Apr 092018
 
 April 9, 2018  Posted by at 9:18 am Finance Tagged with: , , , , , , , , , , ,  


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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Feb 232018
 
 February 23, 2018  Posted by at 10:55 am Finance Tagged with: , , , , , , , , , , , ,  


Pablo Picasso Rooster 1938

 

Art Cashin: Once the 10-Year Yield Hits 3% ‘All Hell’ Could Break Loose (CNBC)
China Regulators Take Control Of Insurance Giant Anbang (AFP)
Xi’s Debt Crackdown Goes Into Hyperdrive (BBG)
BIS Suggests Beijing Is Behind China Shadow Banking Sector (F.)
China Is Letting The Yuan Crush The Dollar To Appease Trump (CNBC)
Bond Villain in the World Economy: Latvia’s Offshore Banking Sector (CP)
Reserve Bank Of Australia Accused Of Causing Ponzi Mortgage Market (AFR)
US Shale Investors Still Waiting On Payoff From Oil Boom (R.)
EU Leaders Go to Battle Over Post-Brexit Budget Gap (BBG)
Irish President Criticises EU Treatment Of Greece (IT)
Greek MPs Vote To Investigate Top Politicians In Novartis Bribery Claims (G.)
Greece Is The European Champion In Corporate Taxes (K.)
The Gun-Control Debate Could Break America (French)
50,000 Die In UK ‘Cold Homes Public Health Crisis’ (Ind.)

 

 

The cavalry.

Art Cashin: Once the 10-Year Yield Hits 3% ‘All Hell’ Could Break Loose (CNBC)

It could be a bad day for the markets once the yield on the benchmark 10-year Treasury hits 3%, closely followed trader Art Cashin told CNBC on Thursday. “That 3% level is both a target and a kind of resistance. Everybody knows it’s like touching the third rail,” said Cashin, UBS director of floor operations at the New York Stock Exchange. “The assumption is once they do it, all hell will break loose. So we’ll wait and see.” As of early Thursday, the 10-year yield was slightly lower, around 2.91%, down from Wednesday’s four-year high of 2.95%. Wall Street fears returned Wednesday afternoon after minutes from the Federal Reserve’s latest meeting sent bond yields rising and stocks into a tailspin. The last time the 10-year yield traded above 3% was in January 2014.

“Initially, yields moved down, stocks rallied like crazy,” Cashin recalled about Wednesday, moments after the Fed minutes were released. “Then about eight minutes into that move, stocks looked back and noticed bonds had changed their mind.” The sharp moves seen Wednesday were probably due to “our friends, the long-lost ‘bond vigilantes,'” Cashin told “Squawk on the Street.” The term “bond vigilantes” was coined by market historian Ed Yardeni during the 1980s, referring to traders who sell their holdings in an effort to enforce what they consider fiscal discipline. Selling bonds sends yields higher due to the inverse relationship between bond prices and bond yields. “We’re going to need a couple weeks to see if the bond vigilantes really are back or not,” Cashin said. “Or whether it was simply a fluke. But remembering what bond vigilantes look like, it certainly had fingerprints on them.”

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Before it burns down the entire financial sector.

China Regulators Take Control Of Insurance Giant Anbang (AFP)

China took over Anbang Insurance for a year on Friday and said its former chairman faces prosecution for “economic crimes”, in the government’s most drastic move yet to rein in politically connected companies whose splashy overseas investments have fuelled fears of a financial collapse. The highly unusual commandeering of Anbang signalled deep official concern over the Beijing-based company’s financial situation and comes as the government looks to address spiralling debt in the world’s second-largest economy. The China Insurance Regulatory Commission said Anbang, which has made a series of high-profile foreign acquisitions in recent years, had violated insurance regulations and operated in a way that may “severely” affect its solvency. The announcement also clarified the fate of Anbang’s chairman Wu Xiaohui, who was reported by Chinese media to have been detained last June.

The insurance regulator confirmed Wu was being “prosecuted for economic crimes”, a startling fall from grace for a man who reportedly married a granddaughter of late Chinese leader Deng Xiaoping. A statement by government prosecutors in Shanghai said Wu was suspected of fraudulent fundraising and “infringement of duties”. Acquisitive private companies such as Anbang, HNA, Fosun and Wanda have increasingly loomed in the government’s cross-hairs as it conducts a sweeping crackdown on potential financial risks. The four firms were in the vanguard of an officially-encouraged surge in multi-billion-dollar overseas deals by Chinese firms to snatch up everything from European football clubs to hotel chains and movie studios, and were until recently considered untouchable because of their political connections.

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China needs to keep its reserves at home.

Xi’s Debt Crackdown Goes Into Hyperdrive (BBG)

If you needed confirmation about China’s determination to rein in surging corporate debt, the dramatic government takeover of Anbang Insurance is pretty much it. The unprecedented seizure of a private insurer underscores President Xi Jinping’s policy drive to cut back on the debt-fueled excesses that have accompanied China’s growth miracle. It’s a direct hit to corporate binge spending that authorities want to stem; it energizes a long running anti-corruption campaign; and it demonstrates that short-term economic pain will be tolerated for the longer-term goal of a more sustainable expansion. For the rest of the world, the intervention offers up a useful reminder: When you do business with China, you do business with the Communist Party.

“It’s a new example of the seriousness of Xi Jinping’s government to insert the party and the state at all levels of business,” said Fraser Howie, co-author of the book “Red Capitalism” who has two decades of experience in China’s financial markets. “They have no qualms about coming in over the top and saying ‘we are going to take this over.’” He likened the takeover to the U.S. Federal Reserve, the Financial Industry Regulatory Authority and the Securities and Exchange Commission coming together to restructure a company. [..] The backdrop to the pincer move on Anbang and its founder Wu Xiaohui, who is to be prosecuted for alleged fraud, is a robust economy that’s giving officials the running room to crack down on debt excesses without depressing growth.

Overseas investment by Chinese companies has been strictly curtailed since last year as part of the broader ambition to shift the economy onto a more sustainable footing after years of debt-fueled expansion. Because China is self financed and credit is steered by state-owned lenders to state-controlled or linked companies, authorities have the luxury of intervening at their whim to shuffle money from one section of the economy to another. That’s one of the key reasons why regulators are able to tackle Anbang and other high profile conglomerates without lawyers, shareholder activists or opposition politicians getting in the way.

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I don’t believe this is the whole story. Shadow banking in China is so lucrative there’s no way foreigners are not heavily involved.

BIS Suggests Beijing Is Behind China Shadow Banking Sector (F.)

Concerns about the scale of shadow banking in China have now risen alongside concerns about the ever-rising debt load across the economy. The IMF, for example, has been consistently warning about this issue, along with Western credit ratings agencies. But the biggest hawk on China’s credit risks has for some time been the Bank for International Settlements (BIS), known as the central banker’s bank. The BIS produced a comprehensive assessment of the “shadow banking” sector last week. The report itself is not very surprising, but it does suggest much coverage of the issue adopts a misplaced tone. The most important insight the report generates is simply that the shadow banking sector in China is almost entirely driven by the traditional, state-dominated banks ; the SOE banks, the Joint Stock banks and the City commercial banks, all of which have significant levels of state involvement.

Indeed it was estimated in 2014 that the Chinese banking system was capitalized by only about 12% private capital, the rest linking back to the Chinese state, either centrally or regionally. In other words, although the phrase “shadow banking” is used in China, in Western economies this usually refers to activity that is quite distinct from the state, where private investors knowingly operate outside of the many regulatory safeguards offered by traditional banking. Whereas in China the state is either the key mediator or even the guarantor of the unregulated activity. In other words, the state in China is freely engaging in unregulated activity, precisely in order to avoid the burdens of their own regulations. This is perhaps why “shadow banking” in China is often–and more accurately–referred to as “banking in the shadows” as it is a substitute for traditional banking, but it takes place out of sight.

This may be well understood by banking professionals, but it is an example of the kind of difference of emphasis that leads to misunderstanding in the markets and the press. The impression that China is somehow slowly getting to grips with a poorly regulated sector, or at least announcing its intention to do so, is quite simply at variance with what is actually going on, which is that the state itself is the source of the problem. The “shadow banking” sector in China has expanded enormously, not in spite of the state but because of it. It both applies the regulations in the formal banking sector, and avoids them in the “shadow banking” sector. None of this changes the fact that the overarching problem is China’s rapidly rising overall debt pile, but we shouldn’t be under any illusions over what exactly is hiding in the shadows. More to the point, if the activities of the Chinese state are hiding in the shadows, it is worth considering what exactly they are hiding from?

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Short term gains. Halt outflows. But a strong yuan wreaks hovoc on exports.

China Is Letting The Yuan Crush The Dollar To Appease Trump (CNBC)

The Chinese yuan has appreciated 10% against the dollar since the start of 2017, quelling some criticism that the export giant has been deliberately suppressing its currency to gain economic advantage over its trading partners. This is all going according to China’s plan, experts said. Although the strength of the yuan against the dollar is in part due to the greenback’s weakness, experts said the world’s second-largest economy is also propping up its currency to appease President Donald Trump. China has “reversed the rise” of the dollar against the yuan, and there’s now “meaningful” strength against the greenback, Bilal Hafeez, global head of G-10 foreign-exchange strategy at Nomura, wrote in a recent note. “Part of this was likely a response to the election of President Trump and the need to avoid being labelled a currency manipulator,” Hafeez added.

On the 2016 campaign trail, Trump repeatedly said he would name China a currency manipulator from his first day in office. That has not happened. [..] China will probably continue to manage its currency in the background even if it keeps its value against the dollar relatively high, analysts said. Morgan Stanley analysts said in a note this week that the trade-weighted yuan should remain “largely stable” around current levels as Beijing’s capital control efforts have worked. “If [the yuan] continues to appreciate rapidly, policy-makers may seek to stem the rise in order to maintain stability in the trade-weighted [yuan], which would likely be achieved by verbal communication and a relaxation of some outbound capital restrictions,” Morgan Stanley added.

Beijing is walking a tricky tightrope as the Communist regime seeks to balance political concerns with economic reforms and the demands that come with a market-based system. In the second half of 2015, the Chinese government shocked markets by devaluing the yuan. That spurred capital flight due to concerns over the health of the world’s second-largest economy — which further depressed the Chinese currency. Beijing has been trying to reverse that damage. “I think they ultimately want a weaker currency, they just don’t know how to achieve it. They tried in 2015, it didn’t work, turned into a vicious cycle and they’re kind of stuck right now with always trying to control everything but not knowing how to get a weaker currency through a structural slowdown in a way that does not cause a lot of disturbances to domestic financial markets for instance,” said Jason Daw at Societe Generale.

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The Russians did it.

Bond Villain in the World Economy: Latvia’s Offshore Banking Sector (CP)

If the world economy were a Bond movie, Latvia’s offshore banking economy would be its Bond villain. Presently, this plucky state of 1.8 million people on Russia’s border is leading the world’s financial press with two major scandals. First, there is their long-standing Central Bank Governor, Mr. Ilmars Rimsevics. While Latvia’s population (disproportionally aged, as many of the young have left to find work abroad) only rivals that of Hamburg, but with a much smaller economy, Mr. Rimsevics nonetheless commands a salary bigger than Central Bank heads of most similar sized countries and in 2016 saw the largest%age salary increase of any EU Central bank head. Regardless of his super-sized income, Mr. Rimsevics has been accused of using his post as a sinecure to increase his pay by several multiples. His ‘victims’ being the banks in Latvia that he oversees, of which one, Norvik, the provenance of a Russian oligarch in London, protested.

[..] The other scandal, more serious, but lacking a face and bereft of central casting’s villainous imagery (e.g., oligarchs at the hunting lodge), is that of ABLV. ABLV is the largest Latvian owned bank. Latvia is a small country with lots of ‘banks.’ ABLV is largely a correspondent bank, or a bank holding deposits of foreigners along with providing them with ‘services’ that conceal the identity of their owners. Correspondent banking, euphemistically in the ‘industry’ called “wealth management” and “tax optimization.” [..] Just as Mr. Rimsevics has seemingly been caught with Russian oligarchs, ABLV has been linked to handling money for North Korea’s weapons program. This crossed the line for the United States, which in the main has vacillated between support and tolerance of offshore banking, but who since 9/11 has become wary of its ‘downsides,’ such as terrorists and ‘axis of evil’ states availing themselves of their helpful services.

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“Yes RBA, you did inflate housing bubble…”

Reserve Bank Of Australia Accused Of Causing Ponzi Mortgage Market (AFR)

For years the Reserve Bank of Australia dismissed our warnings that excessively stimulatory interest rate cuts – which bequeathed borrowers with never-before-seen 3.4% mortgage rates that fuelled double-digit house price inflation – had blown a bubble that presented genuine financial stability risks. This manifested via record increases in speculative investor activity, interest-only loans and, more broadly, Australia’s household debt-to-income and house price-to-income ratios, which leapt into unchartered territory (notably above pre-global financial crisis peaks). The RBA narrative was very different. “Our concern was not that developments in household balance sheets posed a risk to the stability of the banking system,” governor Philip Lowe recently explained.

“Rather, it was more that…the day might come, when faced with bad economic news, households feel they have borrowed too much and respond by cutting their spending sharply, damaging the overall economy.” Nothing to see here when it comes to financial stability, if you believe the weasel words. It turns out Lowe was privately “packing his dacks” after unleashing the mother-of-all-booms powered by the cheapest credit in history. After the sudden deceleration in national house price growth – as documented here – from an 11.5% annualised rate in May 2017 to just 1.9% today, the governor revealed to parliamentarians that he’s now “much more comfortable…than I have been in recent years when I have been appearing before this committee, when I was quite worried”. That’s central speak for petrified.

Lowe conceded that “housing prices were rising very, very quickly – much faster than people’s income – and the level of debt was rising much faster than people’s income”. Yet according to the RBA’s interpretation, the 50% explosion in house prices between 2012 and 2018 was propelled not by the 11 interest rate cuts it bestowed on borrowers over the same period, but by a lack of new housing supply. You have to ignore the record building boom to believe this BS.

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Pay me Ponzi!

US Shale Investors Still Waiting On Payoff From Oil Boom (R.)

U.S. oil production has topped 10 million barrels per day, approaching a record set in 1970, but many investors in the companies driving the shale oil revolution are still waiting for their payday. Shale producers have raised and spent billions of dollars to produce more oil and gas, ending decades of declining output and redrawing the global energy trade map. But most U.S. shale producers have failed for years to turn a profit with the increased output, frustrating their financial backers. Wall Street’s patience ran out late last year as investors called for producers to shift more cash to dividends and share buybacks. “‘Give me some cash, please.’ That’s what investors have said,” said Anoop Poddar, a partner at private equity firm Energy Ventures.

And yet such calls for payouts remain a debate in the industry as oil prices have recently creeped up to four-year highs. Investors demanding immediate returns could risk forcing firms to curb expansion that could have a higher long-term payoff if oil prices continue to rise. For now, share prices of shale producers have yet to fully recover from the 2014 oil price collapse, when many investors took losses as hundreds of firms went bankrupt and those that survived struggled. The energy sector has lagged the rally that took the broader stock market to record highs. The S&P 500 Energy Index remains nearly a third off its peak in mid-2014, when oil prices topped $100 a barrel. The broader S&P 500 index is up 39% during the same period.

This year, five of the 15 largest U.S. independent shale firms have started paying or raised quarterly dividends, the documents show. But six of the firms have never offered a dividend or have not restored cuts implemented since the 2014 oil price collapse. Anadarko Petroleum earlier this month added $500 million to an existing buyback program and raised its dividend by 20%, sending its shares up 4.5% the next trading day. Buybacks reduce the number of shares outstanding, boosting the value of stock that remains.

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This could turn ugly. Very ugly.

EU Leaders Go to Battle Over Post-Brexit Budget Gap (BBG)

Hashing out the European Union’s multiannual budget is a political slugfest at the best of times. Throw in Brexit and the contest looks even more bruising. The U.K.’s scheduled withdrawal from the EU next year will leave a 10 billion-euro ($12.3 billion) annual hole in the bloc’s spending program, the main topic when leaders meet on Friday to map out Europe’s 2021-2027 budget. A Bloomberg survey of government positions reveals splits over how to cover the gap, with at least three net contributors – Sweden, the Netherlands and Austria – saying they won’t pay more. While amounting to only 1 percent of EU economic output, the European budget of 140 billion euros a year provides key funds for farmers, poorer regions and researchers in everything from energy to space technologies.

It’s also a barometer of the political mood in European capitals, signaling the risk of fissures as the EU seeks to maintain unity in the Brexit talks, confront new security challenges and curb democratic backsliding in countries such as Poland. “I expect it to be quite a fight,” said Guntram Wolff, director of the Bruegel think tank in Brussels. “The EU budget hole is quite substantial. You actually have a double challenge: you have to cut some spending and increase money for new priority areas.” [..] Britain’s absence from the next multiannual European spending program is conspicuous because the country is the No. 2 net contributor. Germany, which is the largest, and Italy, the fourth biggest, both say they are open to increasing their payments into the financial framework, the survey shows. Portugal and Estonia, both net recipients of funds, are prepared to raise their contributions, while France and Belgium are still undecided.

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So what’s he going to do about it?

Irish President Criticises EU Treatment Of Greece (IT)

Those responsible for mistaken economic policies that have had such a negative effect on the Greek people need to take responsibility for their actions, President Michael D Higgins has said, on the first day of his state visit. “It is a moral test of all actions that the person who initiates an action must take responsibility for its consequences,” Mr Higgins told his Greek counterpart, Prokopis Pavlopoulos. “It is little less than outrageous that the social consequences of decisions that are taken are not in fact understood and offered to people as choices,” Mr Higgins said, in remarks at a bilateral meeting at the presidential mansion.

Referring to the speech made by Emmanuel Macron on his recent state visit to Athens, Mr Higgins said he had to “say something much stronger” than the French president, who, he noted had acknowledged “that great mistakes, with great effect on the Greek people, have been made and that these were mistakes of the European Union”. “Cohesion, social cohesion, social Europe, must be placed on the top of the agenda that we all now share on the future of the union.” This meant that “we cannot continue adjusting out populations to economics models that not only have failed but have not submitted themselves to empirical tests in relation to their social consequences. “If parliaments and the mediating institutions continue to leach influence because they no longer have any power, because influences are coming from those who have no accountability, then we have a crisis.”

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Note: the whole thing is based on an FBI report, with probes of Novartis going back to at least 2014.

“..bribery scandal [..] the worst since the creation of the modern Greek state almost 200 years ago..”

Greek MPs Vote To Investigate Top Politicians In Novartis Bribery Claims (G.)

The Greek parliament is to investigate 10 of the country’s top politicians over in return for patronage that resulted in huge losses for Greece. After a raucous 20-hour debate, MPs voted early on Thursday to form a parliamentary committee tasked solely with investigating two former prime ministers and eight other ministers in connection with the allegations. The governor of the Bank of Greece, Yannis Stournaras; Europe’s migration commissioner, Dimitris Avramopoulos and the country’s former prime minister Antonis Samaras are among those accused of giving Novartis preferential market treatment. “We will not cover up,” Samaras’s successor, Alexis Tsipras, told parliament. “The Greek people must learn who turned pain and illness into a means of enrichment.”

Officials in Tsipras’ leftist-led administration have described the alleged bribery scandal as the worst since the creation of the modern Greek state almost 200 years ago. It has raised fears of political instability at a time when many had hoped the country was finally returning to normality after years of tumult. All 10 of those implicated vehemently rebutted the charges in often angry and emotional speeches during the debate. Stournaras, a former finance minister who helped steer Greece through some of its darkest days of the debt crisis after the country’s near-economic collapse, described the allegations as “disgusting fabrications”. Panagiotis Pikrammenos, who headed a one-month caretaker administration at the height of the crisis in 2012, came close to tears as he described the allegations against him “as lies and unacceptable slander”.

The cross-party committee, made up of 21 MPs, is expected to be established imminently. It will have the power to decide whether accusations of bribery, breach of duty and money-laundering apply, under a strict statute of limitation, to each of the accused. Under Greek law, parliament must investigate politicians for alleged infractions before they can face judicial prosecution. Few question that wrongdoing was committed. A confidential report by prosecutors originally tipped off by US authorities alleged that bribes of as much as €50m (£44m) were paid to politicians between 2006 to 2015 to promote Novartis’s products. More than 4,500 doctors are accused of malpractice as well. [..] With losses of around €4 billion for the country’s health system, the scandal will have played a significant role in Greece’s financial meltdown.

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How to make sure an economy won’t recover.

Greece Is The European Champion In Corporate Taxes (K.)

Corporate taxation in Greece is burdensome and anti-competitive, the Hellenic Federation of Enterprises (SEV) says in a report published on Thursday, stressing that Greek taxes also fail to draw revenues above the average rate of other European countries that as a rule have lower corporate taxation. According to SEV, the real tax load on corporations has increased considerably, with income tax reverting to the 2006 level plus the income on revenues from dividends: Today income tax comes to 29%, the tax on dividends to 15%, the solidarity levy to 10% and social security contributions for board members to 26.7%. This amounts to 81% of profit distribution, SEV said.

The federation’s analysts argue that profit taxation is above the European Union average and definitely higher than neighboring states that are Greece’s direct rivals within the bloc. If one adds board members’ social security contributions, then Greece has the highest corporate taxes by far, being the only country to have increased its tax sum since 2000, at a time when other states have been reducing the burden. SEV goes on to note that the tax rates are the just tip of the iceberg. The report focuses on the overall framework of corporate taxation that does not allow enterprises to grow and improve their competitiveness in international markets.

The federation highlights six specific problems in the corporate tax framework:
– The option of offsetting losses against future profits in Greece is for just five years, against at least 10 years in most EU states;
– Other countries have special incentives through tax exemption on expenditure, which in Greece are particularly limited;
– There is no framework for favorable regulations and incentives for mergers and acquisitions, which would encourage the streamlining and expansion of companies and reduce bad loans;
– There are no incentives such as accelerated amortization for new investments on equipment, which SEV calculates would have been fiscally neutral;
– Greek amortization rates are noncompetitive, particularly concerning investments in machinery and other equipment, forcing Greek firms to amortize their equipment slowly;
– Finally, Greece retains anachronistic levies such as stamp duty.

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Ignores the role of social media-induced echo chambers.

The Gun-Control Debate Could Break America (French)

Last night, the nation witnessed what looked a lot like an extended version of the famous “two minutes hate” from George Orwell’s novel 1984. During a CNN town hall on gun control, a furious crowd of Americans jeered at two conservatives, Marco Rubio and Dana Loesch, who stood in defense of the Second Amendment. They mocked the notion that rape victims might want to arm themselves for protection. There were calls of “murderer.” Rubio was compared to a mass killer. There were wild cheers for the idea of banning every single semiautomatic rifle in America. The discourse was vicious. It was also slanderous. There were millions of Americans who watched all or part of the town hall and came away with a clear message: These people aren’t just angry at what happened in their town, to their friends and family members; they hate me.

They really believe I’m the kind of person who doesn’t care if kids die, and they want to deprive me of the ability to defend myself. The CNN town hall might in other circumstances have been easy to write off as an outlier, a result of the still-raw grief and pain left in the wake of the Parkland shooting. But it was no less vitriolic than the “discourse” online, where progressives who hadn’t lost anyone in the attack were using many of the same words as the angry crowd that confronted Rubio and Loesch. The NRA has blood on its hands, they said. It’s a terrorist organization. Gun-rights supporters — especially those who oppose an assault-weapons ban — are lunatics at best, evil at worst. This progressive rage isn’t fake. It comes from a place of fierce conviction and sincere belief. Unfortunately, so does the angry response from too many conservatives.

[..] Unlike the stupid hysterics over net neutrality, tax policy, or regulatory reform, the gun debate really is — at its heart — about life and death. It’s about different ways of life, different ways of perceiving your role in a nation and a community. Given these immense stakes, extra degrees of charity and empathy are necessary in public discussion and debate. At the moment, what we have instead are extra degrees of anger and contempt. The stakes are high. Emotions are high. Ignorance abounds. Why bother to learn anything new when you know the other side is evil?

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Major cold spell on the doorstep.

50,000 Die In UK ‘Cold Homes Public Health Crisis’ (Ind.)

Thousands of people are “needlessly” dying each year because they cannot afford to properly heat their homes, new research has revealed. The UK has the second-worst rate of excess winter deaths in Europe, a study by National Energy Action and climate-change charity E3G found. The organisations called for urgent action to end to the devastating but “entirely preventable” tragedy that they say amounts to a “cold homes public health crisis”. The death toll looks set to rise next week as the UK braces for an imminent “polar vortex” predicted to bring harsh frost, snow showers and freezing temperatures. Almost 17,000 people in the UK are estimated to have died in the last five years as a direct result of fuel poverty and a further 36,000 deaths are attributable to conditions relating to living in a cold home, the research found.

The number dying each year is similar to the amount who die from prostate cancer or breast cancer. A total of 168,000 excess winter deaths from all causes have been recorded in the UK over the latest five-year period. Of 30 countries studied, only Ireland has a higher proportion of people dying due to cold weather. The research was published to coincide with Fuel Poverty Awareness Day on Friday which aims to highlight the problems faced by those struggling to keep warm in their homes. It comes just 24 hours after Centrica, which owns British Gas, announced plans to cut 4,000 jobs after a “weak” year in which it made £1.25bn profit. The company’s chief executive, Ian Conn, said the Government’s energy price cap – designed to prevent loyal and vulnerable customers being ripped off – was partly to blame for the layoffs. Pedro Guertler, of E3G, who co-authored the research, said the winter death figures were not only a tragedy but a “national embarrassment”.

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Jan 082018
 
 January 8, 2018  Posted by at 10:41 am Finance Tagged with: , , , , , , , , , , , ,  


James Karales Selma to Montgomery March Alabama 1965

 

Beijing’s Yuan Ambitions Look Dashed (BBG)
Two Major Apple Shareholders Push for Study of iPhone Addiction in Children (BBG)
New Jersey Poised To Bar Drunken Droning (R.)
South Korea Inspects Six Banks Over Crypto Currency Services To Clients (R.)
Bitcoin Futures Traders Are Quietly Building A Big Short Position (ZH)
Australia Forecasts 20% Iron Ore Price Drop In 2018 (R.)
Australia Government Can’t Supply Its Way To Housing Affordability (SMH)
Rising Volatility Begets Rising Volatility (Peters)
The Artificial Liquidity Bubble (Henrich)
Wikileaks Publishes Michael Wolff’s Entire Sold Out Trump Book As A PDF (ZH)
US Freezes While Sydney Sizzles: World’s Temperature Extremes Span 85ºC (BBG)

 

 

It’s not as if a strong yuan is all that good for China. A stable one might be. But the bottom line remains: nobody wants it.

Beijing’s Yuan Ambitions Look Dashed (BBG)

As 2018 gets underway, China seems to be on top again. The yuan has strengthened 6.8% against the dollar over the past 12 months and foreign-exchange reserves are growing. Not so fast.Remember November 2015, when the IMF- with some fanfare – agreed to add the yuan to its prestigious special drawing rights currency basket. Talk then was of the yuan one day becoming one of the world’s reserve currencies, perhaps even rivaling the dollar.Two years on and central banks aren’t buying the notion. Although China’s currency has a weight of more than 10% in the SDR basket, which gives equal importance to a country’s trade status and balance-sheet metrics, just 1.1% of the world’s forex reserves were held in yuan versus 63% in dollars as of the third quarter.

It’s understandable that central banks have been shying away from the euro. German two-year bunds have been offering a negative yield since mid-2014. But why the yuan? China’s short-dated government notes offer among the best interest rates: Part of the explanation is liquidity. According to the Bank of International Settlements, in 2016, the yuan constituted only 4% of the world’s currency trades. The dollar, through pairs with the euro and the yen, accounted for 88% of transactions.

