a “hostile environment” for illegal immigration. In practice, this meant requiring doctors, employers, landlords, and schools to confirm that those whom they served were in the country legally. “The determination was to go systematically through any interaction people might have with the state, short of putting checkpoints in the road, just to have people’s immigration status checked,” Polly Mackenzie, the director of cross-party think tank Demos and the former policy director to Deputy Prime Minister Nick Clegg, told me. The Windrush generation wasn’t supposed to be part of that calculus—they had immigrated to the country legally and were thereby entitled to public services, including the right to education, healthcare, and social security.

But after the implementation of the “hostile environment” policies in 2012, these individuals suddenly had to prove their right to live and work in the country—a right which was guaranteed to them under the Immigration Act of 1971, though not everyone obtained the documentation to confirm it. This documentation problem arose in part from the fact that so many people belonging to the Windrush generation immigrated to the U.K. as children, often on their parents’ passport. What’s more, the British government didn’t keep records of who was permitted to stay in the country, nor did they issue documentation confirming it. What little records the government did keep, such as the landing cards documenting the arrival dates of Windrush-era immigrants, were discarded in 2010.

For some, the result was catastrophic. In one case, a woman had lived and worked in the U.K. for 50 years before she was wrongfully declared an illegal immigrant and almost forced on a plane to her native Jamaica. In another, a man who had lived in the U.K. for 59 years received a letter that not only informed him of his illegal status in the country, but also offered him “help and support on returning home voluntarily.” Perhaps one of the most severe cases concerned a man who, after living in the U.K. for 44 years, had his cancer treatment through the National Health Service withheld because he couldn’t provide sufficient documentation to prove he lived in the country continuously since immigrating from Jamaica in 1973.

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Apr 092018
 


Andreas Feininger Production B-17 heavy bomber 1942

 

Syria and Russia Accuse Israel Of Missile Attack On Syrian Regime Airbase (G.)
Stocks To Retest Correction Lows As Easy Money Disappears – Boockvar (CNBC)
Albert Edwards On The Next Recession: S&P Below 666 (ZH)
Bad Omen for Markets From First Signs of Yield Curve Inversion
Trump’s Trade War Threatens Central Bank ‘Put’ – Deutsche (BBG)
China Is Studying Yuan Devaluation as a Tool in Trade Spat (BBG)
YouTube Illegally Collects Data On Children – Child Protection Groups (G.)
Number Of UK Buy-to-Let Landlords Reaches Record High (Ind.)
Public Backs Fresh Referendum On ‘Final Say’ On Terms Of Brexit Deal (Ind.)
Murderers & Thieves Sold Out America – Gerald Celente (USAW)
Shell Predicted Dangers Of Fossil Fuels And Climate Change In 1980s (Ind.)
Indigenous People Are Being Displaced Again – By Gentrification (Latimore)
Fish Populations In Great Barrier Reef Collapse After Bleaching Events (Ind.)

 

 

I don’t want TAE to be about warfare, but this situation is getting so absurd it’s starting to feel dangerous. Don’t believe the narrative.

Syria and Russia Accuse Israel Of Missile Attack On Syrian Regime Airbase (G.)

Israeli war planes have bombed a Syrian regime airbase east of the city of Homs, the Russian and Syrian military have said. The Russian military said that two Israeli F-15 war planes carried out the strikes from Lebanese air space, and that Syrian air defence systems shot down five of eight missiles fired. Asked about the Russian statement, an Israeli military spokesman said he had no immediate comment. Syrian state TV reported loud explosions near the T-4 airfield in the desert east of Homs in the early hours of Monday. State TV initially reported that the attack was “most likely” American, a claim the Pentagon has denied.

Video footage on social media in Lebanon showed aircraft or missiles flying low over the country, apparently heading east towards Syria. At least 14 people, mostly Iranians or members of Iran-backed groups, were killed, the UK-based Syrian Observatory for Human Rights monitoring group said. Donald Trump warned on Sunday that the regime and its backers would pay a “high price” for the use of chemical weapons in the attack on rebel-held Douma that killed 42 people, but the Pentagon denied US forces were involved in Monday’s strikes. “However, we continue to closely watch the situation and support the ongoing diplomatic efforts to hold those who use chemical weapons, in Syria and otherwise, accountable,” a Pentagon spokesman said.

Separately, the White House put out an account of a telephone conversation between Trump and Emmanuel Macron, in which the US and French presidents “agreed to exchange information on the nature of the attacks and coordinate a strong, joint response”. Macron has said chemical weapons attacks in Syria would cross a “red line” for France and that French forces would strike if the regime was proven to have been involved. However, the French army denied responsibility for Monday’s attack.

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When the easy money goes, everything follows.

Stocks To Retest Correction Lows As Easy Money Disappears – Boockvar (CNBC)

He’s a Wall Street bear who sees more monster market moves coming — with the majority of them leaving stocks deep in the red. The Bleakley Advisory Group’s Peter Boockvar warns there’s more trouble brewing, because the era of easy money is ending, thanks to global central banks hiking borrowing costs. And as fears intensify over a trade war, Boockvar expects a solution to the tariff issue will eventually come at the expense of rising rates. “We could get that resumption of higher interest rates which would then concern the markets, and then retest the [S&P 500 Index] 2500-ish type lows,” the firm’s chief investment officer told CNBC’s “Futures Now” last week.

“We’re late cycle in the market. We’re late cycle in the economy, and you have an intensification in a tightening of monetary policy,” he said. Boockvar, a CNBC contributor, blamed the end of quantitative easing in the United States and Europe for increasing sell-off risks. “We’re a step closer to them wanting to take away negative interest rates. But there are still trillions of dollars of global bonds that have negative yielding rates,” he added. “So, it’s this rate environment that I think is becoming more of a headwind. That really is my main concern.” He doesn’t believe the situation will abate any time soon. Boockvar contended the 10-Year Treasury yield will push back toward 3 percent — preventing the S&P 500 from cracking above its Jan. 26 record high anytime soon.

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Barron’s interview with Albert Edwards via ZH, who add a little David Rosenberg intro:

Albert Edwards On The Next Recession: S&P Below 666 (ZH)

The Fed generally tightens rates until something breaks. David Rosenberg points out that since 1950 there have been 13 Fed tightening cycles, and 10 of them ended in recession (while the others have often ended in emerging market blow-ups, like the 1994 Mexican peso crisis). Surging delinquency and charge-off rates for smaller banks suggest the breaking point for the economy may come sooner than the Fed and bulls expect.

What happens to stocks during the next recession? The Federal Reserve managed to short-circuit this derating process. In 2011, when quantitative easing, or QE, really kicked in, equity re-engaged with bond yields and P/Es expanded. Like an artificial stimulant, QE inflated all asset prices away from fundamental value and from where they would otherwise have gone. We haven’t seen the lows in bond yields. In the next recession, bond yields in the U.S. will go negative and converge with those in Germany and Japan. The forward U.S. P/E bottomed at about 10.5 times in March 2009 on trough earnings. That was lower than the previous recession.

In the next recession, I would expect the P/E to bottom at about seven times, a lower low with earnings about 30% lower because of the recession. That would put the S&P lower than the 666 low of the previous crash, versus 2671 Thursday afternoon. If a recession unfolds, easy monetary policy won’t stop the market from collapsing. It will play itself out.

When will the recession hit: The Conference Board’s leading indicators look OK for now. What’s different is that problems in the real economy aren’t being reflected in the stock and bond markets. What we may see is the reverse: The stock market and parts of the credit markets collapse and cause problems in the real economy. If confidence collapses because the equity market collapses, then a recession unfolds.

