Aug 052019
 


Piet Mondriaan Study for Blue Apple Tree Series 1908

 

Currency War Begins: China Crashes Yuan Past 7, Halts US Agri Imports (ZH)
China Lets Yuan Slump Past 7 Per Dollar For First Time In Over A Decade (R.)
Hong Kong Brought To A Standstill As City-Wide Strikes And Protests Hit (G.)
Job Growth In Trump Land Is Dead In The Water (MW)
10 Alarming Things About The Economy That Politicians Won’t Tell You (MW)
The Crashes That Cause Grown Men To Cry (Eric Peters)
Inside The Plunge Protection Team: Chaos (ZH)
Russiagate is the New 42 (Craig Murray)
Austerity Populism (G.)
Bellingcat Unloads 4,000-Word Hit Piece On Tulsi Gabbard (RT)
America’s Other Original Sin (Bacevich)

 

 

“..trade talks, even the fake kind, is now over, dead and buried..”

Currency War Begins: China Crashes Yuan Past 7, Halts US Agri Imports (ZH)

Update 2: – China’s central bank has confirmed that it is, indeed, on, saying that it is able to keep the yuan exchange rate at a reasonable and balanced level – whatever that means – while acknowledging that the Yuan plunging beyond 7 per dollar is due to market supply and demand, trade protectionism and expectations on additional tariffs on Chinese goods. Meanwhile, resorting to its old, tired and worn out tricks, Dow Jones reports that the PBOC will crack down on short-term Yuan speculation, and anchor market expectations. Which is great… if only the PBOC didn’t say exactly the same back in May, when it warned currenct traders that those “shorting the yuan will inevitably suffer from a huge loss.” Three months later, it’s currency traders 1 – Beijing 0.


Update 1 – China is firing all the big guns tonight, because just an hour after Beijing effectively devalued the yuan, when it launched the latest currency war with the US, Bloomberg reported that the Chinese government has asked its state-owned enterprises “to suspend imports of U.S. agricultural products after President Donald Trump ratcheted up trade tensions with the Asian nation last week.” China’s state-run agricultural firms have now stopped buying American farm goods, and are waiting to see how trade talks progress. Translation: trade talks, even the fake kind, is now over, dead and buried, and the only question is how Trump will react.

[..] in a dramatically unsettling move for global stability, China’s offshore yuan just collapsed below 7/USD — after the PBOC fixed the onshore yuan below 6.90 for the first time in 2019 — the currency plunging a stunning 12 handles to its weakest on record against the dollar as countless stop losses were triggered and thousands of traders were margined out.

“A break of 7 is quite shocking to the market, and close attention will be paid to how China would deal with this move,” says Tsutomu Soma, general manager of the investment trust and fixed-income securities at SBI Securities Co. in Tokyo in a phone interview. This is the weakest offshore yuan has ever been against the dollar…

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Beijing control over the yuan is worrisome. It also prohibits uptake of the currency in global trade.

China Lets Yuan Slump Past 7 Per Dollar For First Time In Over A Decade (R.)

China on Monday let the yuan tumble beyond the key 7-per-dollar level for the first time in more than a decade, in a sign Beijing might be willing to tolerate further currency weakness in the face of an escalating trade row with the United States. The sharp 1.4% drop in the yuan came after the People’s Bank of China set the daily mid-point of the currency’s trading band at 6.9225 per dollar, its weakest level since December 2018. “Today’s fixing was the last line in the sand,” said Ken Cheung, senior Asian FX strategist at Mizuho Bank in Hong Kong. “The PBOC has fully given the green light to yuan depreciation”. The shakeout in the yuan comes days after Trump stunned financial markets by vowing to impose 10% tariffs on the remaining $300 billion of Chinese imports from Sept. 1, abruptly breaking a brief month-long ceasefire in the bruising trade war.

After opening the onshore session at 6.9999 per dollar, the yuan had weakened to 7.0266 per dollar by 0351 GMT, down 1.2% on the day after earlier losing as much as 1.4% of its value. Monday marked the first time the yuan had breached the 7-per-dollar level since May 9, 2008. With the escalating trade war giving Beijing fewer reasons to maintain yuan stability, analysts said they expect the currency to continue to weaken. “In the short-term, the yuan’s strength would be largely determined by the domestic economy. If third-quarter economic growth stabilizes, the yuan could stabilize around 7.2 or 7.3 level,” Zhang Yi, chief economist at Zhonghai Shengrong Capital Management in Beijing.


Capital Economics senior China economist Julian Evans-Pritchard said the PBOC had probably been holding back against allowing a weaker yuan to avoid derailing trade negotiations with the United States. “The fact that they have now stopped defending 7.00 against the dollar suggests that they have all but abandoned hopes for a trade deal with the U.S.,” he said.

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Organizers swore peaceful protests. But a few agitators can take care of that.

Hong Kong Brought To A Standstill As City-Wide Strikes And Protests Hit (G.)

Hong Kong’s embattled leader, Carrie Lam, has warned that mass protests have pushed the region to the brink of a “very dangerous situation” as residents have gone on strike, paralysing the city. Lam, who has disappeared from public view for the past two weeks, gave a media briefing in which she condemned the protests for hurting Hong Kong’s economy and stability. “Such extensive disruptions in the name of certain demands or uncooperative movement have seriously undermined Hong Kong law and order and are pushing our city, the city we all love, and many of us helped to build, to the verge of a very dangerous situation,” she said.

On Monday, transport across Hong Kong was brought to a standstill and more than 150 flights out of the city were cancelled. Almost 100 outbound and 100 inbound flights were cancelled. Protesters also blocked key roads and stopped trains throughout the city. [..] Protesters have shifted tactics beyond only marches and protests in the streets. Civil servants from more than 30 government departments, as well as pilots, teachers, construction workers, engineers, and aviation staff all pledged to strike on Monday.


On Monday morning, several lines of the MTR, the rail network serving Hong Kong, were suspended as protesters, many wearing face masks and black clothing, blocked the doors of trains, preventing them departing the stations. There were also reports of discarded umbrellas being wedged in train doors to prevent them from closing, delaying services. Monday’s planned city-wide protest, which is aimed to disrupt peak-hour travel of commuters, is the fifth consecutive day of mass demonstrations in the city. Simultaneous rallies were planned for seven of Hong Kong’s 18 districts on Monday. Hong Kong has not held a general strike in more than 50 years.

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“Rural America is older, sicker, poorer and more dependent upon state aid than it was before.”

Job Growth In Trump Land Is Dead In The Water (MW)

Since the economy began adding jobs after the Great Recession nine years ago, about 21.5 million jobs have been created in the United States, the second-best stretch of hiring in the nation’s history, second only to the 1990s. But job growth isn’t being spread evenly across the land. Most of the new jobs have been located in a just a few dozen large and dynamic cities, leaving slower-growing cities, small towns and rural areas — where about half of Americans live — far behind. Along with climate change and racial justice, economic development is America’s biggest challenge over the next few decades. Inclusive growth is a must, or else our society will fall apart. The problem: No one — certainly not President Trump — has found the magic wand that will bring back jobs to rural and small-town America.

According to a study titled “The Future of Work in America” by the McKinsey Global Institute released in July, 25 cities that are home to about 30% of Americans will capture about 60% of the job growth between 2017 and 2030, just as they did between 2007 and 2017. Twelve are megacities (and their extended suburbs): Atlanta, Boston, Chicago, Dallas, Houston, Los Angeles, Miami, New York, Philadelphia, Phoenix, San Francisco and Washington. Another 13 are high-growth hubs in smaller cities: Austin, Charlotte, Denver, Las Vegas, Minneapolis, Nashville, Orlando, Portland (Ore.), Raleigh, San Antonio, San Jose, Seattle, and Tampa. A few other smaller, fast-growing cities will also add jobs, while vast swaths of the South, Midwest and Plains will lose jobs.


The New York metro area, home to 20 million people, added more jobs over the past year than all the small towns and rural areas — with 46 million people — did combined. Anyone who’s been paying attention to the political map will recognize that the growth is mostly occurring in places that vote for Democrats, while the stagnation is mostly in places that vote for Republicans. Donald Trump has appealed to those who are the most fearful, the most resentful and the most despairing, but the situation hasn’t gotten any better since his election. Rural America is older, sicker, poorer and more dependent upon state aid than it was before.

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Feel lucky?

10 Alarming Things About The Economy That Politicians Won’t Tell You (MW)

Here are 10 remarkable forecasts and assumptions that Washington is making and isn’t telling you. These are all contained in the Congressional Budget Office’s most recent Long-Term Budget Outlook, the cornerstone document of government financial and economic planning.

1. We’re going to have a lot more immigrants. A lot. They’re expecting a net 22.5 million more immigrants to come to the U.S. over the next 20 years. By 2049, they’re expecting immigration to account for a stunning 87% of annual population growth.

2. We’re going to have a lot more illegal immigrants. Despite the current bluster and the scandals at the border, the CBO expects we’ll have 2.4 million more illegal immigrants (or “undocumented residents,” or whatever) in 20 years’ time than we have today.

3. We’re going to be up to our eyeballs in debt. The national debt is expected to skyrocket to an “unprecedented” 144% of GDP by 2049, or twice the level today. That would put the debt just under $100 trillion. The figure today: Around $18 trillion. As recently as 2000: $4 trillion. Oh, and this isn’t even the worst-case scenario: The national debt could exceed 200% of GDP in 30 years’ time, the CBO acknowledges.

4. We’re going to owe so much money that by 2049 the annual interest on the debt will be about 5% of GDP — roughly the share that we spend today on Social Security. And that’s even if interest rates stay low. Despite rising debt and federal spending, the government is expecting — or hoping — the average rate on federal debt will rise only from today’s lowly 2.4% to 4.2%, still modest by historic standards, by 2049.

5. This debt, and these deficits, will damage the economy. They will crowd private investment out of the debt markets, reducing income and growth, says the CBO. And as we’ll have to borrow more and more from abroad to finance the government, they’ll lead to bigger and bigger interest payments leaving the country.

6. Social Security, Medicare, other health programs and net interest are going to soak up so much of the budget that we’re going to have to slash everything else to the smallest share of the economy in 70 years — just 7%. The average over the past 50 years: 11%.

7. Just to keep the federal deficit to these levels, your taxes will go up. The Obama tax hike on “Cadillac” health-insurance plans will kick in starting in 2022, and the 2017 Trump tax cuts will expire in 2025.

8. Most working stiffs can say goodbye to any other tax cuts. Uncle Sam is explicitly relying on your taxes to go up thanks to “bracket creep,” where income-tax brackets rise only in line with inflation while your income — you hope — rises faster.

9. While tax rates go up for most people, they won’t for those earning the most. That’s because more and more of their income will be above the Social Security “cap,” saving them an effective 12.4% a year. The cap this year is $132,900.

10. Meanwhile, working stiffs will be taxed at twice the marginal rate of those who live on dividends. By 2049, says the CBO, labor income will be taxed at a marginal rate of 32%, compared to just 16% for capital income. Good to know, isn’t it? It would be great to see some of this stuff come up in the presidential race, wouldn’t it?

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“The Fed hiked 25bps to 3.25% in Feb 1994. Grown men cried on the trading floor. Salesmen. They were soon laid off. Their clients suffered staggering losses. They too were fired.”