Then there’s the question of time. It could be decades before any currency, yuan or bitcoin, replaces the greenback.But China itself is also to blame. It seems to have abandoned its great yuan ambitions.What happened to the dim sum bond market? The Chinese government, along with policy banks, sold fewer than $3 billion of offshore yuan notes last year, a sharp pullback from 2016 and 2015. And oddly, last October, China sold its first sovereign dollar debenture since 2004 – a move that was widely interpreted as Beijing wishing to develop a vibrant international bond market for its state-owned enterprises. The panda bond market, where foreign companies raise yuan onshore, is also going nowhere. Hungary had a small, 1 billion yuan ($154 million) issue in July, while the Philippines keeps delaying its plans. China has also hit the pause button on the idea of trading oil in yuan.

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Curious new problems.

Two Major Apple Shareholders Push for Study of iPhone Addiction in Children (BBG)

Two big shareholders of Apple are concerned that the entrancing qualities of the iPhone have fostered a public health crisis that could hurt children – and the company as well. In a letter to the smartphone maker dated Jan. 6, activist investor Jana Partners and the California State Teachers’ Retirement System urged Apple to create ways for parents to restrict children’s access to their mobile phones. They also want the company to study the effects of heavy usage on mental health. “There is a growing body of evidence that, for at least some of the most frequent young users, this may be having unintentional negative consequences,” according to the letter from the investors, who combined own about $2 billion in Apple shares. The “growing societal unease” is “at some point is likely to impact even Apple.”

“Addressing this issue now will enhance long-term value for all shareholders,” the letter said. It’s a problem most companies would kill to have: Young people liking a product too much. But as smartphones become ubiquitous, government leaders and Silicon Valley alike have wrestled for ways to limit their inherent intrusiveness. France, for instance, has moved to ban the use of smartphones in its primary and middle schools. Meanwhile, Android co-founder Andy Rubin is seeking to apply artificial intelligence to phones so that they perform relatively routine tasks without needing to be physically handled. Apple already offers some parental controls, such as the Ask to Buy feature, which requires parental approval to buy goods and services. Restrictions can also be placed on access to some apps, content and data usage.

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I must admit, another new problem, and one that hadn’t occurred to me yet.

New Jersey Poised To Bar Drunken Droning (R.)

U.S. drone sales in 2017 topped $1 billion for the first time ever, but don’t raise a glass too quickly if you are in New Jersey, where lawmakers are poised to outlaw drunken droning next week. It is one of a wave of U.S. states moving to bring the unmanned aircrafts’ high-flying fun back to earth. New Jersey’s Assembly is slated to vote on a bill approved by the state Senate to ban inebriated or drugged droning, as well as to outlaw flying unmanned aircraft systems over prisons and in pursuit of wildlife. The vote was set for Thursday but postponed until Monday because of a severe snowstorm that triggered a state of emergency in New Jersey. “It’s basically like flying a blender,” said John Sullivan, 41, of New York, a drone buff and aerial cinematographer.

He said he opposed drunk droning but also fretted about regulatory overreach. “If I had like one drink, I’d be hesitant to even fly it.” A 2015 drone crash on the White House lawn fueled debate in the U.S. Congress over the need for drone regulations. It was a drunken, off-duty employee of the National Geospatial-Intelligence Agency who flew the 2-foot-by-2-foot (60 cm by 60 cm) “quadcopter” from a friend’s apartment balcony and lost control of it over the grounds surrounding the White House, the New York Times reported. [..] “Like any technology, drones have the ability to be used for good, but they also provide new opportunities for bad actors,” said Assemblywoman Annette Quijano of Elizabeth, New Jersey. She backed the bill, which would impose a punishment of up to six months prison and a $1,000 fine for drunk droning.

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A big gap: “..bitcoin’s global price average was trading at $16,294 while in South Korean markets, it stood at 25 million won, or $23,467.35..?

South Korea Inspects Six Banks Over Crypto Currency Services To Clients (R.)

South Korean financial authorities on Monday said they are inspecting six local banks that offer virtual currency accounts to institutions, amid concerns the increasing use of such assets could lead to a surge in crime. The joint inspection by the Financial Services Commission (FSC) and Financial Supervisory Service (FSS) will check if banks are adhering to anti-money laundering rules and using real names for accounts, FSC Chairman Choi Jong-ku told a press conference. [..] Choi said the inspections are intended to provide guidance to banks and are not the result of any suspected wrongdoing. “Virtual currency is currently unable to function as a means of payment and it is being used for illegal purposes like money laundering, scams and fraudulent investor operations,” said Choi. “The side effects have been severe, leading to hacking problems at the institutions that handle cryptocurrency and an unreasonable spike in speculation.”

A Woori Bank spokesperson told Reuters the bank was filling out a checklist for the inspection. The spokesperson said Woori had stopped providing virtual account services last month as the costs of using a real-name transaction system were too prohibitive. [..] Choi said authorities are also looking at ways to reduce risks associated with cryptocurrency trading in the country, which could include shutting down institutions that use such currencies. Last month, the government said it would impose additional measures to regulate speculation in cryptocurrency trading within the country, including a ban on anonymous cryptocurrency accounts and new legislation to allows regulators to close virtual coin exchanges if needed.

Bitcoin and other virtual coins have been extremely popular in South Korea, drawing wide investments from housewives and students. Government officials have expressed concern over frenzied speculation, with South Korea’s central bank chief warning of “irrational exuberance” in trading of virtual currency last month. A South Korean cryptocurrency exchange, Youbit, shut down and filed for bankruptcy in December after it was hacked twice last year, highlighting security and regulatory concerns. South Korea’s virtual currency exchanges have been more vulnerable to hackers as bitcoin trades at higher rates on local exchanges than they do elsewhere. As of 0710 GMT, bitcoin’s global price average was trading at $16,294 while in South Korean markets, it stood at 25 million won, or $23,467.35, according to Coinhills.com.

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Bitcoin and Ripple are falling, ether rises.

Bitcoin Futures Traders Are Quietly Building A Big Short Position (ZH)

In retrospect, the launch of bitcoin futures one month ago has proven to be a modestly disappointing event: while it helped send the price of bitcoin soaring as traders braced for the institutionalization of bitcoin, the world’s most popular cryptocurrency has stagnated since the beginning of December when first the Cboe then CME started trading bitcoin futures, trading in a range between $12,000 and $17,000. And while bitcoin futures markets volumes have been lower than most had expected, the past 4 weeks have provided enough data to observe how volumes and open interest have evolved.

We discussed previously that Bitcoin futures were off to a slow start in the first week of trading, with volumes of CBOE Bitcoin futures averaging just around $40MM per day, despite intense media hype helping fuel heavy trading when both contracts launched, at least in the first hours of trading. Since then, volumes spike briefly in the following week coinciding with the launch of the CME futures, with volumes of on both exchanges at relatively similar levels. Then, as JPM’s Nikolaos Panagirtzoglou shows, after a spike in volumes to around $200mn on 22 December, which saw sharp swings in underlying Bitcoin prices, volumes have averaged around $50mn and $60mn per day on the CBOE and CME futures, respectively.

One month after their launch, futures trading volumes remain very modest compared to average Bitcoin trading volumes of around $15bn per day since futures contracts were launched according to coinmarketcap.com data. While open interest in both the CBOE and CME contracts has risen steadily, it too remains rather modest at around $60mn and $70mn, respectively. Putting futures volumes in context, on Friday, the combined size of the bitcoin-futures markets at the two exchanges was roughly $150 million, measured in terms of the value of outstanding contracts, while the total value of all bitcoins in existence was around $290 billion.

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That’s a big drop.

Australia Forecasts 20% Iron Ore Price Drop In 2018 (R.)

Australia on Monday said it expects iron ore prices to average $51.50 a tonne this year, down 20% from 2017, because of rising global supply and moderating demand from top importer China as its steel sector shrinks. The world’s top three mining companies, BHP and Vale rely heavily on iron ore sales for the bulk of their revenue despite efforts to diversify more into other industrial raw materials, such as copper, aluminium and coal. Brazil-based Vale is planning to lift iron ore exports 7% in 2018 to 390 million tonnes. In Australia, Rio Tinto and BHP, along with Fortescue Metals Group aim to add about 170 million tonnes of new capacity over the next several years.

The forecast price decline — from an average of $64.30 a tonne in 2017 — continues into 2019, when the steelmaking raw material will average only $49 a tonne, according to the Department of Industry, Innovation and Science. “The iron ore price is expected to experience some ongoing volatility in early 2018, as the market responds to uncertainty regarding the impact of winter production restrictions on iron ore demand,” the department warned in its latest commodities outlook paper. Iron ore currently sells for about $75 a tonne.

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All it needs to do is let prices crash. Does wonders for affordability.

Australia Government Can’t Supply Its Way To Housing Affordability (SMH)

Sydney and Melbourne are entering a housing downturn. While the government has hoped record high levels of property development would have an impact, research shows supply is not behind the price falls. Housing economists say the market slowdown is not due to additional home building but a drop in demand, in part thanks to the banking regulator making it more difficult for some to get a loan. In fact, the effect of new supply on property prices has been very limited despite state governments largely pinning hopes on a surging home building industry to rein in affordability. In a recent Australian National University paper Regional housing supply and demand in Australia academics Ben Phillips and Cukkoo Joseph found supply levels from 2001 to 2017 were larger than necessary to cover demand requirements, with thousands of excess homes in Sydney, but prices boomed over the time period.

This flies in the face of conventional economic wisdom, with the law of supply and demand dictating that the more of something you make, the cheaper it should be. There are many reasons why housing doesn’t respond to increases in supply in the way the market for coal, apples or t-shirts might be expected to react. When economists are making models they usually assume they are calculating the impacts on a “normal” good. One of the assumptions often made when modelling supply and demand for these goods is that what is produced is all homogenous, that is they are more or less the same. Typically, someone will pay the same amount for one item as they will for another that is identical.

Housing is not in this category. Even in the most sterile of apartment blocks, there will be many different design features, flaws, views and aspects that differ in each unit. The impact of new supply on the property market is limited by whether the type of property being built caters to existing demand. For instance, new apartments on the outskirts of greater Sydney or Melbourne may not appeal to the same market bidding up the price of mansions with water views.

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It’s just like Minsky: stability begets instability.

Rising Volatility Begets Rising Volatility (Peters)

To sell implied volatility at current 50yr lows, investors must imagine tomorrow will be virtually identical to today. They must imagine that bond yields won’t rise despite every major central bank eager to hike interest rates and exit QE. They must imagine that economies at or near full employment will not create inflation; that GDP will neither accelerate nor decelerate; that governments will tolerate historic levels of income inequality despite citizens voting for the opposite; that strongly rising global debts will be supported by structurally decelerating global growth. And volatility sellers must imagine that nine years into a bull market, amplified by a proliferation of complex volatility-selling strategies and passive ETFs with liquidity mismatches, that we will dodge a destabilizing shock to market infrastructure.

I can imagine a few of those things happening, but neither sustainably nor simultaneously. It is much easier to imagine a tomorrow that looks different from today. Also consider that investment banks and asset managers have always devised creative strategies to make money once asset valuations exceed reasonable levels. These perpetual prosperity machines typically combine leverage and alchemy, transforming real risk into perceived safety. Examples abound. But in this cycle, a proliferation of cleverly disguised volatility-selling strategies has dominated. Zero interest rates and quantitative easing left yield-starved investors with few ways to achieve their target returns. Wall Street’s engineers developed many wonderful solutions to this problem. Their magnificence is matched only by the amount of negative convexity now lurking in investment portfolios.

As volatility has declined, investors have had to sell even more of it to sustain sufficient profits. This selling reinforces the trend lower, which produces an illusion that legacy volatility shorts are less risky today than yesterday. Lower volatility thus begets lower volatility. And this also ensures that quantitative models reduce overall portfolio risk estimates, which allows (and in many cases forces) investors to buy more assets at prevailing prices. This in turn reduces volatility, reflexively. Naturally, the reverse is also true. Rising volatility begets rising volatility. And given the unprecedented volatility-selling in this cycle, this market is exposed to a historic reversal somewhere along the path to policy normalization. Which has now begun.

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aka the everything bubble.

The Artificial Liquidity Bubble (Henrich)

8 years after the financial crisis we remain in an environment that is entirely dependent on artificial liquidity, be it via central bank liquidity driven low rates and/or QE or now US fiscal stimulus in the form of tax cuts. And while a reduction in central bank stimulus is anticipated for 2018 the $1.5 trillion US tax cut is the next active artificial boost to hit markets. You can view it perhaps this way: When the US ended QE3 Europe and Japan took over the stimulus baton, and now that Europe is reducing stimulus the US again is taking the lead, this time with fiscal stimulus. It is a bizarre dance that excels in one aspect in particular: It never ends. Consider: German unemployment is at all time lows, and European PMIs are at their highest in over 7 years.

Is the ECB raising rates from record lows? Nope. Has QE ended? Nope. QE continues to run at $30B Euro a month and rates remain in full panic mode. Not what one would’ve expected 8 years ago following a return to full employment. Stimulus programs & interventions used to be methods of crisis management now they have become permanent fixtures in global economies. Why? Because this is what it takes. And they will continue. Japanese Prime Minister Shinzo Abe has just instructed central bank chief Kuroda to keep printing as he decides whether to keep him in his job. Wink wink. Normalizing rates? Reducing balance sheets back to pre-crisis levels? Letting markets run on their own without intervention? Call it the big central banking lie. It will never happen. It can’t. Global debt is now exceeding $233 Trillion.

[..] the math of higher rates doesn’t work and will eventual break the camel’s back. Low rates are an absolute must requirement to keep the construct afloat. It is no accident that Morgan Stanley wealth management has decided to pull out of junk bonds. They are warning of US tax cuts accelerating market excesses bringing about a coming recession. And make no mistake, a recession will come as we are very late in the cycle.

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Count me out.

Wikileaks Publishes Michael Wolff’s Entire Sold Out Trump Book As A PDF (ZH)

Considering that Wikileaks made its name by leaking confidential and/or hard to find documents and information, and also considering the reversal in the Trump administration vis-a-vis Julian Assange, whom it first lauded only to threaten with incarceration in recent months, it is perhaps not surprising that moments ago the official Wikileaks twitter account published Michael Wolff’s controversial – and largely sold out – book, “Fire and Fury” in pdf format.

New Trump book “Fire and Fury” by Michael Wolff. Full PDF: https://t.co/sf7vj4IYAx

— WikiLeaks (@wikileaks) January 7, 2018

Since, somewhat ironically, WikiLeaks picked a google drive to host the leaked pdf, it will unlikely remain available for an extended period, as it would mean substantial lost revenue for book published Henry Holt and Company. So for those who wish to read what all the hoople is about – for free – they are advised to do so sooner rather than later.

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View from the west only. How do you dress for a flight like that?

US Freezes While Sydney Sizzles: World’s Temperature Extremes Span 85ºC (BBG)

Temperature extremes across the globe spanned more than 85 degrees Celsius at the weekend as Sydney melted and parts of the U.S. froze. Western Sydney touched 47.3 degrees Celsius (117 degrees Fahrenheit) on Sunday afternoon local time, the city’s hottest day since 1939. Weekend temperatures at Mount Washington Observatory in New Hampshire plummeted to minus 36 degrees Fahrenheit (minus 38 degrees Celsius). Roads melted, firefighters battled wildfires across New South Wales state and Sydney residents retreated to air-conditioned shopping malls as temperatures surged. English cricket captain Joe Root was hospitalized with severe dehydration after battling Australia in the cauldron of the Sydney Cricket Ground. At the same time, freezing fog and snow buffeted Mount Washington, tying the observatory for the second-coldest place on Earth.

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Oct 252017
 
 October 25, 2017  Posted by at 8:48 am Finance Tagged with: , , , , , , , , , ,  


Jackson Pollock Male and female 1942

 

Clinton Campaign, DNC Paid For Research That Led To Russia Dossier (WaPo)
Gold-Backed Petro-Yuan Silliness: Reserve Currency Curse? (Mish)
Do Democrats Really Need Wall Street? (BM)
4 In 10 Canadians Can Not Cover Basic Expenses Without Adding More Debt (ZH)
Italy Faces Worst Shock In Europe As ECB Prepares To Taper Bond Buys (MW)
Don’t Blame Others For Your Problems, Germany’s Schaeuble Tells Greece (R.)
What Happened To The €8 Billion Europe Took From Greece? (EN)
Turkey Says Doesn’t Want Greece To Become ‘Safe Haven’ For Coup Plotters (R.)
Monsanto Faces Blowback Over Cancer Cover-Up (Spiegel)
EU Parliament Votes To Ban Controversial Weedkiller Glyphosate By 2022 (AFP)
Spain’s Government Prepared To ‘Discipline Disobedient Catalans’ (CNBC)
US Military Is Conducting Secret Missions All Over Africa (Vice)
Yes, The US Leads All Countries In Reducing Carbon Emissions (Rapier)
Global Wine Output Hits 50-Year Low (AFP)
Ancient Amazon Tribe Vow To Defend Their Territory Against Mining (AFP)

 

 

What a cesspool, what a shithole Washington has become. Actually, reading through today’s news, the whole world has.

Clinton, Podesta, Corker, Flake, Trump, Clapper, Comey, Mueller, Manafor, Ppmpeo, Sessions, people are simply going to walk away from it all.

And you can say good on the WaPo for publishing this, but they have thrown so much echo chamber stuff out there over the past year, this doesn’t make that right.

Clinton Campaign, DNC Paid For Research That Led To Russia Dossier (WaPo)

The Hillary Clinton campaign and the Democratic National Committee helped fund research that resulted in a now-famous dossier containing allegations about President Trump’s connections to Russia and possible coordination between his campaign and the Kremlin, people familiar with the matter said. Marc E. Elias, a lawyer representing the Clinton campaign and the DNC, retained Fusion GPS, a Washington firm, to conduct the research. After that, Fusion GPS hired dossier author Christopher Steele, a former British intelligence officer with ties to the FBI and the U.S. intelligence community, according to those people, who spoke on the condition of anonymity. Elias and his law firm, Perkins Coie, retained the company in April 2016 on behalf of the Clinton campaign and the DNC.

Before that agreement, Fusion GPS’s research into Trump was funded by an unknown Republican client during the GOP primary. The Clinton campaign and the DNC, through the law firm, continued to fund Fusion GPS’s research through the end of October 2016, days before Election Day. Fusion GPS gave Steele’s reports and other research documents to Elias, the people familiar with the matter said. It is unclear how or how much of that information was shared with the campaign and the DNC and who in those organizations was aware of the roles of Fusion GPS and Steele. One person close to the matter said the campaign and the DNC were not informed by the law firm of Fusion GPS’s role.

The dossier has become a lightning rod amid the intensifying investigations into the Trump campaign’s possible connections to Russia. Some congressional Republican leaders have spent months trying to discredit Fusion GPS and Steele and tried to determine the identity of the Democrat or organization that paid for the dossier. Trump tweeted as recently as Saturday that the Justice Department and FBI should “immediately release who paid for it.”

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“Mathematically, as long as China runs surpluses, foreign holding of yuan will not match foreign holding of dollars.”

Gold-Backed Petro-Yuan Silliness: Reserve Currency Curse? (Mish)

A massive amount of hype is spreading regarding China’s alleged ambitions to dethrone the dollar. The story this time involves China’s plan is to price oil in yuan using a gold-backed futures contract. Even if that were true, the impact would be zero. Nonetheless, CNBC is now in on the hype. CNBC reports China has grand ambitions to dethrone the dollar. It may make a powerful move this year. Yuan pricing and clearing of crude oil futures is the “beginning” of a broader strategic push “to support yuan pricing and clearing in commodities futures trading,” Pan Gongsheng, director of the State Administration of Foreign Exchange, said last month. To support the new benchmark, China has opened more than 6,000 trading accounts for the crude futures contract, Reuters reported in July. Yawn.

Jeff Brown, president at FGE, an international energy consultant has a more accurate assessment. “Most counterparties will not want anything to do with this contract as it adds in a layer of cost and risk. They also don’t like contracts with only a few dominant buyers or sellers and a government role.” Repeat after me: It’s meaningless what currency oil is quoted in. Once you understand the inherent truth in that statement, you immediately laugh at headlines like that presented on CNBC. For those who do not understand the simple logic, consider the fact that one does not need to have dollars to buy oil. Currencies are fungible. In less than a second, and at ant time day or night, one can convert any currency to any other currency. If countries want to hold dollars they can. If one wants to hold Swiss Francs, Euros, or Yen they can as well. Oil likely trades in all of those currencies right now.

Countries accumulate US dollars because the US runs a trade deficit, and those dollars will eventually return to the US. If China wants to assume the role of having the world’s reserve currency, something I highly doubt actually, it will need to have a free-floating currency and the world’s largest bond market . China will need property rights protection and a global willingness of countries to hold the yuan. To assume the role of China would have to be willing to run trade deficits instead of seeking trade surpluses via subsidized exports. Please read that last sentence over and over again until it sinks in. Mathematically, whether they like it or not, China and Japan have massive US dollar reserves as a result of cumulated trade surpluses. Mathematically, as long as China runs surpluses, foreign holding of yuan will not match foreign holding of dollars.

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More on that cesspool. Nothing to do with ideas, or convictions, or voters. Just power.

Do Democrats Really Need Wall Street? (BM)

Halloween is coming and fear mongering seems to be the order of the day — not just on the part of Republicans, but apparently no less so on the part of “centrist” and conservative Democrats who are expressing growing anxiety about offending big donors who see politics not as the pursuit of justice but as the pursuit of their interests. Douglas Schoen, said to have been Bill Clinton’s favorite pollster during his presidency, has taken to the op-ed page of The New York Times to warn center-right party members and friends that ‘all Hell will break loose’ if the Democrats embrace a platform promising “wealth redistribution through higher taxes and Medicare for all” and utilizing democracy to challenge the power of money.

Don’t be bewitched by the fantasies of folks such as Sens. Bernie Sanders (I-VT) and Elizabeth Warren (D-MA), Schoen counsels, for if you do, the American financial elite will not keep the party’s “coffers full.” Indeed, he argues, “Democrats should strengthen their ties to Wall Street,” for “America is a center-right, pro-capitalist nation.” “Memories in politics are short,” Schoen wrote. And he wrings his hands over the amnesia that robs people of remembering that the center-right assembled under Bill Clinton enabled him to balance the budget, limit government and protect essential programs “that make up the social safety net.” Leaving behind “that version of liberalism,” Schoen writes, has cost Democrats several elections. He even claims that Hillary Clinton lost in Michigan and Wisconsin in 2016 because she “lurched to the left.”

Yes, memories are short indeed, but they are made even shorter by the likes of Schoen. The horrors he prophesies make it clear that he does not want us to remember. He wants us to forget, and therefore to tame our aspirations for social democracy and an economy that serves everyday people instead of the 1%. Schoen wants us to forget that Hillary Clinton lost the Upper Midwest not because of her supposed “lurch to the left,” but because many working people could not erase from their minds her lavishly paid Wall Street engagements and her adamant refusal to “release the transcripts” of those flattering speeches to the bankers. To many a Rust Belt voter she was the “Goldman Sachs” candidate, something Schoen would consign to the memory hole.

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You will see this wherever a housing bubble rules the economy.

4 In 10 Canadians Can Not Cover Basic Expenses Without Adding More Debt (ZH)

[..] BNN reported that a survey released yesterday found that almost half of Canadian households don’t feel financially prepared for further interest rate increases. According to the Ipsos poll, conducted on behalf of MNP, 40% of respondents said they fear ending up in financial trouble if rates go up much higher, with one-in-three already feeling the impact of higher rates. “It’s clear that people are nowhere near prepared for a higher rate environment,” MNP President Grant Bazian said in a release. “The good news is that there seems to be at least the acknowledgement now that rates are going to climb which might make people reassess their spending habits – especially using credit.”

It gets worse: 42% of respondents said they don’t think they can cover basic expenses over the next year without going deeper into more debt. The same number said they’re within $200 of not being able to cover monthly expenses. This familiar “ponzi state” means that more than 4 in 10 Canadians effectively have no savings, which is ominously similar to US trends: as we reported earlier this year, a quarter of American adults can’t pay all their monthly bills, while 44% have less than $400 in cash. The Ipsos poll also found 70% of Canadians said they will take a more cautious approach to spending amid higher interest rates, which may be enough to choke off any economic growth and make the Canadian rate hikes a “one and one” affair.

Concern about rising rates is greater among lower-income Canadians – those who tend to rely on credit cards – according to the survey, as opposed to homeowners who said they are a bit more optimistic they can absorb a rate increase of… a whopping 1%. Geographically, over half of Albertans say they’ll be more concerned about paying off debt if interest rates rise, which is more than those in British Columbia and Quebec, where less than half said they are worried. Meanwhile, Ontarians are the least concerned (44 per cent) about their ability to pay down their debts.

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But .. but .. Draghi’s Italian… At one point, he wanted to be its PM.

Italy Faces Worst Shock In Europe As ECB Prepares To Taper Bond Buys (MW)

The entire eurozone will face a crucial test when the European Central Bank begins to wind down its asset-buying program, but one country stands to lose the most as the monetary punch bowl is taken away: Italy. Saddled with mountains of debt and a looming election, the southern European nation will likely struggle to find buyers for its government bonds when the European Central Bank stops snapping up Italian debt over the coming years, according to Christian Schulz, European economist at Citigroup. That means yields are set to rise, potentially strangling the country’s nascent recovery. “It comes at a difficult time. At the moment political uncertainty is rising and the ECB pulling out of the market just makes [the end of quantitative easing] so much harder on Italy than other countries,” Schulz said.

“They have a huge pile of debt, which makes the country much more sensitive to interest rate changes than countries with smaller piles of debt,” he said. Italy has particularly benefited from the ECB’s quantitative easing program that began in 2015, as it’s been one of the biggest bond issuers in the currency union. The central bank has purchased 300 billion euros ($352.9 billion) of Italian bonds under the program, which is more than three times the net bond issuance for the country during that period, according to Schulz. That means the ECB has not only bought pretty much all new bonds issued in Italy since 2015, but also existing bonds from other investors. The ECB is widely expected to announce some sort of tapering at its monetary policy setting meeting on Thursday, and most economists expect the asset purchases to end altogether in late 2018.

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” Schaeuble said Greece had decided to cut pensions instead of taxing wealthy ship-owners..” Not true.

Don’t Blame Others For Your Problems, Germany’s Schaeuble Tells Greece (R.)

Outgoing German Finance Minister Wolfgang Schaeuble urged debt-wracked Greece to stop blaming others for its financial woes and stick to a reform agenda instead of relying on debt relief. Schaeuble, a leading advocate of Greece’s tough austerity programs and one of Germany’s most powerful politicians, was elected speaker of its lower house of parliament on Tuesday. The 75-year-old lawyer, whose no-nonsense approach on austerity made him a popular hate figure among Greeks, told Greek Skai TV that Athens must take responsibility for its fiscal difficulties and act on them. “When you ask others for loans, you cannot insult them for granting the loans. It doesn’t make sense. Greece’s problems are Greece’s problems,” the conservative Christian Democrat said in an interview aired in Greece on Tuesday.

Asked if he ever suggested a “time out” on Greece’s participation in the euro zone, he said he had discussed the option “as a currency devaluation tool” with a former finance minister, who rejected it saying Greece would implement reforms. Schaeuble said he warned Prime Minister Alexis Tsipras while the latter was still in opposition in 2014 that the Greek politician would not be able to meet his pre-election platform of zero austerity. Tsipras, Schaeuble said, told him he wanted to remain in the euro without any conditions. “I responded that I wished, for his sake, that he didn’t win that election because he wouldn’t be able to keep his promises,” Schaeuble said in comments translated from German to Greek.