Will the US be hit harder than Japan and Europe in the next bear market? It should be. Traditionally, if the U.S. goes down 20%, the German Dax, though it is cheaper, would tend to go down a little more. Maybe this time it won’t. Japan is the one market we do like now on a long-term basis, and one of the reasons is the buildup of U.S. corporate debt during these past few years. The big bubble is U.S. corporate debt. In contrast, Japan’s corporate debt is collapsing. Over half of its companies have more cash than debt. When the Fed buys U.S. Treasuries, it pulls down all yields. There has been demand for yield, so investors look at corporate bonds as an alternative. Companies have been very keen to issue them, and they have used the money to buy back stock or as a way to enrich management. This is the way QE has washed through the system here.

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“..rising expectations of a Fed policy mistake.. We could argue that mistake is 10 years old by now.

Bad Omen for Markets From First Signs of Yield Curve Inversion

The forward curve of a closely watched proxy for the Federal Reserve’s policy rate has slightly inverted, signaling investors are either pricing in a mistake from central bankers or end-of-cycle dynamics, according to JPMorgan Chase. The inversion of the one-month U.S. overnight indexed swap rate implies some expectation of a lower Fed policy rate after the first quarter of 2020, the bank’s strategists including Nikolaos Panigirtzoglou, wrote in a note Friday. “An inversion at the front end of the U.S. curve is a significant market development, not least because it occurs rather rarely,” they said. “It is also generally perceived as a bad omen for risky markets.”

The negative market signal comes as investors grapple with higher short term borrowing costs, which have risen in the U.S. to levels unseen since the financial crisis. While the strategists admit it is difficult to discern which of the two explanations for the curve inversion carries more weight, flow data suggests it is more likely to be rising expectations of a Fed policy mistake.

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No, Bloomberg, we know that China can’t dump Treasuries. The “end of Chimerica” sounds poetic though.

Trump’s Trade War Threatens Central Bank ‘Put’ – Deutsche (BBG)

A breakdown in the relationship between dollar weakness and Asian central bank intervention poses a risk to Treasuries, stocks and all risky assets, according to Deutsche Bank. Attempts by the Trump administration to clamp down on currency manipulation have limited the ability of central banks across the region to buy U.S. assets when the dollar weakens, and dampen the appreciation of their currencies, strategist Alan Ruskin write in a note Friday. These purchases have historically limited the greenback’s downside and acted as a “put” on Treasury market weakness, he wrote. Such central bank puts are usually associated with successive Federal Reserve chairs willing to support the wider market with loose monetary policy.

While such puts have been a continuous focus for investors, markets now risk overlooking other sources of central bank support that may be slipping as the U.S.’s “synergistic relationship with China,” comes to an end, according to Ruskin. “It is not a coincidence that in this recent period of dollar weakness, Treasury bonds were also soft,” he said. “Historically, foreign central banks of sizable current account surplus countries like China, Taiwan, Korea and Thailand would have been intervening.” According to the strategist, the “end of Chimerica” means American current account deficits are no longer financed to the same degree by Asian central bank reserve recycling of corresponding trade surpluses. That reduction in demand for Treasuries from foreign reserves is coming at a time when U.S. fiscal supply is set to increase dramatically, putting extra pressure on the country’s bond market.

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This is more likely. Risky for China though, but there must be plans to shore up domestic firms.

China Is Studying Yuan Devaluation as a Tool in Trade Spat (BBG)

China is evaluating the potential impact of a gradual yuan depreciation, people familiar with the matter said, as the country’s leaders weigh their options in a trade spat with U.S. President Donald Trump that has roiled financial markets worldwide. Senior Chinese officials are studying a two-pronged analysis of the yuan that was prepared by the government, the people said. One part of the analysis looks at the effect of using the currency as a tool in trade negotiations with the U.S., while a second part examines what would happen if China depreciates the yuan to offset the impact of any trade deal that curbs exports. The analysis doesn’t mean officials will carry out a devaluation, which would require approval from top leaders, the people said.

The yuan erased early gains on Monday, weakening 0.1 percent to 6.3110 per dollar in onshore trading at 3:32 p.m. local time. While Trump regularly bashed China on the campaign trail for keeping its currency artificially weak, the yuan has gained about 9 percent against the greenback since he took office as China’s economic growth stabilized, the government clamped down on capital outflows and fears of a credit crisis receded. The Chinese currency touched the strongest level since August 2015 last month and has remained steady in recent weeks despite an escalation of trade tensions between the world’s two largest economies.

While a weaker yuan could help President Xi Jinping shore up China’s export industries in the event of widespread tariffs in the U.S., a devaluation comes with plenty of risks. It would make it easier for Trump to follow through on his threat to brand China a currency manipulator, make it more difficult for Chinese companies to service their mountain of offshore debt, and undermine recent efforts by the government to move toward a more market-oriented exchange rate system. It would also expose China to the risk of local financial-market volatility, something authorities have worked hard to subdue in recent years.

When China unexpectedly devalued the yuan by about 2 percent in August 2015, the move sent shock-waves through global markets. “Is it in their interest to devalue yuan? It’s probably unwise,” said Kevin Lai, chief economist for Asia ex-Japan at Daiwa Capital Markets Hong Kong Ltd. “Because if they use devaluation as a weapon, it could hurt China more than the U.S. The currency stability has helped to create a macro stability. If that’s gone, it could destabilize markets, and things would look like 2015 again.”

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No really, it’s everywhere. What they can do, they will.

YouTube Illegally Collects Data On Children – Child Protection Groups (G.)

A coalition of 23 child advocacy, consumer and privacy groups have filed a complaint with the US Federal Trade Commission alleging that Google is violating child protection laws by collecting personal data of and advertising to those aged under 13. The group, which includes the Campaign for a Commercial-Free Childhood (CCFC), the Center for Digital Democracy and 21 other organisations, alleges that despite Google claiming that YouTube is only for those aged 13 and above, it knows that children under that age use the site. The group states that Google collects personal information on children under 13 such as location, device identifiers and phone numbers and tracks them across different websites and services without first gaining parental consent as required by the US Children’s Online Privacy Protection Act (Coppa).

The coalition urges the FTC to investigate and sanction Google for its alleged violations. “For years, Google has abdicated its responsibility to kids and families by disingenuously claiming YouTube — a site rife with popular cartoons, nursery rhymes, and toy ads — is not for children under 13,” said Josh Golin, executive director of the CCFC. “Google profits immensely by delivering ads to kids and must comply with Coppa. It’s time for the FTC to hold Google accountable for its illegal data collection and advertising practices.”

The group claims that YouTube is the most popular online platform for children in the US, used by about 80% of children aged six to 12 years old. Google has a dedicated app for children called YouTube Kids that was released in 2015 and is designed to show appropriate content and ads to children. It also recently took action to hire thousands of moderators to review content on the wider YouTube after widespread criticism that it allows violent and offensive content to flourish, including disturrbing children’s content and child abuse videos.

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Bizarro housing.

Number Of UK Buy-to-Let Landlords Reaches Record High (Ind.)

The number of buy-to-let investors in the UK rose to a record high of 2.5 million in the latest tax year, new research shows. The increase of 5% on the previous year comes despite the introduction of a host of extra taxes and regulations on the sector. In recent years, the government has brought in a 3% Stamp Duty levy, new stress tests for home loans, and ended mortgage interest tax relief. The number of landlords has increased 27% in the past five years, up from 1.97 million in 2011-12, research by London-focused estate agent Ludlow Thompson found.

Landlords now own an average of 1.8 buy-to-let properties each – a figure that has risen for the fifth consecutive year. The data suggests that landlords continue to see residential property, especially in London, as a strong investment, despite signs that house price growth has stalled or even gone into reverse in some areas in the last year. Investors have seen annual returns of almost 10% since 2000, Ludlow Thompson said. Chairman Stephen Ludlow said the rising number of landlords shows the enduring appeal of investing in buy-to-let. “The long-term picture for the buy-to-let market remains strong,” he said.