The Crashes That Cause Grown Men To Cry (Eric Peters)

He started his career in 1989, with Fed Funds at 9.75%. The Fed slashed rates to 8.25% in Dec 1989 as the S&L Crisis unfolded. They continued cutting until Aug 1992, when rates hit a mindboggling low of 3.00%. The Fed kept money that cheap for 1.5 yrs. Investors had recently earned 9.75% for taking no risk and found themselves starved for returns. So banks structured complex products that offered enhanced yields by selling volatility – they were great, provided the Fed neither hiked nor cut rates. They flew off the shelves. Salespeople gouged their clients. The Fed hiked 25bps to 3.25% in Feb 1994. Grown men cried on the trading floor. Salesmen. They were soon laid off. Their clients suffered staggering losses. They too were fired.


And as their bosses and boards discovered the scale of their unbounded risk, they instructed the banks to get them out at the best price. Whenever that happened, the cost was far bigger than expected. And this in turn was reflexive. Those clients who had earlier assured themselves that they could stomach the ride – because they were long-term investors – were forced to vomit. They call that period The Great Bond Massacre. But it seemed like every few years, another great massacre would unfold in one thing or another. So he assumed that this is how the world worked. Of course, he wasn’t alone. Global central bankers also recognized this to be the case. So they strived to avoid new massacres. But their tools only worked when the mechanic applied greater leverage with each use. Massacre after massacre, they cranked away. By 2019, they had produced the longest economic expansion and equity bull market in American history.

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Is this enough to end the Fed?

Inside The Plunge Protection Team: Chaos (ZH)

Now, thanks to Bloomberg, we have a much more detailed look into what transpired at the trading desk of the “Plunge Protection Team”, and what we learn is that the past year said institution which forms the bedrock of support for the US capital market has been gripped by what at times is sheer chaos. Why? Perhaps it will not come as a surprise to anyone, that the reason for said chaos is another career economist, in this case the “new” president of the New York Fed, John Williams (no relation to the Star Wars guy). As Bloomberg details in a “must read” report, “an unusual level of internal tension broke out in recent weeks at the fortress-like Federal Reserve Bank of New York in lower Manhattan.”

This was prompted by the sudden departure of the two longtime officials mentioned above, which “shook staff, sank morale and drew attention to the leadership of the New York Fed under John Williams as he enters his second year at the helm.” And yes, this is the same John Williams who two weeks ago prompted a mini market tantrum following one of the most epic communication fuck ups by a central banker. As Bloomberg writes “the story involves Simon Potter, who ran the all-important markets desk, and Richard Dzina, head of the financial services group. Both were abruptly relieved of their roles in late May by Williams.


Little explanation was given, but according to current and former New York Fed employees, as well as those close to the bank, the nature of the exits, by fault or design, seemed to be a warning: fall in line.” It is not clear exactly what the two titans of US capital markets had to “fall in line” for, but two things are certain – i) Potter did not “resign”, he was fired by Williams, and ii) now that an economist with zero capital markets experience is in charge, and following his termination of Potter and Dzina, the world is one step closer to collapse as a clueless PhD hack is in charge of the most important market in the world.

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“Judge Koeltl concluded that, quite simply, the claims made as the basis of Russiagate are insufficient to even warrant a hearing.”

Russiagate is the New 42 (Craig Murray)

Douglas Adams famously suggested that the answer to life, the universe and everything is 42. In the world of the political elite, the answer is Russiagate. What has caused the electorate to turn on the political elite, to defeat Hillary and to rush to Brexit? Why, the evil Russians, of course, are behind it all. It was the Russians who hacked the DNC and published Hillary’s emails, thus causing her to lose the election because… the Russians, dammit, who cares what was in the emails? It was the Russians. It is the Russians who are behind Wikileaks, and Julian Assange is a Putin agent (as is that evil Craig Murray). It was the Russians who swayed the 1,300,000,000 dollar Presidential election campaign result with 100,000 dollars worth of Facebook advertising.

It was the evil Russians who once did a dodgy trade deal with Aaron Banks then did something improbable with Cambridge Analytica that hypnotised people en masse via Facebook into supporting Brexit. All of this is known to be true by every Blairite, every Clintonite, by the BBC, by CNN, by the Guardian, the New York Times and the Washington Post. “The Russians did it” is the article of faith for the political elite who cannot understand why the electorate rejected the triangulated “consensus” the elite constructed and sold to us, where the filthy rich get ever richer and the rest of us have falling incomes, low employment rights and scanty welfare benefits. You don’t like that system? You have been hypnotised and misled by evil Russian trolls and hackers. [Whether Trump and/or Brexit were worthy beneficiaries of the popular desire to express discontent is an entirely different argument and not one I address here].


Except virtually none of this is true. Mueller’s inability to defend in person his deeply flawed report took a certain amount of steam out of the blame Russia campaign. But what should have killed off “Russiagate” forever is the judgement of Judge John G Koeltl of the Federal District Court of New York. In a lawsuit brought by the Democratic National Committee against Russia and against Wikileaks, and against inter alia Donald Trump Jr, Jared Kushner, Paul Manafort and Julian Assange, for the first time the claims of collusion between Trump and Russia were subjected to actual scrutiny in a court of law. And Judge Koeltl concluded that, quite simply, the claims made as the basis of Russiagate are insufficient to even warrant a hearing. The judgement is 81 pages long, but if you want to understand the truth about the entire “Russiagate” spin it is well worth reading it in full. Otherwise let me walk you through it.

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Poverty as a means of getting rid of the unwanted.

Austerity Populism (G.)

In a recent book ostensibly focused on Jeremy Corbyn’s Labour party, but partly about recent British political history, the academics Matt Bolton and Frederick Harry Pitts explain the last decade in terms of “austerity populism”. Cuts, welfare crackdowns and the case for leave, they explain, were all sold to the public via the exclusion of supposedly unproductive undesirables: “scroungers” in the austerity narrative; “migrants” in the stories that swirled around the 2016 referendum. Both traded on a nostalgic idea of national struggle, keeping calm and carrying on, and some strange, latent belief that the country was in need of a purgative spell of pain akin to an imaginary version of the second world war.

In this vision, David Cameron’s election victory in 2015 and the leave side’s win a year later were watershed moments on the same national journey. But if austerity populism has so far been politically successful, it also comes with obvious risks. Trumpeting the wonders of slashing services and kicking around the poor only works for as long as the majority of people are largely untouched by those things – which is why Johnson is now partly changing tack and pledging to spend money (although our nasty, broken benefits system and countless imperilled public services will surely remain untouched).


By the same token, the romance of leaving the EU will only endure while its losers – sheep farmers, car industry workers, people who have come to the UK from central and eastern Europe – form a minority, and enough voters can still be persuaded that they will be winners in a Tory Brexit. Yet, however shambolic the opposition offered by Labour, the lived reality of no deal would surely risk tipping too many people into doubt and fear and away from the Conservatives, which is one reason why Johnson and his allies are in such an obvious hurry. The emotional side of me would simply describe this all as a very English tragedy, centred on a mean-spiritedness that the woman I met in Dover would instantly recognise. And at least until the end of this long, overheated summer and the start of an autumn of nightmares, millions of us will carry on behaving much as we have done for the last decade: not just passing by on the other side, but dancing as we do it.

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A weird propaganda tool. That we pay attention to it is a flashing red sign of where our societies are at.

Bellingcat Unloads 4,000-Word Hit Piece On Tulsi Gabbard (RT)

Running as an anti-war candidate in the US comes with a target painted on your back that draws fire from those rooting for foreign interventions. In case of Tulsi Gabbard, it includes a lengthy piece on chemical attacks in Syria. Gabbard, a Democratic presidential hopeful, became the most-googled candidate during the second primary debate – but the surge of public interest came with renewed attacks against her anti-interventionist agenda. In case you’ve missed it all, Gabbard has been branded a ‘Russian’ spoiler for whichever candidate is eventually picked, and, once again, an apologist for Syrian President Bashar Assad.

Joining the chorus of bashers on Sunday was Elliot Higgins, the founder of the UK-based ‘citizen investigation’ outlet Bellingcat, who wrote a whopping 4,000-word piece attacking Gabbard’s negative attitude toward regime change wars. In particular, Higgins didn’t like her skepticism over chemical weapons attacks in Syria reflected on her campaign website. The attacks were used by Washington to justify missile attacks against the country’s government – and by extension continued illegal US military presence in the country.


The mammoth piece starts with screenshots featuring logos of RT and InfoWars (Russian propaganda, dear readers, conspiracy theories!) and goes on to criticize anyone doubting the US-favored narrative about what happened in Syria. MIT Professor Theodore Postol gets an honorable mention, with whom Higgins no longer debates in person since their encounter in 2018. Back then, Higgins failed to address Postol’s technical criticisms of his investigations and instead resorted to mocking applauses and calling his opponent a tool of Russian propaganda.

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Always a sucker for a good history lesson.

America’s Other Original Sin (Bacevich)

Can there be more than one Original Sin? I’m guessing that may be a theological nonstarter, but as a basis for historical interpretation there is real merit in considering the possibility of multiple exiles from the Garden of Eden. That the arrival of the first African slaves to Jamestown 400 years ago this month qualifies as America’s Original Sin is now widely recognized. While holdouts remain, most agree that slavery and racism together have left an indelible stain on our nation. Many would argue that this awareness has arrived belatedly. I might even cite myself as an example.

As a kid growing up in Northwest Indiana in the middle of the last century, I judged slavery to have been an unfortunate mistake long since corrected. In the de facto segregated Calumet region where my family lived, race obviously remained a sensitive subject, but to my mind one best kept at arm’s length. I had more important things to worry about than the relationship between white people like me and those who were not white—why the Cubs were permanently stuck in or near the National League cellar being but one example. In the decades since, I’ve learned to see matters differently. So have many others.

But let me suggest the possibility of a Second Original Sin, not rising to the level of the first, but at least deserving far more attention than it has received. And that’s the sin committed in December 1898, when the United States laid claim to the Philippines. The history of this transaction, centering on a transfer of sovereign authority from Madrid to Washington, is both well known and almost entirely forgotten. As had been the case with race in East Chicago, Indiana, back in the late 1950s, the incorporation of the Philippines into an increasingly far-flung American empire has been written off. This, I have come to believe, is unfortunate, especially today when the American empire appears increasingly precarious.

The essential facts are these. In April 1898, the United States went to war with Spain. The war’s nominal purpose was to liberate Cuba from oppressive colonial rule. The war’s subsequent conduct found the United States not only invading and occupying Cuba, but also seizing Puerto Rico, completing a deferred annexation of Hawaii, scarfing up various other small properties in the Pacific, and, not least of all, replacing Spain as colonial masters of the Philippine Archipelago, located across the Pacific.


1898 US Political Cartoon: U.S. President William McKinley is shown holding the Philippines, depicted as a savage child, as the world looks on. The implied options for McKinley are to keep the Philippines, or give it back to Spain, which the cartoon compares to throwing a child off a cliff.

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Jun 252019
 


Caravaggio Conversion on the way to Damascus 1600-01

 

Something’s been nagging me for the past few days, and I’m not sure I’ve figured out why yet. It started when Donald Trump first called off the alleged planned strikes on targets in Iran because they would have cost 150 lives, and then the next day said the US would do sanctions instead. As they did on Monday, even directly targeting Trump’s equal, the “Supreme Leader Khameini”.

When Trump announced the sanctions, I thought: wait a minute, by presenting this the way you did, you effectively turned economic sanctions into a military tool: we chose not to do bombs but sanctions. Sounds the same as not doing a naval invasion but going for air attacks instead. The kind of decisions that were made in Vietnam a thousand times.

However, Vietnam was all out war (well, invasion is a better term). Which shamed the US, killed and maimed the sweet Lord only knows how many promising young Americans as well as millions of Vietnamese, and ended in humiliating defeat. But the US is not in an all out war in Iran, at least not yet. And if they would ever try to be, the outcome would be Vietnam squared.