Seven months after he was elected, Tsipras was forced to cave into lenders’ demands for more belt-tightening. He was re-elected saying the bailout, the country’s third since 2010, was a product of blackmail. Greece is eyeing a bailout exit in 2018. Asked if the Greek case had become a personal issue for him, Schaeuble said: “Obviously in Greece I was a bogeyman, or at least for some media.” Politicians, he said, had a habit of using lenders as an excuse to impose cutbacks. “That saddened me somewhat, because nobody ever wanted to harm Greece,” he said. By way of example, Schaeuble said Greece had decided to cut pensions instead of taxing wealthy ship-owners – contrary to what the leftist Syriza party promised before elections. “This wasn’t a German parliament decision, it was a Greek government decision,” he said.

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Anything to say on this, Wolfgang? Where I come from this is called ordinary blackmail.

What Happened To The €8 Billion Europe Took From Greece? (EN)

In 2012 with Greece on the verge of bankruptcy, fellow Eurozone states rallied round to rescue one of their own. Part of the bailout package they agreed was to use almost 27 billion euros to buy up Greek debt to prevent a vicious circle that would see the country facing more and more expensive borrowing costs. At the time, the countries agreed that they should not profit from this action and that the interest paid to them by Athens linked to the bonds they had bought should be returned. To this day, that interest amounts to almost €8 billion (More precisely €7,838,000,000, according to an email sent by EU finance commissioner Pierre Muscovici to MEPs). Some of this money has been sent back to Greece but much of it remains in the hands of other European countries. And they seem determined not to reveal how much.

“For legal reasons, it’s not possible for member states to declare the amounts paid by their central banks to Greece,” said a source at the European Commission, citing the principle that central banks should not disclose details about their investments to avoid unduly influencing the behaviour of markets. For once, it seems, that Europe is united on the issue – Ireland, Italy, Spain and even Greece all refused to disclose how much had been returned and how much they were still holding. In Luxembourg, the press revealed that the government had handed back to Greece €28.3 million and was committed to returning the entire €40.2 million of interest it had accrued.

According to Euronews’ calculations, the Bundesbank, due to its position as the largest of Europe’s central banks earned €2 billion of interest since 2012 on the debt they purchased from Greece. France took €1.58 billion and Italy €1.37 billion. Documents obtained by Euronews confirm the figure for France, officials from other countries would not confirm or deny the amounts by the time this story was published.

Under the Securities Market Programme, Eurozone central banks bought up Greek government bonds, pushing up the prices for that debt and thereby lowering the interest rates Athens needed to pay to borrow. This offset to a degree the impact of market fears about the country’s economy which had obliged the government to pay significantly higher rates to secure the money it needed to keep operating. As a result of this programme, the countries participating received interest from Greece on the bonds they had purchased.

It was this money that they agreed to return under the 2012 bailout deal. When Alexis Tsipras swept to power in 2015 and rejected a proposed deal to extend the bailout, Eurozone finance ministers agreed to freeze these payments, having returned €4.3 billion relating to the debt buyup and a separate programme known as ANFA. The withholding of this money, according to Christopher Dembik, an economist at Saxo Bank, serves as a “kind of punishment” combined with a “means to pressure” Greece to fulfill its bailout obligations.

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What Greece moves close to the US.

Turkey Says Doesn’t Want Greece To Become ‘Safe Haven’ For Coup Plotters (R.)

Turkish Foreign Minister Mevlut Cavusoglu urged Greece on Tuesday to not become a “safe haven” for plotters of last year’s coup attempt, citing the 995 people who have applied for asylum since the failed putsch. Speaking at a joint news conference with his Greek counterpart, Nikos Kotzias, Cavusoglu said asylum seekers needed to be evaluated to determine those linked to the network of U.S.-based cleric Fethullah Gulen, blamed by Turkey for masterminding the putsch. “We would not want our neighbor Greece, with whom we are improving our ties, to be a safe haven for Gulenists. We believe these applications will be evaluated meticulously and that traitors will not be given credit,” Cavusoglu said.

Responding to Cavusoglu’s comments, Kotzias said the decisions on asylum seekers were made by the Greek judiciary and had to be respected even if “it doesn’t please some”. Relations between Turkey and Greece were further strained in May after a Greek court ruled to not extradite eight Turkish soldiers who fled to Greece following last year’s coup attempt. Turkey alleges the men, who fled to Greece in a military helicopter as the July coup unfolded, were involved in efforts to overthrow President Tayyip Erdogan and has repeatedly demanded they be sent back. Greek courts have blocked two extradition requests by Ankara, drawing an angry rebuke from Turkey and highlighting the tense relations between the NATO allies, who remain at odds over issues from territorial disputes to ethnically split Cyprus.

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Lies, threats and ghostwriting.

Monsanto Faces Blowback Over Cancer Cover-Up (Spiegel)

Some companies’ reputations are so poor that the public already has low expectations when it comes to their ethics and business practices. That doesn’t make it any less shocking when the accusations against them are confirmed in black and white. Agricultural chemicals giant Monsanto is under fire because the company’s herbicide, Roundup (active ingredient: glyphosate), is suspected of being carcinogenic. Permission to sell the chemical in the European Union expires on December 15 with member states set to decide on Wednesday whether to renew it for another 10 years. And now, the longstanding dispute about glyphosate has been brought to a head by the release of explosive documents. Monsanto’s strategies for whitewashing glyphosate have been revealed in internal e-mails, presentations and memos.

Even worse, these “Monsanto Papers” suggest that the company doesn’t even seem to know whether Roundup is harmless to people’s health. “You cannot say that Roundup is not a carcinogen,” Monsanto toxicologist Donna Farmer wrote in one of the emails. “We have not done the necessary testing on the formulation to make that statement.” The email, sent on Nov. 22, 2003, is one of more than 100 documents that a court in the United States ordered Monsanto to provide as evidence after about 2,000 plaintiffs demanded compensation from Monsanto in class-action suits. They claim that Roundup has caused non-Hodgkin’s lymphoma, a form of lymph node cancer, in them or members of their family.

The documents suggest the company concealed risks, making their publication a disaster for the company. The matter is also likely to be a topic of discussion at Bayer, the German chemical company in the process of acquiring Monsanto. “The Monsanto Papers tell an alarming story of ghostwriting, scientific manipulation and the withholding of information,” says Michael Baum, a partner in the law firm of Baum, Hedlund, Aristei & Goldman, which is bringing one of the US class actions. According to Baum, Monsanto used the same strategies as the tobacco industry: “creating doubt, attacking people, doing ghostwriting.”

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First of multiple steps. The European Commission has totally different ideas.

EU Parliament Votes To Ban Controversial Weedkiller Glyphosate By 2022 (AFP)

The European Parliament Tuesday called for the controversial weedkiller glyphosate to be banned by 2022 amid fears it causes cancer, a day before EU states vote on whether to renew its licence. MEPs approved a resolution which is not binding but will add fresh pressure on the European Commission, the bloc’s executive arm, which has recommended the licence for the herbicide be renewed for 10 years. Glyphosate critics, led by environmental campaigners Greenpeace, are calling for an outright ban in Europe and on Monday activists handed the EU a petition signed by more than 1.3 million people backing such a move.

Experts from the EU’s 28 member states are due to vote on the commission recommendation on Wednesday, just as a row escalates over claims that US agro giant Monsanto unduly influenced research into its weedkiller’s safety. MEPs criticised the commission’s proposal, saying it “fails to ensure a high level of protection of both human and animal health and the environment (and) fails to apply the precautionary principle”. They called for a halt to non-professional use of glyphosate when its licence runs out in December 15 and for its use to end near public parks and playgrounds. Opponents of glyphosate, used in Monsanto’s best-selling herbicide Roundup, point to a 2015 study by the World Health Organization’s (WHO) International Agency for Research on Cancer that concluded it was “probably carcinogenic”.

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Madrid better be careful.

Spain’s Government Prepared To ‘Discipline Disobedient Catalans’ (CNBC)

Spain’s central government is prepared to discipline Catalan citizens who chose to disobey direct rule from Madrid, the Spanish government’s official representative in Catalonia told CNBC. “The Spanish government is going to have the responsibility of taking decisions of a disciplinary nature if there is a rejection, by any functionaries, of any of the orders that they receive,” Enric Millo told CNBC on Monday, according to a translation. Prime Minister Mariano Rajoy invoked unprecedented constitutional powers on Saturday, vowing to curtail some of the freedoms of Catalonia’s parliament, sack some of its political players and force regional elections within six months. A vote in the national Senate to implement this direct rule is scheduled for Friday.

In response, the far-left CUP party — a key supporter of Catalonia’s pro-independence minority government in the regional parliament — described Madrid’s actions as an aggression against all Catalans. The secessionist group also urged Catalan citizens to engage in “massive civil disobedience.” Millo said he was hopeful the “large majority” of public servants based in the northeast of Spain would resist calls from separatist leaders to disobey the constitution. However, when he was asked what preparations had been made for those who ignored Madrid’s direct rule, Millo said that it would be the politicians who had decided to break with “democratic legality” that would be dealt with first. “These people will resign … And therefore, although they may not agree, they will not have any type of responsibility, validity, nor any type of authorization in any institutional decision. They will be left without any responsibilities,” he said.

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Colonialism 2.0

US Military Is Conducting Secret Missions All Over Africa (Vice)

U.S. troops are now conducting 3,500 exercises, programs, and engagements per year, an average of nearly 10 missions per day, on the African continent, according to the U.S. military’s top commander for Africa, General Thomas Waldhauser. The latest numbers, which the Pentagon confirmed to VICE News, represent a dramatic increase in U.S. military activity throughout Africa in the past decade, and the latest signal of America’s deepening and complicated ties on the continent. With the White House and the Pentagon facing questions about an Oct. 4 ambush in Niger in which four U.S. Special Forces soldiers were killed, Secretary of Defense James Mattis reportedly indicated to two senior members of the Senate Armed Services Committee Friday that these numbers are only likely to increase as the U.S. military shifts even greater attention to counterterrorism in Africa.

“You’re going to see more actions in Africa, not less,” said Sen. Lindsey Graham after the briefing. “You’re going to see more aggression by the United States toward our enemies, not less; you’re going to have decisions being made not in the White House but out in the field.” But the U.S. military has already seen significant action in Africa, where its growth has been sudden and explosive. When U.S. Africa Command, the umbrella organization for U.S. military operations on the continent, first became operational in 2008, it inherited 172 missions, activities, programs, and exercises from other combatant commands. Five years in, that number shot up to 546. Today’s figure of 3,500 marks an astounding 1,900 percent increase since the command was activated less than a decade ago, and suggests a major expansion of U.S. military activities on the African continent.

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But…

Yes, The US Leads All Countries In Reducing Carbon Emissions (Rapier)

Last week, in an interview with Fox News, Environmental Protection Agency Administrator Scott Pruitt claimed: “We are leading the nation – excuse me – the world with respect to our CO2 footprint in reductions.” The Washington Post fact-checked this claim and rated it “Three Pinocchios,” which means they rate the claim mostly false. They further wrote that Pruitt’s usage of data appeared to be a “deliberate effort to mislead the public.” I agree that this is a nuanced issue, but the data mostly support Pruitt’s claim. According to the 2017 BP Statistical Review of World Energy, since 2005 annual U.S. carbon dioxide emissions have declined by 758 million metric tons. That is by far the largest decline of any country in the world over that timespan and is nearly as large as the 770 million metric ton decline for the entire EU.

By comparison, the second largest decline during that period was registered by the United Kingdom, which reported a 170 million metric ton decline. At the same time, China’s carbon dioxide emissions grew by 3 billion metric tons, and India’s grew by 1 billion metric tons. Thus, I don’t think it’s the least bit misleading to claim that the U.S. is leading the world in reducing carbon dioxide emissions. The Washington Post gets into per capita emissions, and indeed despite the decline, U.S. per capita emissions are still among the highest in the world. However, the Washington Post story claimed: “The United States may have had the largest decrease in carbon emissions, but it is still the largest per capita emitter.” That’s not accurate either. According to World Bank data, U.S. per capita carbon dioxide emissions rank 11th among countries.

So, we are not the largest per capita emitter, but we do emit 2.2 times as much on a per capita basis as China. But, China has 4.3 times as many people, and that matters from an overall emissions perspective. China’s lower per capita carbon dioxide emissions are more than offset by its greater population, so China emits over 70% more carbon dioxide annually than the U.S. The story quoted Pruitt a second time: “We have reduced our CO2 footprint by over 18%, almost 20%, from 2000 to 2014.” The Post also disputes this claim, citing EPA numbers that stated “energy-related CO2 emissions” have fallen by 7.5% since 2000. I am not sure why anyone is using numbers from 2000, as U.S. carbon dioxide emissions continued to rise until 2005. That’s when they began to fall.

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Can’t say that makes me feel happy.

Global Wine Output Hits 50-Year Low (AFP)

Worldwide wine production tumbled 8.2% this year to hit a 50-year low due to unfavourable climate conditions, the International Organisation of Vine and Wine (OIV) said Tuesday. The total output of 246.7 million hectolitres was due in large part to steep drops in the top three wine producing countries: Italy, France and Spain. “This drop is consecutive to climate hazards, which affected the main producing countries, particularly in Europe,” said the Paris-based OIV, an intergovernmental organisation that provides scientific and technical advice on vines and wine. In Italy production slumped 23% to 39.3 mhl, while in France the drop was 19% to 36.7 mhl. Production in Spain fell 15% to 33.5 mhl.

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Symbol of all our troubles as a species.

Ancient Amazon Tribe Vow To Defend Their Territory Against Mining (AFP)

They appear silently, seemingly from nowhere: a dozen figures, naked except for bright red loincloths, blocking the dirt road. These are the Waiapi, an ancient tribe living in Brazil’s Amazon rainforest but now fearing invasion by international mining companies. Leading AFP reporters to a tiny settlement of palm-thatched huts hidden in foliage, the tribesmen streaked in red and black dye vow to defend their territory. They brandish six-foot (two-meter) bows and arrows to reinforce the point. “We’ll keep fighting,” says Tapayona Waiapi, 36, in the settlement called Pinoty. “When the companies come we’ll keep resisting. If the Brazilian government sends soldiers to kill people, we’ll keep resisting until the last of us is dead.”

The Waiapi indigenous reserve is in pristine rainforest near the eastern end of the Amazon river. It is part of a much larger conservation zone called Renca, covering an area the size of Switzerland. Surrounded by rivers and towering trees, the tribe operates almost entirely according to its own laws, with a way of life at times closer to the Stone Age than the 21st century. Yet modern Brazil is barely a few hours’ drive away. And now the center-right government is pushing to open Renca to international mining companies who covet the rich deposits of gold and other metals hidden under the sea of green.

Read more …

Oct 142017
 
 October 14, 2017  Posted by at 9:12 am Finance Tagged with: , , , , , , , , ,  


Georgia O’Keeffe Manhattan 1932

 

Central Bankers Use Moment of Calm to Debate How to Fight the Next Crisis (DJ)
BOJ’s Kuroda Says No Signs Of Excesses Building In Markets (R.)
What Keeps Poor Americans From Moving (Atlantic)
Prepare for a Chinese Maxi-Devaluation (Rickards)
The Cost of Missing the Market Boom Is Skyrocketing (BBG)
Are You Better Off Than You Were 17 Years Ago? (CH Smith)
As Crisis At Kobe Steel Deepens, CEO Says Cheating Engulfs 500 Firms (R.)
Worse Than Big Tobacco: How Big Pharma Fuels the Opioid Epidemic (Parramore)
Tesla Fired Hundreds Of Employees In Past Week (R.)
No-Deal Brexit: It’s Already Too Late (FCFT)
‘They Have To Pay’, EU’s Juncker Says Of Britain (R.)
EU Intervention In Catalonia Would Cause Chaos – Juncker (G.)
Blade Runner 2049: Not The Future (Kunstler)

 

 

This really is the firefighter setting his own house on fire so he can play the hero. There’s often talk of central bankers taking away the punch bowl, but we need to take away the punch bowl from them. Urgently.

Central Bankers Use Moment of Calm to Debate How to Fight the Next Crisis (DJ)

Central bankers, basking in a moment of synchronized growth and a global economy less dependent on easy-money policies, are thinking about what they will do when the next economic meltdown happens. ECB President Mario Draghi said Thursday that central banks might need to reuse some of the weapons employed to fight the last war, most notably negative interest rates. Federal Reserve and ECB officials, who are gathered in Washington for the fall meetings of the IMF and World Bank, are using a tranquil period to debate the type of monetary policies central banks might pursue. The world’s two most influential central banks signaled no shifts in strategy – in the Fed’s case, to raise rates gradually and shrink its bond portfolio, and in the ECB’s, to announce a slowdown of its bond-purchase program as soon as its next policy meeting on Oct. 26.

But while current policies are stepping away from the bond-purchase programs known as quantitative easing, central bankers are opening the door for a future that could include more negative interest rates and periods of higher inflation following recession. The discussions are still largely hypothetical. Ever since the global financial crisis of 2007-09, central bankers have wished for more moments when they could gather in calm and openly spitball monetary policy ideas without the risk of derailing recovery. That moment has finally arrived. Mr. Draghi said that negative interest rates, an untested policy for the ECB until 2014, had been a success, and that the decision to push the ECB’s target rate into negative territory hadn’t hurt bank profitability as critics suggested it would.

“We haven’t seen the distortions that people were foreseeing,” Mr. Draghi said at the Peterson Institute for International Economics in Washington. “We haven’t seen bank profitability going down; in fact, it is going up.” Mr. Draghi reiterated that the ECB would maintain its negative target rate “well past” the time it steps back from its bond-purchase program, underscoring growing comfort in the negative-rate strategy. And while Mr. Draghi endorsed negative rates, current and former Fed officials engaged in an unusually open discussion about changing the target for 2% inflation. That discussion was kicked off by former Federal Reserve Chairman Ben Bernanke, who presented a paper Thursday morning at the Peterson Institute arguing the Fed could overshoot its target for 2% inflation to make up for periods of recession in which inflation ran too low.

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And this is just pure insanity.

BOJ’s Kuroda Says No Signs Of Excesses Building In Markets (R.)

Bank of Japan Governor Haruhiko Kuroda said on Friday he did not see any signs of bubbles or excesses building up in U.S., European and Japanese markets as a result of heavy money printing by their central banks. Kuroda also dismissed some analysts’ criticism that the BOJ’s purchases of exchange-traded funds (ETF) were distorting financial markets or dominating Japan’s stock market. “I don’t think we have a very big share” of Japan’s total stock market capitalisation, he told reporters after attending the Group of 20 finance leaders’ gathering. The IMF painted a rosy picture of the global economy in its World Economic Outlook earlier this week, but warned that prolonged easy monetary policy could be sowing the seeds of excessive risk-taking.

Kuroda said that while policymakers should not be complacent about their economies, he did not see huge risks materializing as a result of their policies. Although major central banks deployed massive stimulus programmes to battle the global financial crisis, they have always scrutinized whether their policies were causing excessive risk-taking, he said. “I don’t think we’re seeing excesses building up and emerging as a big risk,” Kuroda said, adding that recent rises in global stock prices reflected strong corporate profits in Japan, the United States and Europe. He added that Japan’s economy was on track for a steady recovery that will likely gradually push up inflation and wages. “I don’t see any big risk for Japan’s economy. But there could be external risks, such as geopolitical ones, so we’re watching developments carefully,” he said.

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Bubbles shape (distort) the space around them. It’s like a miniature version of Einstein’s gravitational waves.

What Keeps Poor Americans From Moving (Atlantic)

Seccora Jaimes knows that she is not living in the land of opportunity. Her hometown has one of the highest unemployment rates in the nation, at 9.1%. Jaimes, 34, recently got laid off from the beauty school where she taught cosmetology, and hasn’t yet found another job. Her daughter, 17, wants the family to move to Los Angeles, so that she can attend one of the nation’s top police academies. Jaimes’s husband, who works in warehousing, would make much more money in Los Angeles, she told me. But one thing is stopping them: The cost of housing. “I don’t know if we could find a place out there that’s reasonable for us, that we could start any job and be okay,” she told me. Indeed, the average rent for a two-bedroom apartment in Merced, in California’s Central Valley, is $750. In Los Angeles, it’s $2,710.

America used to be a place where moving one’s family and one’s life in search of greater opportunities was common. During the Gold Rush, the Depression, and the postwar expansion West millions of Americans left their hometowns for places where they could earn more and provide a better life for their children. But mobility has fallen in recent years. While 3.6% of the population moved to a different state between 1952 and 1953, that number had fallen to 2.7% between 1992 and 1993, and to 1.5% between 2015 and 2016. (The share of people who move at all, even within the same county, has fallen too, from 20% in 1947 to 11.2% today.) Of course, it wasn’t simply “moving” that mattered—it was that they moved to specific areas that were growing.

When farming jobs were plentiful in the Midwest, for example, people moved there—in 1900, states including Iowa and Missouri were more populous than California. Black men who moved from to the North from the South earned at least 100% more than those who stayed, according to work by Leah Platt Boustan, an economist at Princeton. Additionally, for most of the 20th century, both janitors and lawyers could earn a lot more living in the tri-state area of New York, New Jersey, and Connecticut than they could living in the Deep South, so many people moved, according to Peter Ganong, an economist at the University of Chicago. With less labor supply in the regions that they left, wages would then increase there, and fall in the regions they were moving to, as the supply of workers increased.

As a result, for more than 100 years, the average incomes of different regions were getting closer and closer together, something economists call regional income convergence. Wages in poorer cities were growing 1.4% faster than wages in richer cities for much of the 20th century, according to Elisa Giannnone, a post-doctoral fellow at Princeton. But over the past 30 years, that regional income convergence has slowed. Economists say that is happening because net migration—the tendency of large numbers of people to move to a specific place—is waning, meaning that the supply of workers isn’t increasing fast enough in the rich areas to bring wages down, and isn’t falling fast enough in the poor areas to bring wages up.

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Well argued.

Prepare for a Chinese Maxi-Devaluation (Rickards)

In August 2015, China engineered a sudden shock devaluation of the yuan. The dollar gained 3% against the yuan in two days as China devalued. The results were disastrous. U.S. stocks fell 11% in a few weeks. There was a real threat of global financial contagion and a full-blown liquidity crisis. A crisis was averted by Fed jawboning, and a decision to put off the “liftoff” in U.S. interest rates from September 2015 to the following December. China conducted another devaluation from November to December 2015. This time China did not execute a sneak attack, but did the devaluation in baby steps. This was stealth devaluation. The results were just as disastrous as the prior August. U.S. stocks fell 11% from January 1, 2016 to February 10. 2016. Again, a greater crisis was averted only by a Fed decision to delay planned U.S. interest rate hikes in March and June 2016. The impact these two prior devaluations had on the exchange rate is shown in the chart below.


Major moves in the dollar/yuan cross exchange rate (USD/CNY) have had powerful impacts on global markets. The August 2015 surprise yuan devaluation sent U.S. stocks reeling. Another slower devaluation did the same in early 2016. A stronger yuan in 2017 coincided with the Trump stock rally. A new devaluation is now underway and U.S. stocks may suffer again.

[..] China escaped the impossible trinity in 2015 by devaluing their currency. China escaped the impossible trinity again in 2017 using a hat trick of partially closing the capital account, raising interest rates, and allowing the yuan to appreciate against the dollar thereby breaking the exchange rate peg. The problem for China is that these solutions are all non-sustainable. China cannot keep the capital account closed without damaging badly needed capital inflows. Who will invest in China if you can’t get your money out? China also cannot maintain high interest rates because the interest costs will bankrupt insolvent state owned enterprises and lead to an increase in unemployment, which is socially destabilizing. China cannot maintain a strong yuan because that damages exports, hurts export-related jobs, and causes deflation to be imported through lower import prices. An artificially inflated currency also drains the foreign exchange reserves needed to maintain the peg.

[..] Both Trump and Xi are readying a “gloves off” approach to a trade war and renewed currency war. A maxi-devaluation of the yuan is Xi’s most potent weapon. Finally, China’s internal contradictions are catching up with it. China has to confront an insolvent banking system, a real estate bubble, and a $1 trillion wealth management product Ponzi scheme that is starting to fall apart. A much weaker yuan would give China some policy space in terms of using its reserves to paper over some of these problems. Less dramatic devaluations of the yuan led to U.S. stock market crashes. What does a new maxi-devaluation portend for U.S. stocks?

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See my article yesterday: The Curious Case of Missing the Market Boom .

The Cost of Missing the Market Boom Is Skyrocketing (BBG)

Skepticism in global equity markets is getting expensive. From Japan to Brazil and the U.S. as well as places like Greece and Ukraine, an epic year in equities is defying naysayers and rewarding anyone who staked a claim on corporate ownership. Records are falling, with about a quarter of national equity benchmarks at or within 2% of an all-time high. “You’ve heard people being bearish for eight years. They were wrong,” said Jeffrey Saut, chief investment strategist at St. Petersburg, Florida-based Raymond James Financial Inc., which oversees $500 billion. “The proof is in the returns.” To put this year’s gains in perspective, the value of global equities is now 3 1/2 times that at the financial crisis bottom in March 2009.

Aided by an 8% drop in the U.S. currency, the dollar-denominated capitalization of worldwide shares appreciated in 2017 by an amount – $20 trillion – that is comparable to the total value of all equities nine years ago. And yet skeptics still abound, pointing to stretched valuations or policy uncertainty from Washington to Brussels. Those concerns are nothing new, but heeding to them is proving an especially costly mistake. Clinging to such concerns means discounting a harmonized recovery in the global economy that’s virtually without precedent — and set to pick up steam, according to the IMF. At the same time, inflation remains tepid, enabling major central banks to maintain accommodative stances. “When policy is easy and growth is strong, this is an environment more conducive for people paying up for valuations,” said Andrew Sheets, chief cross-asset strategist at Morgan Stanley.

“The markets are up in line with what the earnings have done, and stronger earnings helped drive a higher level of enthusiasm and a higher level of risk taking.” The numbers are impressive: more than 85% of the 95 benchmark indexes tracked by Bloomberg worldwide are up this year, on course for the broadest gain since the bull market started. Emerging markets have surged 31%, developed nations are up 16%. Big companies are becoming huge, from Apple to Alibaba. Technology megacaps occupy all top six spots in the ranks of the world’s largest companies by market capitalization for the first time ever. Up 39% this year, the $1 trillion those firms added in value equals the combined worth of the world’s six-biggest companies at the bear market bottom in 2009. Apple, priced at $810 billion, is good for the total value of the 400 smallest companies in the S&P 500.

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“If we define “winning the war” by counting dead bodies, then the dead bodies pile up like cordwood.”

Are You Better Off Than You Were 17 Years Ago? (CH Smith)

If we use GDP as a broad measure of prosperity, we are 160% better off than we were in 1980 and 35% better off than we were in 2000. Other common metrics such as per capita (per person) income and total household wealth reflect similarly hefty gains. But are we really 35% better off than we were 17 years ago, or 160% better off than we were 37 years ago? Or do these statistics mask a pervasive erosion in our well-being? As I explained in my book Why Our Status Quo Failed and Is Beyond Reform, we optimize what we measure, meaning that once a metric and benchmark have been selected as meaningful, we strive to manage that metric to get the desired result. Optimizing what we measure has all sorts of perverse consequences. If we define “winning the war” by counting dead bodies, then the dead bodies pile up like cordwood.

If we define “health” as low cholesterol levels, then we pass statins out like candy. If test scores define “a good education,” then we teach to the tests. We tend to measure what’s easily measured (and supports the status quo) and ignore what isn’t easily measured (and calls the status quo into question). So we measure GDP, household wealth, median incomes, longevity, the number of students graduating with college diplomas, and so on, because all of these metrics are straightforward. We don’t measure well-being, our sense of security, our faith in a better future (i.e. hope), experiential knowledge that’s relevant to adapting to fast-changing circumstances, the social cohesion of our communities and similar difficult-to-quantify relationships. Relationships, well-being and internal states of awareness are not units of measurement.