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No chance of a second vote for now. But that may change yet.

Public Backs Fresh Referendum On ‘Final Say’ On Terms Of Brexit Deal (Ind.)

Support is growing for a fresh referendum on the final Brexit deal, according to a new poll showing the public back the idea for the first time. The survey found that 44% of people want a vote on the exit terms secured by Theresa May, amid continued uncertainty over the withdrawal agreement. That is a clear eight points ahead of the 36% who reject a further referendum, the research conducted for the anti-Brexit Best for Britain group showed. The group pointed to evidence that “Brexit is sharpening the British public’s minds” and called for MPs to respond to the people’s growing desire for a “final say”.

The referendum would be held on the details of the deal the prime minister must strike by the autumn – on both the planned transition period and a “framework” for a permanent trade and security relationship. Eloise Todd, Best for Britain’s chief executive, said voters should be allowed to choose between the details of the future on offer outside the EU, or staying inside the bloc. “Now there is a decisive majority in favour of a final say for the people of our country on the terms of Brexit. This poll is a turning point moment,” she said. “The only democratic way to finish this process is to make sure the people of this country – not MPs across Europe – have the final say, giving them an informed choice on the two options available to them: the deal the government brings back and our current terms.

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Celente rants are always good.

Murderers & Thieves Sold Out America – Gerald Celente (USAW)

Renowned trends researcher Gerald Celente says the trade war President Trump is starting against China must be fought for America to survive. Celente explains, “We have lost 3.5 million jobs (to China). Some 70,000 manufacturing plants have closed. Why would anybody be fighting Trump to do a reversal of us being in a merchandise trade deficit of $365 billion? Tell me any two people that would do business with each other and one side takes a huge loss and keeps taking it. . . So, why would people argue and fight and bring down the markets because Trump wants to bring back jobs and readjust a trade deficit that, by any standard, is destroying the nation?” Who’s to blame for the lopsided trade deficits destroying the middle class of America?

Look no further than the politicians and corporations buying them off. Celente charges, “They sold us out. The European companies and the American companies sold us out, and the people fighting Trump are also the big retailers because they’ve got their slave labor making their stuff over there. They bring it back here and mark up the price, and they make more money. If they have to pay our people to do that work, they have to pay them a living wage and they can’t make enough profit. That’s who is fighting us. . You go back to our top trend in 2017, and it was China was going to be the leader in AI (artificial intelligence) now and beyond, and that is exactly what happened. All the corporations have sold us out. . . .The murderers and the thieves sold out America.”

Celente thinks the odds are there will not be a financial crash in 2018 “because they are repatriating all that dough from overseas at a very low tax rate and because of the tax cuts from 35% to 21%. These are the facts. In the first three months of this year, there have been more stock buybacks and mergers and acquisitions activity than ever before in this short period of time because of all that cheap money going back into the corporations. That’s what’s keeping the markets up.”

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Shell’s political power will shield it.

Shell Predicted Dangers Of Fossil Fuels And Climate Change In 1980s (Ind.)

Oil giant Shell was aware of the consequences of climate change, and the role fossil fuels were playing in it, as far back as 1988, documents unearthed by a Dutch news organisation have revealed. They include a calculation that the oil company’s products alone were responsible for 4% of total global carbon emissions in 1984. They also predict that changes to sea levels and weather would be “larger than any that have occurred over the past 12,000 years”. As a result, the documents foresee impacts on living standards, food supplies and other major social, political and economic consequences.

In The Greenhouse Effect, a 1988 internal report by Shell scientists, the authors warned that “by the time the global warming becomes detectable it could be too late to take effective countermeasures to reduce the effects or even to stabilise the situation”. They also acknowledged that many experts predicted an increase in global temperature would be detectable by the end of the century. They went on to state that a “forward-looking approach by the energy industry is clearly desirable”, adding: “With the very long time scales involved, it would be tempting for society to wait until then before doing anything. “The potential implications for the world are, however, so large that policy options need to be considered much earlier. And the energy industry needs to consider how it should play its part.”

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Money trumps history.

Indigenous People Are Being Displaced Again – By Gentrification (Latimore)

It is symptomatic of the colonial-settler prerogative that has sought to eliminate the offensive presence of the natives from any profitable territory. In 21st-century Australia, the “dispersal” that began with European invasion continues through the gentrification of city suburbs where Indigenous identities persist. In the colonial argot of the 19th century, dispersal euphemistically described a bloody practice of massacre and forced dispossession of First Nations peoples, often performed as punishment for perceived theft, or any other form of resistance to the colonisers more generally. In the early and mid-20th century, blackfullas were forcibly coerced into government reserves most commonly known as “missions”.

The overarching intent of these “protection” policies was to ensure the dissolution of First Nations culture and traditional governance structures, pushing mob to develop from “their former primitive state to the standards of the white man”, as the Aboriginal Protection Board said in 1935. When the missions began to be disbanded after the second world war, it forced significant Indigenous migration from the bush to towns and cities, where we repopulated places like Fitzroy, Brisbane’s West End and particularly Redfern in great numbers. This 1950s policy of “assimilation” was essentially a state-sanctioned experiment to force Indigenous people to give up their beliefs and traditions as they adapted to urban life.

[..] Yet the place of blackfullas in Australia’s cities is under threat. Faced with rapid gentrification and associated rental and ownership price hikes, urban Indigenous populations continue to relocate to the outer suburbs, where cheaper housing is usually located. The trend could be viewed as a contemporary iteration of the dispersals of the past – decidedly less bloody, though equally impelled by capitalistic imperatives.

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Logic.

Fish Populations In Great Barrier Reef Collapse After Bleaching Events (Ind.)

The coral bleaching events that have devastated the Great Barrier Reef in recent years have also taken their toll on the region’s fish population, according to a new study. While rising temperatures on the reef killed nearly all the coral in some sections, the effects on the wider marine community have been less clear. Now, scientists have begun to establish the long-term effects of bleaching events on the Great Barrier Reef’s fish population. This work is essential for researchers trying to understand what will happen to coral reef ecosystems as global warming makes mass bleaching events more frequent. “The widespread impacts of heat stress on corals have been the subject of much discussion both within and outside the research community,” said PhD student Laura Richardson of the ARC Centre of Excellence for Coral Reef Studies.

“We are learning that some corals are more sensitive to heat stress than others, but reef fishes also vary in their response to these disturbances.” Ms Richardson and her collaborators studied reefs in the northern section of the Great Barrier Reef, where around two-thirds of corals were killed in the 2016 bleaching event that followed a global heatwave. The researchers found there were “winners” and “losers” among the fish species on the reef, but overall there was a significant decline in the variety of species following bleaching. Their results were published in the journal Global Change Biology. “Prior to the 2016 mass bleaching event, we observed significant variation in the number of fish species, total fish abundance and functional diversity among different fish communities,” said co-author Dr Andrew Hoey.

“Six months after the bleaching event, however, this variation was almost entirely lost.” Predictably, the scientists noted that fish with intimate associations with corals suffered severe losses. Butterflyfish, which feed on corals, faced the steepest declines. In response to the looming threat of coral bleaching, scientists have called for “radical interventions” to save the world’s reefs. Some have suggested that more than 90% of corals could die by 2050 at the current rate of global warming.