Still, that’s not really my point here. It’s simply about the use of having the world reserve currency as a military weapon instead of an economic one. And I think that is highly significant. As well as an enormous threat to the US. The issue at hand is overreach.

While you could still argue that economic sanctions on North Korea, Venezuela and Russia are just that, economic and/or political ones, the way Trump phrased it, comparing sanctions one on one with military strikes, no longer leaves that opening when it comes to Iran. The new Iran sanctions are a preliminary act of war. Simply because of how he presented them. He explicitly stated that he swapped one for the other.

 

There are quite a few people who have been harping on the demise of the USD as reserve currency for a long time, and I always think: look, nobody wants the yuan, let alone the ruble. There’s no trade being executed in these currencies. So taking over from the USD is a pipe dream.

But that may very well change, and perhaps very fast too, if the US uses the dollar not as an economic weapon (and there are plenty issues with that already), but as a military one. That would potentially hugely speed up any efforts to move away from the buck in international trade.

For the simple reason that it becomes unreliable. Traders hate that, they can’t have that. A reserve currency must be neutral -to a point-. The world of trade doesn’t want the yuan because Beijing controls it and can therefore change conditions and values overnight. But if and when the US uses the USD as a military tool, it essentially risks doing exactly the same: it deneutralizes the USD.

Using the USD as an economic weapon is ugly, but something global trade can deal with. A military weapon, though, is something else altogether. And I see no sign that Trump understands this. The thing is, using your currency, which also happens to be the world reserve currency, as a military tool, means you’ve become a threat to everyone, the entire globe, overnight.

And people don’t want to live that way. Not Iran, not Russia, not China, not Europe, no-one. It’s one thing to use the USD for sanctions. But it’s a real different thing to use it as just a military alternative to “bombing a country into obliteration”.

 

What Trump did comes awfully close to signing the death warrant for the USD as the global reserve currency. And it’s really only because he and his people weren’t paying attention. He could have phrased the entire thing differently, and it would have been business as usual, a business that Moscow and Beijing are actively trying to undermine, but they could have waited a bit longer reacting.

Now, however, their plans have to be sped up. They’re going to be buying a lot of gold, as they’ve already been doing, they’ll try to do their mutual business in their own currencies backed by this gold, and they’ll speed up alternatives-to-USD plans with other countries in their neighborhood. Because they have no choice anymore.

I see Tyler Durden reporting that the US threatens to throw a Chinese state-owned bank out of the SWIFT system, and I think: great idea. Why not force China to quit the reserve currency system, the petrodollar, outright?! Why not force it to hasten the Asian/Russian alternative trade model into existence? What a great and lovely idea.

The US should today make friends. It should preserve the reserve currency status of the USD for as long as it can, by convincing allies and foes alike that it will protect its neutrality in global trade. But Trump and his people are doing the exact opposite, they’re playing all-on-red.

The US no longer has the economic, political or military might to dictate to the entire world any terms it wants to. Those days are long gone. That ended in Vietnam. Trump’s living in the last century, while Bolton and Pompeo, they live in their own time and world.

 

But yeah, sure, perhaps this is what the dying days of an empire MUST look like. Maybe there’s a model to follow and there’s no escape, maybe it’s all written in the stars. Like Rome and Greece and Genghis Khan. Maybe things simply just have to play out. Still, looking at that Trump statement about the new Iran sanctions that started me off, it doesn’t feel all that smart.

 

 

 

 

Apr 272019
 


Vincent van Gogh Pietà (after Delacroix) 1889

 

The Big Mystery In The GDP Report – Where Did The Inventories Come From? (MW)
China Finds Dollar Hegemony Is A Tough Nut To Crack (WS)
Nearly 102 Million Americans Do Not Have A Job Right Now (Snyder)
Trump Makes Post-Mueller Vow To Release “Devastating” FISA Docs (ZH)
Blowback Is a Harsh Mistress (Kunstler)
Marina Butina Sentenced To 18 Months In Prison (ZH)
Labour Party In ‘Complete Meltdown’ Over Final Say (Ind.)
London Extinction Rebellion Mural is a Banksy (G.)
Greeks The Most Stressed People Worldwide – Gallup (K.)
Brazil Governed By ‘Lunatics’ And US ‘Lackeys’ – Lula (G.)

 

 

Industrial production and imports are both down. But inventories rise.

The Big Mystery In The GDP Report – Where Did The Inventories Come From? (MW)

It is a case that would make Sherlock Holmes proud. Growth in the first quarter smashed expectations, fueled in part by strong inventory building. According to the government, $32 billion of goods were added to inventories this quarter, or $128 billion annualized. This stockpiling of goods boosted first-quarter GDP growth by about 70 basis points and helped propel growth to a 3.2% annual rate, well above forecasts. The problem is that it is not at all obvious where these inventories came from. Goods have to come from somewhere, either produced by domestic firms or imported from abroad. The mystery is that both production and imports fell in the first three months of the year, according to government data.

“You can’t stockpile what you do not import or do not produce,” said Robert Brusca, chief economist at FAO Economics. The Fed reported last week that industrial output slipped at a 0.3% annual rate in the first quarter. And the government’s GDP report estimates that imports fell 3.7% in the first three months of the year. The one other explanation — that consumption fell sharply enough to leave businesses with unexpected unsold goods — also doesn’t fit the evidence, Brusca said. Consumption did not fall faster than industrial production or imports to generate any surplus, he said. To be sure, spending on consumer durable goods fell 5.3%, the biggest drop in 10 years. Business spending on equipment was also weak. “Any way you slice it, this GDP report…is an apparent mess,” he said.

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Nobody will want the yuan as long as Beijing decides what it’s worth.

China Finds Dollar Hegemony Is A Tough Nut To Crack (WS)

In terms of global reserve currency, the renminbi (RMB) has a share of only 1.9%, in fifth place, and barely ahead of the Canadian dollar, but miles behind the US dollar (61.7%) and the euro (20.7%). Over the past two years, the RMB has made only microscopic headway as a reserve currency. And as an international payments currency, the RMB has failed similarly to crack the co-hegemony of the dollar and the euro. “With more than 1,900 financial institutions now using the RMB for payments with China and Hong Kong, the internationalization of RMB carries great strategic significance” for banks and financial institutions, gushes SWIFT (Society for Worldwide Interbank Financial Telecommunication), which tracks the progress of the RMB as payment currency.


But in March 2019, the RMB had a minuscule share of merely 1.22% for international cross-border payments by value (cross-border payments from one Eurozone country to another Eurozone country are excluded). This minuscule share put the RMB in 8th position, just behind the Swiss franc:

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Civilian labor force participation rate lingers around 63%.

Nearly 102 Million Americans Do Not Have A Job Right Now (Snyder)

At this moment, we are told that only 6.2 million Americans are officially “unemployed”, and that sounds really, really good. But that is only half the story. What the mainstream media rarely mentions is the fact that the number of Americans categorized as “not in the labor force” has absolutely exploded since the last recession. Right now, that number is sitting at 95.577 million. When you add 6.2 million “officially unemployed” Americans to 95.577 million Americans that are categorized as “not in the labor force”, you get a grand total of almost 102 million Americans that do not have a job right now. If that sounds terrible to you, that is because it is terrible.

Yes, the U.S. population has been growing over the last decade, and that is part of the reason why the number of Americans “not in the labor force” has been growing. But overall, the truth is that the level of unemployment in this country is not that much different than it was during the last recession. John Williams of shadowstats.com tracks what the real employment figure would be if honest numbers were being used, and according to him the real rate of unemployment in the United States at the moment is 21.2 percent.

Just before the last recession, the civilian labor force participation rate was sitting at about 66 percent, and that was pretty good. But then the recession hit, and the civilian labor force participation rate fell below 63 percent, and it stayed between 62 percent and 63 percent for an extended period of time. So where are we today? At this moment, we are sitting at just 63.0 percent. Does that look like a recovery to you? Of course not.

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“I’m glad I waited because i thought that maybe they would obstruct if I did it early..”

Trump Makes Post-Mueller Vow To Release “Devastating” FISA Docs (ZH)

President Trump on Thursday renewed his vow to declassify a wide swath of “devastating” documents related to the Russia probe “and much more” – adding that he’s glad he waited until the Mueller investigation was complete. In a Thursday night phone interview on Fox News, host Sean Hannity asked “will you declassify the FISA applications, gang of 8 material, those 302s – what we call on this program ‘the bucket of five’?” To which Trump replied: “Yes, everything is going to be declassified – and more, much more than what you just mentioned. It will all be declassified, and I’m glad I waited because i thought that maybe they would obstruct if I did it early – and I think I was right. So I’m glad I waited, and now the Attorney General can take a look – a very strong look at whatever it is, but it will be declassified and more than what you just mentioned.”

Last September 17th, Trump vowed to release all text messages related to the Russia investigation with no redactions, as well as specific pages from the FBI’s FISA surveillance warrant application on former Trump campaign aide Carter Page, and interviews with the DOJ’s Bruce Ohr. nFour days later, however, Trump said over Twitter that the Justice Department – then headed by Attorney General Jeff Sessions (while the Russia investigation was headed up by Deputy AG Rod Rosenstein) – told him that it might have a negative impact on the Russia probe, and that key US allies had asked him not to release the documents.

“I met with the DOJ concerning the declassification of various UNREDACTED documents,” Trump tweeted. “They agreed to release them but stated that so doing may have a perceived negative impact on the Russia probe. Also, key Allies’ called to ask not to release. Therefore, the Inspector General has been asked to review these documents on an expedited basis. I believe he will move quickly on this (and hopefully other things which he is looking at). In the end I can always declassify if it proves necessary. Speed is very important to me – and everyone!”


That key ally turns out to have been the UK, according to the New York Times., which reported last September that their concern was over material which “includes direct references to conversations between American law enforcement officials and Christopher Steele,” the former MI6 agent who compiled the infamous “Steele Dossier.” We now know, of course, that Steele had extensive contact with Bruce and Nellie Ohr in 2016, while Bruce was the #4 official at the Obama DOJ, and Nellie was working for Fusion GPS – the opposition research firm hired by Hillary Clinton and the DNC to produce the infamous Steele Dossier.

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“Mr. Mueller himself may well be subject to prosecution for destroying evidence and, yes, obstruction of justice…”

Blowback Is a Harsh Mistress (Kunstler)

The Thinking Class behind the bad faith Resistance is about to be beaten within an inch of its place in history with an ugly-stick of reality as The Narrative finally comes to be fairly adjudicated. The Mueller Report was much more than just disappointing; it was a comically inept performance insofar as it managed to overlook the only incidence of collusion that actually took place: namely, the disinfo operation sponsored by the Hillary Clinton campaign in concert with the highest officials of the FBI, the Department of Justice, State Department personnel, the various Intel agencies, and the Obama White house for the purpose of interfering in the 2016 election.


It will turn out that the Mueller Investigation was just an extension of that felonious op, and Mr. Mueller himself may well be subject to prosecution for destroying evidence and, yes, obstruction of justice. John F. Kennedy once observed that “life is unfair.” It is unfair, perhaps, that a TV Reality Show huckster, clown, and rank outsider beat a highly credentialed veteran of the political establishment and that he flaunts his lack of decorum in the Oval Office. But it happens that he was on the side of the truth in the RussiaGate farrago and that happens to place him in a position of advantage going forward.

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The empire destroying lives to uphold a narrative. It no longer matters what these crazies say, and they know it. The public swallows anything thrown at them. Collusion, Assange, Butina, these are all fictional stories, but today they dictate the headlines and dominate the airwaves. Butina is accused of “Ambitious conspiracy”. When she was 22.