While GDP has soared since 1980, many people feel that life has become much worse, not much better: many people feel less financially secure, more pressured at work, more stressed by not-enough-time-in-the-day, less healthy and less wealthy, regardless of their dollar-denominated “wealth.” Many people recall that a single paycheck could support an entire household in 1980, something that is no longer true for all but the most highly paid workers who also live in locales with a modest cost of living.

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How on earth is it possible these people still have jobs?

As Crisis At Kobe Steel Deepens, CEO Says Cheating Engulfs 500 Firms (R.)

The cheating crisis engulfing Kobe Steel just got bigger. Chief Executive Hiroya Kawasaki on Friday revealed that about 500 companies had received its falsely certified products, more than double its earlier count, confirming widespread wrongdoing at the steelmaker that has sent a chill along global supply chains. The scale of the misconduct at Japan’s third-largest steelmaker pummeled its shares as investors, worried about the financial impact and legal fallout, wiped about $1.8 billion off its market value this week. As the company revealed tampering of more products, the crisis has rippled through supply chains across the world in a body blow to Japan’s reputation as a high-quality manufacturing destination. A contrite Kawasaki told a briefing the firm plans to pay customers’ costs for any affected products.

“There has been no specific requests, but we are prepared to shoulder such costs after consultations,” he said, adding the products with tampered documentation account for about 4% of the sales in the affected businesses. Yoshihiko Katsukawa, a managing executive officer, told reporters that 500 companies were now known to be affected by the tampering. Kobe Steel initially said 200 firms were affected when it admitted at the weekend it had falsified data about the quality of aluminum and copper products used in cars, aircraft, space rockets and defense equipment. Asked if he plans to step down, Kawasaki said: “My biggest task right now is to help our customers make safety checks and to craft prevention measures.”

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“The manufacturers can now exploit their monopoly positions, created by the patents, by marketing their drugs for conditions for which they never got regulatory approval.”

Worse Than Big Tobacco: How Big Pharma Fuels the Opioid Epidemic (Parramore)

Once again, an out-of-control industry is threatening public health on a mammoth scale Over a 40-year career, Philadelphia attorney Daniel Berger has obtained millions in settlements for investors and consumers hurt by a rogues’ gallery of corporate wrongdoers, from Exxon to R.J. Reynolds Tobacco. But when it comes to what America’s prescription drug makers have done to drive one of the ghastliest addiction crises in the country’s history, he confesses amazement. “I used to think that there was nothing more reprehensible than what the tobacco industry did in suppressing what it knew about the adverse effects of an addictive and dangerous product,” says Berger. “But I was wrong. The drug makers are worse than Big Tobacco.”

The U.S. prescription drug industry has opened a new frontier in public havoc, manipulating markets and deceptively marketing opioid drugs that are known to addict and even kill. It’s a national emergency that claims 90 lives per day. Berger lays much of the blame at the feet of companies that have played every dirty trick imaginable to convince doctors to overprescribe medication that can transform fresh-faced teens and mild-mannered adults into zombified junkies. So how have they gotten away with it? The prescription drug industry is a strange beast, born of perverse thinking about markets and economics, explains Berger. In a normal market, you shop around to find the best price and quality on something you want or need—a toaster, a new car. Businesses then compete to supply what you’re looking for.

You’ve got choices: If the price is too high, you refuse to buy, or you wait until the market offers something better. It’s the supposed beauty of supply and demand. But the prescription drug “market” operates nothing like that. Drug makers game the patent and regulatory systems to create monopolies over every single one of their products. Berger explains that when drug makers get patent approval for brand-name pharmaceuticals, the patents create market exclusivity for those products—protecting them from competition from both generics and brand-name drugs that treat the same condition. The manufacturers can now exploit their monopoly positions, created by the patents, by marketing their drugs for conditions for which they never got regulatory approval. This dramatically increases sales. They can also charge very high prices because if you’re in pain or dying, you’ll pay virtually anything.

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How much longer?

Tesla Fired Hundreds Of Employees In Past Week (R.)

Luxury electric vehicle maker Tesla fired about 400 employees this week, including associates, team leaders and supervisors, a former employee told Reuters on Friday. The dismissals were a result of a company-wide annual review, Tesla said in an emailed statement, without confirming the number of employees leaving the company. “It’s about 400 people ranging from associates to team leaders to supervisors. We don’t know how high up it went,” said the former employee, who worked on the assembly line and did not want to be identified.

Though Tesla cited performance as the reason for the firings, the source told Reuters he was fired in spite of never having been given a bad review. The Palo Alto, California-based company said earlier in the month that “production bottlenecks” had left Tesla behind its planned ramp-up for the new Model 3 mass-market sedan. The company delivered 220 Model 3 sedans and produced 260 during the third quarter. In July, it began production of the Model 3, which starts at $35,000 – half the starting price of the Model S. Mercury News had earlier reported about the firing of hundreds of employees by Tesla in the past week.

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Behind closed doors, the EU is already talking to Jeremy Corbyn. But that’s too late too.

No-Deal Brexit: It’s Already Too Late (FCFT)

As things stand at the moment, eighteen months from now the UK will leave the EU without any agreement on trade regulation or tariffs, either with the EU or any of the other countries with which it currently has trade agreements. The arrangements which assure the smooth running of 60 percent of our goods trade will disappear. Once we are outside the regulatory framework, many products, particularly in highly regulated areas like agriculture and pharmaceuticals, will no longer be accredited for sale in Europe. Aeroplanes will be unable to fly to and from the EU to the UK. Those goods which can still legally be traded with the EU will face lengthy customs checks. Integrated supply chains and just-in-time manufacturing processes will be severely disrupted and, in some cases, damaged beyond repair. Unless politicians do something, that’s where we are heading.

International trade and commerce doesn’t just happen. It is facilitated by a framework of agreements on tariffs, quotas and regulations. Without these, trade is either very expensive or, in some cases, simply illegal. Therefore, if the UK were to leave the EU without concluding a trade deal, things wouldn’t simply stay the same. They would be very different and very damaging. Of course, it would be disruptive for the rest of the EU too, although it is much easier to find new suppliers and customers in a bloc of 27 countries than it is in a stand alone country with no trade deals. Even so, most of us have assumed that common sense will prevail at some point. No-one in their right mind would let such a thing happen so surely both sides will do what is necessary to between now and March 2019 to avoid it.

Incredibly, though, our government, egged on by ideologues on its own back benches, has been talking up the prospect of a no-deal Brexit, apparently as a negotiating ploy to make the EU realise that we are serious about walking away. Almost as soon as the no-deal idea was suggested, Phillip Hammond said that he was not willing to set aside any money to fund it. In any organisation, that’s a sure-fire sign of a project that’s going nowhere. If the finance director won’t even stump up the cash for the planning phase, you might as well forget the whole thing. Mr Hammond said that he would wait until “the very last moment” before committing any money to prepare for a no-deal scenario. Which means it’s not going to happen because the very last moment passed some time ago, most probably before we even had the referendum.

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“They have to pay, they have to pay, not in an impossible way.”

‘They Have To Pay’, EU’s Juncker Says Of Britain (R.)

Britain must commit to paying what it owes to the European Union before talks can begin about a future relationship with the bloc after Brexit, European Commission President Jean-Claude Juncker said on Friday. “The British are discovering, as we are, day after day new problems. That’s the reason why this process will take longer than initially thought,” Juncker said in a speech to students in his native Luxembourg. “We cannot find for the time being a real compromise as far as the remaining financial commitments of the UK are concerned. As we are not able to do this we will not be able to say in the European Council in October that now we can move to the second phase of negotiations,” Juncker said. “They have to pay, they have to pay, not in an impossible way. I‘m not in a revenge mood. I‘m not hating the British.” The EU has told Britain that a summit next week will conclude that insufficient progress has been made in talks for Brussels to open negotiations on a future trade deal.

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Summary: EU countries can use whatever force they want against their European citizens. Because anything else would threaten Brussels.

EU Intervention In Catalonia Would Cause Chaos – Juncker (G.)

The president of the European commission has spoken of his regret at Spain’s failure to follow his advice and do more to head off the crisis in Catalonia, but claimed that any EU intervention on the issue now would only cause “a lot more chaos”. Speaking to students in Luxembourg on Friday, Jean-Claude Juncker said he had told the Spanish prime minister, Mariano Rajoy, that his government needed to act to stop the Catalan situation spinning out of control, but that the advice had gone unheeded. “For some time now I asked the Spanish prime minister to take initiatives so that Catalonia wouldn’t run amok,” he said. “A lot of things were not done.” Juncker said that while he wished to see Europe remain united, his hands were tied when it came to Catalan independence.

“People have to undertake their responsibility,” he said. “I would like to explain why the commission doesn’t get involved in that. A lot of people say: ‘Juncker should get involved in that.’ “We do not do it because if we do … it will create a lot more chaos in the EU. We cannot do anything. We cannot get involved in that.” Juncker said that while he often acted as a negotiator and facilitator between member states, the commission could not mediate if calls to do so came only from one side – in this case, the Catalan government. Rajoy has rejected calls for mediation, pointing out that the recent Catalan independence referendum was held in defiance of the Spanish constitution and the country’s constitutional court. “There is no possible mediation between democratic law and disobedience or illegality,” he said on Wednesday.

Despite his refusal to intervene, however, Juncker warned the international community that the political crisis in Spain could not be ignored. “OK, nobody is shooting anyone in Catalonia – not yet at least. But we shouldn’t understate that matter, though,” he added. he commission president also spoke more generally about the fragmentation of national identities within Europe, saying he feared that if Catalonia became independent, other regions would follow. “I am very concerned because the life in communities seems to be so difficult,” he said. “Everybody tries to find their own in their own way and they think that their identity cannot live in parallel to other people’s identity. “But if you allow – and it is not up to us of course – but if Catalonia is to become independent, other people will do the same. I don’t like that. I don’t like to have a euro in 15 years that will be 100 different states. It is difficult enough with 17 states. With many more states it will be impossible.”

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“The people who deliver that way of life, and profit from it, are every bit as sincerely wishful about it as the underpaid and overfed schnooks moiling in the discount aisles. ”

Blade Runner 2049: Not The Future (Kunstler)

The original Mad Max was little more than an extended car chase — though apparently all that people remember about it is the desolate desert landscape and Mel Gibson’s leather jumpsuit. As the series wore on, both the vehicles and the staged chases became more spectacularly grandiose, until, in the latest edition, the movie was solely about Charlize Theron driving a truck. I always wondered where Mel got new air filters and radiator hoses, not to mention where he gassed up. In a world that broken, of course, there would be no supply and manufacturing chains. So, of course, Blade Runner 2049 opens with a shot of the detective played by Ryan Gosling in his flying car, zooming over a landscape that looks more like a computer motherboard than actual earthly terrain.

As the movie goes on, he gets in and out of his flying car more often than a San Fernando soccer mom on her daily rounds. That actually tells us something more significant than all the grim monotone trappings of the production design, namely, that we can’t imagine any kind of future — or any human society for that matter — that is not centered on cars. But isn’t that exactly why we’ve invested so much hope and expectation (and public subsidies) in the activities of Elon Musk? After all, the Master Wish in this culture of wishful thinking is the wish to be able to keep driving to Wal Mart forever. It’s the ultimate fantasy of a shallow “consumer” society. The people who deliver that way of life, and profit from it, are every bit as sincerely wishful about it as the underpaid and overfed schnooks moiling in the discount aisles.

In the dark corners of so-called postmodern mythology, there really is no human life, or human future, without cars. This points to the central fallacy of this Sci-fi genre: that technology can defeat nature and still exist. This is where our techno-narcissism comes in fast and furious. The Blade Runner movies take place in and around a Los Angeles filled with mega-structures pulsating with holographic advertisements. Where does the energy come from to construct all this stuff? Supposedly from something Mr. Musk dreams up that we haven’t heard about yet. Frankly, I don’t believe that such a miracle is in the offing.

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Sep 252017
 
 September 25, 2017  Posted by at 9:19 am Finance Tagged with: , , , , , , , , ,  


Pablo Picasso Portrait of the artist’s mother 1896

 

Colin Kaepernick Has Won: He Wanted A Conversation And Trump Started It (G.)
The World Can’t Stop Borrowing Dollars (BBG)
What’s Around The Corner For The Hottest Emerging Markets (BBG)
China Plans Closer Oversight of $304 Billion in State Company Funds (BBG)
China’s Yuan Is Anything But Stable as Party Congress Approaches (BBG)
US Households Are Loaded Up With Stocks (Lyons)
Merkel Lands Fourth Term, But at What Cost? (Spiegel)
Angela’s Ashes: 5 Takeaways From The German Election (Pol.)
German Vote Could Doom Merkel-Macron Deal On Europe (R.)
German FinMin Wolfgang Schaeuble May Soon Be Losing His Job (CNBC)
Luxury Properties On Greek Islands Attract Ever More Foreign Buyers (K.)
There Never Was a Real Tulip Fever (Smithsonian)

 

 

Apparently, players never stood for the anthem until 2009. Then the Defense Department started paying teams to get them out of the dressing room and onto the field when the anthem was played. A recruiting tool.

But Kaepernick is a brave man no matter what. Trump should invite him to the White House and talk.

Colin Kaepernick Has Won: He Wanted A Conversation And Trump Started It (G.)

All Colin Kaepernick ever asked was for his country to have a conversation about race. This, he warned, would not be easy. Such talks are awkward and often end in a flurry of spittle, pointed fingers and bruised feelings. But from the moment the former San Francisco 49ers quarterback first spoke about his decision to kneel or sit during the national anthem, he said was willing to give up his career to make the nation talk. In one speech on Friday night, Donald Trump gave Kaepernick exactly what he wanted. With a fiery blast at protesting NFL players that seemingly came from nowhere, the president bonded black and white football players with wealthy white owners in a way nobody could have imagined. By saying any player who didn’t stand for the anthem was a “son of a bitch” and should be fired by his team’s owner, Trump crossed a line from which no one could look away.

Come Sunday afternoon, players who wanted nothing of a racial dialogue stood before giant flags, linking arms in protest. Owners who once wished their kneeling players would just stop offending fans fired off statements in their support. Networks who have avoided showing the raised fists of dissent had no choice but show the rows of players standing strong against Trump’s rage. Whether anyone wanted it or not, Trump has forced the US to have the conversation Kaepernick has been requesting. [..] “I think this is something that can unify this country,” Kaepernick said in the summer of 2016, at his first press conference about his protest. “If we can have the real conversations that are uncomfortable for a lot of people – if we can have this conversation there’s a better understanding where both sides are coming from. (And) if we can reach common ground and can understand what everyone’s going through, we can really affect change.”

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Why the dollar’s demise is greatly exaggerated.

The World Can’t Stop Borrowing Dollars (BBG)

Companies and governments around the world can’t seem to stop borrowing U.S. dollars. This could be a problem, both for them and for the Federal Reserve. Not long ago, it seemed as though a global boom in dollar borrowing had to be reaching its limit. Encouraged by near-zero interest rates, non-U.S. borrowers had binged on trillions in new dollar-denominated debt. With the central bank aiming to increase rates and the U.S. currency rising, strains were beginning to show, as companies struggled to pay back the dollars with devalued local-currency earnings. Yet the party keeps going, perhaps thanks to the Fed’s extremely gradual pace of rate increases and a related decline in the dollar’s exchange rate. According to the Bank for International Settlements, total dollar borrowing outside the U.S. reached $10.7 trillion in the first quarter of 2017, up about 6% from a year earlier and up 83% from 2009. Here’s how that looks as a%age of non-U.S. GDP:

About a third of the debt is owed by companies and governments in emerging markets, where the relatively high volatility of earnings and exchange rates can make dollar borrowing particularly risky. Here’s the dollar-denominated debt of the countries that the BIS tracks, as a%age of their GDP:

To be sure, some of the debt might not be too burdensome if borrowers have a lot of dollar revenue from, say, oil exports (think Russia and Saudi Arabia). But to the extent that the obligations aren’t hedged, they will make the world more sensitive to the Fed’s interest-rate moves. And if future rate increases trigger belt-tightening and defaults abroad, the malaise could easily spread back to the U.S., complicating the Fed’s efforts to keep growth on track. So the world is becoming increasingly exposed to the Fed, which leaves the Fed increasingly exposed to the world.

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What’s around the corner is more debt. Dollar-denominated debt.

What’s Around The Corner For The Hottest Emerging Markets (BBG)

Nothing has been able to silence the roar of emerging markets this year, be it Kim Jong-Un’s missiles, President Donald Trump’s protectionist rhetoric or a host of domestic political ructions from Brazil to South Africa and Turkey. Instead, investors have focused on economies supported by slowing inflation, a recent recovery in commodity prices and the comfort of watching central banks conducting policy by more conventional methods than their developed-nation counterparts. The MSCI EM Currency Index and the Bloomberg Barclays index of emerging-market local-currency government bonds both reached three-year highs this month, while a gauge of developing-nation equities is close to its highest since 2011. And now that the Federal Reserve has laid out a tapering game plan likely to drive down longer-maturity U.S. Treasuries, the bulls are taking new heart, betting the rally’s just getting started.

For others, it’s getting perilously near to closing time. “We all enjoyed the party, but this may be its last leg and there maybe more volatility in the year-end,” said Peter Schottmueller, the head of asset allocation at Deka Investment GmbH in Frankfurt, who helps manage the equivalent of $7.8 billion. “The market is very myopic and very short-term focused.’’ Corporate borrowing has outstripped economic growth over the five years through 2016, according to the Bank for International Settlements. That’s raised questions about how long it can continue as central banks in developed nations prepare to pare back quantitative easing, according to Toru Nishihama, at Tokyo-based Dai-ichi Life Research.

Emerging economies expanded 4.4% in 2016, almost half of the rate of a decade ago, when the Fed was in its last year of a cycle of interest-rate increases. “There remains a gap between the growth rate of emerging economies and developed countries as well as returns from investment, and investors will continue to pour funds into emerging markets,” Dai-ichi’s Nishihama said. “However, from here, not all emerging-market investments are rosy, and investors may become more selective in which country or countries to invest.”

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“China will create a centralized financing company..” Yes, but to oversee assets, or to oversee debt, liabilities?

China Plans Closer Oversight of $304 Billion in State Company Funds (BBG)

China will create a centralized financing company to oversee some $304 billion of funds held by the country’s state-owned enterprises’ finance units, people familiar with the matter said, allowing the government closer supervision of SOEs’ borrowing and investments. The plan, approved by the State Council or Cabinet, will increase the government’s ability to supervise the non-financial central SOE finance companies’ investments, giving the entity a fuller picture of how these companies are using funds, according to the people, who asked not to be named because the plans have not been made public. Non-financial, central SOEs have their own finance units that currently offer various products and services such as deposits and loans, and the new entity could facilitate those efforts.

The plan would assist regulators by directing some 2 trillion yuan of funds held by the non-financial SOEs through the new company, meaning they could monitor the flow through only one financing company rather than dozens. Many details about the new entity were not immediately clear, such as who would control it, how much regulatory and oversight authority it would have, and how it might conduct external financing on behalf of the SOEs. The aim is to boost efficiency in the $20 trillion state sector in line with a government campaign to reduce the companies’ debt, according to the people. While the centralized finance company would have a regulatory oversight role, the SOEs would retain control over the funds, the people said.

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Not the plan.

China’s Yuan Is Anything But Stable as Party Congress Approaches (BBG)

China’s currency has swung from hot to cold in a matter of weeks, thwarting expectations that policy makers would keep the yuan stable before a crucial Communist Party Congress next month. The yuan fell 0.3% to 6.6075 per greenback at 2:29 p.m. in Shanghai, taking its decline from a Sept. 8 peak to 2.6%. That’s a sharp reversal from earlier this month, when the currency surged 1.5% in just six days. The stunning shift has propelled a gauge of 50-day price swings on the yuan to a six-month high. With China’s financial markets closed for the whole of next week due to National Day holidays, there are effectively just over two weeks of trading to go before the congress begins Oct. 18.

The turning point for the currency came when the PBOC eased a forwards trading rule that made betting against the currency more expensive – a clear signal that the surge had gone far enough. A mild recovery in the greenback thanks to a more hawkish Federal Reserve – the Bloomberg Dollar Spot Index is up 1.2% since Sept. 8. – has hastened the yuan’s decline. “Investors were too optimistic earlier, and they are now pushing the yuan lower because they figured the policy makers believed the currency was too strong,” said Eddie Cheung at Standard Chartered in Hong Kong. “There’s still room for the dollar to rise in the short term if the market becomes more confident on U.S. rate hikes. That said, the yuan could weaken further this year, though the PBOC wouldn’t allow any sharp declines.”

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Hmm, really? With so many people living paycheck to paycheck?

US Households Are Loaded Up With Stocks (Lyons)

From the Federal Reserve’s latest Z.1 Release (formerly, Flow Of Funds), we learn that in the 2nd quarter, household and nonprofit’s stock holdings amounted to 35.7% of their total financial assets. This is the highest%age since 2000. In fact, the blow-off phase from 1998 to 2000 leading up to the dotcom bubble burst was the only time in the history of the data (since 1945) that saw higher stock investment than now. You might say that everyone is in the pool. We’ve talked about this data series many times. It is certainly not a timing tool. Rather, it is what we call a “background” indicator, representative of the longer-term backdrop — and potential — of the stock market.

It also serves as an instructional lens into investor psychology. For these reasons, it is one of our favorite metrics pertaining to the stock market, as we wrote in a September 2014 post: “This is one of our favorite data series because it reveals a lot about not only investment levels but investor psychology as well. When investors have had positive recent experiences in the stock market, i.e., a bull market, they have been happy to pour money into stocks. It is consistent with all of the evidence of performance-chasing pointed out by many. Note how stock investment peaked with major tops in 1966, 1968, 1972, 2000 and 2007. Of course, investment will rise merely with the appreciation of the market; however, we also observe disproportionate jumps in investment levels near tops as well.

Note the spikes at the 1968 and 1972 tops and, most egregiously, at the 2000 top. On the flip side, when investors have bad recent experiences with stocks, it negatively effects investment flows, and in a more profound way than the positive effect. This is consistent with the scientifically proven notion we’ve discussed before that feelings of fear or loss are much stronger than those of greed or gain. Stock investment during he 1966-82 secular bear market provides a good example of this. After stock investment peaked at 31% in 1968 (by the way, after many of the indexes had topped in 1966 – investors were still buying the dip), it embarked on steady decline over the next 14 years. This, despite the fact the stock market drifted sideways during that time. By the beginning of the secular bull market in 1982, the S&P 500 was right where it was in 1968. However, household stock investment was at an all-time low of 10.9%.

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She won but lost. What happens here is the future of Europe is decided by German voters alone. That is the core of the European problem.

Merkel Lands Fourth Term, But at What Cost? (Spiegel)

Angela Merkel’s election result four years ago was, to be sure, extraordinary. It was clear from the surveys that her conservatives wouldn’t be able to repeat it. But a fall like this? Merkel’s Christian Democratic Union (CDU) and its Bavarian sister party Christian Social Union (CSU) saw their joint result fall by more than eight%age points – their worst showing since 1949. During her first appearance after the election at her party’s headquarters, the chancellor said she had, in fact, hoped for a somewhat better result. Those gathered at the headquarters dutifully chanted, “Angie, Angie.” Then things grew quiet again. Nobody waved the German flag. It was a far cry from 2013, when CDU politicians broke out into a spontaneous karaoke session after the results were announced. This time, the prominent members of Merkel’s party who had gathered behind her on the stage seemed sobered by the tepid showing.

Merkel can keep her job as chancellor, the “strategic goal” has been achieved, as Merkel refers to it. But it comes at a high price. Voters have severely punished the parties of the current governing coalition, with Merkel’s conservatives losing dozens of seats in parliament. The right-wing populist Alternative for Germany (AfD) will now enter parliament with a strong, double-digit result. And it will be extremely difficult for Merkel to build a government coalition that will be stable for the next four years. There won’t just be a sprinkling of renegades representing the AfD in parliament. The right-wing populists will be the third-largest party in the Bundestag and they have announced their intention to “chase down” the chancellor as one of the party’s two leading candidates expressed it on Sunday.

The election campaign already gave a taste of what might be coming, with AfD supporters loudly venting their hatred and anger at events held by Merkel’s CDU. Merkel, who isn’t known for being the world’s best public speaker, will now be confronted by them on a daily basis. And the conservatives will also have to ask themselves what share of the responsibility they carry for the AfD’s success. What can they do to win back disappointed voters? More than a million voters are believed to have flocked from the CDU and the CSU to the AfD. And most of them say that it was the chancellor’s refugee policies that led them to vote for the right-wing competition. It’s little wonder, then, that Merkel has identified the enduring regulation of refugee flows and domestic security as the key topics for the coming years.

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I went for the headline. But good insights too.

Angela’s Ashes: 5 Takeaways From The German Election (Pol.)

1. Merkel’s twilight has begun SPD leader Martin Schulz told Merkel on live television she was the election’s “biggest loser.” A bit harsh perhaps (especially coming from a candidate who just recorded his party’s worst-ever result), but there’s some truth to it. Instead of addressing tough questions such as migration head-on, Merkel ran a vague, feel-good campaign, promising a “Germany in which we live well and happily,” while offering few specifics about how she wanted to get there.

2. Germany’s consensus-driven political model is shattered The next parliament will include seven parties (eight, if you count the CSU, the Bavarian sister party to Merkel’s CDU), representing a much more diverse cross-section of the country’s body politic than its predecessor. Sparks will fly. The inclusion of the far right in parliament will make German politics louder and nastier. AfD leader Jörg Meuthen made it clear Sunday that confrontation and “provocation” were central to the party’s strategy. If other European countries where populists have a strong foothold are any indication, that no-holds-barred spirit will infect the political mainstream, creating a decidedly more raucous political climate.

3. Forget about meaningful eurozone reforms Merkel’s conservatives were skeptical of French President Emmanuel Macron’s reform proposals even before Sunday. A grand coalition represented the French president’s best chance for realizing his vision. With that option now off the table, a weakened Merkel is unlikely to be able win over the Free Democrats and skeptics in her own party, even if she wanted to. France and Germany may agree to establish some form of budget and an oversight position for the eurozone with the title of finance minister, but neither will have the scope the French, not to mention many economists, had been hoping for.

4. Berlin will play hardball with Europe on refugees German patience over Europe’s lack of solidarity on the refugee front was already wearing thin. After Sunday’s result, look for outright confrontation with countries like Poland and Hungary. In the view of many Christian Democrats, the AfD would have never gotten this far if other European countries had taken in their fair share of refugees instead of letting Germany bear the burden. It’s payback time.

5. This isn’t Weimar For all the breathless historical comparisons, it’s worth taking a deep breath and remembering Germany is a stable democracy. The vast majority of Germans didn’t vote for the AfD and most of those who did, did so in protest. The coming years won’t be pretty, but Germany’s democratic foundations are robust enough to withstand the populist onslaught.

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Not could, will. Already has.

German Vote Could Doom Merkel-Macron Deal On Europe (R.)

Weakened by the worst result for her party since 1949 and facing a more fractious political landscape at home, Germany’s Angela Merkel could be forced to rein in plans to re-shape Europe together with France’s Emmanuel Macron. Merkel’s conservatives garnered more support than any other party in the German election on Sunday, projections showed, ensuring that she will return for a fourth term as chancellor. But her party appeared on track for its poorest performance since the first German election after World War Two and its only path to power may be through an unwieldy, untested three-way coalition with the ecologist Greens and liberal Free Democrats (FDP), fierce critics of Macron’s ideas for Europe.

Over the next four years, Merkel will also have to cope with a more confrontational opposition force in the Alternative for Germany (AfD), a eurosceptic, anti-immigration party that rode a wave of public anger after her decision to open Germany’s borders to hundreds of thousands of migrants in 2015.[..] This will be a new world for Merkel, who has grown accustomed to cozy coalitions and toothless Bundestag opposition during her 12 years in power. “In my mind, reform of the euro zone is the single most important foreign policy issue that the new government has in front of it,” said Thomas Kleine-Brockhoff, who runs the Berlin office of the German Marshall Fund. But he predicted a so-called “Jamaica” coalition between Merkel’s conservatives, the FDP and the Greens – whose combined party colors of black, yellow and green are like those the Jamaican national flag – would struggle to deliver.