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Nov 202017
 
 November 20, 2017  Posted by at 9:52 am Finance Tagged with: , , , , , , , , ,  3 Responses »


Stanley Kubrick Laboratory at Columbia University 1948

 

Banks Show An Almost Autistic Disregard For The Law – Australia Senator (Abc)
ECB Proposes End To Deposit Protection (GC)
Europe Faces a Hamstrung Germany as Merkel’s Coalition Bid Fails
3 Things That Could Destroy One Of The Greatest Stock Rallies Of All Time (BI)
China’s Clampdown On Shadow Banking Hits The Stock Market (BBG)
Mugabe Faces Impeachment as He Holds on as Zimbabwe Leader (BBG)
Yield Curve Flattening Could Derail Fed Interest Rate Hikes (BI)
Everything Is Overvalued And Implicitly Overleveraged (Peters)
Gresham’s Law (Rivelle)
Britain’s Gravest Economic Challenge Isn’t Brexit (R.)
UK Christmas Spending Expected To Fall For First Time Since 2012 (Ind.)
Many Americans Are Still Paying Off Debt From Last Christmas (CNBC)

 

 

Headline of the day. Will they actually get their inquiry?

Banks Show An Almost Autistic Disregard For The Law – Australia Senator (Abc)

Pressure for a commission of inquiry into the banking sector is growing, with Nationals senator Barry O’Sullivan warning he might have the numbers to push his private members bill through Parliament. The banks “show an almost autistic disregard for prudential regulation and law and it’s time for these people to have their day in court”, the senator told ABC’s RN Breakfast on Monday. Senator O’Sullivan said he has support from as many as four colleagues. These include maverick Liberal National (LNP) MP George Christensen, who has already threatened to cross the floor, and fellow Queensland LNP MP Llew O’Brien, who has indicated “50-50” support. While a commission of inquiry would be an embarrassment for the Turnbull Government given its resistance to a royal commission, Senator O’Sullivan said it was time for the Prime Minister to listen.

“There’s no more important piece of business — millions and millions of Australians have been affected by the behaviour of the banks over time,” he said. “If both houses of Parliament think this is a good thing to do … then I think the Prime Minister has to … sit up and take note of that, and support the parliamentary decision.” But Senator O’Sullivan refused to comment on whether his move would embarrass and further destabilise the Prime Minister. “I am not going to be drawn on the question of the impacts on the Prime Minister and the Government — this is about democracy at work.” The proposed commission of inquiry would have similar powers to a royal commission. It would also look beyond banking and include superannuation, insurance and services associated with the scandal-plagued sector.

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Time to be afraid in Europe.

ECB Proposes End To Deposit Protection (GC)

It is the ‘opinion of the European Central Bank’ that the deposit protection scheme is no longer necessary: ‘covered deposits and claims under investor compensation schemes should be replaced by limited discretionary exemptions to be granted by the competent authority in order to retain a degree of flexibility.’ To translate the legalese jargon of the ECB bureaucrats this could mean that the current €100,000 (£85,000) deposit level currently protected in the event of a bail-in may soon be no more. But worry not fellow savers, as the ECB is fully aware of the uproar this may cause so they have been kind enough to propose that: “…during a transitional period, depositors should have access to an appropriate amount of their covered deposits to cover the cost of living within five working days of a request.”

So that’s a relief, you’ll only need to wait five days for some ‘competent authority’ to deem what is an ‘appropriate amount’ of your own money for you to have access to in order eat, pay bills and get to work. The above has been taken from an ECB paper published on 8 November 2017 entitled ‘on revisions to the Union crisis management framework’. It’s 58 pages long, the majority of which are proposed amendments to the Union crisis management framework and the current text of the Capital Requirements Directive (CRD). It’s pretty boring reading but there are some key snippets which should be raising a few alarms. It is evidence that once again a central bank can keep manipulating situations well beyond the likes of monetary policy. It is also a lesson for savers to diversify their assets in order to reduce their exposure to counterparty risks.

According to the May 2016 Financial Stability Review, the EU bail-in tool is ‘welcome’ as it: “…contributes to reducing the burden on taxpayers when resolving large, systemic financial institutions and mitigates some of the moral hazard incentives associated with too-big-to-fail institutions…” As we have discussed in the past, we’re confused by the apparent separation between ‘taxpayer’ and those who have put their hard-earned cash into the bank. After all, are they not taxpayers? This doesn’t matter, believes Matthew C.Klein in the FT who recently argued that “Bail-ins are theoretically preferable because they preserve market discipline without causing undue harm to innocent people.” Ultimately bail-ins are so central banks can keep their merry game of easy money and irresponsibility going. They have been sanctioned because rather than fix and learn from the mess of the bailouts nearly a decade ago, they have just decided to find an even bigger band-aid to patch up the system.

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Feels like the FDP never wanted the talks to succeed. But they will support a minority government.

Europe Faces a Hamstrung Germany as Merkel’s Coalition Bid Fails (BBG)

Angela Merkel may be running out of road after 12 years at the helm in Germany. With the chancellor’s attempt to form a fourth-term government in disarray, Merkel’s once unquestioned ability to steer Europe is waning as the region’s biggest economy heads into uncharted waters and possibly a protracted political stalemate. Markets reacted with unease, with the euro slumping the most in three weeks against the dollar. The breakdown in coalition talks late Sunday – amid disputes over migration and other policies between a grab-bag of disparate parties – raised the prospect of fresh elections, which probably would be held next spring. Relying on a minority administration with shifting alliances to pass legislation would run counter to Merkel’s promise to provide a stable government.

However she attempts to move forward, European decisions on everything from Brexit and Greece to Russian sanctions and French President Emmanuel Macron’s proposals for strengthening the euro will now be hemmed in by Merkel’s weakened role as a caretaker chancellor. “What it means is that Germany is pulled inward because it has to manage its political transition,” said Daniel Hamilton, executive director of the Center for Transatlantic Relations at Johns Hopkins University in Washington. “So the state of drift in Europe continues and now Germany, which has been the stabilizer of the last number of years, is part of that.” Merkel, 63, said she plans to stay on as acting chancellor and will consult with Germany’s president later Monday on what comes next.

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We can all name 27 more.

3 Things That Could Destroy One Of The Greatest Stock Rallies Of All Time (BI)

Extreme leverage build-up Morgan Stanley points out that previous comparable cycles have been derailed by steep increases in a measure of US debt to GDP. While the firm doesn’t see conditions as dire as they were around the Great Depression or the most recent financial crisis, it notes that deleveraging has stalled. While this situation may be sustainable in the near-term, since interest rates are still locked near zero, that could soon change with the Federal Reserve signaling multiple rate hikes by the end of 2018. Morgan Stanley also notes that interest coverage — or the ability to service debt — has been declining for both US investment-grade and junk debt since 2015. The chart below shows the ratio of debt/GDP, which has gone sideways in the past few years, implying that companies are no longer reducing debt burdens like they did when they were trying to dig out of the last market crash.

Exuberant sentiment This next driver is one that was briefly addressed in the introduction: investor overconfidence. The thinking here is that when the market gets too cocky, it becomes blind to potential risks and therefore more susceptible to downward shocks. As Morgan Stanley puts it, when there’s a “descent from thinking to feeling,” that could spell trouble. Morgan Stanley doesn’t think the market is too exuberant quite yet. While one measure shows that expectations around the economy have gotten overly optimistic, it’s still lower than where it was during the last financial crisis or the dotcom bubble. Still, the chart below shows that US consumer confidence is the highest it’s been since 2000, including a precipitous surge since the start of the bull market in 2009.

Excessive policy tightening When Morgan Stanley says that cycle downturns follow prolonged periods of monetary policy tightening, it speaks from experience. After all, the Federal Reserve persistently hiked interest rates in the periods leading up to both the dotcom bubble and the financial crisis. And while the firm doesn’t see excessive tightening yet, it warns that it could be right around the corner. “We have a bit of a ‘runway’ to the cycle peak, but not much,” a group of Morgan Stanley strategists wrote in a recent client note. “Over the next 12 months, our US economists expect further hikes in excess of core inflation, which would take us to ~190bp of cumulative hikes over 24 months, in line with the typical end-of-cycle policy environment.”