Marina Butina Sentenced To 18 Months In Prison (ZH)

Accused Russian spy Marina Butina has been sentenced to 18 months in prison on Friday after pleading guilty to acting as an unregistered agent of a foreign government, the Hill reports. Butina, who was arrested in 2018, pled guilty to the charges in late. 2018. She will only serve nine months, as the judge knocked nine months off her sentence for time served. Prosecutors had recommended that she serve an additional 18 months, while her lawyers had asked for no prison time and her immediate deportation. Butina wasn’t mentioned in the Mueller report. Before her sentencing hearing on Friday, Butina pleaded with the judge for leniency, RT reports.


“My parents discovered my arrest on the morning news they watch in their rural house in a Siberian village,” she told the court. “I love them dearly, but I harmed them morally and financially. They are suffering from all of that. I destroyed my own life as well. I came to the United States not under any orders, but with hope, and now nothing remains but penitence.” Butina arrived in the US on a student visa in 2016 and became active in pro-gun circles. During the investigation into Russian interference that followed Trump’s electoral triumph, she was accused of working with the Russian government to infiltrate the Republican Party and National Rifle Association. Moscow and President Putin have denied any connection with her.

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Corbyn still clings to his dreams of an independent left-wing Britain. But matters haven’t stood still for the past 3 years.

Labour Party In ‘Complete Meltdown’ Over Final Say (Ind.)

Jeremy Corbyn is under growing pressure over his party’s position on a second Brexit referendum after a leaked draft of a campaign leaflet included no mention of a Final Say vote. The Labour leader faced an angry backlash over the flyer, with MPs saying it had triggered “complete meltdown” in the party and left pro-EU MPs “utterly furious”. As the row deepened, 75 MPs and 14 MEPs wrote to Labour’s governing body to demand that “a clear commitment” to another referendum be included in the party’s manifesto for next month’s European parliament elections. Mr Corbyn’s top team is split on whether Labour should support a second referendum. Several senior shadow cabinet ministers want the party to support a public vote on any Brexit deal passed by parliament, but Mr Corbyn’s inner circle say he only supports a referendum on the government’s deal or to avoid a no-deal outcome.


Other shadow ministers oppose another public poll entirely. In their letter to the National Executive Committee (NEC), the MPs and MEPs said Labour had “a clear opportunity to win these elections” if it fully supports a Final Say vote. They wrote: “These elections are about the kind of Europe we want to live in, and we can’t make a convincing case in them without being clear about Brexit. Labour has already, rightly, backed a confirmatory public vote. The overwhelming majority of our members and voters support this, and it is the democratically established policy of the party. “Our members need to feel supported on doorsteps by a clear manifesto that marks us out as the only viable alternative to Nigel Farage’s Brexit Party.

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First, you just have a wall. The next day, you have a wall worth a million dollars.

London Extinction Rebellion Mural is a Banksy (G.)

A Banksy collector and expert believes a mural that appeared at Extinction Rebellion’s Marble Arch base overnight is an authentic piece by the Bristolian street artist. John Brandler, who owns a dozen pieces by Banksy is convinced the artwork – which features the slogan “From this moment despair ends and tactics begin” next to a young girl sitting on the ground holding an Extinction Rebellion logo – is an original because of its execution and theme. The art dealer and gallerist said: “I’m convinced about the one in London for two reasons: it’s a topic that he would support, and it’s a continuation of the Port Talbot piece that appeared in December 2018.

“The name in the corner is not important, the signature is the work. And this is a Banksy. It’s a wonderful statement and a beautiful piece.” The work appeared at the site which had been occupied by climate activists since protests began in the capital almost two weeks ago. A spokesperson for Westminster council confirmed the work was being investigated but had not been authenticated yet. “We’re aware of the possible Banksy which appeared in Marble Arch overnight. Our officers are looking into this,” he said. Banksy has not confirmed whether the painting is legitimate, and his press team did not respond to a request for comment.

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Gallup does really bad surveys.

Greeks The Most Stressed People Worldwide – Gallup (K.)

Greeks are the most stressed people in the world, according to the results of the Gallup 2019 Global Emotions report conducted on a sample of 150,000 people in 140 countries. According to the poll, which was conducted last year, 59 percent of Greeks said they “experienced a lot of stress yesterday,” putting Greece at the top of the chart for the third consecutive year. After Greece on the list are the Philippines, Tanzania and Albania. The same poll asked respondents about their negative experiences and participants from Chad, Nigeria, Sierra Leone, Iraq and Iran polled the highest. The survey also polled anger levels with Armenians topping the chart, followd by Iraqis, Iranians and Palestinians. The five countries recording the most positive experiences are Paraguay, Panama, Guatemala, Mexico and El Salvador.

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“Does anyone really think the US is going to favour Brazil?” Lula asked. “Americans think of themselves first, second, third, fourth, fifth – and if there’s any time left over they think about Americans.”

Brazil Governed By ‘Lunatics’ And US ‘Lackeys’ – Lula (G.)

Brazil is being governed by “a bunch of lunatics” and United States “lackeys” who have shattered its international reputation, former president Luiz Inácio Lula da Silva has claimed in his first interview since being jailed one year ago. Lula, Brazil’s president from 2003 and 2011, surrendered himself to police last April after being convicted on corruption charges he disputes. The 73-year-old leftist had been forbidden from giving face-to-face interviews until Friday, when two Brazilian journalists were allowed to visit him at his prison in southern Brazil following a lengthy legal battle.

Lula told them Brazil needed to undergo period of “self-reflection” after what he described as the “crazy” fake news and hate-filled election of far-right populist Jair Bolsonaro last year. “What we can’t have is this country being run governed by a bunch of lunatics. The country doesn’t deserve this and above all the people do not deserve this.” “Brazil is adrift – so far he doesn’t know what to do,” he added of Bolsonaro, who took office in January and has suffered a turbulent opening act in power. Lula said he profoundly regretted “the disaster that is taking place in this country” and criticised Brazil’s dramatic tack towards Washington under Bolsonaro.


“I’ve never seen a [Brazilian] president salute the American flag. I’ve never seen a president go around saying, ‘I love the United States, I love it!’” Lula said of Bolsonaro, who paints himself as a “tropical Trump” and last month travelled to the United States to tout his close relations with the US president. “You should love your mother, you should love your country. What’s all this about loving the United States? “Does anyone really think the US is going to favour Brazil?” Lula asked. “Americans think of themselves first, second, third, fourth, fifth – and if there’s any time left over they think about Americans. And these Brazilian lackeys go around thinking the Americans will do anything for us.”

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Jan 282019
 


Pablo Picasso Bust of woman with arms raised 1922

 

US Sanctions On Venezuela Are Killing Citizens – Former UN Rapporteur (Ind.)
PBOC Fixes Yuan Dramatically Stronger Following Gold Spike (ZH)
China’s Real Estate Loan Growth Slows Further In 2018 (CNBC)
Britain’s Biggest Lender To Offer 100% Mortgages To First-Time Buyers (G.)
UK Cannot Simply Trade On WTO Terms After No-Deal Brexit (G.)
May To Seek Binding Changes To Irish Backstop – Boris Johnson (R.)
Ireland Stresses It Will Not Yield On Brexit Backstop (G.)
UK Military Bases Stockpiling To Prepare For No-Deal Brexit (Sky)
Brexit Exposes Growing Fractures In UK Society (G.)
In Germany’s Plan To Phase Out Coal, A Big Polluter Will Benefit (BBG)

 

 

Picked up these numbers last week on Twitter. Chavez announced cancer in late 2012, died early 2013. Oil prices only explain a smal part of it. Economic warfare does the rest.

@spectatorindex – Venezuela GDP growth.
2012: 5.6%
2013: 1.3%
2014: -3.9%
2015: -6.2%
2016: -17%
2017: -15%
2018: -16%

US Sanctions On Venezuela Are Killing Citizens – Former UN Rapporteur (Ind.)

The first UN rapporteur to visit Venezuela for 21 years has told The Independent the US sanctions on the country are illegal and could amount to “crimes against humanity” under international law. Former special rapporteur Alfred de Zayas, who finished his term at the UN in March, has criticized the US for engaging in “economic warfare” against Venezuela which he said is hurting the economy and killing Venezuelans. The comments come amid worsening tensions in the country after the US and UK have backed Juan Guaido, who appointed himself “interim president” of Venezuela as hundreds of thousands marched to support him. European leaders are calling for “free and fair” elections. Russia and Turkey remain Nicolas Maduro’s key supporters.

Mr De Zayas, a former secretary of the UN Human Rights Council (HRC) and an expert in international law, spoke to The Independent following the presentation of his Venezuela report to the HRC in September. He said that since its presentation the report has been ignored by the UN and has not sparked the public debate he believes it deserves. “Sanctions kill,” he told The Independent, adding that they fall most heavily on the poorest people in society, demonstrably cause death through food and medicine shortages, lead to violations of human rights and are aimed at coercing economic change in a “sister democracy”. On his fact-finding mission to the country in late 2017, he found internal overdependence on oil, poor governance and corruption had hit the Venezuelan economy hard, but said “economic warfare” practised by the US, EU and Canada are significant factors in the economic crisis.

In the report, Mr de Zayas recommended, among other actions, that the International Criminal Court investigate economic sanctions against Venezuela as possible crimes against humanity under Article 7 of the Rome Statute. The US sanctions are illegal under international law because they were not endorsed by the UN Security Council, Mr de Zayas, an expert on international law and a former senior lawyer with the UN High Commissioner for Human Rights, said. “Modern-day economic sanctions and blockades are comparable with medieval sieges of towns. “Twenty-first century sanctions attempt to bring not just a town, but sovereign countries to their knees,” Mr de Zayas said in his report.

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Xi remains nervous.

PBOC Fixes Yuan Dramatically Stronger Following Gold Spike (ZH)

PBOC fixed the yuan dramatically stronger against the dollar overnight, sending offshore yuan surging to its strongest against the dollar in six months. While the Chinese currency is reportedly strengthening on the heels of trade talks optimism (which is entirely the opposite of the rhetoric coming out of Washington), we note that this was the biggest positive shift in the yuan fix in 19 months…

Notably, the yuan is strengthening considerably more against the dollar than it is against the broad basket of trade partner currencies…Shanghai Accord 2.0? And coincidentally, the surge in yuan comes the day after gold prices broke out higher… Perhaps the PBOC’s aggressive action was prompted to manage the Yuan peg against gold back into balance?

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If you look closer, nothing seems very dramatic. But real estate has become such a huge part of the economy that Beijing must weigh curbing risks vs continued growth.

It’s also the speed with which this has happened. 10 years ago Chinese didn’t borrow for homes. It’s literally been used to mitigate the financial crisis.

China’s Real Estate Loan Growth Slows Further In 2018 (CNBC)

Loans to China’s property sector grew at a slower pace in 2018 as Beijing tightened home-purchase rules to curb bubble risk, but lending to property developers expanded slightly faster than the year before, central bank data showed on Friday. Outstanding yuan property loans grew 20% from a year earlier to 38.7 trillion yuan ($5.72 trillion) by end-December, compared with 20.9% growth in 2017, the PBOC said in a quarterly financial report. Outstanding mortgage lending climbed 17.8% year-on-year to 25.75 trillion yuan by the end of 2018, below a 22.2% rise in 2017, central bank data showed.

Policymakers have vowed to ensure “stable and healthy” development of the property market, repeatedly emphasizing that homes are for living in, not speculative investment. The government’s sustained drive to reduce debt risks in the economy has cooled the property market but a continued downturn in credit growth in the sector could add to growing pressures on the world’s second-largest economy. The real estate sector is a key driver of economic growth, so any further weakness could influence the pace and scope of fresh stimulus steps expected from Beijing this year.