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Party in the streets of Athens.

German FinMin Wolfgang Schaeuble May Soon Be Losing His Job (CNBC)

In the aftermath of the German election, there could be one important casualty for markets. Wolfgang Schaeuble, the German Finance minister, could soon lose his influence on Germany and the euro zone if coalition talks remove him from his key ministry. Schaeuble became the face of austerity and had a determinant role in bailout programs across the euro zone, namely Greece, and is often described as Chancellor Angela Merkel’s co-chancellor, given his importance to the German government. However, given the tough political horse-trading that lies ahead, Merkel might not manage to keep her close ally. “Coalition building will be extremely difficult,” Carsten Brzeski, chief economist at ING, told CNBC Monday via email.

“If Schauble would really no longer be Finance minister it would be a watershed for the entire euro zone. An exit of one of the main characters of the entire euro zone crisis clearly marks the end of a historical chapter,” he said. Merkel’s center-right CDU and its Bavarian sister-party the CSU won 33% of the vote, provisional votes showed, down from 41.5% in the previous election. The pro-business FDP party, which placed fourth with 10.7% of the votes, has said it is open for coalition talks with Merkel’s CDU. The Greens are set to join coalition talks too, which could ultimately form Germany’s first four-party government in decades. In German politics, it’s usually the case that the largest party chooses the chancellor, and the second largest group picks the next post.

As such, the FDP could opt for the Finance Ministry and put an end to Schaeuble’s eight-year reign. The future for Schaeuble is “the question” from a market perspective, Carsten Nickel, managing director at Teneo Intelligence, told CNBC Monday. “In the end, I think there is probably very little alternative to Schaeuble, right now, at least in terms of individual politicians. There’s nobody who really comes to mind as the key person who would challenge him for that role. I wouldn’t be surprised if he stays on in the end,” he said. f Germany were to lose Schaeuble as Finance minister, the current momentum for further euro zone integration could also be damaged.

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The firesale continues unabated. Prices were cut in half over the last decade, even in the high end. Greeks won’t own anything in their own country anymore.

Luxury Properties On Greek Islands Attract Ever More Foreign Buyers (K.)

The rise of tourism and the popularity of certain destinations such as Myconos and Santorini have sent demand for and purchases of luxury holidays homes soaring. The first half of the year saw a 63.5% annual increase in the inflow of capital for property buys in Greece, following a 45.3% rise in the entire 2016 year-on-year to reach 270 million euros. Another factor boosting investments in holiday homes grow is the considerable decline in prices – averaging at 50% – compared to the period before the financial crisis, around 2008. The drop mainly took place from 2009 to 2013, as this section of the property market has become stable since then with some growth signs mainly regarding properties that have unique features and are regarded as emblematic.

Several foreigner buyers are scrambling to complete their acquisitions within the year, sensing that the window of opportunity may shut in the coming months, as there already are cases of owners who are raising their asking prices in view of the spike in demand. Franceska Kalamara, the head of the Franceska Properties estate agency that is active in the Myconos market, tells Kathimerini that “the buyers from abroad are interested in sizable and luxurious properties, from 400 square meters upward, and at very favorable locations, as close to the sea as possible. These are mostly individuals from Egypt, Lebanon and Israel, but also from the US, while there has recently been particular activity by Cypriot buyers.”

Among the recent well-known buyers of luxurious homes on Greek islands are Israeli entrepreneur Teddy Sagi (owner of Camden Market in London) who bought a series of properties on Myconos, according to estate agency sources, and Egyptian businessman Naguib Sawiris, buyer of two villas on the same island costing a total of some 11 million euros. It should be noted that the actual volume of the funds invested in the Greek holiday home market is far greater than reported by the Bank of Greece, as the majority of sellers ask buyers to deposit the money in bank accounts abroad. This trend has grown considerably since the imposition of capital controls two years ago.

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But we like the story! Don’t take our modern mythology away.

There Never Was a Real Tulip Fever (Smithsonian)

According to popular legend, the tulip craze took hold of all levels of Dutch society in the 1630s. “The rage among the Dutch to possess them was so great that the ordinary industry of the country was neglected, and the population, even to its lowest dregs, embarked in the tulip trade,” wrote Scottish journalist Charles Mackay in his popular 1841 work Extraordinary Popular Delusions and the Madness of Crowds. According to this narrative, everyone from the wealthiest merchants to the poorest chimney sweeps jumped into the tulip fray, buying bulbs at high prices and selling them for even more. Companies formed just to deal with the tulip trade, which reached a fever pitch in late 1636. But by February 1637, the bottom fell out of the market.

More and more people defaulted on their agreement to buy the tulips at the prices they’d promised, and the traders who had already made their payments were left in debt or bankrupted. At least that’s what has always been claimed. In fact, “There weren’t that many people involved and the economic repercussions were pretty minor,” Goldgar says. “I couldn’t find anybody that went bankrupt. If there had been really a wholesale destruction of the economy as the myth suggests, that would’ve been a much harder thing to face.” That’s not to say that everything about the story is wrong; merchants really did engage in a frantic tulip trade, and they paid incredibly high prices for some bulbs. And when a number of buyers announced they couldn’t pay the high price previously agreed upon, the market did fall apart and cause a small crisis—but only because it undermined social expectations.

“In this case it was very difficult to deal with the fact that almost all of your relationships are based on trust, and people said, ‘I don’t care that I said I’m going to buy this thing, I don’t want it anymore and I’m not going to pay for it.’ There was really no mechanism to make people pay because the courts were unwilling to get involved,” Goldgar says. But the trade didn’t affect all levels of society, and it didn’t cause the collapse of industry in Amsterdam and elsewhere. As Garber, the economist, writes, “While the lack of data precludes a solid conclusion, the results of the study indicate that the bulb speculation was not obvious madness.” [..] All the outlandish stories of economic ruin, of an innocent sailor thrown in prison for eating a tulip bulb, of chimney sweeps wading into the market in hopes of striking it rich—those come from propaganda pamphlets published by Dutch Calvinists worried that the tulip-propelled consumerism boom would lead to societal decay.

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Sep 132017
 
 September 13, 2017  Posted by at 9:18 am Finance Tagged with: , , , , , , , , , ,  


Sergio Larraín Valparaiso Chile 1963

 

Greece Property Value Review A Hard Task (K.)
Creditors Set To Increase Pressure On Athens (K.)
US Threatens To Cut Off China From SWIFT If It Violates North Korea Sanctions (ZH)
Yuan Fixing Takes Center Stage, Again (BBG)
Cryptocurrency Chaos As China Cracks Down On ICOs (R.)
JPMorgan’s Dimon Says Bitcoin ‘Is A Fraud’ (R.)
America’s Fiscal Doomsday Machine (Stockman)
IMF Is Resisting A Moratorium On Barbuda’s Sovereign Debt Repayments (Ind.)
UK’s High Street Banks Are Accident Waiting To Happen (G.)
We Must Repeal The Authorization For The Use Of Military Force (Rand Paul)
Democrats Fought For 25 Years Over Single-Payer. Now Many Back Sanders (Sirota)
China Plans Nationwide Use Of Ethanol Gasoline By 2020 (R.)
Capitalism Can’t Save The Planet – It Can Only Destroy It (Monbiot)

 

 

As EU President Juncker this morning unveils his vision of more Europe all the time, here’s what Europe is really like:

42% of Greek mortgage loans are non-performing. Today’s sale prices are 70-80% lower than in 2008. And that’s before 200-300,000 homes will be forced onto the market this fall.

Greece Property Value Review A Hard Task (K.)

The government is facing a daunting task in adjusting the so-called objective values (the property rates used for tax purposes) to market levels by the end of the year, as its bailout agreement dictates. The huge slump in transactions and the forced sales of properties due to their owners’ debts do not lead to any safe conclusions for the values per area. One in four sales are conducted with prices that lag the objective value by 60-70%, and the prices of 2008 by 70-80%. The Finance Ministry must overcome all the obstacles to bring to Parliament all the necessary adjustments and regulations.

Moreover, once the objective values are brought in line with market rates, the government will have to maintain the same amount of revenues from the Single Property Tax (ENFIA) either by raising the tax’s rates or by introducing a new tax in the form of the old Large Property Tax. Furthermore, once the objective values are reduced by 40-50% to match the going prices, banks’ may see problems with their capital adequacy, as lenders will incur losses by having to revise the collateral they get. Mortgage loans in Greece amount to €59.44 billion, of which 42%, or €25.4 billion are nonperforming.

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Forget about more Europe, or you’ll wind up with a whole lot less Europe.

Creditors Set To Increase Pressure On Athens (K.)

Technical experts representing the country’s creditors started visiting the country’s ministries in Athens on Monday, paving the way for the third bailout review, which has long ceased to be viewed as a simple matter and is increasingly burdened with problems. Pressure for a satisfactory conclusion to the review will grow with the planned visit on September 25 of Eurogroup chief Jeroen Dijsselbloem, who will meet with Greek Finance Minister Euclid Tsakalotos. Responding to a question by Kathimerini, Dijsselbloem’s spokesman said that the head of the Eurogroup will discuss eurozone issues and certainly the progress of the adjustment program. Government officials estimate that the discussion on the course of the review and the Greek program may be combined with the expiry of Dijsselbloem’s mandate at the Eurogroup chair at year-end.

The Dutch minister – whose last visit in Athens and his meeting with his counterpart at the time, Yanis Varoufakis, was quite eventful – would obviously like to leave on a positive note in regards to the Greek program. It has been rumored that he may seek another office in the eurozone. Sources from Brussels also say that the top European Commission’s top representative, Declan Costello, will also be coming to Athens in the next few days. In addition to the main cluster of 113 prior actions, of which 95 should be implemented by year-end, the creditors have expressed their objections and doubts about recent legislative moves made by the government, such as the labor law passed last Thursday.

Sources say that the creditors have also expressed concerns about clauses related to the reduced value-added tax on agricultural supplies, the opening up of closed professions, as well as the civil service. A large number of the 95 prior actions the government must implement in record time have a high degree of difficulty, and government officials believe this may require revisions on family benefits, the operation of the sell-off hyperfund and its subsidiaries, the opening up of the energy market, etc.

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How would the US pay for all the shiny trinkets?

US Threatens To Cut Off China From SWIFT If It Violates North Korea Sanctions (ZH)

In an unexpectedly strong diplomatic escalation, one day after China agreed to vote alongside the US (and Russia) during Monday’s United National Security Council vote in passing the watered down North Korea sanctions, the US warned that if China were to violate or fail to comply with the newly imposed sanctions against Kim’s regime, it could cut off Beijing’s access to both the US financial system as well as the “international dollar system.” Speaking at CNBC’s Delivering Alpha conference on Tuesday, Steven Mnuchin said that China had agreed to “historic” North Korean sanctions during Monday’s United Nations vote. “We worked very closely with the U.N. I’m very pleased with the resolution that was just passed. This is some of the strongest items. We now have more tools in our toolbox, and we will continue to use them and put additional sanctions on North Korea until they stop this behavior.”

In response, Andrew Ross Sorkin countered that “we haven’t been able to move the needle on China, which seems to be the real mover on this, in terms of being able to apply the real pressure. What do you think the issue is? What is the problem?” The stunner was revealed in Mnuchin’s answer: “I think we have absolutely moved the needle on China. I think what they agreed to yesterday was historic. I’d also say I put sanctions on a major Chinese bank.That’s the first time that’s ever been done. And if China doesn’t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the U.S. and international dollar system. And that’s quite meaningful.”

And to underscore his point, the Treasury Secretary also said that “in North Korea, economic warfare works. I made it clear that the President was strongly considering and we sent a message that anybody that wanted to trade with North Korea, we would consider them not trading with us. We can put on economic sanctions to stop people trading.” In other words, to force compliance with the North Korean sanctions, Mnuchin threatened Beijing with not only trade war, but also a lock out from the dollar system, i.e. SWIFT, something the US did back in 2014 and 2015 when it blocked off several Russian banks as relations between the US and Russia imploded. Of course, whether the US would be willing to go so far as to use the nuclear option, and pull the dollar plug on its biggest trade partner, in the process immediately unleashing an economic depression domestically and globally is a different matter.

So far Washington has been reluctant to impose economic sanctions on China over concerns of possible retaliatory measures from Beijing and the potentially catastrophic consequences for the global economy. Washington runs a $350 billion annual trade deficit with Beijing, while the PBOC also holds over $1 trillion in US debt. Ironically, the biggest hurdle to the implementation of the just passed sanctions may be the president himself. “We think it’s just another very small step, not a big deal,” Trump told reporters at the start of a meeting with Malaysian Prime Minister Najib Razak. “I don’t know if it has any impact, but certainly it was nice to get a 15-to-nothing vote, but those sanctions are nothing compared to what ultimately will have to happen,” said Trump who has vowed not to allow North Korea to develop a nuclear ballistic missile capable of hitting the United States.

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Xi demands peace for the Party Congress. Brokerages have been told: no holidays during Congress.

Yuan Fixing Takes Center Stage, Again (BBG)

China’s yuan fixing is back in focus, with a run of surprises moving the market in recent days. The central bank set its reference rate – which limits onshore moves to 2% on either side – at a weaker than expected level for the third day in a row Wednesday. The rates, and the removal of a reserve requirement rule on the trading of foreign-exchange forwards, are fueling bets that authorities want to limit gains after the onshore yuan surged more than 4% against the dollar in the three months through Sept. 7. The People’s Bank of China set Wednesday’s fixing at 6.5382 per dollar, compared with the average forecast of 6.5355 in a Bloomberg survey of 19 traders and analysts. The authorities have had greater opportunity to sway the fixing either way since May, with the introduction of a “counter-cyclical factor” to the rate-setting mechanism.

“The PBOC still wants a relatively stable yuan,” said Nathan Chow at DBS. “Even if it strengthens or weakens, the pace needs to be controlled, and in an orderly and gradual manner. This will be easier for exporters to manage risks. The market expectation is that there should be no big changes or surprises before the party congress next month.” The yuan’s rally began to falter on Friday as the removal of the reserve rule made it less expensive to bet on yuan declines. The monetary authority weakened Tuesday’s fixing by the most in eight months following an overnight surge in a gauge of the greenback, pushing the onshore spot rate lower.

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“There are a lot of companies raising a lot of money for not very good ideas..”

Cryptocurrency Chaos As China Cracks Down On ICOs (R.)

China’s move last week to ban initial coin offerings (ICO) has caused chaos among start-ups looking to raise money through the novel fund-raising scheme, prompting halts, about-turns and re-thinks. China is cracking down on fundraising through launches of token-based digital currencies, targeting ICOs in a market that has ballooned this year in what has been a bonanza for digital currency entrepreneurs. The boom has fueled a jump in the value of cryptocurrencies, but raised fears of a potential bubble. “This is not unlike the dotcom bubble of 2000,” said a partner at a venture capital fund in Shanghai, who didn’t want to be named because of the issue’s sensitivity. “There are a lot of companies raising a lot of money for not very good ideas, and these will eventually be weeded out. But even from the big dotcom bust, you still have gems.”

“One of the reasons regulators stepped in was that the ICO fever extended beyond the traditional crypto community. The timing was an attempt to pre-empt this before it goes into a much broader mass market in China,” the partner said. Investors in China contributed up to 2.6 billion yuan ($394 million) worth of cryptocurrencies through ICOs in January-June, according to a state-run media report citing National Committee of Experts on Internet Financial Security Technology data. Pre-ICO roadshows featuring elaborate standing room-only presentations at 5-star hotels drew a diverse crowd, including grandmothers – a likely tipping point for regulators. The hype and subsequent crackdown came as China focuses on economic and social stability ahead of next month’s congress of the Communist Party, a once-in-five-years event.

Beijing is also waging a broader campaign against fraudulent fundraising and speculative investment, which analysts attribute to China’s underdeveloped financial regulation and lack of legitimate investment options. While several start-ups said the exuberance had got out of control and they had expected Beijing to act, they said last week’s move panicked investors and caused confusion.

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Worse than tulip bulbs.

JPMorgan’s Dimon Says Bitcoin ‘Is A Fraud’ (R.)

Bitcoin “is a fraud” and will blow up, Jamie Dimon, chief executive of JPMorgan Chase, said on Tuesday. Speaking at a bank investor conference in New York, Dimon said, “The currency isn’t going to work. You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart.” Dimon said that if any JPMorgan traders were trading the crypto-currency, “I would fire them in a second, for two reasons: It is against our rules and they are stupid, and both are dangerous.” Dimon’s comments come as the bitcoin, a virtual currency not backed by any government, has more than quadrupled in value since December to more than $4,100.

[..] “It is worse than tulips bulbs,” Dimon said, referring to a famous market bubble from the 1600s. JPMorgan and many of its competitors, however, have invested millions of dollars in blockchain, the technology that tracks bitcoin transactions. Blockchain is a shared ledger of transactions maintained by a network of computers on the internet. Dimon said such uses will roll out over coming years as it is adapted to different business lines. Financial institutions are hoping blockchain can be adapted to simplify and lower the costs of processes such as securities settlement, loan trading and international money transfers. Dimon predicted big losses for bitcoin buyers. “Don’t ask me to short it. It could be at $20,000 before this happens, but it will eventually blow up.” he said.

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From Reagan’s Budget Director.

America’s Fiscal Doomsday Machine (Stockman)

Maybe the Democrats did win the 2016 election. Or at least the the Deep State and its accomplices among the beltway political class, K-Street lobbies and the media did. That’s because the media won a giant victory against something they deplore and despise more than anything else — the public debt ceiling. They sanctimoniously admonish that it’s a relic of the nation’s fiscally benighted past. They operate on a belief that this is an episodic tendency to threaten America’s credit and to offer Capitol Hill an opening to grandstand about the fiscal verities is a blight on orderly governance. So the Donald’s latest burst of impetuosity — agreeing with Sen. Schumer to permanently abolish the public debt ceiling — has descended on the beltway like manna from heaven.

Not Barack Obama, Bill Clinton, Jimmy Carter or even the Great Texas Porker, Lyndon Johnson, dared to utter the thought of it — at least not in polite company. Suddenly, and notwithstanding all the good he has done disrupting the status quo, the Donald has become the foremost enemy of America’s very financial survival. The Federal budget is a Fiscal Doomsday Machine. The depository of American wars and entitlements have run rampant. Under the pile drivers of a global empire and the retiring baby boom, it is rapidly propelling the nation toward fiscal catastrophe. That grim outcome is virtually guaranteed if the only remaining safety brake — the debt ceiling — is summarily abolished. Due to entitlements, debt service and the slow pipeline of appropriated spending there is no such thing as an annual Federal budget or accountability for how much Uncle Sam spends and borrows.

Instead, the $4.1 trillion that Congressional Budget Office (CBO) projects the Federal government will spend in FY 2018, and the $563 billion it will borrow, reflects the dead hand of the past. Entitlements and other mandatory spending alone is projected to reach $2.566 trillion or 63% of total FY 2018 outlays. Another $307 billion will be required for interest on the nation’s $20 trillion public debt, while upwards of half the $1.22 trillion for so-called “discretionary” or appropriated programs also reflects funds appropriated years ago. Altogether, $3.5 trillion, or 85% of outlays, will be essentially baked into the cake before a single Congressional vote is taken on anything regarding the FY 2018 budget.

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They just want to lend more.

IMF Is Resisting A Moratorium On Barbuda’s Sovereign Debt Repayments (Ind.)

The IMF is resisting putting a moratorium on Barbuda’s sovereign debt repayments in the wake of the devastation left by Hurricane Irma on the tiny Caribbean island. Barbuda is said to have lost around 90% of its structures in the wake of the storm and the national repair and reconstruction bill has been estimated at $150m. The prime minister of Antigua and Barbuda, Gaston Browne, has also said that around half or the island’s population of 1,600 is now homeless. Yet Antigua and Barbuda have debt with the IMF of around $15.8m and a coalition of US faith institutions have been calling on the Fund to pause the repayments of states battered by the hurricane. However, the IMF’s special representative to the UN, Christopher Lane, reportedly suggested late last week that the Fund would rather lend more money to the island, rather than stop collecting the repayments due.

“Our general view is that we’d rather put new money in than to have moratoria,” he said, according to Court House News. Stressing that were technical and political difficulties in simply stopping the debt collection he said: “We borrow money from our members who lend. So we’d have to get agreement from the lending parties.” “We might borrow money from the United States and loan that to Antigua. If we don’t get paid back on time, we’d have to make an arrangement with the source of the funds themselves. It gets a bit arcane, but there’s a number of constraints on how we operate. We’re like a bank. We borrow and lend.”

In a letter to the IMF managing director Christine Lagarde on 7 September the Jubilee USA network wrote: “We invite the IMF to implement an immediate moratorium on debt payments for countries severely impacted by the Category 5 storm until they have rebuilt and recovered.” “For example, the nation of Antigua and Barbuda has almost $3m in debt payments due to the Fund today and a debt payment moratorium could immediately be put into rebuilding Barbuda where almost the entire population is homeless.” The group also urged that further IMF reconstruction payments to Barbuda, and other affected islands, should be in the form of grants, rather than loans.

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All major banks are.

UK’s High Street Banks Are Accident Waiting To Happen (G.)

The UK’s high street banks are an accident waiting to happen and could struggle in another financial crisis, according to a report published on Wednesday to mark the 10th anniversary of the run on Northern Rock. The report criticises the annual health checks – stress tests – that have been conducted by the Bank of England since the crisis and concludes that the methodology used by Threadneedle Street is flawed and the tests not gruelling enough. [..] Kevin Dowd, a professor of finance and economics at Durham University and a long-standing critic of the stress tests, said the Bank does not use the correct measures to assess the health of the banking system. Dowd is also a senior fellow at the Adam Smith Institute, a rightwing thinktank. His analysis – which the Bank of England has previously rejected – focuses on the health check of the major lenders published last November.

Those tests were based on a number of hypothetical scenarios including house prices falling and the global economy contracting by 1.9%. Royal Bank of Scotland failed the test and Barclays and Standard Chartered would both have struggled to cope. Dowd argued that the scenarios were “hardly doomsday” and disputes the way banks’ capital strength is measured. “The stress tests are about as useful as a cancer test that cannot detect cancer. They seek to demonstrate a financial resilience on the part of UK banks that simply isn’t there,” said Dowd in the report. “Our banking system is an accident waiting to happen.” The Bank uses the value of assets as calculated by the banks rather than their value on the markets which, he argued, would give a more accurate assessment of their financial health. “It is disturbing that 10 years on from Northern Rock, the best measures of leverage – those based on market values – indicate that UK banks are even more leveraged than they were then,” said Dowd.

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“American warfare in 7 different countries..”

We Must Repeal The Authorization For The Use Of Military Force (Rand Paul)

As Congress takes up the 2018 National Defense Authorization Act (NDAA), I will insist it vote on my amendment to sunset the 2001 and 2002 Authorizations for the Use of Military Force. Why? Because these authorizations to use military force are inappropriately being used to justify American warfare in 7 different countries. Sunsetting both AUMFs will force a debate on whether we continue the Afghanistan war, the Libya war, the Yemen war, the Syria war, and other interventions. Our military trains our soldiers to be focused and disciplined, yet the politicians who send them to fight have for years ignored those traits when developing our foreign policy. The result? Trillions spent in seemingly endless conflicts in every corner of the globe, while we find ourselves 16 years into the war in Afghanistan wondering what our purpose there even is any more, or if we’ll ever bring our troops home.

If we don’t get this rudderless foreign policy under control now, we’ll still be asking the same questions another 16 years down the road. It’s time to demand the policymakers take their own jobs as seriously as the men and women we ask to risk it all for our nation. Doing so means restoring constitutional checks and balances. Congress has no greater responsibility than defending our country, and the Founders entrusted it with the power of declaring war because they wanted such a weighty decision to be thoroughly debated by the legislature instead of unilaterally made by the Executive branch. Yet Congress has largely abdicated its role anyways, and its sidekick status was plainly evident when former President Obama proposed a new AUMF for the fight against ISIS while insisting he really had all the authority he needed – it being more of a “wouldn’t it be nice” afterthought than an acknowledgement of any required step.

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Not a lot of insight into what’s wrong with US Democrats.

Democrats Fought For 25 Years Over Single-Payer. Now Many Back Sanders (Sirota)

When U.S. Sen. Bernie Sanders’ introduces his Medicare-for-All legislation on Wednesday, advocates of a single-payer, government-sponsored health care hope it will be the end of a bitterly fought policy battle that has roiled the Democratic Party for generations. Since Democratic President Harry Truman first proposed a government-sponsored universal health care system in 1945 — and since a Democratic president and Democratic congress first enacted Medicare and Medicaid in the mid-1960s — progressives have hoped that the United States would follow other industrialized countries by guaranteeing health care to all citizens. Indeed, many of the original proponents of Medicare hoped the system would ultimately be expanded to cover the entire country — as former Social Security commissioner Robert Ball wrote, “We expected Medicare to be a first step toward universal national health insurance.”

And although the intervening years saw the rise of Republican President Ronald Reagan, who derided “socialized medicine,” some Democrats continued to champion the idea. The party’s 1992 presidential contender Jerry Brown ran for the White House promising to support single-payer. But when Bill Clinton defeated him and won the presidency, the Clinton administration opted to back health care reforms that preserved the existing private insurance system — even as Hillary Clinton made favorable comments about single-payer. A generation later, Barack Obama also retreated from single-payer, and instead pushed the Affordable Care Act, which subsidizes the private insurance system.

Now, things appear once again to be shifting. Even as Sanders has declared that his Medicare-for-All bill is not a litmus test, Democrats from across the party’s ideological spectrum are flocking to his legislation. On the progressive side, Democratic senators such as Elizabeth Warren (MA), Jeff Merkley (OR) and Al Franken (MN) have signed onto the legislation. Within the party establishment, former Vice President Al Gore has expressed support, as has conservative former Sen. Max Baucus — one of the architects of the Affordable Care Act whom single-payer advocates saw as a nemesis. With polls showing rising support for government-sponsored health care, the party’s long civil war over the issue may be over, potentially allowing a more unified party to campaign on Medicare-for-All in 2018.

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China has hardly enough land to feed its people.

China Plans Nationwide Use Of Ethanol Gasoline By 2020 (R.)

China plans to roll out the use of ethanol in gasoline nationally by 2020, state media reported on Wednesday citing a government document, as Beijing intensifies its push to boost industrial demand for corn and clean up choking smog. It’s the first time the government has set a targeted timeline for pushing the biofuel, known as E10 and containing 10% corn, across the world’s largest car market, although it has yet to announce a formal policy. Mandates requiring that a minimum amount of biofuel must be blended into fuel for the nation’s cars, similar to the United States and Brazil, are currently set at a provincial level. “This news has greatly boosted confidence inside the industry,” said Michael Mao, analyst with Sublime China Information, adding that without government support ethanol would likely be too expensive to survive in the market.

Shares in biofuel producers rallied on the news, with Shandong Longlive Bio-Technology Co surging 10%, on track for its biggest one-day gain since December 2015. Major producer COFCO Biochemical Anhui Co, a listed unit of state-owned grains trader COFCO, was up almost 6%. A renewed effort to promote the nation’s fledging biofuels industry will be a further blow to major oil producers. On Saturday, the government said it has begun studying when to ban the production and sale of cars using traditional fuels. The news comes after the government said late last year it would aim to double ethanol output by 2020 amid growing pressure to whittle down mountains of ageing corn in state warehouses.

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Some good points, but needs much more work.