But before you start to panic, Morgan Stanley would like to remind you that the stock market can continue to soar, even in the final year of an expansion cycle. They point out that in the past, the S&P 500 has rallied an average of 15% in the last 12 months of an equity bull market. “The final year of the bull market can still be uncomfortably profitable,” the Morgan Stanley strategists wrote. “Timing is everything.”

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A thin line.

China’s Clampdown On Shadow Banking Hits The Stock Market (BBG)

China’s sweeping new plan to rein in its shadow banking industry rippled through the nation’s stock market on Monday, sending the Shanghai Composite Index to a two-month low. Investors pushed the benchmark gauge down as much as 1.4% amid concern that the government’s latest attempt to tighten supervision of $15 trillion in asset-management products will siphon funds from the market. Developers and brokerages paced losses. While analysts applauded the plan as an important step toward curbing risk in China’s financial system, they also warned of turbulence as markets adjust to outflows from popular shadow-banking products. The government directives, which are set to take effect in 2019, add to signs that President Xi Jinping is willing to sacrifice growth as he tries to put the world’s second-largest economy on a more stable financial footing.

“The rules dealt a blow to the market,” said Zhang Gang, a Shanghai-based strategist with Central China Securities Co. “A lot of such products had positions in the equity market, and those that don’t qualify under new rules may choose to exit some small and medium caps.” The Shanghai Stock Exchange Property Index dropped 1.3%, with Gemdale Corp. losing as much as 2.6% and Poly Real Estate Group Co. declining 3.2%. China Vanke Co. sank as much as 4.9% in Shenzhen. A measure of securities firms fell to a five-month low, with Citic Securities Co. tumbling 3.7%.

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He reportedly has just agreed to step down.

Mugabe Faces Impeachment as He Holds on as Zimbabwe Leader (BBG)

President Robert Mugabe shocked Zimbabwe on Sunday night with a televised address that failed to announce his highly anticipated resignation, a dramatic twist that means the 93-year-old may face immediate impeachment hearings. Whether the final act of defiance was planned or simply the result of reading the wrong remarks, three senior party officials who spoke on the condition of anonymity said Mugabe deviated from an agreed-upon-text announcing he was leaving office. His ruling Zimbabwe African National Union-Patriotic Front will start a bid in parliament on Monday to force an end to this 37 years in power, the officials said. Delivering the nationally televised address with the armed forces commanders who took power last week looking on, Mugabe, who is the world’s oldest serving leader at 93, frequently lost his place and had to repeat himself.

He said the southern African nation must not be guided by “bitterness” and urged Zimbabweans to “move forward.” “Mugabe is dragging down the process as he tries to look for a dignified exit on his own terms,” Rashweat Mukundu, an analyst with the Harare-based Zimbabwe Democracy Institute, said by phone. “The impeachment process will still go ahead while on the other hand he will try and resign on his own terms.” Earlier Sunday, Zanu-PF central committee decided to fire Mugabe as its leader and ordered him to step down. Emmerson Mnangagwa, who Mugabe dismissed as vice president this month, will be reinstated, take over as interim president and be Zanu-PF’s presidential candidate in elections next year, the party said. It also expelled the president’s wife, Grace, the nation’s other vice president, Phelekezela Mphoko, along with several other senior officials.

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“..an inverted yield curve, where long-term interest rates fall below their short-term counterparts, has been a reliable predictor of recessions.”

Yield Curve Flattening Could Derail Fed Interest Rate Hikes (BI)

The Federal Reserve’s plan to keep raising interest rates could soon run into a wall of its own making: low long-term borrowing costs that signal expectations for weak economic growth and anemic investment returns for the foreseeable future. Why is the Fed to blame? They’re not the only culprits, but the subdued economic recovery from the Great Recession and continued expectations for weakness stem in part from an insufficient, halting policy reaction to the deepest downturn in generations — both from monetary, and importantly, fiscal policy. In the past, including before the Great Recession of 2007-2009, an inverted yield curve, where long-term interest rates fall below their short-term counterparts, has been a reliable predictor of recessions.

The bond market is not there yet, but a sharp recent flattening of the yield curve has many in the markets watchful and concerned. The US yield curve is now at its flattest in about 10 years — in other words, since around the time a major credit crunch of was gaining steam. The gap between two-year note yields and their 10-year counterparts has shrunk to just 0.63 percentage point, the narrowest since November 2007. In fact, Shyam Rajan, Carol Zhang, and Olivia Lima, rate strategists at Bank of America Merrill Lynch, think low long-term bond yields could actually prevent the central bank from hiking interest rates further, as it plans to do. “We believe a precondition for the Fed to continue its hiking cycle in 2018 should be higher intermediate and long term rates,” they wrote in a research note to clients. “Without the latter, we would have doubts on the former.”

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Eric Peters gets the style price again.

Everything Is Overvalued And Implicitly Overleveraged (Peters)

“People ask, ‘Where’s the leverage this time?’” said the investor. Last cycle it was housing, banks. “People ask, ‘Where will we get a loss in value severe enough to sustain an asset price decline?’” he continued. Banks deleveraged, the economy is reasonably healthy. “People say, ‘What’s good for the economy is good for the stock market,’” he said. “People say, ‘I can see that there may be real market liquidity problems, but that’s a short-lived price shock, not a value shock,’” he explained. “You see, people generally look for things they’ve seen before.” “There’s less concentrated leverage in the economy than in 2008, but more leverage spread broadly across the economy this time,” said the same investor. “The leverage is in risk parity strategies. There is greater duration and structural leverage.”

As volatility declines and Sharpe ratios rise, investors can expand leverage without the appearance of increasing risk. “People move from senior-secured debt to unsecured. They buy 10yr Italian telecom debt instead of 5yr. This time, the rise in system-wide risk is not explicit leverage, it is implicit leverage.” “Companies are leveraging themselves this cycle,” explained the same investor, marveling at the scale of bond issuance to fund stock buybacks. “When people buy the stock of a company that is highly geared, they have more risk.” It is inescapable. “It is not so much that a few sectors are insanely overvalued or explicitly overleveraged this time, it is that everything is overvalued and implicitly overleveraged,” he said. “And what people struggle to see is that this time it will be a financial accident with economic consequences, not the other way around.”

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For some reason, people fail to apply Gresham’s law to all assets.

Gresham’s Law (Rivelle)

There is a tale told by a lesser known Nobel laureate, Kenneth Arrow. As a World War II weather officer, he was tasked with analyzing the reliability of the army’s long-range weather forecasts. His conclusion: statistically speaking, the forecasts weren’t worth the paper they were printed on. Captain Arrow sent along his report only to be told, “Yes, the General is well-aware the forecasts are completely unreliable. But, he needs them for planning his military operations.” Okay, maybe you don’t actually need a Nobel prize to know that rationality in the decision-making department is often lacking. Case in point: the capital markets. While subtle and ingenious in construction, the capital markets are, nonetheless, driven by the mass action of millions. They are a reflection of ourselves and necessarily express both the summit of our knowledge as well as the pit of our fears, and everything else in-between.