Property investment is also looking wobbly, with analysts waiting to see if the government will risk loosening restrictions on home buyers that have kept speculation in check. Real estate investment in December rose 8.2% from a year earlier, down from 9.3% in November, according to Reuters calculations based on data released by the National Bureau of Statistics. That was just ahead of the slowest pace of growth last year at 7.7% recorded for October. Developers raised their borrowings last year though, with loans extended for property development up 22.6% in 2018 versus growth of 21.7% in 2017, the report showed. The central bank also said outstanding household loans jumped 18.2% to 47.9 trillion yuan by end-2018.

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How much can Brexit hurt the British? A lot, we must assume. Then again, if you fall for this stuff at this moment in time, maybe you deserve what’s coming. How about a crisis worse than the 1930s?

Britain’s Biggest Lender To Offer 100% Mortgages To First-Time Buyers (G.)

Britain’s biggest lender is to offer 100% mortgages to first-time buyers in a return to lending last seen before the financial crash – but only if the buyer has family that can stand behind the loan. Under the new Lloyds Bank “Lend A Hand” deal, a first-time buyer will be able to borrow up to £500,000 for a new home, without putting down a penny of deposit. The Lloyds move marks a major expansion into the first-time buyer market, as most other mainstream lenders demand a minimum deposit worth 5% of the property purchase price, although Barclays has offered a similar “family springboard” deal. Lloyds has priced the mortgages to undercut the Barclays offer.

The deal – part of what Lloyds said is a £30bn commitment to help first-time buyers – will reopen concern about a two-tier market where buyers with well-off families can elbow aside those without. Saving for a deposit is usually cited by first-time buyers as the biggest hurdle to home ownership. Lloyds said the average deposit put down by first-time buyers has climbed to £33,211, and a staggering £110,182 in London. The Lloyds deal requires that a member of the family – such as parent, grandparent or close relative – helps out. The bank will only grant the 100% mortgage if the family member puts a sum equal to 10% of the value of the property into a Lloyds savings account.

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“The anticipated recession will be worse than the 1930s, let alone 2008.”

UK Cannot Simply Trade On WTO Terms After No-Deal Brexit (G.)

The UK will be unable to have frictionless, tariff-free trade under World Trade Organization rules for up to seven years in the event of a no-deal Brexit, according to two leading European Union law specialists. The ensuing chaos could double food prices and plunge Britain into a recession that could last up to 30 years, claim the lawyers who acted for Gina Miller in the historic case that forced the government to seek parliament’s approval to leave the EU. It has been claimed that the UK could simply move to WTO terms if there is no deal with the EU. But Anneli Howard, a specialist in EU and competition law at Monckton Chambers and a member of the bar’s Brexit working group, believes this isn’t true. “No deal means leaving with nothing,” she said. “The anticipated recession will be worse than the 1930s, let alone 2008.

It is impossible to say how long it would go on for. Some economists say 10 years, others say the effects could be felt for 20 or even 30 years: even ardent Brexiters agree it could be decades.” The government’s own statistics have estimated that under the worst case no-deal scenario, GDP would be 10.7% lower than if the UK stays in the EU, in 15 years. There are two apparently insurmountable hurdles to the UK trading on current WTO tariffs in the event of Britain crashing out in March, said Howard. Firstly, the UK must produce its own schedule covering both services and each of the 5,000-plus product lines covered in the WTO agreement and get it agreed by all the 163 WTO states in the 32 remaining parliamentary sitting days until 29 March 2019. A number of states have already raised objections to the UK’s draft schedule: 20 over goods and three over services.

To make it more complicated, there are no “default terms” Britain can crash out on, Howard said, while at the same time, the UK has been blocked by WTO members from simply relying on the EU’s “schedule” – its existing tariffs and tariff-free trade quotas. The second hurdle is the sheer volume of domestic legislation that would need to be passed before being able to trade under WTO rules: there are nine statutes and 600 statutory instruments that would need to be adopted. The government cannot simply cut and paste the 120,000 EU statutes into UK law and then make changes to them gradually, Howard said. “The UK will need to set up new enforcement bodies and transfer new powers to regulators to create our own domestic regimes,” she said.

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Fast and loose with Good Friday.

May To Seek Binding Changes To Irish Backstop – Boris Johnson

Prime Minister Theresa May will seek legally binding changes to the Irish backstop from the European Union in an attempt to break the deadlock over Brexit, lawmaker Boris Johnson wrote in The Telegraph on Sunday, citing senior government sources. The PM is looking to change the text of the agreement to insert either a sunset clause or a mechanism for the UK to escape without reference to the EU, Boris Johnson said in The Telegraph. The contentious backstop arrangement is designed to prevent a hard border between Ireland and the UK province of Northern Ireland by requiring Britain to keep some EU rules if it was unable to agree a trade deal with the bloc. Ireland said earlier on Sunday it would not accept any changes to the backstop agreement.

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The backstop will be May’s major point of contention this week. Stop her! There’s already talk of reinserting issues in the deal that have already been thrown out.

Ireland Stresses It Will Not Yield On Brexit Backstop (G.)

Ireland has launched a last-minute effort to warn Theresa May off any attempt to unravel the backstop, two days before a crucial Commons debate that may decide the next move for the UK’s rudderless Brexit policy. Simon Coveney, the Irish foreign minister and deputy prime minister, insisted the backstop – the mechanism to ensure there will be no hard border between the Irish Republic and Northern Ireland if Britain and the EU fail to strike a free trade deal – was “part of a balanced package that isn’t going to change”. In a forceful interview, he insisted it was only part of the withdrawal agreement because of the UK’s red lines.

On Tuesday Tory Brexiters may get the chance to vote for amendments that would signal their willingness to back May’s Brexit deal subject to the backstop’s either being removed or time-limited. Ministers have not formally backed any of the anti-backstop amendments, which are incompatible with the deal that May agreed with UK leaders, but if one were to pass by a majority, she would be able to present the EU with a firm idea of what changes might get her deal through parliament – something that as yet remains unclear to Brussels. In an interview with BBC One’s The Andrew Marr Show, Coveney said he did not see the need for further compromise because “the backstop is already a compromise”.

Although originally Northern Ireland-specific, it was made UK-wide at the request of May, he said. “And the very need for the backstop in the first place was because of British red lines that they wanted to leave the customs union and single market,” he said.

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Many Brits are so poor they can’t even think of stockpiling.

UK Military Bases Stockpiling To Prepare For No-Deal Brexit (Sky)

Britain has begun stockpiling food, fuel, spare parts and ammunition at military bases in Gibraltar, Cyprus and the Falklands in case of a no-deal Brexit, Sky News has learnt. Extra supplies are also being built up at bases in the UK to reduce the risk of the armed forces running short and being unable to operate if it suddenly becomes much harder to import and export day-to-day goods after 29 March. Military chiefs have spent at least £23m on what is being described as “forward-purchased” goods, Sky News understands. The move is part of contingency planning by the government – codenamed Operation Yellowhammer – to reduce disruption if Britain departs from the European Union without an agreement, according to three defence sources.

“An army marches on its stomach. If supply lines breakdown they struggle,” one source said. Any blockage in the flow of food and other vital items to Britain’s military bases overseas could impact on operations and affect thousands of soldiers, sailors and airmen. There is a concern that supplies delivered to British troops in the rest of Europe – the UK has a permanent presence in Cyprus and a base on the British overseas territory of Gibraltar, which shares a border with Spain – could be impacted, according to the sources.

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We haven’t seen any of it yet.

Brexit Exposes Growing Fractures In UK Society (G.)

Britons have become angrier since the referendum to leave the EU, according to a survey which suggests there is widespread unhappiness about the direction in which the country is heading. 69 per cent of respondents said they felt their fellow citizens had become “angrier about politics and society” since the Brexit vote in 2016, according to the Edelman Trust Barometer, a long-established, annual survey of trust carried out across the globe. 40 per cent of people think others are now more likely to take part in violent protests, the UK results from the survey show, even though violent political protest in Britain is rare.

One person in six said they had fallen out with friends or relatives over the vote to leave the bloc, the survey found. Edelman, which said the findings exposed a “disUnited Kingdom”, found widespread concern about where the government was heading, particularly among those who voted remain, and those who backed Labour. Overall, about 65% of Britons think the country is “on the wrong track”, the survey suggests. Amongst remain voters the figure is 82%, but even among leave voters the figure is 43%. Some 60% of people who identify with the Conservatives think the country is heading in the right direction, but among Labour identifiers, the figure is just 20%.

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The coal phase-out is part of a 500 billion-euro switch away from fossil fuels and toward renewables..

Compensating coal-mining regions & consumers for higher electricity prices expected to cost German taxpayer up to €78bn.

But across the border lies Italy, and next to it Greece. How are they going to pay for such a switch? And if they don’t, what’s the use of Germany doing it?

In Germany’s Plan To Phase Out Coal, A Big Polluter Will Benefit (BBG)

A proposal to stop Germany from using coal for power generation within two decades may leave an unexpected beneficiary: The company that burns the most of the fuel. While RWE AG was quick to say it’s “too soon” to shed all fossil fuel plants by 2038, the recommendations outlined this weekend by a panel advising Chancellor Angela Merkel called for compensation for the utilities and 40 billion euros ($45.6 billion) for regions coping with the transition. Together, the measures would significantly soften the blow on industry from Merkel’s vow to scale back greenhouse gases. They show how far the government has moved away from a quick clampdown on the most polluting fossil fuel and give more certainty for the future of some of RWE’s most valuable assets.

And while the proposals could yet be watered down by politicians, they signal a longer life for many of the utility’s plants than environmentalists had hoped for. “We believe that clarity, compensation payments, and a relatively long phase-out period should trigger a re-rating for the company’s conventional power generation,” said Guido Hoymann, an analyst at the private bank B. Metzler Seel. Sohn & Co. KGaA who added RWE to a list of top 10 German stocks.

Germany’s 120 or so remaining coal and lignite plants have a combined capacity of about 45 gigawatts. That’s enough to feed 40 percent of the nation’s power demand or about 32 million homes. Germany is already falling short on its targets to slash greenhouse gas emissions and sees closing coal plants as one of the most important ways to make the reductions needed. The coal commission includes members from the main political parties, environmental groups and industry charged with developing a consensus that Germany can live with for years to come.

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Jan 072019
 


Berthe Morisot Julie and her boat 1884

 

China Has a Dangerous Dollar Debt Addiction (Balding)
China Drops Hints Of Trade Pain Ahead (BV)
US and China To Resume Trade Talks With Both Eager For Compromise (G.)
May To Hold Parliamentary Brexit Vote On January 15 (R.)
Theresa May Pleads For EU To Give Ground And Rescue Brexit Deal (G.)
Germany and Ireland Step Up Efforts To Find Brexit Border ‘Fix’ (G.)
Average UK Unsecured Household Debt Hits Record £15,400 (G.)
UK Car Sales Record Biggest Fall Since Financial Crisis (R.)
France’s Macron Reeling As Tough Stance Against ‘Yellow Vests’ Backfires (R.)
The Euro: A Mindless Idea – Ashoka Mody (Spiked)

 

 

$1.2 trillion will have to be rolled over this year. There are $90 billion of offshore renminbi deposits in Hong Kong available to buy dollars. Good luck.