Capitalism Can’t Save The Planet – It Can Only Destroy It (Monbiot)

There was “a flaw” in the theory: this is the famous admission by Alan Greenspan, the former chair of the Federal Reserve, to a congressional inquiry into the 2008 financial crisis. His belief that the self-interest of the lending institutions would lead automatically to the correction of financial markets had proved wrong. Now, in the midst of the environmental crisis, we await a similar admission. We may be waiting some time. For, as in Greenspan’s theory of the financial system, there cannot be a problem. The market is meant to be self-correcting: that’s what the theory says. As Milton Friedman, one of the architects of neoliberal ideology, put it: “Ecological values can find their natural space in the market, like any other consumer demand.” As long as environmental goods are correctly priced, neither planning nor regulation is required.

Any attempt by governments or citizens to change the likely course of events is unwarranted and misguided. But there’s a flaw. Hurricanes do not respond to market signals. The plastic fibres in our oceans, food and drinking water do not respond to market signals. Nor does the collapse of insect populations, or coral reefs, or the extirpation of orangutans from Borneo. The unregulated market is as powerless in the face of these forces as the people in Florida who resolved to fight Hurricane Irma by shooting it. It is the wrong tool, the wrong approach, the wrong system. There are two inherent problems with the pricing of the living world and its destruction. The first is that it depends on attaching a financial value to items – such as human life, species and ecosystems – that cannot be redeemed for money. The second is that it seeks to quantify events and processes that cannot be reliably predicted.

[..] A system that depends on growth can survive only if we progressively lose our ability to make reasoned decisions. After our needs, then strong desires, then faint desires have been met, we must keep buying goods and services we neither need nor want, induced by marketing to abandon our discriminating faculties, and to succumb instead to impulse. [..] Continued economic growth depends on continued disposal: unless we rapidly junk the goods we buy, it fails. The growth economy and the throwaway society cannot be separated. Environmental destruction is not a byproduct of this system: it is a necessary element.


Illustration: Sebastien Thibault

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Feb 082017
 
 February 8, 2017  Posted by at 9:21 am Finance Tagged with: , , , , , , , , , ,  


Dorothea Lange Rear window tenement dwelling, 133 Avenue D, NYC 1936

This Is How Out-Of-Whack US Trade Relationships Really Are (WS)
John Kelly, Homeland Security Chief, Says Travel Ban Rolled Out Too Quickly (WSJ)
Trump Travel Ban: Judges Skeptical About Arguments On Executive Order (G.)
‘Trump Makes Sense To A Grocery Store Owner’ – Taleb (Hindu)
Do Not Let Elliott Abrams Anywhere Near The State Department (Rand Paul)
EU Faces Crisis As IMF Warns Greek Debts Are On ‘Explosive’ Path (Tel.)
Greece’s Debt Costs Rise Sharply As Worries Grow Over IMF Role (G.)
Don’t Sell the Euro Short. It’s Here to Stay. (Eichengreen)
Money Is Pouring Out Of China, And The Government Can’t Stop It (R.)
China’s Reserves Approach Breaking Point As Another Devaluation Looms (BBG)
Russia Shows Why China Should Just Stop Burning Up Its Reserves (BBG)
Cracks Are Appearing In Australia’s Trillion-Dollar Property Debt Pile (BBG)
Putin Orders Russian Air Force To Prepare For ‘Time Of War’ (Ind.)
Controversial Dakota Pipeline To Go Ahead After Army Approval (R.)
Why Should A Libertarian Take Universal Basic Income Seriously? (Dolan)

 

 

“It never was a big deal because growing imports were portrayed as healthy demand in the US. The world loved it.”

This Is How Out-Of-Whack US Trade Relationships Really Are (WS)

2016 marked another banner year for US trade, a banner year largely for other countries that at the initiative of Corporate America, whose supply chains weave all over the world, managed to load the US up with their merchandise. According to the Commerce Department’s report today, the US trade deficit in goods and services rose to $502.3 billion in 2016, the highest in four years. Exports of goods and services fell $52 billion in 2016 year-over-year to $2.21 trillion, and imports fell $50 billion to $2.71 trillion. That both exports and imports fell is a sign of weakening world trade, lackluster demand globally, and lousy economic growth in the US, where GDP in 2016 inched up by a miserable 1.6%, matching the growth rate of 2011, both having been the lowest growth rates since 2009.

Exports add to the economy and to GDP; imports subtract from GDP. And it’s a big number: the trade deficit in 2016 amounted to 2.7% of GDP. In overly simplified, scribbled-on-a-napkin-after-the-third-beer math: had trade been balanced, with imports about equal to exports, GDP growth would have been 2.7 percentage points higher in 2016. So 4.3%! OK, we’re dreaming. But that’s how a massive trade deficit whacks the economy. The overall trade balance is composed of trade in goods and services. It used to be years ago when the trade deficit in goods began to balloon that it was no big deal because America was exporting innovative services, such as complex financial services, and they would make up for the deficit in old-fashioned goods.

They did lessen the pain for a little while, and then they didn’t. And soon, even the overall US trade deficit ballooned, but it was no big deal because soaring imports showed that the US economy was healthy and brimming with consumer demand. Year after year, we heard this from economists and politicians. Beyond that, apathy was palpable. No one cared. It’s just the way it is. Dreaming of balanced trade was like so 1980s or whatever. Meanwhile, Corporate America was fine-tuning its game of offshoring production and importing from cheaper countries. The entire business model of Wal-Mart depends on it. US supply chains wind all over the globe, in search of the lowest production costs, whether it’s consumer gadgets or automotive components. It never was a big deal because growing imports were portrayed as healthy demand in the US. The world loved it.

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Kelly’s a straight shooter. Wonder how long he can last.

John Kelly, Homeland Security Chief, Says Travel Ban Rolled Out Too Quickly (WSJ)

Homeland Security Secretary John Kelly told Congress the Trump administration should have taken more time to inform Congress before implementing its controversial executive order temporarily blocking entry of people from seven nations. “The thinking was to get it out quick so potentially people coming here to harm us would not take advantage” of a delay, Mr. Kelly told the House Homeland Security Committee on Tuesday. In his first congressional appearance as a cabinet member, Mr. Kelly offered a forceful defense of the order, saying it wasn’t a ban on Muslims as critics have charged, but a “temporary pause” on immigrants and visitors from countries about whose residents the U.S. can’t access solid information. He sought to take responsibility for the chaotic rollout, saying the confusion was “all on me.”

“Going forward, I would have certainly taken some time to inform the Congress and certainly that’s something I’ll do in the future,” he said. The Wall Street Journal and others have reported that Mr. Kelly had little input in the order or its rollout, which was directed by the White House. The order, issued on the afternoon of Friday, Jan. 27, resulted in initial confusion and confrontation at airports around the country, as some travelers were detained for hours or sent away and protesters gathered at terminals to denounce the new rules. A federal court in Seattle temporarily put the order on hold on Friday, citing potential legal concerns. That action prompted President Donald Trump to question the judge’s credentials and say he could be to blame in the event of a terrorist attack. Mr. Kelly waded into that debate on Tuesday, likening judges to academics removed from on-the-ground realities.

“I have nothing but respect for judges, but in their world it’s a very academic, very almost in-a-vacuum discussion, and of course, in their courtrooms, they are protected by people like me, so they can have those discussions,” he said. “They live in a different world than I do. I’m paid to worst-case it, he’s paid to, in a very academic environment, make a call.” [..] Committee chairman Rep. Michael McCaul (R., Texas) said he backed the executive order, which a court order has put on hold. But he said it was poorly implemented. He said some U.S. permanent residents who are citizens of the targeted countries were initially not allowed to return to the country, while foreigners who aided the U.S. military and students attending American schools were “trapped overseas.”

“I applaud you for quickly correcting what I consider errors,” Mr. McCaul said. The congressman said he had suggested the approach President Donald Trump took when Mr. Trump was a candidate. His goal, Mr. McCaul said, was to help reframe the proposal from what Mr. Trump initially described as a Muslim ban, an approach he thought would have been unconstitutional.

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It’s great to have the courts discuss this. That’s where it belongs. If Trump can win, we will know just how broad US presidents’ power had become, before Trump. And we can judge whether we like things that way. He either has the authority, or he doesn’t. That should be clear from the law, not a matter of taste or preference.

Trump Travel Ban: Judges Skeptical About Arguments On Executive Order (G.)

A lawyer seeking to reinstate Donald Trump’s travel ban was grilled by a panel of three judges on Tuesday, facing questions over the president’s inflammatory campaign promise to close America’s borders to Muslims. August Flentje, of the Department of Justice, was put on the spot over why seven Muslim-majority countries had been targeted in Trump’s executive order, as well as past statements made by the president and his ally Rudy Giuliani. The hour-long hearing before the San Francisco-based ninth circuit court of appeals was the most significant legal battle yet over the ban. The judges said they would try to deliver a ruling as soon as possible but gave no indication of when. Flentje, reportedly called up for the hearing at short notice, asked the judges for a stay on the temporary restraining order placed on Trump’s travel ban by district court judge James Robart last week.

[..] During a hearing conducted by telephone between various locations, Flentje described the ban as putting a “temporary pause” on travelers from countries that “pose special risk”. He said the seven countries targeted had “significant terrorist presence” or were “safe havens for terrorism”. Trump’s actions were “plainly constitutional”, Flentje argued, as the president sought to strike a balance between welcoming visitors and securing the nation of the risk of terrorism. “The president has struck that balance,” he said. “The district court order upset that balance.” Flentje argued that the district court restraining order was too broad, giving rights to people “who have never been to the United States” and “really needs to be narrowed”. Judge Michelle Friedland asked: “Are you arguing then that the president’s decision in the regard is unreviewable?”

Flentje replied: “Yes, there are obviously constitutional limitations.” But Judge William Canby pointed out that people from the seven countries already could not come into the country without a visa and were subject to “the usual investigations”. How many of these people had committed terrorist attacks in the US, he wondered, before pointing out it was none. Flentje pointed to Congress’s determination that they were countries of concern, an argument that Judge Richard Clifton dismissed as “pretty abstract”. Trying to regain ground, the lawyer said: “Well, I was just about to at least mention a few examples. There have been a number of people from Somalia connected to al-Shabaab [an Islamist militant group] who have been convicted in the United States.” Friedland, who was appointed by Barack Obama, interjected: “Is that in the record? Can you point us to what, where in the record you are referring?” Flentje admitted: “It is not in the record.”

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“..if you went to the local souk [bazaar] in Aleppo and brought one of the retail shop owners, he would do the same thing Trump is doing. Like making a call to Boeing and asking why are we paying so much..”

‘Trump Makes Sense To A Grocery Store Owner’ – Taleb (Hindu)

In Skin in the Game, you seem to build on theories from The Black Swan that give a sense of foreboding about the world economy. Do you see another crisis coming? Oh, absolutely! The last crisis [2008] hasn’t ended yet because they just delayed it. [Barack] Obama is an actor. He looks good, he raises good children, he is respectable. But he didn’t fix the economic system, he put novocaine [local anaesthetic] in the system. He delayed the problem by working with the bankers whom he should have prosecuted. And now we have double the deficit, adjusted for GDP, to create six million jobs, with a massive debt and the system isn’t cured. We retained zero interest rates, and that hasn’t helped. Basically we shifted the problem from the private corporates to the government in the U.S. So, the system remains very fragile.

You say Obama put novocaine in the system. How will the Trump administration be able to address this? Of course. The whole mandate he got was because he understood the economic problems. People don’t realise that Obama created inequalities when he distorted the system. You can only get rich if you have assets. What Trump is doing is put some kind of business sense in the system. You don’t have to be a genius to see what’s wrong. Instead of Trump being elected, if you went to the local souk [bazaar] in Aleppo and brought one of the retail shop owners, he would do the same thing Trump is doing. Like making a call to Boeing and asking why are we paying so much.

You’re seen as something of an oracle, given that you saw the 2008 economic crash coming, you predicted the Brexit vote, the outcome of the Syrian crisis. You said the Islamic State would benefit if Bashar al-Assad was pushed out and you predicted Trump’s win. How do you explain it? Not the Islamic State, but al-Qaeda at the time, and I said the U.S. administration was helping fund them. See, you have to have courage to say things others don’t. I was lucky financially in life, that I didn’t need to work for a living and can spend all my time thinking. When Trump was running for election, I said what he says makes sense to a grocery store owner. Because the grocery guy can say Trump is wrong because he can see where he is wrong. But with Obama, he can’t understand what he’s saying, so the grocery man doesn’t know where he is wrong.

Is it a choice between dumbing down versus over-intellectualisation, then? Exactly. Trump never ran for archbishop, so you never saw anything in his behaviour that was saintly, and that was fine. Whereas Obama behaved like the Archbishop of Canterbury, and was going to do good but people didn’t feel their lives were better. As I said, if it was a shopkeeper from Aleppo, or a grocery store owner in Mumbai, people would have liked them as much as Trump. What he says makes common sense, asking why are we paying so much for this rubbish or why do we need these complex taxes, or why do we want lobbyists. You can call Trump’s plain-speaking what you like. But the way intellectuals treat people who don’t agree with them isn’t good either. I remember I had an academic friend who supported Brexit, and he said he knew what it meant to be a leper in the U.K. It was the same with supporting Trump in the U.S.

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Amen to that.

Do Not Let Elliott Abrams Anywhere Near The State Department (Rand Paul)

I hope against hope that the rumors are wrong and that President Donald Trump will not open the State Department door to the neocons. Crack the door to admit Elliott Abrams and the neocons will scurry in by the hundreds. Neoconservative interventionists have had us at perpetual war for 25 years. While President Trump has repeatedly stated his belief that the Iraq War was a mistake, the neocons (all of them Never-Trumpers) continue to maintain that the Iraq and Libyan Wars were brilliant ideas. These are the same people who think we must blow up half the Middle East, then rebuild it and police it for decades. They’re wrong and they should not be given a voice in this administration.

One of the things I like most about President Trump is his acknowledgement that nation building does not work and actually works against the nation building we need to do here at home. With a $20 trillion debt, we don’t have the money to do both. I urge him to keep that in mind this week when he meets with Elliott Abrams, the rumored pick for second in command to the Secretary of State. Abrams would be a terrible appointment for countless reasons. He doesn’t agree with the president in so many areas of foreign policy and he has said so repeatedly; he is a loud voice for nation building and when asked about the president’s opposition to nation building, Abrams said that Trump was absolutely wrong; and during the election he was unequivocal in his opposition to Donald Trump, going so far as to say, “the chair in which Washington and Lincoln sat, he is not fit to sit.”

Why then would the president trust him with the second most powerful position in the State Department? Abrams was equally dismissive throughout Trump’s entire candidacy. As a Never-Trumper, he repeatedly said he would neither vote for Clinton nor Trump. He likened the choice to the one the nation faced of McGovern vs. Nixon. I voted for Rex Tillerson for secretary of state because I believe him to have a balanced approach to foreign policy. My hope is that he will put forward a realist approach. I don’t see Abrams as part of any type of foreign policy realism. Elliott Abrams is a neoconservative too long in the tooth to change his spots, and the president should have no reason to trust that he would carry out a Trump agenda rather than a neocon agenda. But just as importantly, Congress has good reason not to trust him – he was convicted of lying to Congress in his previous job.

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It’s not only a broken record, it’s a really bad song too.

EU Faces Crisis As IMF Warns Greek Debts Are On ‘Explosive’ Path (Tel.)

The EU faces a looming crisis which could threaten the sustainability of the eurozone as the IMF has warned Greece’s debts are on an “explosive” path despite years of attempted austerity and economic reforms. Global financiers at the IMF are increasingly unwilling to fund endless bailouts for the eurozone’s most troubled country, passing more of the burden onto the EU – at a time when Germany does not want to keep sending cash to Athens. The assessment opens up a fresh split with Europe over how to handle Greece’s massive public debts, as the IMF called on Europe to provide “significant debt relief” to Greece – despite Greece’s EU creditors ruling out any further relief before the current rescue programme expires in 2018. Jeroen Dijsselbloem, the Eurogroup President repeated that position last night, saying there would be no Greek debt forgiveness and dismissing the IMF assessment of Greece’s growth prospects as overly pessimistic.

“It’s surprising because Greece is already doing better than that report describes,” said Mr Dijsselbloem, who chairs meetings of eurozone finance ministers, adding that Greece was on track for a “pretty good recovery at the moment”. The renewed divisions over how to handle the Greek debt crisis has raised fresh questions over whether the IMF will be a full participant in the next phase of the Greek rescue – a key condition for backing from the German and Dutch parliaments. As Angela Merkel, the German chancellor, fights a tough reelection battle, Germany is particularly reluctant to send funds directly to Greece, with populist parties in Germany arguing that the payments amount to an unfair bailout from hard-working Germans to less deserving Greeks.

The IMF split came as Mrs May last night comfortably defeated a Brexit rebellion in the Commons as MPs rejected Labour plans to give Parliament a “meaningful” vote on the terms of a final deal. Despite suggestions that up to 30 Tory MPs could defy their party whip and back the Labour amendment just seven chose to do so. Mrs May stemmed the rebellion after the Government pledged to hold a vote in Parliament on the deal before it is sent to the European Parliament. However ministers said that MPs would have to “take or leave it”, meaning that Mrs May is prepared to walk away from Europe without a deal if Parliament rejects it. A fresh crisis over Greek debt could be triggered as soon as in July when Greece is due to repay some €7bn to its creditors – money the country cannot pay without a fresh injection of bailout cash.

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As they do the same thing again and again, things only get worse. And then they have to do it again.

Greece’s Debt Costs Rise Sharply As Worries Grow Over IMF Role (G.)

Fresh worries over Greece’s debts have pushed the country’s borrowing costs sharply higher amid renewed insistence from Athens it will not swallow further austerity demands from international lenders. The yields on two-year government bonds jumped to their highest level since last June and went above 10% to reflect growing anxiety on financial markets over Greece’s ability to keep up to date with debt repayments. Yields on 10-year government bonds were also higher at above 7.8%, the highest close since November. The renewed focus on Greece’s debts came as the International Monetary Fund revealed its board was split over how far spending cuts in the country should go, raising fresh doubts over its participation in rescue plans for the struggling Greek economy.

The fund has made repeated warnings that Greece’s debt burden of about €330bn is unsustainable despite the government pushing through spending cuts and tax increases that have badly hit popularity ratings for the government of prime minister Alexis Tsipras. The IMF declined to join other international lenders – the ECB and the EU – in funding the country’s third bailout, agreed in August 2015, and it is currently deciding whether to take part in a new chunk of rescue funds needed by mid-2018. Germany has warned the IMF’s involvement is crucial if support for Greece is to continue. News of a split on the IMF board raised new questions over whether Germany will see its wish granted for the fund joining the next rescue. In its latest annual review of the Greek economy, the IMF revealed that its board members were in disagreement over whether Athens should enforce even more austerity to satisfy its lenders.

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Barry Eichengreen basically says the euro will stay because of fear (of the consequences of leaving). That doesn’t seem a very stable foundation.

Don’t Sell the Euro Short. It’s Here to Stay. (Eichengreen)

Two forms of glue hold the euro together. First, the economic costs of break-up would be great. The minute investors heard that Greece was seriously contemplating reintroducing the drachma with the purpose of depreciating it against the euro, or against a “new Deutsche mark,” they would wire all their money to Frankfurt. Greece would experience the mother of all banking crises. The “new Deutsche mark” would then shoot through the roof, destroying Germany’s export industry. More generally, those predicting, or advocating, the euro’s demise tend to underestimate the technical difficulties of reintroducing national currencies. They suggest briefly imposing capital controls to prevent holders of euros from fleeing while the new money, electronic or other, is quickly put in place.

This ignores the complexity of actually removing controls once they are adopted. Recall the experiences of Iceland and Cyprus, which required years, not days, to completely remove their “temporary” controls. The proponents advocate quickly restructuring the debts of banks, firms and households with euro-denominated liabilities, without realizing that one person’s debt is another’s asset. Moreover, because borrowing and lending occurs across borders, agreement on debt restructuring will require lengthy negotiation between countries if the country abandoning the euro is to avoid harsh retaliatory measures. This process would make the U.K.’s Brexit negotiations look like a stroll in the park.

For southern European countries, there is an additional complication. They would have a massive bill to the ECB, and by implication to the other member states that are shareholders in the ECB, in settlement of their so-called Target2 balances, liabilities incurred as a result of cross-border payments in central bank money. ECB President Mario Draghi recently made clear that countries abandoning the euro would be presented with this bill. For Italy, to pick a case not entirely at random, those balances currently stand at €360 billion ($383 billion), or approximately €6,000 for every man, woman and child. That’s about 10 times on a per capita basis what the U.K. likely owes the EU as alimony for its divorce. And if a country like Italy chooses to default on its Target2 obligations, it will be unceremoniously kicked out of the EU.

This brings us to the second form of glue: namely that European countries, Britain aside, still attach very considerable value to EU membership. That membership matters even more now that that President Trump has cast NATO into doubt and the United States is no longer seen as a reliable ally. The example of U.K. Prime Minister Theresa May, reduced to cozying up to Mr. Trump and Turkish Prime Minister Recep Tayyip Erdogan, is not one that many other European politicians care to follow. In a 2007 article, I too made a bet — namely that the euro, while flawed, wasn’t going away. I argued that it is the roach motel of currencies. Like the Hotel California of the song: you can check in, but you can’t check out. For 10 years I’ve been right. To be sure, past performance is no guarantee of future returns, as any prudent investor knows. Even so, unlike ambassador-in-waiting Malloch, I continue to think that shorting the euro is bad advice.

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And this is before Trump.

Money Is Pouring Out Of China, And The Government Can’t Stop It (R.)

China’s foreign exchange reserves unexpectedly fell below the closely watched $3 trillion level in January for the first time in nearly six years, even as authorities tried to curb outflows by tightening capital controls. Reserves fell by $12.3 billion in January to $2.998 trillion, compared with a drop of $41 billion drop in December. Economists polled by Reuters had forecast forex reserves would fall by about $10.5 billion to $3 trillion. While the $3 trillion mark is not seen as a firm “line in the sand” for Beijing, concerns are swirling in global financial markets over the speed at which the country is depleting its ammunition to defend the currency and staunch capital outflows.

Some analysts fear a heavy and sustained drain on reserves could prompt Beijing to devalue the currency. The yuan fell 6.6% against the rising dollar in 2016, its biggest annual drop since 1994. For 2016 as a whole, China burned through nearly $320 billion of reserves, on top of a record drop of $513 billion in 2015. The yuan has found some respite in recent weeks as the dollar retreated, helped also by recent steps to curb capital outflows. But analysts expect downward pressure on the yuan to resume, especially if the U.S. continues to raise interest rates, which would likely trigger fresh capital outflows from emerging economies such as China and test its enhanced capital controls.

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“What was presented as a gradual depreciation of the yuan last year was in reality a significant 6% weakening of the currency versus the dollar as China’s domestic woes mounted. A collapse of the crawling peg could lead to yuan depreciation that is three times as large.”

China’s Reserves Approach Breaking Point As Another Devaluation Looms (BBG)

In his first few weeks in office, President Donald Trump has ordered the U.S. to withdraw from the Trans-Pacific Partnership and confirmed his intention to renegotiate the North American Free Trade Agreement. The consensus is that it won’t be long before he turns his focus to China, which he calls a currency manipulator. China can weather such criticism, for now. But if Trump’s threats of trade sanctions and 45% tariffs become real, the economic impact for the world’s second-biggest economy would be meaningful and could upend financial markets, potentially leading to a global recession. With economic growth already slowing and capital fleeing the nation, China’s $11 trillion economy is operating from a position of weakness.

Here’s how it plays out: As the world’s dominant reserve currency, the dollar has no peer. IMF data show that the greenback accounts for 63.3% of global foreign-exchange reserves, with the euro next at 20.3%, followed by the British pound and Japanese yen, both at 4.5%. That means that in times of crisis, the dollar benefits from global investors seeking a haven, even if the strife and the the uncertainty emanates from the U.S. It’s possible that a trade war would drive flows into the dollar, putting upward pressure on the currency at the expense of other exchange rates. That would be on top of the natural demand for the greenback created by the anticipation of significant fiscal stimulus floated by the Trump administration and a faster pace of interest-rate increases by the Federal Reserve.

In terms of China, it’s important to remember that the yuan’s external value is managed by authorities in a way that isn’t compatible with a sharp appreciation pressure of the dollar vis-à-vis all other currencies. The currency is managed to achieve a stable, effective, trade-weighted exchange rate and to foster a gently crawling peg relative to the dollar. That peg would be threatened if a trade war weakened China’s economy at a faster rate than forecast. What was presented as a gradual depreciation of the yuan last year was in reality a significant 6% weakening of the currency versus the dollar as China’s domestic woes mounted. A collapse of the crawling peg could lead to yuan depreciation that is three times as large.

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The ruble lost 50% vs the USD. A similar path for the yuan would be catastrophic.

Russia Shows Why China Should Just Stop Burning Up Its Reserves (BBG)

China has wiped out about a quarter of the world’s heftiest foreign-currency stockpile over the past 18 months in its quest to keep the yuan stable. According to Commerzbank, such intervention is futile. Data Tuesday showed China’s foreign reserves slipped below $3 trillion in January, the first time they’ve breached that psychologically potent level in almost six years. Yet the experiences of some fellow BRICs show that drawing down the stockpile will probably have little effect on the currency’s long-term fate, Hao Zhou, Commerzbank’s Singapore-based senior emerging-markets economist, wrote in a research note late Tuesday.

While efforts by Russia and Brazil in recent years might have cushioned the blow of currency declines, they couldn’t change the market’s dynamics. In Russia’s case, a collapse in oil prices and the imposition of economic sanctions over the Crimea crisis proved more powerful drivers than the sale of a third of the country’s foreign-currency hoard between April 2013 and March 2015. The ruble fell more than 50% versus the dollar in the period.

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Get out while you can.

Cracks Are Appearing In Australia’s Trillion-Dollar Property Debt Pile (BBG)

The Reserve Bank of Australia frequently seeks feedback on the health of the economy. It might want to call the debt counsellors soon. Homeowners, consumers and property investors around Australia are making more calls to financial helplines as three warning signs back up the spike in demand: mortgage arrears are creeping up, lenders’ bad debt provisions have increased and personal insolvencies are near an all-time high. “It’s steadily out of control – I don’t know of too many financial counselling services where demand doesn’t exceed supply,” said Fiona Guthrie, chief executive officer of Financial Counselling Australia, who says the biggest increase in calls is from people suffering mortgage stress. “There are more people who have got mortgages that they can’t afford to pay.”

Australia’s households are among the world’s most-indebted after bingeing on more than $1 trillion of mortgages amid a housing boom that’s fizzled out in parts of the country, but still roaring in Sydney and Melbourne. While most are capably servicing their debts, a worsening of credit metrics has seen executives and analysts take a more cautious tone. It’s also a key factor in the central bank’s rate decisions this year, as RBA governor Philip Lowe places financial stability at the forefront of monetary policy. The concerns are understandable. Australians’ private debt has soared to 187% of their income, from about 70% in the early 1990s, encouraged by low interest rates. In a November speech, Lowe said that while most households are managing these levels of debt, many feel they are closer to their borrowing capacity than they once were.

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Odd that this reaches the press.

Putin Orders Russian Air Force To Prepare For ‘Time Of War’ (Ind.)

Russia’s air force has been ordered to prepare for a “time of war”. President Vladimir Putin has ordered a “snap check” of the country’s armed forces, accoording to defense minister Sergey Shoigu. As well as checking whether agencies and troops are ready for battle, the same order will ensure that systems are ready to fight, according to state news agency TASS. Those preparations have already begun, according to Russian ministers. “In accordance with the decision by the Armed Forces Supreme Commander, a snap check of the Aerospace Forces began to evaluate readiness of the control agencies and troops to carry out combat training tasks,” he said, according to TASS.