And, this brings us to the subject at hand: Gresham’s Law. Sir Thomas Gresham was a financier in the time of King Henry VIII and his name is, of course, attached to the principle that “bad money drives out good money.” Coin collectors of a certain age are familiar with the near immediate disappearance from circulation of all silver American coins once Congress had mandated the use of base metals beginning with the 1965 vintage. While all coins – silver and copper alike – carried identical legal tender value, it was the silver coins that vanished. Perhaps you are wondering what this has to do with bond investing? Everything! Consider the state of financial markets as witnessed by metrics of implied volatility:

VIX Index

 

MOVE Index

Both indices hover at generational low levels. If markets were “run” today by humanity’s better angels of wisdom and rationality, you would have to conclude that Mr. Market has drawn on his collective insight and pronounced the capital markets to be safer now than at any other time in the past quarter-century. That is a stunning conclusion! But if rationality can’t explain a 25-year trough in expected risk, then we must necessarily conclude that there must be some other, less rational explanation. How about this: investors are, by and large, famished for yield and willing to underwrite most any risk to get some income. In short, the marginal price setter is “irrationally exuberant”, or dare we say it out loud? “Greedy.”

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It’s productivity.

Britain’s Gravest Economic Challenge Isn’t Brexit (R.)

Few British budgets have mattered as much as the one that Philip Hammond will deliver to the House of Commons on Nov. 22. The chancellor of the exchequer must shore up Theresa May’s perilously shaky government ahead of a vital Brexit summit of European leaders in mid-December. At the same time Hammond has to keep a grip on the public finances. But the gravest challenge he faces is economic: Britain’s persistent productivity blight.Productivity – output per hour worked – is the mainspring of economic growth. In the decade before the financial crisis of 2007-08 productivity was increasing in Britain by just over 2% a year, outpacing the average for the other economies of the G7. But since the crisis British performance has been dismal. Although productivity jumped in the third quarter of 2017, prolonged weakness means that it is barely higher than its pre-crisis peak a decade ago.

The recovery in GDP has been driven overwhelmingly by more labor input, a source of growth that is running dry – not least since the vote to leave the European Union delivered a message to curb immigration. Other advanced economies have also experienced setbacks to productivity growth following the financial crisis. Where Britain stands out is in the severity of its reverse. The shortfall in productivity is the main reason real wages are now 4% lower than 10 years ago, a potent reason why the leave campaign prevailed in the Brexit referendum. Productivity is so central to prosperity and to macroeconomic management – by determining how fast the economy can sustainably grow – that a gaggle of economic researchers have been busy in their labs trying to diagnose the now decade-long disease.

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It could be disastrous.

UK Christmas Spending Expected To Fall For First Time Since 2012 (Ind.)

Christmas spending across the UK is expected to fall for the first time since 2012, research by Visa and IHS Markit shows. According to a report published on Monday, a challenging economic environment, in which real wages are falling and economic growth is sluggish, will likely lead to a 0.1% fall in consumer spending during the 2017 festive season. That’s in sharp contrast to last year, when spending increased by 2.8% over the Christmas period. “While it still looks likely that consumers will be hitting stores and websites in search of bargains this Black Friday and Cyber Monday, we expect spending for the duration of the festive season to be lower in comparison to last year,” said Mark Antipof, chief commercial officer at Visa.

“Looking back, consumers were in a sweet spot in 2016 – low inflation and rising wages meant there was a little extra in household budgets to spend on the festive period,” he said. “2017 has seen a reversal of fortunes – with inflation outpacing wage growth and the recent interest rate rise leaving shoppers with less money in their pockets.” The research anticipates that high street spending will be particularly hard hit, falling by 2.1% compared to equivalent figures for last year – the biggest contraction since 2012. Online spending, however, is still expected to rise – by 3.6% over this Christmas period – meaning that it will account for a record share of this year’s Christmas spend. Visa said that of every £5 spent during the period, almost £2 will likely be spent online.

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There’ll be more next Christmas.

Many Americans Are Still Paying Off Debt From Last Christmas (CNBC)

As the holiday season approaches, the pressure to spend spikes. This year, gift-buying Americans plan to spend $660 on average. That’s according to new data from NerdWallet’s 2017 Consumer Holiday Shopping Report, which analyzed spending and behavior trends of more than 2,000 Americans aged 18 and over. And holiday-induced debt is a growing problem. Although survey respondents say they plan to spend roughly the same amount as they spent last year, 24% of shoppers say they overspent in 2016, while 27% admit to not making a budget at all. Even a budget is only a good start.

“There’s this myth that planning ahead and budgeting always ensures you don’t overspend. But in reality, creating and even sticking to a budget won’t make you immune to holiday debt,” Courtney Jespersen, a consumer savings expert at NerdWallet, says in the survey. “It’s so important to set a realistic ceiling for your spending.” During the 2016 season, boomers proved most likely to take on debt to finance their purchases, with 63% of respondents copping to the habit. Other generations took on debt as well, including 58% of Gen-Xers and 40% of millennials. What’s alarming about this pattern is that many Americans are still carrying last year’s debt as they head into yet another holiday season. Millennials are the worst culprits here: 24% still haven’t paid off credit card debt incurred during the 2016 shopping season, while 16% of Gen-Xers haven’t and only 8% of boomers haven’t.

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Oct 302017
 
 October 30, 2017  Posted by at 9:36 am Finance Tagged with: , , , , , , , , ,  8 Responses »


Salvador Dalí Cadaques 1923

 

The Dollar’s Enjoying a Renaissance (BBG)
Biggest Stock Collapse in World History Has No End in Sight (BBG)
China’s Bonds Spell Disaster (BBG)
China’s Debt Battle Has Global Growth at Stake (BBG)
China Corporate Bond Investors’ Luck May Be About to Run Out (BBG)
China Bond Selloff Spreads to Stocks as Deleveraging Risks Mount (BBG)
US Regulator Wants To Loosen Leash On Wells Fargo (R.)
Damning Verdict On UK Austerity In Major Report (Ind.)
Plan To Create $400 Million Army in Sahel Faces UN Moment Of Truth (G.)
Greek Islanders Are ‘Heroes,’ Says European Commission VP (K.)
Bushman Banter’ Was Crucial To Hunter-Gatherers’ Evolutionary Success (G.)

 

 

“More than a dead cat bounce?!”

The Dollar’s Enjoying a Renaissance (BBG)

After getting pummeled all year by the euro, the dollar is having a moment. In Wall Street parlance, it may be more than just a dead-cat bounce, as politics, economic fundamentals and technicals have converged to give the greenback a boost. The U.S. currency surged in the immediate aftermath of Donald Trump’s election victory before suffering a long descent that lasted from December until last month. That’s when the political viability of U.S. fiscal policy reform in the shape of – as yet to be detailed – tax cuts (and maybe even tax reform) became increasingly likely. Although equity markets have reflected optimism all year that tax cuts would come, the dollar has conveyed doubt along with gold and bonds. The Bloomberg Dollar Index is up more than 4% from its low for the year on Sept. 8, partially rebounding from the more than 10% drop since the end of December.

There could be more to come in the short term if tax cuts happen, because the legislation is likely to contain a provision that would allow U.S. companies to repatriate significant foreign profits and further bolster the economy. That could spark more inflation and put U.S. monetary policy on a more aggressive path. In terms of the euro, the political situation in Europe has been a distraction. After the election of the far-right Alternative for Germany party to the Bundestag on Sept. 24, the independence movement in the Spanish autonomous region of Catalonia has devolved into a political rat’s nest. Uncertainty, regionalism and the risk of escalating discord in Spain are adding to the political dissonance – a stark contrast to the apparent acceptance of U.S. Senate Republicans of higher national debt levels in exchange for tax cuts.

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Lots of Bloomberg today. After the Party Congress, things start to look very different. Stocks and bonds both under a lot of pressure.

Biggest Stock Collapse in World History Has No End in Sight (BBG)

It’s going to take more than the biggest stock slump in world history to convince analysts that PetroChina has finally hit bottom. Ten years after PetroChina peaked on its first day of trading in Shanghai, the state-owned energy producer has lost about $800 billion of market value – a sum large enough to buy every listed company in Italy, or circle the Earth 31 times with $100 bills. In current dollar terms, it’s the world’s biggest-ever wipeout of shareholder wealth. And it may only get worse. If the average analyst estimate compiled by Bloomberg proves right, PetroChina’s Shanghai shares will sink 16% to an all-time low in the next 12 months.