China Has a Dangerous Dollar Debt Addiction (Balding)

China’s foreign debt has been rising rapidly, and that’s becoming an increasingly big problem — for the country and, potentially, the world. Officially, China lists its outstanding external debt at $1.9 trillion. For a $13 trillion economy, that’s not a major amount. But focusing on the headline number significantly understates the underlying risks. Short-term debt accounted for 62% of the total as of September, according to official data, meaning that $1.2 trillion will have to be rolled over this year. Just as worrying is the speed of increase: Total external debt has increased 14% in the past year and 35% since the beginning of 2017. External debt is no longer a trivial slice of China’s foreign-exchange reserves, which stood at just over $3 trillion at the end of November, little changed from two years earlier. Short-term foreign debt increased to 39% of reserves in September, from 26% in March 2016.

The true picture may be more precarious. China’s external debt was estimated at between $3 trillion and $3.5 trillion by Daiwa Capital Markets in an August report. In other words, total foreign liabilities could be understated by as much as $1.5 trillion after accounting for borrowing in financial centers such as Hong Kong, New York and the Caribbean islands that isn’t included in the official tally. Circumstances aren’t moving in China’s favor. The nation’s companies rushed to borrow in dollars when there was a 3% to 5% spread between Chinese and U.S. interest rates and the yuan was expected to strengthen. Borrowing offshore was cheaper and offered the additional bonus of likely currency gains. Now, the spread in official short-term yields has shrunk to near zero and the yuan has been depreciating for most of the past year. Refinancing debt in dollars has become harder, and more risky.

Beijing’s policies have exacerbated the buildup of foreign debt. To promote Xi Jinping’s Belt and Road Initiative, the president’s landmark foreign policy endeavor, China has been borrowing dollars on international markets and lending around the world for everything from Kenyan railways to Pakistani business parks. With this year and 2020 being the peak years for repayments, China faces dollar funding pressure. To repay their dollar debts, Chinese firms will either have to draw from the central bank’s foreign-exchange reserves (a prospect Beijing is unlikely to allow) or buy dollars on international markets. This creates a new set of problems. There are only 617 billion yuan ($90 billion) of offshore renminbi deposits in Hong Kong available to buy dollars. If China was to push firms to bring debt back onshore, this would necessitate significant outflows that would push down the yuan’s value against the dollar.

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More trickle down fails.

China Drops Hints Of Trade Pain Ahead (BV)

While a cut in the reserve requirement ratio, China’s fifth in a year, was not surprising, the 100-basis point shift that started off 2019 was larger than anticipated. Of course, demand for cash tends to spike around this time of year, due to both the Chinese New Year holiday and tax deadlines, but the economy is cooling uncomfortably fast. Official figures may show growth slowed to 6.3% in the fourth quarter, Standard Chartered reckons. Friday’s announcement adds to other easing measures: People’s Bank of China officials last month announced a new policy tool to encourage lenders to disburse their cash more widely. The “targeted medium-term lending facility” will make cheaper funding available to banks that the PBOC judges to be doing their part by lending more to small companies.

It’s certainly not full-blown monetary stimulus yet; the central bank has not fired its heavier artillery, such as a benchmark rate cut. The market has also been kept waiting for reductions to cost of borrowing from the PBOC’s more important channel, its regular medium-term lending facility. But the overall direction of travel is clear, and both recent moves point to structural issues that worry pessimists: the extra liquidity pumped into the system does not seem to be translating into more loans for smaller companies, which may signal deeper problems with capital allocation, not to mention the private sector’s nervousness about politics in 2019.

All of this is bad news for Beijing’s trade negotiators, when they hold talks with U.S. counterparts face-to-face this week. As the pain mounts, they may be pushed to yield more in order to gain relief. They could, for example, agree to formally drop the controversial “Made in China 2025” plan, or to announce concrete measures to beef up enforcement of intellectual property rights. Trump said on Sunday that weakness in China’s economy will push officials to negotiate. He may be right.

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Tariffs rose Jan 1. It’s getting urgent.

US and China To Resume Trade Talks With Both Eager For Compromise (G.)

US officials arrived in China for the first face-to-face negotiations since a 90-day truce was declared in a trade war between Washington and Beijing, in the hope of ending a bruising confrontation between the world’s two largest economies. Hopes that the sixth round of negotiations between the two sides could yield a breakthrough helped Asian shares rise on Monday, combined with optimism about the state of the global economy on the back of strong US jobs figures on Friday. In Tokyo, the Nikkei soared more than 3% and there were also strong positive moves in Shanghai, Hong Kong and Sydney. US and Chinese trade representatives were set to hold talks on Monday and Tuesday.

After failing to reach an agreement in December when Donald Trump and Xi Jinping met, both sides agreed to suspend tariff increases while holding discussions on technology transfers, as well as intellectual property theft and cybersecurity. If no agreement is reached, US tariffs on $200bn of Chinese goods will increase in March to 25% from the current 10%. Trump said on Sunday that China was under pressure to do a deal amid signs of a slowdown in its economy. “I think China wants to get it resolved. Their economy’s not doing well. I think that gives them a great incentive to negotiate,” he said. “China’s slowdown is occurring across the board, affecting almost every industry and region,” said Scott Kennedy, a trade expert focused on China at the Center for Strategic and International Studies. “Resolving the trade war or at least finding some common ground with Washington will be needed to fully restore confidence,” he said.

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Whatever the outcome, chaos guaranteed. You can jot down next Tuesday night in your agenda for that.

May To Hold Parliamentary Brexit Vote On January 15 (R.)

Prime Minister Theresa May will hold a delayed parliamentary vote on her Brexit deal on Tuesday, January 15, the BBC reported on Monday, citing government sources. May was forced to pull the vote on her deal in December after she said it would be defeated by a large majority. The government had previously said the vote would be held in the week of January 14. May said on Sunday that Britain would be in uncharted territory if her Brexit deal is rejected by parliament, despite little sign that she has won over sceptical lawmakers.

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In case you were still wondering who will be blamed.

Theresa May Pleads For EU To Give Ground And Rescue Brexit Deal (G.)

Theresa May is preparing to make another desperate plea to EU leaders to offer a concession on the Irish backstop as she attempts to win over Brexiters who have vowed to vote down the government’s deal. The prime minister on Sunday promised to hold the meaningful vote in parliament in the week beginning 14 January despite growing opposition from Conservative backbenchers and the Democratic Unionist party, whose votes are required to push the deal through parliament. As MPs prepare to return to Westminster with the crucial Commons vote looming on the withdrawal agreement, Downing Street insisted that new compromises could still be won from Europe that would ensure the safe passage of May’s plan.

The hope of new developments came as opposition to the prime minister’s deal hardened. The hurdles facing May include: • Brexiters say the government faces a disaster if it fails to ditch the current deal, with DUP deputy leader Nigel Dodds describing the Irish backstop as “toxic”. • EU sources say talks to be held in Dublin on Tuesday between Leo Varadkar and Germany’s foreign minister, Heiko Maas, will not seek to reopen negotiations over the 585-page withdrawal agreement. • Senior MPs including Yvette Cooper and Nicky Morgan are launching a parliamentary campaign to rewrite government legislation to block a no-deal Brexit. • Chris Patten, the former Conservative Party chairman, called for a second referendum on the UK’s decision to leave the EU. • More than 200 MPs have signed a letter calling for Theresa May to rule out a no-deal Brexit. Tory ex-minister Dame Caroline Spelman, who organised the letter with Labour’s Jack Dromey, said the group had been invited to see the prime minister on Tuesday.

In an interview on Sunday, May said the vote, which was due to be held last month and postponed, would go ahead next week, as she sought further clarification from the EU to address MPs’ concerns. She also said she would look at giving parliament a greater say in how the UK’s future relationship would be negotiated, but refused to say exactly what that might be. Asked if there had been any changes she could offer to backbenchers who were expected to vote down her deal, she told BBC1’s Andrew Marr Show: “What we will be setting out over the next few days are assurances in three areas: first are measures specific to Northern Ireland; the second is a greater role for parliament as we take these negotiations forward into the next stage for our future relationship; and third – and we are still working on this – is further assurances from the European Union to address the issues that have been raised.”

Whitehall sources insisted that a compromise could still be found with the EU and that further planned announcements will be made this week that would win over MPs opposed to the deal. “We will be working flat out. There will be further contacts with the EU leaders. The issue of the backstop is not yet over,” the source said.

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“The EU cannot now give another concession ahead of the vote because if the deal isn’t ratified, it means any new concessions will simply be banked again to no benefit at all. It would be pointless.”

Germany and Ireland Step Up Efforts To Find Brexit Border ‘Fix’ (G.)

Germany’s foreign affairs minister is to fly to Dublin on Tuesday for Brexit talks as relations with Ireland intensify in an attempt to find a “fix” that will help Theresa May get the EU withdrawal agreement ratified. Heiko Maas will address an annual gathering of Ireland’s global diplomatic corps and take part in an unofficial fourth round of talks between Ireland and German leaders since Thursday. He will make the address in English, with a large German media contingent accredited, a reflection of how significant his speech is deemed back in Berlin. Last week the taoiseach, Leo Varadkar, had a lengthy telephone call with Angela Merkel. He then flew to Munich to address a meeting of her coalition partners, the CSU, and on Friday met the Germany chancellor’s successor as CDU leader, Annegret Kramp-Karrenbauer, for discussions on Brexit and the future of Europe.

The emerging Irish-German nexus on the Irish border backstop “fix” is being seen as significant in Irish political circles, where people also point to the fact that Varadkar speaks German and has a good working relationship with Merkel. They point out it was Merkel, not the taoiseach, who requested the phone call with Varadkar last Thursday. The talks lasted 40 minutes and were, according to Varadkar, “an opportunity to kind of brainstorm a bit as to what we could do to assist prime minister Theresa May in securing ratification of the withdrawal agreement”. But informed EU sources say Brexiters should not raise their hopes of a reopening of negotiations. The “fix” will be further details in the political declaration on the future relationship and not the 585-page withdrawal agreement. “That is locked,” said one EU source.

There is deep frustration that the British cannot see how far the EU went to break the impasse on the Irish border talks, yielding to May’s demands for a UK-wide customs arrangement. One EU source said: “The EU was totally opposed to this in 2017 and again in March and June in 2018. It then emerged out of the tunnel in the autumn as the solution, but the Brexiters did not see it for what it was – a major concession. [..] “They are now looking for more concessions, but they just can’t be given. The Brits banked this major concession and just did nothing with it. People can’t understand why it wasn’t sold as a victory for May. “The EU cannot now give another concession ahead of the vote because if the deal isn’t ratified, it means any new concessions will simply be banked again to no benefit at all. It would be pointless.”

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That’s about $20,000. Not including mortgages and student loans.

Average UK Unsecured Household Debt Hits Record £15,400 (G.)

Britain’s household debt mountain has reached a new peak, with UK homes now owing an average of £15,385 to credit card firms, banks and other lenders, according to the TUC. The trade union body said household debt rose sharply in 2018 as years of austerity and wage stagnation forced households to increase their borrowing. The TUC said in its annual report on the nation’s finances that the amounts owed by British households rose to a combined £428bn in the third quarter of 2018. Each household owed £886 more than it did 12 months previously, it said. The figures do not include outstanding mortgage debts but do include student loans.

The level of unsecured debt as a share of household income is now 30.4%, the highest level it has ever been at. It is well above the £286bn peak in 2008 before the financial crisis, the TUC said. That figure also included student loans, but tuition fees then were £3,000 a year compared with up to £9,250 now. [..] The TUC general secretary, Frances O’Grady, said: “Household debt is at crisis level. Years of austerity and wage stagnation has pushed millions of families deep into the red. The government is skating on thin ice by relying on household debt to drive growth. A strong economy needs people spending wages, not credit cards and loans.”

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They’re going to stay home?!