“Special attention should be paid to combat alert, deployment of air defense systems for a time of war and air groupings’ readiness to repel the aggression,” Shoigu added. The preparations come amid increasing concern about tensions between Russia and many of the world’s largest superpowers. Donald Trump has both condemned Russia’s military campaigns and been criticised for being too close to the country’s leaders, and Russia itself is standing in an increasingly tense relationship with some Nato countries. The country has been increasing movement of its military including the launch of the biggest Arctic military push since the fall of the Soviet Union, last month. It has also revealed plans to expand its military over 2017, including a huge boost in the number of tanks, armoured vehicles and aircraft controlled by the company.

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Really? Trump is willing to strongarm veterans and Native Americans? Bad PR.

Controversial Dakota Pipeline To Go Ahead After Army Approval (R.)

The U.S. Army will grant the final permit for the controversial Dakota Access oil pipeline after an order from President Donald Trump to expedite the project despite opposition from Native American tribes and climate activists. In a court filing on Tuesday, the Army said that it would allow the final section of the line to tunnel under North Dakota’s Lake Oahe, part of the Missouri River system. This could enable the $3.8 billion pipeline to begin operation as soon as June. Energy Transfer Partners is building the 1,170-mile (1,885 km) line to help move crude from the shale oilfields of North Dakota to Illinois en route to the Gulf of Mexico, where many U.S. refineries are located. Protests against the project last year drew drew thousands of people to the North Dakota plains including Native American tribes and environmental activists, and protest camps sprung up.

The movement attracted high-profile political and celebrity supporters. The permit was the last bureaucratic hurdle to the pipeline’s completion, and Tuesday’s decision drew praise from supporters of the project and outrage from activists, including promises of a legal challenge from the Standing Rock Sioux tribe. “It’s great to see this new administration following through on their promises and letting projects go forward to the benefit of American consumers and workers,” said John Stoody, spokesman for the Association of Oil Pipe Lines. The Standing Rock Sioux, which contends the pipeline would desecrate sacred sites and potentially pollute its water source, vowed to shut pipeline operations down if construction is completed, without elaborating how it would do so.

The tribe called on its supporters to protest in Washington on March 10 rather than return to North Dakota. “As Native peoples, we have been knocked down again, but we will get back up,” the tribe said in the statement. “We will rise above the greed and corruption that has plagued our peoples since first contact. We call on the Native Nations of the United States to stand together, unite and fight back.” Less than two weeks after Trump ordered a review of the permit request, the Army said in a filing in District Court in Washington D.C. it would cancel that study. The final permit, known as an easement, could come in as little as a day, according to the filing. There was no need for the environmental study as there was already enough information on the potential impact of the pipeline to grant the permit, Robert Speer, acting secretary of the U.S. Army, said in a statement.

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The case is not that hard to make. You just need to erase the ideological resistance.

Why Should A Libertarian Take Universal Basic Income Seriously? (Dolan)

In a recent post on EconLog, Bryan Caplan writes, “I’m baffled that anyone with libertarian sympathies takes the UBI [universal basic income] seriously.” I love a challenge. Let me try to un-baffle you, Bryan, and the many others who might be as puzzled as you are. Here are three kinds of libertarians who might take a UBI very seriously indeed. Philosophical issues aside, what galls many libertarians most about government is the failure of many policies to produce their intended results. Poverty policy is Exhibit A. By some calculations, the government already spends enough on poverty programs to raise all low-income families to the official poverty level, even though the poverty rate barely budges from year to year. Wouldn’t it be better to spend that money in a way that helps poor people more effectively?

A UBI would help by ending the way benefit reductions and “welfare cliffs” in current programs undermine work incentives. When you add together the effects of SNAP, TANF, CHIP, EITC and the rest of the alphabet soup, and account for work-related expenses like transportation and child care, a worker from a poor household can end up taking home nothing, even from a full-time job. A UBI has no benefit reductions. You get it whether you work or not, so you keep every added dollar you earn (income and payroll taxes excepted, and these are low for the poor). But, wait, you might say. Why would I work at all if you gave me a UBI? That might be a problem if you got your UBI on top of existing programs, but if it replaced those programs, work incentives would be strengthened, not weakened.

In which situation would you be more likely to take a job: one where you get $800 a month as a UBI plus a chance to earn another $800 from a job, all of which you can keep, or one where your get $800 a month in food stamps and housing vouchers, and anything extra you earn is taken away in benefit reductions? Or, you might say, a UBI might be fine for the poor, but wouldn’t it be unaffordable to give it to the middle class and the rich as well? Yes, if you added it on top of all the middle-class welfare and tax loopholes for the rich that we have now. No, if the UBI replaced existing tax preferences and other programs that we now lavish on middle- and upper-income households. Done properly, a UBI would streamline the entire system of federal taxes and transfers without any aggregate impact on the federal budget.

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Jan 232017
 
 January 23, 2017  Posted by at 10:08 am Finance Tagged with: , , , , , , , , ,  


DPC Looking south on Fifth Avenue at East 56th Street, NYC 1905

We’ve Been in Decline for 40 Years – Trump is a Chance to Rethink – Eno (G.)
The Coming Unhappiness With Trump – Egon von Greyerz (KWN)
Trump’s Infrastructure, Defense Plans Will Lead To Ruin – Ron Paul (CNBC)
China’s Central Bank ‘Playing Dangerous Game’ To Prop Up Yuan (SCMP)
EU Is Dead But Doesn’t Know This Yet – Marine Le Pen (DS)
We Need An Alternative To Trump’s Nationalism. It’s Not The Status Quo (YV)
George Soros and the Women’s March on Washington (Nomani)
These are the Countries with the Biggest Debt Slaves (WS)
“Billion-Year” Gambian President Was Installed By The CIA (SCF)
Greek Supreme Court To Decide On Fate Of Eight Turkish Servicemen (Kath.)
UK Government ‘Sneaks Out’ Its Own Alarming Report On Climate Change (Ind.)
The Last Time Oceans Got This Warm Sea Levels Were 20 to 30 Feet Higher (LAT)

 

 

Only fitting that the best description of how I feel about this can be found in an interview about music.

We’ve Been in Decline for 40 Years – Trump is a Chance to Rethink – Eno (G.)

He has called himself an optimist. In the past. I ask him if he still is, post-2016. Yes, he says, there is a positive way to look at it. “Most people I know felt that 2016 was the beginning of a long decline with Brexit, then Trump and all these nationalist movements in Europe. It looked like things were going to get worse and worse. I said: ‘Well, what about thinking about it in a different way?’ Actually, it’s the end of a long decline. We’ve been in decline for about 40 years since Thatcher and Reagan and the Ayn Rand infection spread through the political class, and perhaps we’ve bottomed out. My feeling about Brexit was not anger at anybody else, it was anger at myself for not realising what was going on. I thought that all those Ukip people and those National Fronty people were in a little bubble.

Then I thought: ‘Fuck, it was us, we were in the bubble, we didn’t notice it.’ There was a revolution brewing and we didn’t spot it because we didn’t make it. We expected we were going to be the revolution.” He draws me a little diagram to explain how society has changed – productivity and real wages rising in tandem till 1975, then productivity continuing to rise while real wages fell. “It is easily summarised in that Joseph Stiglitz graph.” The trouble now, he says, is the extremes of wealth and poverty. “You have 62 people worth the amount the bottom three and a half billion people are worth. Sixty-two people! You could put them all in one bloody bus … then crash it!” He grins. “Don’t say that bit.” (Since we meet, Oxfam publish a report suggesting that only eight men own as much wealth as the poorest 3.6 billion people in the world – half the world’s population.)

[..] He is still thinking about the political fallout of the past year. “Actually, in retrospect, I’ve started to think I’m pleased about Trump and I’m pleased about Brexit because it gives us a kick up the arse and we needed it because we weren’t going to change anything. Just imagine if Hillary Clinton had won and we’d been business as usual, the whole structure she’d inherited, the whole Clinton family myth. I don’t know that’s a future I would particularly want. It just seems that was grinding slowly to a halt, whereas now, with Trump, there’s a chance of a proper crash, and a chance to really rethink.”

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Not his fault. As I wrote in November 8’s America is the Poisoned Chalice.

The Coming Unhappiness With Trump – Egon von Greyerz (KWN)

“The new US Administration has taken over with the conviction that they will “make America great again.” I really hope they will succeed because a strong US would be good for the world. Sadly, the odds of achieving that admirable objective are totally stacked against them. At the end of the next 4 years there is a risk that this Administration will be more hated than any government since Carter and probably even more hated than Carter. The coming unhappiness with Trump and his team will not arise because of the actions they take. They will clearly do everything in their might to make America great again. But the probabilities are totally against them to achieve this goal. They are taking over power at a time when debt has grown exponentially since the 1970s. They are also assuming power of a country that has not achieved a proper budget surplus for well over half a century. Even worse, the US has not had a positive trade balance since the early 1970s.

So here we have a country that has been living above its means for decades and has no real chance of changing this vicious cycle. The Federal debt is at $20 trillion and has been growing at the rate of 9% per year for the last 40 odd years. The forecast for the next four years is that the growth of the debt will accelerate. Total US debt is over $70 trillion or over 3.5x GDP. But that is just a fraction of the US liabilities. Unfunded liabilities are over $200 trillion. And you can add to that to the real gross derivative positions of US banks, which most likely more than $500 trillion. The success of a president in the US is closely linked to the performance of the stock market. Therefore, the best chance for a president to be loved by the American people and re-elected is for stocks to go up. P/Es on the S&P index are now at 70% above their historical mean – hardly a position from which it is likely to surge. Corporate borrowings have also surged since the Great Financial Crisis started.

In 2006 US corporate debt was just over $2 trillion. Today it is more than 3x higher at $7 trillion! At the same time, cash as a%age of corporate debt is declining and is now down to 27%. Within this massive increase in debt, there are major defaults looming in many areas like car loans, student loans and the fracking sector where potential write offs could be in the trillions of dollars. Another disaster which is guaranteed to happen in the US and the rest of the world is the coming pension crisis. Most people in the West have zero or a minimal pension. And even for the ones who have proper pension plans, they are greatly underfunded. It is estimated that US state and local government pensions are underfunded to the extent of a mind-blowing $6 trillion. And this is after a long period of surging stocks and bonds. Imagine what will happen to these pensions when stocks and bonds collapse, which is very likely to happen in the next few years.

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Look here, CNBC, introducing Ron Paul as a “well-known Trump critic” is insane. Fake labeling.

Trump’s Infrastructure, Defense Plans Will Lead To Ruin – Ron Paul (CNBC)

For all the fanfare that greeted President Donald Trump at his inauguration on Friday, the next four years of his presidency could very well be marred by a weakening economy as a result of “injurious” policies. That’s according to past Texas Congressman and former presidential candidate Ron Paul, who joined CNBC’s “Futures Now” last week to echo his past sentiments about the new president. Most notably, the well-known Trump critic believes that the President’s proposed plans could overspend the economy into trouble and drive the Federal Reserve to interfere. “With his massive increase in infrastructure and the military, I think there’s going to be a lot more spending,” said Paul. “The debt is going to be much bigger [and] I think that will put more pressure” on the Federal Reserve, he said, with the central bank already planning to tighten interest rates.

“You have good times, and then you have bad times to compensate for the artificially good times,” he added. “So we’ll have a downturn and that will be a real challenge for the new administration.” Although most of Wall Street appears bullish about the short-term economic outlook under Trump’s fiscal policy plans, some economists have been less than sanguine. Paul’s critique echoed that of David Stockman, a former Reagan-era budget director who also warned CNBC last week that Trump’s plans would ultimately lead to financial calamity. Paul had refused to endorse Trump from early on in the election cycle, claiming that the now President would divide the Republican Party. Much of Paul’s criticism of Trump lies with the latter’s proposed border taxes, which Paul believes is actually more of a “tariff” that would block free trade. “I think that right now, I’d fear most the retaliation [from other countries] and the burden it’s going to place on the consumer,” said Paul.

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“Floatation does not mean a large devaluation,” he said. “Actually, a one-off devaluation [of the yuan] doesn’t need to be big

No, I don’t think so. A devaluation must be big, because you can’t risk having to repeat it. And floatation will mean a large loss of value no matter what. When you float, you can’t manipulate anymore.

China’s Central Bank ‘Playing Dangerous Game’ To Prop Up Yuan (SCMP)

China’s central bank is playing a dangerous game using the country’s foreign reserves to defend the yuan because it could leave the nation defenceless in an increasingly volatile world, a state researcher has warned. Zhang Ming, senior fellow at the Institute of World Economics and Politics under the Chinese Academy of Social Sciences, said the People’s Bank of China (PBOC) should take a hands-off approach to the currency and focus on safeguarding foreign exchange reserves. “Forex reserves are valuable assets that [China] can use at critical times. It’s a pity that they are being sold heavily in the market,” Zhang said. “It should be the last resort.” Zhang said the PBOC was betting on “the weakening of the US dollar and a domestic economic rebound”.

The country’s forex reserves have shrunk by almost a $1 trillion since June 2014 as the central bank has sought to prevent a large fall in the yuan against the U.S. dollar. Zhang call’s for Beijing to reverse tack and abandon its heavy intervention in the foreign exchange market is gaining traction among researchers. Zhang Bin, another researcher at the Chinese Academy of Social Sciences, agreed that Beijing should free up controls on the yuan’s exchange rate by reducing government intervention in the market. “Floatation does not mean a large devaluation,” he said. “Actually, a one-off devaluation [of the yuan] doesn’t need to be big, and [the currency] may rebound as well. By doing this it will help the domestic economy,” he said.

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She’s dead on, I’ve been saying this for years, and she’s getting it handed to her on a silver platter the same way Trump was.

EU Is Dead But Doesn’t Know This Yet – Marine Le Pen (DS)

Far-right National Front leader Marine Le Pen said on Sunday that France has to leave the European Union as she claimed that staying in the bloc is no longer a viable option for the country. Speaking in an interview with France’s BGNES, Le Pen said the EU is dead but it does not know this yet, stating that the bloc has failed economically, socially as well as security-wise. She said the recent economic growth, unemployment and poverty indicators prove the EU’s failure, adding that the bloc is also incapable of protecting its own borders against what she called as “Islamic terrorism”. With voters across Europe moving to the right, most polls currently show a Fillon-Le Pen runoff is the most likely scenario in May. National Front leader Le Pen told a meeting of rightwing populist parties in Germany on Saturday that Europe was about to “wake up” following the victory of Donald Trump in the US election and the British vote to leave the EU.

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I get what Varoufakis thinks and says, but I also think renewed nationalism is backed into the cake by now. Where I differ from most is I don’t see that as a disaster, not necessarily. It’s the EU that is a disaster.

We Need An Alternative To Trump’s Nationalism. It’s Not The Status Quo (YV)

Thatcher’s and Reagan’s neoliberalism had sought to persuade that privatisation of everything would produce a fair and efficient society unimpeded by vested interests or bureaucratic fiat. That narrative, of course, hid from public view what was really happening: a tremendous buildup of super-state bureaucracies, unaccountable supra-state institutions (World Trade Organisation, Nafta, the European Central Bank), behemoth corporations, and a global financial sector heading for the rocks. After the events of 2008 something remarkable happened. For the first time in modern times the establishment no longer cared to persuade the masses that its way was socially optimal.

Overwhelmed by the collapsing financial pyramids, the inexorable buildup of unsustainable debt, a eurozone in an advanced state of disintegration and a China increasingly relying on an impossible credit boom, the establishment’s functionaries set aside the aspiration to persuade or to represent. Instead, they concentrated on clamping down. In the UK, more than a million benefit applicants faced punitive sanctions. In the Eurozone, the troika ruthlessly sought to reduce the pensions of the poorest of the poor. In the United States, both parties promised drastic cuts to social security spending. During our deflationary times none of these policies helped stabilise capitalism at a national or at a global level. So, why were they pursued?

Their purpose was to impose acquiescence to a clueless establishment that had lost its ambition to maintain its legitimacy. When the UK government forced benefit claimants to declare in writing that “my only limits are the ones I set myself”, or when the troika forced the Greek or Irish governments to write letters “requesting” predatory loans from the European Central Bank that benefited Frankfurt-based bankers at the expense of their people, the idea was to maintain power via calculated humiliation. Similarly, in America the establishment habitually blamed the victims of predatory lending and the failed health system.

It was against this insurgency of a cornered establishment that had given up on persuasion that Donald Trump and his European allies rose up with their own populist insurgency. They proved that it is possible to go against the establishment and win. Alas, theirs will be a pyrrhic victory which will, eventually, harm those whom they inspired. The answer to neoliberalism’s Waterloo cannot be the retreat to a barricaded nation-state and the pitting of “our” people against “others” fenced off by tall walls and electrified fences.

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Russia threw out Soros, Hungary wants to, so does FYROM. Who’s next?

George Soros and the Women’s March on Washington (Nomani)

In the pre-dawn darkness of today’s presidential inauguration day, I faced a choice, as a lifelong liberal feminist who voted for Donald Trump for president: lace up my pink Nike sneakers to step forward and take the DC Metro into the nation’s capital for the inauguration of America’s new president, or wait and go tomorrow to the after-party, dubbed the “Women’s March on Washington”? The Guardian has touted the “Women’s March on Washington” as a “spontaneous” action for women’s rights. Another liberal media outlet, Vox, talks about the “huge, spontaneous groundswell” behind the march. On its website, organizers of the march are promoting their work as “a grassroots effort” with “independent” organizers. Even my local yoga studio, Beloved Yoga, is renting a bus and offering seats for $35.

The march’s manifesto says magnificently, “The Rise of the Woman = The Rise of the Nation.” It’s an idea that I, a liberal feminist, would embrace. But I know — and most of America knows — that the organizers of the march haven’t put into their manifesto: the march really isn’t a “women’s march.” It’s a march for women who are anti-Trump. As someone who voted for Trump, I don’t feel welcome, nor do many other women who reject the liberal identity-politics that is the core underpinnings of the march, so far, making white women feel unwelcome, nixing women who oppose abortion and hijacking the agenda. To understand the march better, I stayed up through the nights this week, studying the funding, politics and talking points of the some 403 groups that are “partners” of the march. Is this a non-partisan “Women’s March”?

Roy Speckhardt, executive director of the American Humanist Association, a march “partner,” told me his organization was “nonpartisan” but has “many concerns about the incoming Trump administration that include what we see as a misogynist approach to women.” Nick Fish, national program director of the American Atheists, another march partner, told me, “This is not a ‘partisan’ event.” Dennis Wiley, pastor of Covenant Baptist United Church of Christ, another march “partner,” returned my call and said, “This is not a partisan march.” Really? UniteWomen.org, another partner, features videos with the hashtags #ImWithHer, #DemsInPhily and #ThanksObama. Following the money, I pored through documents of billionaire George Soros and his Open Society philanthropy, because I wondered:

What is the link between one of Hillary Clinton’s largest donors and the “Women’s March”? I found out: plenty. By my draft research, which I’m opening up for crowd-sourcing on GoogleDocs, Soros has funded, or has close relationships with, at least 56 of the march’s “partners,” including “key partners” Planned Parenthood, which opposes Trump’s anti-abortion policy, and the National Resource Defense Council, which opposes Trump’s environmental policies. The other Soros ties with “Women’s March” organizations include the partisan MoveOn.org (which was fiercely pro-Clinton), the National Action Network [..]. Other Soros grantees who are “partners” in the march are the American Civil Liberties Union, Center for Constitutional Rights, Amnesty International and Human Rights Watch.

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Well, they call their debts assets…

These are the Countries with the Biggest Debt Slaves (WS)

Americans have been on a borrowing binge. To buy their favorite cars and trucks, they’ve loaded up on $1.14 trillion in auto loans. Young and not so young Americans are mortgaging their future with student loans that now amount to $1.28 trillion. Credit card and other debts are at $1.12 trillion. And mortgage debt stands at $8.82 trillion. So, total household debt was $12.35 trillion, according to the New York Fed’s Household Debt and Credit Report for the third quarter 2016. That’s a massive amount of debt. Many consumers are struggling with it. Student loans are seeing enormous default rates, and repayment rates are far worse than previously disclosed. And “debt slaves” has become a term in the financial vernacular. But it isn’t nearly enough debt…

Neither for the New York Fed whose President William Dudley, in a speech a few days ago, practically exhorted households to borrow more against the equity in their homes so that they blow this cash and drive up retail sales: “Whatever the timing, a return to a reasonable pattern of home equity extraction would be a positive development for retailers, and would provide a boost to aggregate growth,” he mused, with nostalgic thoughts of 2008. Nor for the global rankings of debt slaves, where US households squeaked into the ignominious 10th place, barely ahead of Portugal! I mean, come on! Portugal!! There are many ways to measure household indebtedness and debt burdens. Comparing total household debt to the overall size of the economy as measured by GDP is one of the measures. And per this household-debt-to-GDP measure, the Americans are 10th place with 78.8% and look practically prudent compared to the peak just before the Financial Crisis.

[..] And here’s some inevitable food for a terrifying thought: The countries with highly indebted households, so the top of the list, are mostly countries were central-bank policy rates are very low or even negative, and where mortgage rates are super low. What happens to those housing markets, the households, the banks, and the overall economies when interest rates rise even a little and that whole equation of perennially ballooning debt falls apart? We already know what happens.

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You might be tempted to name this an unbelievable story, but then you realize this is what the US is good at. Reads like a spy novel, a film script.

“Billion-Year” Gambian President Was Installed By The CIA (SCF)

Gambian President and dictator Yahya Jammeh, facing a combined military force composed of Senegalese army troops, the Nigerian air force, and troops from Mali, Ghana, and Togo, has agreed to relinquish the presidency of Gambia. On December 1, 2016, Jammeh was defeated for re-election in a surprise upset by his little-known rival Adama Barrow. Jammeh received only 45% of the vote. During the election campaign Jammeh vowed in an interview with the BBC to «rule for one billion years». After initially conceding defeat to Barrow, Jammeh reneged on his promise to step down and announced he would remain as president. The Economic Community of West African Countries (ECOWAS) decided that Jammeh had to go, a stance ironically supported by the United States, which had assisted Jammeh in overthrowing Gambia’s democratically-elected president, Sir Dauda K. Jawara, in 1994.

After Jammeh refused ECOWAS’s, the African Union’s, and the United Nations Security Council’s demands to leave office and permit Barrow to assume the presidency, ECOWAS mobilized its military forces. On January 19, 2017, Barrow was sworn in as president in the Gambian embassy in Dakar, the Senegalese capital. Hours later, Senegalese troops began to enter Gambia and Nigerian air force jets buzzed the Gambian capital of Banjul. The presidents of Mauritania and Guinea flew to Banjul to urge Jammeh to leave office peacefully. Jammeh’s fate was sealed when Major General Ousman Badjie, the commander of the Gambian armed forces, recognized Barrow as Gambia’s commander-in-chief.

The demand from the United States for Jammeh to relinquish power was a display of absolute hypocrisy since Washington had not only installed Jammeh into power but two successive U.S. presidents warmly welcomed the military ruler to the White House. Jammeh, who owns a $3.5 million mansion in Potomac, Maryland, was warmly greeted by President Barack Obama at the 2014 and 2015 U.S.-Africa Leaders’ Summits in Washington. President George W. Bush greeted Jammeh at the U.S.-Africa Business Summit in Washington in 2003. With the protection of the State Department’s Diplomatic Security Service, Jammeh’s Moroccan-born wife, Zineb Jammeh, ran up huge totals at the Washington area’s fashionable shopping malls. She also settled on Sam’s Club, a wholesale discount store, to buy massive amounts of household goods. Jammeh is a textbook case of CIA-sponsored kleptocracy on a grand scale.

Under Jammeh, Gambia continued to be a strategic ally of the United States. The kleptocratic Gambian leader permitted the U.S. National Aeronautics and Space Administration (NASA) to maintain an emergency landing site for NASA’s space shuttle in the country and Gambia participated with the U.S. Central Intelligence Agency in the post-9/11 rendition program. Before being installed as Gambia’s dictator, Jammeh had received training from the Pentagon. Merely a lieutenant in the Gambian National Army. In 1993, Jammeh attended the notorious «School of the Americas» in Fort Benning, Georgia. The school has trained some of Latin America’s most notorious military dictators and death squad commanders. While in Fort Benning, Jammeh was made an honorary citizen of the state of Georgia. The following year, and before he launched his coup, Jammeh attended the Military Police Officers Basic Course (MPOBC) at Fort McClellan, Alabama.

[..] It was during the administration of President Bill Clinton that the green light was given for Jammeh to be installed in a CIA-led coup in Gambia. On July 24, 1994, President Jawara was at his palace in Banjul entertaining the commanding officer of the visiting U.S. Navy tank landing ship, the USS La Moure County. Also present was U.S. ambassador to Gambia, Andrew Winter, a career foreign service officer who represented a new breed of U.S. ambassador – one that routinely and publicly involved himself in the domestic political affairs of the nation to which they were posted. While Jawara and the ship’s commander exchanged diplomatic niceties, junior army officers, led by Jammeh, staged a coup against the democratically elected government.

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Only one decision makes any sense.

Greek Supreme Court To Decide On Fate Of Eight Turkish Servicemen (Kath.)

The Greek Supreme Court on Monday is to rule whether eight Turkish servicemen who fled to Greece after July’s failed coup should be extradited. Three separate panels of Greek judges have already ruled that the Turkish officers’ lives may be put at risk if they were to be returned to Turkey, where Prime Minister Recep Tayyip Erdogan has launched a tough crackdown on dissent since the summer’s coup attempt. Diplomatic circles that fear a rejection of Turkey’s request could put a further strain on ties between Athens and Ankara, particularly at a time when Cyprus reunification talks also hang in the balance, have been keeping a close eye on proceedings. The issue has also drawn attention from intellectuals and the media in Greece and other parts of Europe, who see it as a test of the bloc’s fundamental principles and values. All eight servicemen have denied involvement in the coup attempt and say they fear for their lives if they are returned to Turkey.

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What a surprise.

UK Government ‘Sneaks Out’ Its Own Alarming Report On Climate Change (Ind.)

The Government has been accused of trying to bury a major report about the potential dangers of global warming to Britain – including the doubling of the deaths during heatwaves, a “significant risk” to supplies of food and the prospect of infrastructure damage from flooding. The UK Climate Change Risk Assessment Report, which by law has to be produced every five years, was published with little fanfare on the Department for Environment, Food and Rural Affairs’ (Defra) website on 18 January. But, despite its undoubted importance, Environment Secretary Andrea Leadsom made no speech and did not issue her own statement, and even the Defra Twitter account was silent. No mainstream media organisation covered the report.

One leading climate expert accused the Government of “trying to sneak it out” without people noticing, saying he was “astonished” at the way its publication was handled. In the report, the Government admitted there were a number of “urgent priorities” that needed to be addressed. It said it largely agreed with experts’ warnings about the effects of climate change on the UK. These included two “high-risk” issues: the damage expected to be caused by flooding and coastal erosion; and the effect of rising temperatures on people’s health. The report concluded that the number of heat-related deaths in the UK “could more than double by the 2050s from a current baseline of around 2,000 per year”. It said “urgent action” should be taken to address overheating in homes, public buildings and cities generally, and called for further research into the effect on workers’ productivity.

The Government also recognised that climate change “will present significant risks to the availability and supply of food in the UK”, the report said, partly because of extreme weather in some of the world’s main food-growing regions. The report also said the public water supply could be affected by shortages and that the natural environment could be degraded. Bob Ward, policy and communications director at the Grantham Research Institute on Climate Change and the Environment in London, said he was “astonished” at the way such a report had been slipped out. “Defra did very little to publicise it – they didn’t even tweet about it,” he said. “It’s almost as if they were trying to sneak it out without people realising. I have no idea what they were thinking.”
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You better start swimming or you’ll sink like a stone.
For the times they are a-changing.