The stock has been pummeled by some of China’s biggest economic policy shifts of the past decade, including the government’s move away from a commodity-intensive development model and its attempts to clamp down on speculative manias of the sort that turned PetroChina into the world’s first trillion-dollar company in 2007. Throw in oil’s 44% drop over the last 10 years and Chinese President Xi Jinping’s ambitious plans to promote electric vehicles, and it’s easy to see why analysts are still bearish. It doesn’t help that PetroChina shares trade at 36 times estimated 12-month earnings, a 53% premium versus global peers. “It’s going to be tough times ahead for PetroChina,” said Toshihiko Takamoto, a Singapore-based money manager at Asset Management One, which oversees about $800 million in Asia. “Why would anyone want to buy the stock when it’s trading for more than 30 times earnings?”

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No mincing words.

China’s Bonds Spell Disaster (BBG)

Qin Han, chief fixed-income analyst at Guotai Junan Securities, doesn’t mince his words when it comes to the rout in Chinese bonds. “Considering the pace of the slump, which is very fast, it’s fair to say we are likely in a bond disaster,” Qin said. Shorter-tenor notes led the selloff in government debt on Monday, making the yield curve inversion the steepest since at least 2006, according to data compiled by Bloomberg. Concern that rising borrowing costs and inflation will erode returns have weighed on the debt market in the past month, with one top-performing macro fund manager saying he was shorting Chinese bonds.

The yield on five-year government bonds surged nine basis points to 3.97% as of 1:29 p.m. in Shanghai, while the cost on 10-year notes jumped six basis points to 3.9%, with the spread reaching eight basis points earlier Monday. The yield gap will widen further, and the cost on debt due in a decade will likely reach 4% “very soon,” said Qin. “The yield will become even more inverted as fragile sentiment prevails,” he said. “Yes, this is overselling, but it’s not the time to buy yet as the overselling could last longer.”

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It’s not just China that’s affected.

China’s Debt Battle Has Global Growth at Stake (BBG)

It used to be that when America sneezed, the world caught a cold. This time around, it’s the risk of a sickly China that poses a bigger threat. The world’s second-largest economy is now trying to ward off the sniffles. While output is still growing at a pace that sees GDP double every decade, the problem remains that much of that has been fueled by a massive buildup of credit. Total borrowing climbed to about 260% of the economy’s size by the end of 2016, up from 162% in 2008, and will hit close to 320% by 2021 according to Bloomberg Intelligence estimates. Economy-wide debt levels are on track to rank among “the highest in the world,” according to Tom Orlik, BI’s Chief Asia Economist. That path may be what prompted outgoing People’s Bank of China Governor Zhou Xiaochuan to warn of the risk of a plunge in asset values following a debt binge, or a “Minsky Moment,” earlier this month.

Given that China is forecast by the International Monetary Fund to contribute more than a third of global growth this year, controlling China’s debt matters far beyond its borders. There are two key components of China’s credit clampdown, each posing challenges to policy makers. First is wringing out bets on property prices. As President Xi Jinping put it in a keynote policy speech to the Communist Party leadership on Oct. 18: Housing is for living in, not for speculation. The latest data show that in some areas, prices are still surging in many cities despite a raft of measures to make it harder for investors to buy real estate with borrowed money. Xi’an, China’s ancient capital, saw home values soar almost 15% in September from a year before. It will be up to regulators to come up with measures that deliver on Xi’s mandate without tipping housing into a downward spiral.

Property crashes in the U.S., Japan and U.K. over the past three decades amply illustrated how damaging they can be to economies. The second key challenge is progress in aligning borrowing costs with borrowers’ ability to repay — rather than with their relationship with the state. China’s financial system has long let companies that are state owned or are seen to be implementing state initiatives get funding more cheaply than others. That’s thanks to the assumption the government would step in if needed to back them up. To help encourage capital to be deployed more efficiently – and to prevent firms that are effectively insolvent keep going thanks to continued funding – policy makers have begun to gradually take away implicit support.

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“A majority of non-bank financial institutions’ debt holdings are corporate bonds, so their selloff can lead to severe consequences..”

China Corporate Bond Investors’ Luck May Be About to Run Out (BBG)

Investors in Chinese company bonds have so far avoided the brunt of a debt selloff that’s driven 10-year sovereign yields to the highest in three years. Their luck may be about to run out. Now that the Communist Party Congress is over, China’s bond holders may be about to get hit by “daggers falling from the sky,” said Huachuang Securities Co., referring to aggressive deleveraging policies. Plus, accelerating inflation and the risk that China’s central bank may follow the Federal Reserve in raising borrowing costs are casting a shadow over the entire bond market. That all means that the situation that’s existed for most of 2017 – sovereign yields rising, and corporate debt remaining relatively resilient – is at risk of cracking. As appetite for bonds of any kind dwindles and authorities roll out measures that target higher-risk investments, company securities are in the line of fire.

“It’s very likely we will see a significant increase in corporate yields in the coming year,” said David Qu, a market economist at Australia & New Zealand Banking in Shanghai. “The trigger could be tougher regulations or a default. A majority of non-bank financial institutions’ debt holdings are corporate bonds, so their selloff can lead to severe consequences. Banks are underestimating authorities’ intentions to tighten regulations.” Signs of a turnaround are already beginning to show, with the yield on three-year AAA notes – the most common grading for Chinese corporate debt – rising 21 basis points this month to the highest level since early June. The spread between those notes and government debt has climbed in October and was last at 116 basis points, though it’s still a long way from this year’s peak of 150 basis points in April.

Losses accelerated earlier this month after People’s Bank of China Governor Zhou Xiaochuan voiced concern about high borrowing levels and signaled that growth could beat expectations. If concerns on regulation intensify and risks of a debt repayment failure appear, the market may go through a major correction in the near term, Huachuang analysts including Qu Qing wrote in a note last week.

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How far will Xi go? Is that big yuan devaluation still in play?

China Bond Selloff Spreads to Stocks as Deleveraging Risks Mount (BBG)

Chinese stocks fell the most since early August, breaking the calm that persisted through the recent Communist Party Congress, as government bonds extended a monthly rout amid concern the government will step up efforts to reduce leverage in the financial sector. The Shanghai Composite Index dropped as much as 1.7% on Monday, and was 0.8% lower at 11:27 a.m. local time. Small-cap shares bore the brunt of the selling, with the ChiNext gauge tumbling as much as 2.5%. Equity indexes in Hong Kong pared gains. The 10-year yield climbed five basis points to 3.90%, a three-year high. While China’s equity market was subdued for most of this month amid state efforts to limit volatility during the twice-a-decade Party gathering, sovereign yields have been climbing.

There’s more than 1 trillion yuan ($150 billion) of funding provided by the central bank that matures this week, the most since February. “Pessimism in the bond market is spilling over to the stocks,” said Hao Hong, chief China strategist at Bocom International Holdings Co. in Hong Kong. “Surging yields of the government bonds are resulting in worsened sentiment and higher funding costs for companies, of which smaller ones will suffer most as they rely more heavily on the market rather than bank loans for financing.” There are also early signs economic data may weaken, after solid figures for most of this year buoyed equities. Chinese shares held steady during the week-long Congress amid speculation the “National Team,” as state-backed funds are referred to, would step in to avoid any large swings.

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Yeah, that sounds great. Wells Fargo should be shut down and its execs put on trial.

US Regulator Wants To Loosen Leash On Wells Fargo (R.)