UK Car Sales Record Biggest Fall Since Financial Crisis (R.)

British new car sales in 2018 fell at their fastest rate since the global financial crisis a decade ago, hit by a slump in demand for diesel, stricter emissions rules and waning consumer confidence due to Brexit, according to an industry body. Demand dropped by nearly 7% last year to 2.37 million vehicles, the largest fall since registrations nosedived 11.3% in 2008, preliminary data from the Society of Motor Manufacturers and Traders (SMMT) showed. A nearly 30% drop in demand for diesel was the most significant factor in the decline. Diesel has been pummelled since the Volkswagen emissions cheating scandal of 2015, prompting a crackdown and higher levies.

But the industry also warned that Britain’s departure from the European Union due at the end of March risks the future of a sector which employs over 850,000 people and has been one of Britain’s few manufacturing success stories since the 1980s. “It’s still hard to see any upside to Brexit,” said SMMT Chief Executive Mike Hawes. “Everyone recognises that Brexit is an existential threat to the UK automotive industry and we hope a practical solution will prevail,” he said, calling for lawmakers to back Prime Minister Theresa May’s deal to guarantee a transition period. [..] After record highs in 2015 and 2016, demand fell in 2017 and some analysts see car demand as a leading indicator which could be a harbinger for future economic performance. Britain’s economy slowed to a crawl at the end of 2018, the housing market is stalling and lending to consumers growing at its slowest pace in nearly four years, according to data released on Friday.

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Macron is not just a fool himself, he’s surrounded by them as well. His spokesman after fleeing his office out of a back door as protesters invaded the courtyard and smashed up several cars said: “It wasn’t me who was attacked.” “It was the Republic.”.

Because the government is the Republic. The population is not.

France’s Macron Reeling As Tough Stance Against ‘Yellow Vests’ Backfires (R.)

Emmanuel Macron intended to start the new year on the offensive against the ‘yellow vest’ protesters. Instead, the French president is reeling from more violent street demonstrations. What began as a grassroots rebellion against diesel taxes and the high cost of living has morphed into something more perilous for Macron – an assault on his presidency and French institutions. The anti-government protesters on Saturday used a forklift truck to force their way into a government ministry compound, torched cars near the Champs Elysees and in one violent skirmish on a bridge over the Seine punched and kicked riot police officers to the ground.

The French authorities’ struggle to maintain order during the weekend protests raises questions not just over policing tactics but also over how Macron responds, as he prepares to bring in stricter rules for unemployment benefits and cut thousands of public sector jobs. On Sunday evening, Macron wrote on Twitter: “Once again, the Republic was attacked with extreme violence – its guardians, its representatives, its symbols.” His administration had hardened its stance against the yellow vests after the protest movement appeared to have lost momentum over the Christmas holidays.

The government would not relent in its pursuit of reforms to reshape the economy, government spokesman Benjamin Griveaux said on Friday, branding the remaining protesters agitators seeking to overthrow the government. Twenty-four hours later, he was fleeing his office out of a back door as protesters invaded the courtyard and smashed up several cars. “It wasn’t me who was attacked,” he later said. “It was the Republic.”

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“There is a Euro, which is a single currency in an incomplete monetary union, with a set of fiscal rules that are evidently economically illiterate..”

The Euro: A Mindless Idea – Ashoka Mody (Spiked)

[..] most serious of all is the notion of common economic development as a basis for Europe. It was briefly true after the Treaty of Rome in 1957, which opened up the borders, but the momentum ran out within two decades. You open borders, but once they’re open, there’s not a lot more you can do. Even the gains from the so-called Single Market are very limited beyond a certain point. Every economist understands that. On the Euro, there was never any question that it was a bad idea. Nicholas Kaldor, an economist at Cambridge University, wrote in March 1971 that a single currency was a terrible idea, both as economics and as politics. And Kaldor has been proven right time and again.

But the entire European establishment just ignores every subsequent warning from well-regarded economists, and produces defensive counternarratives. For example, I often hear that Europe needs fixed exchange rates in order to have a Single Market. Why? Germany is trading a lot with Poland, Hungary and the Czech Republic, which are in the Single Market, but have different currencies. These fluctuate, but the trade continues apace. You don’t need a single currency for a Single Market.

spiked: When did your critique of the European project emerge? Was it during your involvement in the Irish bailout? Mody: When I finished at the IMF I planned to write a book on the Euro crisis. And I began writing it as an IMF economist would – what happened before the crash, the bubble, the bubble bursting, the panic, the fact it wasn’t well managed, and so on. But I soon realised that something wasn’t right here. And so I spent two years tracing the history of the Euro, and asking the question: what brought the Euro into existence in its current form? You see, it is not just that there is a Euro. There is a Euro, which is a single currency in an incomplete monetary union, with a set of fiscal rules that are evidently economically illiterate – and nobody questions the fact that they are economically illiterate, that they lack a necessary fiscal backstop and the necessary fiscal union. So why does it exist?

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Nov 142018
 
 November 14, 2018  Posted by at 10:15 am Finance Tagged with: , , , , , , , , , , , ,  4 Responses »


Pablo Picasso Still life 1917

 

Britiain, EU Agree on Brexit Plan (G.)
France and Facebook Announce Partnership Against Online Hate Speech (Pol.eu)
Oil’s Unprecedented Slide Accelerates, Capitulates To Darkening Outlook (BBG)
Major Markets Are All Flashing Warning Signs (Roberts)
Trump’s Tariff Battle With China Spurs Record Dollar-Yuan Trading (CNBC)
Goldman Sachs Is Implicated In History’s Largest Financial Con (Ind.)
IMF Says Governments Could Set Up Their Own Cryptocurrencies (G.)
Amazon’s ‘HQ2’ Headquarters Will Cost US Taxpayers $2 Billion (R.)
Decoding The Hypersonic Putin On A Day Of Remembrance (Escobar)
Angela Merkel Calls For Creation Of ‘Real, True’ EU Army (Ind.)
Saudi ‘Kill Team’s’ Luggage Contained Syringes, Defibrillators, Scissors (AFP)
Who Gets to Live in Victimville? (Monics Lewinsky)
Social Media Increases Depression And Loneliness (TI)
Heatwaves Can ‘Wipe Out’ Male Insect Fertility (G.)

 

 

At sort of the last moment, the long awaited deal is announced. Alas, all it really does is push forward any awkward decisions- and there are many. And even that can be voted down by the Cabinet, or parliament, or some other party involved, like the DUP. One thing seems certain: Theresa May will no longer be in charge when actual decisions are made. So why would she care? It’s about saving face by now.

Britiain, EU Agree on Brexit Plan (G.)

Theresa May summoned her cabinet to an emergency meeting on Wednesday afternoon to sign off her long awaited final Brexit deal, prompting hard-Brexit Tories to call for senior ministers to stand up and block it. The critical meeting is the culmination of months of negotiations and will see May’s senior ministers consider whether they can personally endorse the agreement that the prime minister has been able to reach. Ministers were summoned to No 10 in the early evening and some met individually with May or her chief of staff, Gavin Barwell. They were given the chance to read the key documents, although they were not trusted to take any papers home.

Further one-on-one meetings were expected to take place on Wednesday. “Cabinet will meet at 2pm tomorrow to consider the draft agreement the negotiating teams have reached in Brussels, and to decide on next steps,” a No 10 spokesman confirmed. “Cabinet ministers have been invited to read documentation ahead of that meeting.” Key elements of the deal began to leak in the early evening. The UK was understood to have agreed that an independent arbitration committee will judge when a UK-wide customs backstop could be terminated, comprising an equal number of British and EU representatives plus an independent element.

There will be a review in July 2020, Brussels sources added, six months before the end of the transition period, at which it will be determined if the UK is ready to move to a free trade deal; transfer to the backstop; or extend the transition period, possibly by a year to 2021.

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Scary. The leader of one political party seeks to decide with Silicon Valley, what constitutes hate speech. The main potential target of this is Marine le Pen, who’s already had her share of hate accusations. Thing is, Macron has fallen behind her in the -EU election- polls, his popularity has fallen to 23%. And now Zuckerberg gives him the tools to get rid of Le Pen.

France and Facebook Announce Partnership Against Online Hate Speech (Pol.eu)

Emmanuel Macron just “friended” Mark Zuckerberg. The French president announced on Monday a six-month partnership with Facebook aimed at figuring out how the European country should police hate speech on the social network. As part of the cooperation — the first time that Facebook has teamed up with national politicians to hammer out such a contentious issue — both sides plan to meet regularly between now and May, when the European election is due to be held. They will focus on how the French government and Facebook can work together to remove harmful content from across the digital platform, without specifying the outcome of their work or if it would result in binding regulation.

The partnership, which will involve meetings in Paris, Dublin and California, may be broadened out to cover other as yet unnamed areas after six months. A French official who asked not to be named called the partnership an “unprecedented experiment” that would grant authorities insight into Facebook’s processes to formulate recommendations that are “concrete and operational.” The social networking giant is now trying to lobby national lawmakers on the perceived dangers of regulating the internet. “We are giving blind faith to our daily digital tools,” Macron told an audience in Paris. “Today, when I see our democracy, internet is much better used by the extremes … or by terrorist groups.”

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Feeding on itself by now?!

Oil’s Unprecedented Slide Accelerates, Capitulates To Darkening Outlook (BBG)

Oil’s unprecedented decline deepened as investors fled a market hammered by swelling excess supplies, a darkening demand outlook and U.S. President Donald Trump’s Twitter critique of the world’s biggest crude exporter. Futures plunged 7.1 per cent in New York on Tuesday for the biggest one-day drop in three years. OPEC’s dire forecast for 2019 demand came at a time of steadily rising American production and stockpiles. Trump admonished Saudi Arabia for planning to curb output and lamented prices that settled below US$56 a barrel for the first time in a year. “This tweet certainly did not help prices,” said Warren Patterson, a senior commodities strategist at ING Bank.

“Given the growing global surplus over the first half of 2019, OPEC will likely try to ignore President Trump’s call as much as possible.” West Texas Intermediate futures have fallen for a record 12 sessions on fears that a supply glut similar to the price-killing surplus of 2014 is redeveloping. In London, Brent futures have declined in 11 of the past 12 sessions. Money managers’ combined bullish positions in WTI and Brent sank to the lowest in 14 months as of Nov. 6, Commodity Futures Trading Commission data show, as long positions shrank and shorts increased.

“Today’s move is just capitulation,” said Nick Gentile, managing partner of commodity trading advisor NickJen Capital Management & Consulting LLC in New York. “You’re getting a combination of the systematic CTAs, the trend following guys, adding to the shorts and global macro guys liquidating longs.” WTI for December delivery dropped US$4.24 to end the session at US$55.69 a barrel on the New York Mercantile Exchange. Total volume traded Tuesday was about 90 per cent above the 100-day average.

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Master graphmaker Lance Roberts has some more. I picked a few.

Major Markets Are All Flashing Warning Signs (Roberts)

[..] the failure of the market to hold the 200-dma also increases the downside risk of the market currently. There is an important point here to be made about “bull markets” and “bear markets. While there is no “official” definition of what constitutes a “bull” or “bear” market, the generally accepted definition is a decline of 20% in the market. However, since I really don’t want to subject my clients to a loss of 20% in their portfolios, I would suggest a different definition based on the “trend” of the market as a whole. As shown in the chart below: • If prices are generally “trending higher” then such is considered a “bull market.” • A “bear market” is when the “trend” changes from positive to negative.

[..] what is happening domestically should not be a surprise. The rest of the world markets have already confirmed bear market trends and continue to trade below their long-term moving averages. (The very definition of a bear market.) While it has been believed the U.S. can “decouple” from the rest of the world, such is not likely the case. The pressure on global markets is a reflection of a slowing global economy which will ultimately find its way back to the U.S.