The Last Time Oceans Got This Warm Sea Levels Were 20 to 30 Feet Higher (LAT)

Ocean temperatures today are about the same as they were more than 100,000 years ago – at a time when sea levels were 20 to 30 feet higher. The findings, published in the journal Science, highlight the key role that human activity has played in global warming and underscore concerns about the future impact of rising sea levels. Over millions and billions of years, the Earth has gone through periods of cooling (when water freezes out of the oceans, causing glaciers to grow and sea levels to fall) and warming (when the ice melts and sea levels rise). Scientists often look for clues hidden in layers of ancient rock and ice to determine what conditions were like in that long-gone climate.

The last interglacial period, which took place some 129,000 to 116,000 years ago, is a particularly intriguing chapter in Earth’s relatively recent history because of what it could tell us about today’s climate, said lead author Jeremy Hoffman, a paleoclimatologist at the Science Museum of Virginia. “The last interglacial is extremely interesting because it’s the last time period in recent Earth history when global temperatures were a little bit higher and global sea level was about 6 to 9 meters higher – but carbon dioxide in the atmosphere was roughly at what it was during the pre-industrial era,” said Hoffman, who conducted the work as a doctoral student at Oregon State University. “So it’s a really interesting scientific question: What is it about the last interglacial that’s so unique, that gave rise to higher sea levels?”

The problem is, researchers often assume climate change happened synchronously across the globe — that is, if it grew warm in one part, it also heated up in the others, and if it cooled in one area, it was cooling everywhere else at the same time. It’s already clear from climate patterns today that this simply isn’t the case, Hoffman said. Even if Earth overall is warming at a given point in time, for example, some spots might be getting cooler while others heat up. “What we know about how climate and temperature change on this planet is, it’s not all at the same time or at the same rate,” he said. “You can see these even today in human-caused climate change, how that’s playing out on a global scale.”

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Jan 162017
 
 January 16, 2017  Posted by at 10:13 am Finance Tagged with: , , , , , , , , , , , ,  


John Collier Japanese restaurant, Monday after Pearl Harbor, San Francisco 1941

World Could Enjoy Utopian Future With Sustainable Development (Ind.)
The Global Chain That Produces Your Fish (AFP)
Trump Calls NATO Obsolete And Dismisses EU (BBG)
Trump Slams NATO And EU, Prepared To “Cut Ties” With Merkel (ZH)
NATO, Russia, Merkel, Brexit: Trump Unleashes Broadsides On Europe (AFP)
Trump Vows ‘Insurance For Everybody’ In Replacing Obamacare (R.)
CIA Director Warns Trump To Watch What He Says (R.)
Trump Team May Move West Wing Briefings to Expand Capacity (BBG)
Pound Sterling Hits New 31-Year-Low Ahead Of May’s Brexit Speech (Ind.)
The Scandal of the 35-Page Anti-Trump ‘Intelligence Dossier’ (GR)
Eight Billionaire Men ‘As Rich As World’s Poorest 3.5 Billion People’ (BBC)
“China Should Stop Intervening In FX Market And Let Yuan Float” (R.)
China’s Booming Middle Class Drives Asia’s Toxic E-Waste Mountains (G.)
Greece Strives To Absorb EU’s Migration Funds (Kath.)

 

 

If you find this appealing, seek help. These people mean it, which makes them the biggest danger to your future, bar none. We’re not going to fix the world for profit. The sustainable delusion will kill us.

World Could Enjoy Utopian Future With Sustainable Development (Ind.)

It is an unremittingly bleak vision of the future: over the next decade the world’s economy stagnates, fossil fuels ramp up global warming and the gap between rich and poor widens, fuelling nationalist tensions based on resentment of the ‘global elite’. But, while a major new report by the Business & Sustainable Development Commission (BSDC) warns this appears to be humanity’s current path, it also spells out how to create not quite “heaven on Earth” but a world that is wealthier, more peaceful and fair for all. And their call for the world to start living up to the United Nations’ 17 Sustainable Development Goals was backed by more than 80 major companies in a joint letter to Theresa May, which urged the UK Government to take this “essential” step to secure “our long-term prosperity and the well-being of generations to come”.

However, Ms May did not respond personally to the letter, with the Department for International Development instead issuing a response on behalf of the Government in an implicit snub to the letter’s call for all departments, “not only” DfID, to get involved. The UN’s ‘Global Goals’, as they are known, seem at first sight to be almost impossibly ambitious. There should be “no poverty” and “zero hunger” in the world, universal health coverage, a decent education for all, gender equality, access to affordable and clean energy, action on climate change, the list goes on. But the BSDC’s report, compiled after a year of research into their effects, says achieving them is actually key to delivering massive growth. The document, called Better Business, Better World, estimates the Global Goals could be worth up to $36,000bn a year in savings and extra revenue by 2030.

They based this on an analysis of four major economic sectors – food and agriculture; energy and materials; cities; and health and wellbeing – which would benefit to the tune of $12,000bn a year. They then estimated the total economic prize would be two to three times higher. Lifting people out of poverty could bring up to a billion people into the consumer economy. And achieving gender equality alone could add at least $12,000bn to the world’s total GDP by 2025, according to one estimate. “The overall prize is enormous,” the report says. “The results will not be heaven on Earth; there will be many practical challenges. “But the world would undoubtedly be on a better, more resilient path. We could be building an economy of abundance.

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Mommy, tell me the story again about how smart we once were.

The Global Chain That Produces Your Fish (AFP)

That smoked salmon you bought for the New Year’s festivities has a story to tell. The salmon may have been raised in Scotland – but it probably began life as roe in Norway. Harvested at a coastal farm, the fish may have been sent to Poland to be smoked. It may even have travelled halfway around the world to China to be sliced. It eventually arrived, wrapped in that tempting package, in your supermarket. Globalisation has changed the world in many ways, but fish farming is one of the starkest examples of its benefits and hidden costs. The nexus of the world fish-farming trade is China – the biggest exporter of fish products, the biggest producer of farmed fish and a major importer as well.

With battalions of lost-cost workers, linked to markets by a network of ocean-going refrigerated ships, China is the go-to place for labour-intensive fish processing. In just a few clicks on Alibaba, the Chinese online trading hub, you can buy three tonnes of Norwegian filleted mackerel shipped from the port city of Qingdao for delivery within 45 days. “There is a significant amount of bulk frozen fish sent to China just for filleting,” said a source from an association of importers in an EU country. “The temperature of the fish is brought up to enable the filleting but the fish are not completely defrosted.” The practice has helped transform the Chinese coastal provinces of Liaoning and Shandong into global centres for fish processing.

But globalised fish farming leaves a mighty carbon footprint and has other impacts, many of which are unseen for the consumer. Don Staniford, an activist and director of the Global Alliance Against Industrial Aquaculture, called the fish industry’s production and transportation chain “madness”. “The iconic image of Scottish salmon – a wild salmon leaping out of the river – has gone. The Scottish salmon farming industry is dominated, 60-70%, by Norwegian companies,” he said. The biggest such company, Marine Harvest, is the world’s largest producer of Atlantic salmon, some 420,000 tonnes in 2015. Scottish salmon farms import eggs from Norway, the fish food from Chile and then send the fish to Poland – “because it’s cheaper” – for smoking, said Staniford.

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Lots of coverage of Trump’s weekend interviews in Europe. Too many details to cover them all in this format. Overall impression: he makes a lot of sense. Likes Brexit, doesn’t like NATO, sees EU as a project to benefit Germany, wants far less nukes, far less US regime change-focused interventionism.

Trump Calls NATO Obsolete And Dismisses EU (BBG)

Donald Trump called NATO obsolete, predicted that other European Union members would follow the U.K. in leaving the bloc, and threatened BMW with import duties over a planned plant in Mexico, according to two European newspapers which conducted a joint interview with the president-elect. Trump, in an hourlong discussion with Germany’s Bild and the Times of London published on Sunday, signaled a major shift in trans-Atlantic relations, including an interest in lifting U.S. sanctions on Russia as part of a nuclear weapons reduction deal. Quoted in German by Bild from a conversation held in English, Trump predicted that Britain’s exit from the EU will be a success and portrayed the EU as an instrument of German domination designed with the purpose of beating the U.S. in international trade.

For that reason, Trump said, he’s fairly indifferent to whether the EU stays together, according to Bild. The Times quoted Trump as saying he was interested in making “good deals with Russia,” floating the idea of lifting sanctions that were imposed as the U.S. has sought to punish the Kremlin for its annexation of Crimea in 2014 and military support of the Syrian government. “They have sanctions on Russia – let’s see if we can make some good deals with Russia,’’ Trump said, according to the Times. “For one thing, I think nuclear weapons should be way down and reduced very substantially, that’s part of it.’’ Trump’s reported comments leave little doubt that he’ll stick to campaign positions and may in some cases upend decades of U.S. foreign policy, putting him fundamentally at odds with Angela Merkel on issues from free trade and refugees to security and the EU’s role in the world.

Repeating a criticism of NATO he made during his campaign, Trump said that while trans-Atlantic military alliance is important, it “has problems.” “It’s obsolete, first because it was designed many, many years ago,” Trump said in the Bild version of the interview. “Secondly, countries aren’t paying what they should” and NATO “didn’t deal with terrorism.” The Times quoted Trump saying that only five NATO members are paying their fair share. While those comments expanded on doubts Trump expressed about the North Atlantic Treaty Organization during his campaign, he reserved some of his most dismissive remarks for the EU and Merkel, whose open-border refugee policy he called a “catastrophic mistake.”

In contrast, Trump praised Britons for voting in 2016 to leave the EU. People and countries want their own identity and don’t want outsiders coming in to “destroy it,” he said. The U.K. is smart to leave the bloc because the EU “is basically a vehicle for Germany,” the Times quoted Trump as saying. “If you ask me, more countries will leave,” he said. Trump told the Times that he plans to quickly pursue a trade deal with the U.K. after taking office and will meet with British Prime Minister Theresa May soon. “We’re gonna work very hard to get it done quickly and done properly. Good for both sides,” he said. “We’ll have a meeting right after I get into the White House and it’ll be, I think we’re gonna get something done very quickly.”

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ZH has a good summary of the interviews.

Trump Slams NATO And EU, Prepared To “Cut Ties” With Merkel (ZH)

In two separate, and quite striking, interviews with Germany’s Bild (paywall) and London’s Sunday Times (paywall), Donald Trump did what he failed to do in his first US press conference, and covered an extensive amount of policy and strategy, much of which however will likely please neither the pundits, nor the markets. Among the numerous topics covered in the Bild interview, he called NATO obsolete, predicted that other European Union members would join the U.K. in leaving the bloc and threatened BMW with import duties over a planned plant in Mexico, according to a Sunday interview granted to Germany’s Bild newspaper that will raise concerns in Berlin over trans-Atlantic relations. Furthermore, in his first “exclusive” interview in the UK granted to the Sunday Times, Trump said he will offer Britain a quick and “fair” trade deal with America within weeks of taking office to help make Brexit a “great thing”.

Trump revealed that he was inviting Theresa May to visit him “right after” he gets into the White House and wants a trade agreement between the two countries secured “very quickly”. Trump told the Times that other countries would follow Britain’s lead in leaving the European Union, claiming it had been deeply damaged by the migration crisis. I think it’s very tough, he said. People, countries want their own identity and the UK wanted its own identity. [..] Trump discussed his stance on Russia and suggested he might use economic sanctions imposed for Vladimir Putin’s encroachment on Ukraine as leverage in nuclear-arms reduction talks, while NATO, he said, “has problems.” “[NATO] is obsolete, first because it was designed many, many years ago,” Bild quoted Trump as saying about the trans-Atlantic military alliance. “Secondly, countries aren’t paying what they should” and NATO “didn’t deal with terrorism.”

While those comments expanded on doubts Trump raised about the North Atlantic Treaty Organization during his campaign, he reserved some of his most dismissive remarks for the EU and Merkel, whose open-border refugee policy he called a “catastrophic mistake.” He further elaborated on this stance in the Times interview, where he said he was willing to lift Russian sanctions in return for a reduction in nuclear weapons. When asked about the prospect of a nuclear arms reduction deal with Russia, Trump told the newspaper in an interview: “For one thing, I think nuclear weapons should be way down and reduced very substantially, that’s part of it.” Additionally, Trump said Brexit will turn out to be a “great thing.” Trump said he would work very hard to get a trade deal with the United Kingdom “done quickly and done properly”.

Trump praised Britons for voting last year to leave the EU. People and countries want their own identity and don’t want outsiders to come in and “destroy it.” The U.K. is smart to leave the bloc because the EU “is basically a means to an end for Germany,” Bild cited Trump as saying. “If you ask me, more countries will leave,” he was quoted as saying.

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Goal-seeked ‘reporting’: “Five days before his inauguration as the 45th President of the United States, the billionaire populist let loose a torrent of controversial comments..” AFP didn’t stand out so far as having joined the anti-Trump ranks, but there you go.

NATO, Russia, Merkel, Brexit: Trump Unleashes Broadsides On Europe (AFP)

NATO is “obsolete”, Germany’s Angela Merkel made a “catastrophic mistake” on refugees, Brexit will be “great” and the US could cut a deal with Russia: Donald Trump unleashed a volley of broadsides in interviews with European media. Five days before his inauguration as the 45th President of the United States, the billionaire populist let loose a torrent of controversial comments about European allies in interviews with British newspaper The Times and Germany’s Bild. He extended a hand to Russia, which has been hit by a string of sanctions under his predecessor Barack Obama over Moscow’s involvement in Ukraine, the Syrian war and for alleged cyber attacks to influence the US election. “Let’s see if we can make some good deals with Russia,” Trump said in remarks carried by The Times.

The US president-elect suggested a deal in which nuclear arsenals would be reduced and sanctions against Moscow would be eased, but gave no details. “Russia’s hurting very badly right now because of sanctions, but I think something can happen that a lot of people are gonna benefit,” said the president-elect, who has previously expressed admiration for Russian leader Vladimir Putin. Washington’s European allies imposed sanctions against Russia over Ukraine in 2014. Those measures were renewed on December 19.

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Trump grants an interview to the WaPo? He has a big heart!

Trump Vows ‘Insurance For Everybody’ In Replacing Obamacare (R.)

U.S. President-elect Donald Trump aims to replace Obamacare with a plan that would envisage “insurance for everybody,” he said in an interview with the Washington Post published on Sunday night. Trump did not give the newspaper specifics about his proposals to replace Democratic President Barack Obama’s signature health insurance law, but said the plan was nearly finished and he was ready to unveil it alongside the leaders of the Republican-controlled Congress. The Republican president-elect takes office on Friday. “It’s very much formulated down to the final strokes. We haven’t put it in quite yet but we’re going to be doing it soon,” Trump told the Post, adding he was waiting for his nominee for health and human services secretary, Tom Price, to be confirmed.

The plan, he said, would include “lower numbers, much lower deductibles,” without elaborating. “We’re going to have insurance for everybody,” Trump said. “There was a philosophy in some circles that if you can’t pay for it, you don’t get it. That’s not going to happen with us.” Trump was also quoted as saying in the interview that he would target pharmaceutical companies over drug pricing and insist they negotiate directly with the Medicare and Medicaid government health plans for the elderly and poor. U.S. House Republicans won passage on Friday of a measure starting the process of dismantling the Affordable Care Act, popularly known as Obamacare, despite concerns about not having a ready replacement and the potential financial cost of repealing the law.

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All these people, CIA, media, who actively attempted to undermine Trump’s campaign and candidacy, are now shocked (I tell you, shocked!) that he doesn’t ignore what they did.

CIA Director Warns Trump To Watch What He Says (R.)

CIA Director John Brennan on Sunday offered a stern parting message for Donald Trump days before the Republican U.S. president-elect takes office, cautioning him against loosening sanctions on Russia and warning him to watch what he says. Brennan rebuked Trump for comparing U.S. intelligence agencies to Nazi Germany in comments by the outgoing CIA chief that reflected the extraordinary friction between the incoming president and the 17 intelligence agencies he will begin to command once he takes office on Friday. In an interview with “Fox News Sunday,” Brennan questioned the message sent to the world if the president-elect broadcasts that he does not have confidence in the United States’ own intelligence agencies.

“What I do find outrageous is equating the intelligence community with Nazi Germany. I do take great umbrage at that, and there is no basis for Mr. Trump to point fingers at the intelligence community for leaking information that was already available publicly,” Brennan said. Brennan’s criticism followed a tumultuous week of finger-pointing between Trump and intelligence agency leaders over an unsubstantiated report that Russia had collected compromising information about Trump. The unverified dossier was summarized in a U.S. intelligence report presented to Trump and outgoing President Barack Obama this month that concluded Russia tried to sway the outcome of the Nov. 8 election in Trump’s favor by hacking and other means. The report did not make an assessment on whether Russia’s attempts affected the election’s outcome.

Trump has accused the intelligence community of leaking the dossier information, which its leaders denied. They said it was their responsibility to inform the president-elect that the allegations were being circulated. Later on Sunday, Trump took to Twitter to berate Brennan and wrote, “Was this the leaker of Fake News?” In a separate posting, Trump scolded “those intelligence chiefs” for presenting the dossier as part of their briefing. “When people make mistakes, they should APOLOGIZE,” he wrote.

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Excellent. The elite press do not deserve their status.

Trump Team May Move West Wing Briefings to Expand Capacity (BBG)

The incoming Trump administration is considering moving White House press briefings out of the West Wing to accommodate more than the “Washington media elite,” President-elect Donald Trump’s press secretary said. “This is about greater accessibility, more people in the process,” Sean Spicer said Sunday on Fox News Channel’s “Media Buzz.” Involving more people, including bloggers and others who aren’t from the mainstream media, “should be seen as a welcome change,” he said. Their comments followed a report Saturday by Esquire, citing unidentified officials from the transition team, that the new administration may move the press corps out of the main White House building altogether because of antagonism between Trump and the media.

Any change would be made for logistical reasons, in response to heavy demand from media organizations, Vice President-elect Mike Pence said Sunday. “The briefing room is open now to all reporters who request access,” White House Correspondents’ Association President Jeff Mason said in a statement Sunday. “We object strenuously to any move that would shield the president and his advisers from the scrutiny of an on-site White House press corps.” Mason said he was meeting with Spicer “to try to get more clarity on exactly what” the proposal is. “There’s such a tremendous amount of interest in this incoming administration that they’re giving some consideration to finding a larger venue on the 18 acres in the White House complex, to accommodate that extraordinary interest,” Pence said on CBS News’ “Face the Nation.”

“The interest of the team is to make sure that we accommodate the broadest number of people who are interested and media from around the country and around the world,” Pence said. On ABC’s “This Week,” incoming White House chief of staff Reince Priebus said demand for press-conference credentials far exceeds the “49 people” who can fit into the current briefing room. “The one thing that we discussed was whether or not we want to move the initial press conferences into the Executive Office Building,” Priebus said, adding, “you can fit four times the amount of people.”

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Oh well, with Trump praising Brexit and promising a swift deal, this may reverse.

Pound Sterling Hits New 31-Year-Low Ahead Of May’s Brexit Speech (Ind.)

Fears of the consequences of a hard Brexit have sent the pound to a fresh 31-year-low against the dollar, excluding last October’s flash crash. The pound hit new lows after reports said that Prime Minister Theresa May will on Tuesday signal plans to quit the EU’s single market to regain control of Britain’s borders, in a speech which is expected to give the most detailed insight yet into her approach to the forthcoming negotiations with Brussels. Sterling fell against all of its major peers, dropping below $1.1985 against the dollar in early Asian trade on Monday, before recovering slightly to just above $1.20. This is a more than three-decade low for the currency, excluding the flash crash on 7 October that sent the pound plunging more than six per cent to $1.18.

Fears among currency traders and investors that the UK is heading for a hard Brexit – in which access to the EU’s single market would be sacrificed in favour of tighter control over immigration – have tended to weaken the pound while suggestions that the UK could retain access to the EU single market have helped it recover. Sterling is down against the dollar by about 19 per cent since the Brexit vote, with declines since mainly sparked by concerns that Mrs May would pursue a so-called hard Brexit. City analysts are anticipating Mrs May’s speech on Tuesday with a sense of gloom.

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I know, I know, we should ignore this drivel. But there’s a few good take downs, this being one. I still wonder how the peeing hookers tale -apparently- ended up in Steele’s report. Because it came from the US, not Russia. Then again, of course, Steele hasn’t been to Russia in decades. If this report says anything, it’s that they can’t find dirt on Trump.

The Scandal of the 35-Page Anti-Trump ‘Intelligence Dossier’ (GR)

Some critics have been ungrateful enough to suggest that claims published without the least scintilla of supporting evidence by intelligence agencies which have a rich history of lying to the American people as well as everyone else, and which are in addition led by James Clapper, the Director of National Intelligence, may not be above suspicion. But the latest revelation, a 35-page sequence of linked texts published on January 10 by BuzzFeedNews, gives what simpletons are expected to interpret as unimpeachable evidence of soundness and credibility. The document is authored “by a person who has claimed to be a former British intelligence official,” and its sources, identified by letters of the alphabet, include a “senior Russian Foreign Ministry figure,” “a former top level Russian intelligence officer still active inside the Kremlin,” as well as another “senior Kremlin official.”

(How could one fail to doff one’s cap in acknowledgment of the spy-craft of those Brits, who are able so deftly to penetrate the inner counsels of the wicked Mr. Putin and induce his close associates to sing like canaries?) The texts which make up this document propose that Mr. Trump and his entourage had routine treasonous contacts with Russian state authorities over a long period leading up to the election, and that Mr. Putin was interfering in that election in every way possible—including by exploiting “TRUMP’s personal obsessions and sexual perversion in order to obtain suitable ‘kompromat’ (compromising material) on him.” The document’s most lurid claim—certified by Sources B, D, E and F—is made on its second page. It’s not clear what form of perverse pleasure Mr. Trump was supposed to have obtained by having “a number of prostitutes” urinate on his bed in the Moscow Ritz Carlton’s presidential suite.

The explanation given for the motivation behind this command performance – that the same bed had previously been slept in, on one of their official visits to Russia, by Barack and Michelle Obama (“whom he hated”) – seems bizarre. After all, on the night in question, whose soggy bed was it now? [..] The most immediate concern raised by this literally filthy story may be humanitarian. It seems well attested that Mr. Trump is not merely fastidious, but germaphobic: where is he supposed to have slept out the rest of the night? On the perhaps undefiled sofa, or on the carpet? And what are we to make of the claim by trolling posters at 4Chan that this “golden showers” story was a hoax they had foisted onto a Republican operative known to despise Trump, who then shopped it around to news media, other politicians, and intelligence agencies? If this story is a fiction, then are the document’s Sources B, D, E and F, who confirmed it, also fictional? And if some of the document’s sources are made up, what kind of fool would want to believe that any of the rest are authentic?

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We call these people success stories. We need to redefine ‘success’.

Eight Billionaire Men ‘As Rich As World’s Poorest 3.5 Billion People’ (BBC)

The world’s eight richest individuals have as much wealth as the 3.6bn people who make up the poorest half of the world, according to Oxfam. The charity said its figures, which critics have queried, came from improved data, and the gap between rich and poor was “far greater than feared”. Oxfam’s report coincides with the start of the World Economic Forum in Davos. Mark Littlewood, of the Institute of Economic Affairs, said Oxfam should focus instead on ways to boost growth. “As an ‘anti-poverty’ charity, Oxfam seems to be strangely preoccupied with the rich,” said the director-general of the free market think tank. For those concerned with “eradicating absolute poverty completely”, the focus should be on measures that encourage economic growth, he added.

Ben Southwood, head of research at the Adam Smith Institute, said it was not the wealth of the world’s rich that mattered, but the welfare of the world’s poor, which was improving every year. “Each year we are misled by Oxfam’s wealth statistics. The data is fine – it comes from Credit Suisse – but the interpretation is not.” The annual event in Davos, a Swiss ski resort, attracts many of the world’s top political and business leaders. Katy Wright, Oxfam’s head of global external affairs, said the report helped the charity to “challenge the political and economic elites”. “We’re under no illusions that Davos is anything other than a talking shop for the world’s elite, but we try and use that focus,” she added.

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But that would sink it. A band of 25%?!

“China Should Stop Intervening In FX Market And Let Yuan Float” (R.)

China should stop intervening in the foreign exchange market, devalue the yuan and let it float freely to restore stability, a senior researcher at a government-backed think tank said. Xiao Lisheng, a finance expert with the Chinese Academy of Social Sciences, made the remarks in an article on Monday in the official China Securities Journal amid a growing debate among the country’s economists on whether authorities should let the closely-managed currency trade more freely. The yuan lost 6.6% against the dollar last year, the biggest annual loss since 1994. “The more the government delays the release of depreciation pressure, the greater the impact and destructive power of the release of depreciation pressure will be,” Xiao wrote.

The authorities should “let the yuan exchange rate have a one-off adjustment to realize a free float” of the currency, he said. The yuan is allowed to trade in a band of 2% on either side of a daily reference rate managed by the central bank. Authorities have said repeatedly there was no basis for continued depreciation of the unit, but many currency strategists predict a further weakening this year if the U.S. dollar remains strong, spurring further capital outflows from China. Xiao said the current mid-point formation mechanism, adopted in 2015, is still immature and in transition, although it has eased depreciation pressure and curbed sharp declines in the country’s foreign exchange reserves. “But any foreign exchange rate mechanism without a free float cannot fundamentally reach a market clearing (price),” he wrote.

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Much more of that to come, even if -or especially if- their economy tanks.

China’s Booming Middle Class Drives Asia’s Toxic E-Waste Mountains (G.)

Asia’s mountains of hazardous electronic trash, or e-waste, are growing rapidly, new research reveals, with China leading the way. A record 16m tonnes of electronic trash, containing both toxic and valuable materials, were generated in a single year – up 63% in five years, new analysis looking at 12 countries in east and south-east Asia shows. In China the mountain of discarded TVs, phones, computers, monitors, e-toys and small appliances grew by 6.7m tonnes in 2015 alone. That’s an 107% increase in just five years. To get a sense of scale, if every woman, man and child in China had an old LCD monitor and dumped it the pile would not equal the 2015 tonnage. The region’s fast-increasing middle class is the main driver of e-waste increases, not population growth, the report by the United Nations University found.

However, Asia’s 3.7kg per person of waste is still tiny compared to Europe’s 15.6 kg per person, it said. “Growing incomes, the creation of more and more gadgets and ever-shorter lifespans of things like mobile phones are the reasons for this tremendous increase in Asia,” said co-author Ruediger Kuehr of UN University. Electronics and electrical devices have a big eco footprint, meaning their manufacture consumes a lot of energy and water, along with valuable and sometimes scarce resources, making recycling and recovery very important. The increasing volumes of e-waste combined with a lack of environmentally sound management is a cause for concern, says Kuehr. “We risk future production of these devices and very high costs without recycling the materials,” he said.

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The numbers start to be confusing. It’s good to realize that Kathimerini is not a fan of Tsipras. What we know is the EU prefers to donate millions to NGOs rather than Greece.

But the point stands: where is the money going, what is it being spend on, and why is there no public accounting of this? Why are refugees freezing to death?

Greece Strives To Absorb EU’s Migration Funds (Kath.)

Greece is struggling to make use of EU money for migrants and refugees after having absorbed just a fraction of the 509 million euros in funding for up to 2020. So far, Athens has used about 2% of 294.6 million euros from the EU’s Asylum, Migration and Integration Fund, and around 25% of 214.8 million euros from the Internal Security Fund. Greek authorities blame the slow absorption rate on emergency conditions caused by the migrant influx, whereas Brussels has pointed to technical faults on the other end.

Athens, however, appears more flexible absorbing separate EU emergency funding: From about 350 million euros for 2015-16, some 175 million has gone to state agencies and an equal sum to the UN refugee agency, the International Organization for Migration (IOM) and the European Asylum Service. “Were it not for the emergency funds, we would be able to do nothing. Or we would have to spend money from the state budget. Regular funding requires a lot of bureaucracy,” a Labor Ministry official told Kathimerini on condition of anonymity.

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