A leading U.S. regulator wants to make it easier for Wells Fargo to pay employees when they leave, loosening a restriction in place since a phony accounts scandal hit the bank last year, according to people familiar with the matter. The initiative comes as President Donald Trump is trying to lighten rules on Wall Street and the bank regulator, Keith Noreika, acting Comptroller of the Currency (OCC), must weigh whether to vet new Wells Fargo executives. If Noreika’s approach prevails, the OCC could go easier on Wells Fargo and any other large banks sanctioned in the future. Since Noreika took control of the OCC in May, he has advocated easing up on sanctions imposed on Wells Fargo in the wake of the scandal over abusive sales practices, according to current and former officials.

Wells Fargo reached a $190 million settlement in September 2016 after admitting that its sales staff opened as many as 2.1 million accounts without customers’ consent. Since then the estimate has climbed to as many as 3.5 million. As part of the deal with regulators, incoming Wells Fargo executives can face a vetting from the OCC while severance payouts must be cleared by the OCC and a sister agency, the Federal Deposit Insurance Corporation. But Noreika wants officials to work faster when they review severance pay and the agency can choose to waive its check on incoming executives. Hundreds of Wells Fargo employees have had their severance payouts frozen when they left as regulators tried to determine what role those employees might have had in the scandal.

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High time for the Tories to leave.

Damning Verdict On UK Austerity In Major Report (Ind.)

Despite years of painful austerity, the UK’s level of public spending is today no lower as a share of national income than it was after 11 years of a Labour government in 2008, according to a report by the Institute for Fiscal Studies. The major report from the UK’s leading economic think tank shows that deep cuts have left the NHS, schools and prisons in a “fragile state”, and have merely returned public spending to pre-financial crisis levels. The document presents a challenge to claims that Conservative-driven austerity saved the public finances following years of Labour overspending. The think tank’s report goes on to conclude that in the light of the data, Chancellor Philip Hammond’s plan to abolish the UK’s deficit by the mid-2020s is “no longer sensible”.

With his critical Budget approaching in November, it challenges him to admit the target looks “increasingly unlikely” in the light of a worsening economic outlook, exacerbated by Britain’s “terrible” productivity and uncertainty over Brexit. The IFS analysis of public spending levels appears in its pre-Budget look at the Chancellor’s options published on Monday. It found public spending as a share of national income was at a similar level both now and shortly before the financial crash, an event David Cameron and George Osborne claimed Labour overspending left the country ill-prepared for. In 2007-08, public spending as a share of GDP was 39%, it peaked in 2009-10 at 45.1% and is forecast to be 39.6% this year, according to the IFS.

The main justification for austerity has been the need to reduce and eventually abolish the deficit, a target that the IFS refers to as “ever-receding”. The IFS argues Mr Hammond’s critical budget speech next month, will be given against a backdrop of a worsening economic outlook that demands austerity goals are rethought. [..] The IFS report said: “It looks like [Mr Hammond] will face a substantial deterioration in the projected state of the public finances. “He will know that seven years of ‘austerity’ have left many public services in a fragile state. And, in the known unknowns surrounding both the shape and impact of Brexit, he faces even greater than usual levels of economic uncertainty.”

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Armies. The only answer we have.

Plan To Create $400 Million Army in Sahel Faces UN Moment Of Truth (G.)

Unprecedented plans to combat human trafficking and terrorism across the Sahel and into Libya will face a major credibility test on Monday when the UN decides whether to back a new proposed five-nation joint security force across the region. The 5,000-strong army costing $400m in the first year is designed to end growing insecurity, a driving force of migration, and combat endemic people-smuggling that has since 2014 seen 30,000 killed in the Sahara and an estimated 10,000 drowned in the central Mediterranean. The joint G5 force, due to be fully operational next spring and working across five Sahel states, has the strong backing of France and Italy, but is suffering a massive shortfall in funds, doubts about its mandate and claims that the Sahel region needs better coordinated development aid, and fewer security responses, to combat migration.

The Trump administration, opposed to multilateral initiatives, has so far refused to let the UN back the G5 Sahel force with cash. The force commanders claim they need €423m in its first year, but so far only €108m has been raised, almost half from the EU. The British say they support the force in principle, but have offered no funds as yet. Western diplomats hope the US will provide substantial bilateral funding for the operation, even if they refuse to channel their contribution multilaterally through the UN. France, with the support of the UN secretary general, António Guterres, and regional African leaders, has been pouring diplomatic resources into persuading a sceptical Trump administration that the UN should financially back the force.

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With a straight face. But the refugees must stay on the islands, even if there’s no place for them.

Greek Islanders Are ‘Heroes,’ Says European Commission VP (K.)

The Greek islanders in the eastern Aegean who have helped thousands of refugees under adverse conditions are “heroes,” according to the European Commission’s First Vice President Frans Timmermans. In an interview with Sunday’s Kathimerini ahead of his visit to Greece on Monday, Timmermans said that, despite being under immense pressure, the mayors and residents of the islands are doing everything in their power to help refugees.Timmermans, who has described the situation on the islands as “unacceptable,” expressed concern over the difficulty the Greek government has in absorbing EU funds – around €1 billion – for infrastructure to shelter some 50,000 refugees.

“We are faced with a series of problems,” he said, adding that that the Commission’s experience “has shown that it’s hard to get the support we provide in the spot where it is needed most.” Timmermans, who was one of the main architects of last year’s deal between the EU and Turkey to stem the flow of migrants into Europe, said that people whose asylum applications have been processed should be returned to Turkey as stipulated in the agreement. But with just 1,600 returns having taken place since 2016, Timmermans said that “this doesn’t happen enough.” He refrained from placing blame on either Greece or Turkey but insisted that the system must not be changed. Migrants, he said, must stay on the islands, despite the difficulties, because their transfer to the mainland would send a wrong message and create a new wave of arrivals.

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” If the success of a civilisation is judged by its endurance over time, this means the Khoisan are by far the most successful, stable and sustainable civilisation in human history.”

Bushman Banter’ Was Crucial To Hunter-Gatherers’ Evolutionary Success (G.)

Barely a day goes by when proponents of greater taxation, universal income and other initiatives aimed at addressing systematic inequality are not accused of inciting the “politics of envy”. Doing so is an effective way of closing down debate; envy is, after all, among the deadliest of the “deadly sins”. Yet politicians inclined to dismiss inequality in this way may do so at their peril. For the evidence of our hunting and gathering ancestors suggests we are hard-wired to respond viscerally to inequality. In the 1960s, the Ju/’hoansi “Bushmen” of the Kalahari desert became famous for turning established views of social evolution on their head. But their contribution to our understanding of the human story is far more important than simply making us rethink our past.

Until then, it had been widely believed that hunter gatherers endured a near-constant battle against starvation. But when a young Canadian anthropologist, Richard B Lee, conducted a series of simple economic input-output analyses of the Ju/’hoansi as they went about their daily lives, he found not only did they make a good living from hunting and gathering, but they did so on the basis of only 15 hours’ work per week. On the strength of this, anthropologists redubbed hunter-gatherers “the original affluent society”. I started working with Ju/’hoansi in the early 1990s. By then, more than a half-century of land dispossession meant that, other than in a few remote areas, they formed a highly marginalised underclass eking out a living on the dismal fringes of an ever-expanding global economy. I have been documenting their often traumatic encounters with modernity ever since.

The importance of understanding how hunter-gatherers made such a good living has only recently come to light, thanks to a sequence of genomic studies and archaeological discoveries. These show that the broader Bushmen population (referred to collectively as Khoisan) are far older than we had ever imagined, and have been hunting and gathering continuously in southern Africa for well over 150,000 years. If the success of a civilisation is judged by its endurance over time, this means the Khoisan are by far the most successful, stable and sustainable civilisation in human history.

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