(Note: we closed all international and emerging market positions in our portfolios at the beginning of this year.) Just as a side note, China has been in a massive bear market trend since 2015 and is down nearly 50% from its previous highs.

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China’s foreign reserves are under severe pressure.

Trump’s Tariff Battle With China Spurs Record Dollar-Yuan Trading (CNBC)

Market uncertainty tied to the ongoing U.S.-China trade war has spurred more transactions than ever before between the American dollar and the Chinese yuan in recent months. Much of that volume comes as businesses and investors with exposure to the Chinese market are looking to hedge their foreign exchange risk. Many of them are looking to buy into the strengthening dollar, and that’s stoked speculation that Chinese authorities are intervening in the market to defend their currency, boosting trading volumes to new highs in the process. On Tuesday, currency traders told Reuters major state-owned banks were selling dollars to defend the Chinese yuan, as the greenback climbed to a 16-month peak against a basket for currencies.

Most trading between the two currencies takes place on the spot market, where dollars and yuan change hands as soon as a deal is done. That sort of market has seen volumes surge this year for the currency pair. But futures trading — where the transaction is agreed to take place at a later date at a certain price — is also increasingly catching dollar-yuan traders’ interests, according to Benjamin Lu, an investment analyst with Singapore brokerage Phillip Futures. [..] ups-and-downs in the foreign exchange market have prompted a Singapore-based privately backed Chinese exchange to launch a new dollar-offshore yuan futures contract. “Nobody knows how the trade war will end. There’s a lot of fear and panic in the financial market and worries about trade,” said Eugene Zhu, CEO of the Chinese-backed Asia Pacific Exchange.

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Malaysia should call Blankfein to testify in court. He knew, he was there. But Goldman is far more likely to just pay some huge fine.

Goldman Sachs Is Implicated In History’s Largest Financial Con (Ind.)

Even by Wall Street standards of gouging customers this was one hell of a skim. In 2012 and 2013, the Malaysian government was raising $6.5bn (£5bn) from investors to establish a sovereign wealth fund and finance various domestic infrastructure investment projects. And the cut for Goldman Sachs – the most prestigious investment bank in the world – for arranging the fundraising from the global capital markets? Ten per cent, or $600m. Now we can have a guess as to why the Malaysian authorities were so insouciant about those extortionate fundraising costs: because they themselves were, apparently, going to loot the pot in one of the biggest frauds in history. Around half of the fund has gone missing.

According to the US Justice Department a fair amount has been pumped into luxury American real estate and shady art auction bids. Appropriately, some went into investing in Martin Scorsese’s The Wolf of Wall Street. At one stage $680m mysteriously appeared in the bank account of the former Malaysian prime minister, Najib Razak, who chaired the 1MDB advisory board, and who is now charged in his own country with corruption. Malaysian politicians, officials and financiers had effectively bought Goldman Sachs’ blue chip reputation to pull in naive investors to the “1MDB” state investment fund. Ten per cent probably seemed a reasonable cut in the circumstances. The question is: what did Goldman know about the theft?

The bank claims today that it was completely oblivious. But the senior Goldman banker on the ground in Malaysia, Tim Leissner, certainly knew. He pleaded guilty in New York to financial crimes related to 1MDB last week, including bribery of officials to ensure Goldman was the sole fundraiser. What’s even more problematic for the bank is that Leissner told the court there was a “culture” at Goldman Sachs of bypassing internal compliance. That’s backed up by US prosecutors, who say Goldman’s business culture in the region was “highly focused on consummating deals, at times prioritising this goal ahead of the proper operation of its compliance functions”.

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And then let the IMF control them all.

IMF Says Governments Could Set Up Their Own Cryptocurrencies (G.)

Governments should consider offering their own cryptocurrencies to prevent the systems becoming havens for fraudsters and money launderers, Christine Lagarde, head of the International Monetary Fund said referring to the fast-growing fintech industry. Lagarde said central banks had to work quickly to establish digital cash for burgeoning networks of private financial transactions or risk their mushrooming into trading networks that were inherently unstable. A system regulated by central banks could become the basis for a rapid expansion of financial services to developing world countries and the poorest people in western societies without the risks associated with privately managed digital currencies, she said.

[..] Speaking at a fintech conference in Singapore, Lagarde said central banks would take over the processing of transactions while private-sector providers offered innovative services to customers. “The advantage is clear. Your payment would be immediate, safe, cheap, and potentially semi-anonymous. And central banks would retain a sure footing in payments. In addition, they would offer a more level playing field for competition, and a platform for innovation. Meanwhile your bank or fellow entrepreneurs would have ensured a friendly user experience based on the latest technologies,. “Putting it another way. The central bank focuses on its comparative advantage – back-end settlement – and financial institutions and start-ups are free to focus on what they do best – client interface and innovation. This is public-private partnership at its best.”

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Because Bezos is barely scraping by. Everywhere you look, Amazon gets rewarded for destroying communities.

Amazon’s ‘HQ2’ Headquarters Will Cost US Taxpayers $2 Billion (R.)

Amazon.com picked America’s financial and political capitals for massive new offices on Tuesday, branching out from its home base in Seattle with plans to create more than 25,000 jobs in both New York City and an area just outside Washington, D.C. The world’s largest online retailer plans to spend $5 billion on the two new developments in Long Island City and Arlington, Virginia, and expects to get more than $2 billion in tax credits and incentives with plans to apply for more. The prize, which Amazon called HQ2, attracted hundreds of proposals from across North America in a year-long bidding war that garnered widespread publicity for the company. Amazon ended the frenzy by dividing the spoils between the two most powerful East Coast U.S. cities and offering a consolation prize of a 5,000-person center in Nashville, Tennessee, focused on technology and management for retail operations.

[..] At the outset of its search last year, Amazon said it was looking for a business-friendly environment. The company said it will receive performance-based incentives of $1.525 billion from the state of New York, including an average $48,000 for each job it creates. It can also apply for other tax incentives, such as New York City’s Relocation and Employment Assistance Program that offers tax breaks potentially worth $900 million over 12 years. What benefit the company would actually get was unclear. In Virginia, Amazon will receive performance-based incentives of $573 million, including an average $22,000 for each job it creates. These rewards come on top of $1.6 billion in subsidies Amazon has received across the United States since 2000, according to a database from watchdog Good Jobs First.

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“We don’t have any defense that could deny the employment of such a weapon against us.”

Decoding The Hypersonic Putin On A Day Of Remembrance (Escobar)

A battle of ideas now rages across Europe, epitomized by the clash between the globalist Macron and populism icon Matteo Salvini, the Italian interior minister. Salvini abhors the Brussels system. Macron is stepping up his defense of a “sovereign Europe.” And much to the horror of the US establishment, Macron proposes a real “European army” capable of autonomous self-defense side by side with a “real security dialogue with Russia.” Yet all these “strategic autonomy” ideals collapse when you must share the stage, live, with the undisputed stars of the global show: President Donald Trump and President Vladimir Putin.

So the optics in Paris were not exactly of a Yalta 2.0 conference. There were no holds barred to keep Trump and Putin apart. Seating arrangements featured, from left to right, Trump, Chancellor Angela Merkel, Macron, his wife Brigitte and Putin. Neither Trump nor Putin, for different reasons, took part in a “walking in the rain” stunt evoking peace. And yet they connected. Sir Peter Cosgrove, the governor general of Australia, confirmed that Trump and Putin, at a working lunch, had a “lively and friendly” conversation for at least half an hour. No one better than Putin himself to reveal, even indirectly, what they really talked about. Three themes are absolutely key.

[..] Vast sectors of the US Deep State are in denial, but Putin may have been able to impress on Trump the necessity of serious dialogue due to an absolutely key vector: the Avangard. The Avangard is a Russian hypersonic glide vehicle capable of flying over Mach 20 – 24,700km/h, or 4 miles per second – and one of the game-changing Russian weapons Putin announced at his ground-breaking March 1 speech. The Avangard has been in the production assembly line since the summer of 2018, and is due to become operational in the southern Urals by the end of next year or early 2019.

In the near future, the Avangard may be launched by the formidable Sarmat RS-28 intercontinental ballistic missile and reach Washington in a mere 15 minutes, flying in a cloud of plasma “like a meteorite” – even if the launch is from Russian territory. Serial production of Sarmat ICBMs starts in 2021. The Avangard simply cannot be intercepted by any existing system on the planet – and the US knows it. Here is General John Hyten, head of US Strategic Command: “We don’t have any defense that could deny the employment of such a weapon against us.”

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“This is one of the scariest speeches I have heard as an MEP in my nine years. Merkel is an out-and-out European federalist and we should not be pandering to her as if she is on our side. She is on the side of the superstate.”

Angela Merkel Calls For Creation Of ‘Real, True’ EU Army (Ind.)

Angela Merkel has called for the creation of a “real, true” European army, echoing a similar call by her French counterpart. The German chancellor’s backing for the force comes amid a spat with US president Donald Trump, who took offence to a suggestion by Emmanuel Macron that such an army could ensure Europe’s security in the shadow of the United States. Ms Merkel endorsed the creation of the army while addressing MEPs at the European parliament in Strasbourg. “We should work on a vision of one day establishing a real, true European army,” Ms Merkel said. The French president made his call during a radio interview last week: “We have to protect ourselves with respect to China, Russia and even the United States of America.

“We will not protect the Europeans unless we decide to have a true European army.” He added: “When I see President Trump announcing that he’s quitting a major disarmament treaty which was formed after the 1980s Euro-missile crisis that hit Europe, who is the main victim? Europe and its security.” [..] Ms Merkel’s intervention is significant because France has historically been the strongest and most vocal proponent of an EU army, with its neighbour tentatively endorsing proposals for a joint command structure for military interventions. Eurosceptics reacted angrily to the speech. Conservative MEP David Campbell Bannerman said: “This is one of the scariest speeches I have heard as an MEP in my nine years. Merkel is an out-and-out European federalist and we should not be pandering to her as if she is on our side. She is on the side of the superstate.”

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Bone saw was a local purchase. As was the acid.

Saudi ‘Kill Team’s’ Luggage Contained Syringes, Defibrillators, Scissors (AFP)

Luggage carried by a 15-member Saudi team dispatched to Istanbul included scissors, defibrillators and syringes that may have been used against journalist Jamal Khashoggi, who was murdered in the Saudi consulate, a pro-government Turkish daily said Tuesday. X-ray images of the luggage were published in the Sabah newspaper as the New York Times reported that a member of the team at the consulate had told a superior by phone to “tell your boss”, suspected to be Crown Prince Mohammed bin Salman, that the operation was accomplished. Turkish media has published gruesome details of the murder of 59-year-old Khashoggi who according to a Turkish prosecutor was strangled and dismembered soon after he entered the Istanbul consulate on October 2.

After repeated denials, Saudi Arabia finally admitted Khashoggi, a Washington Post columnist and Riyadh critic, had been murdered at the mission in a “rogue” operation. Turkish President Recep Tayyip Erdogan has said the 15-member Saudi team travelled from Riyadh to Istanbul to kill Khashoggi. The luggage carried by the team was loaded into two planes that left for Riyadh at 1520 GMT and 1946 GMT on October 2, Sabah newspaper said. The luggage contained 10 phones, five walkie-talkies, intercoms, two syringes, two defibrillators, a jamming device, staplers, and scissors, the paper reported. [..] Khashoggi’s body has never been found, but Sabah reported on Saturday that his killers poured his remains down the drain after dissolving them in acid.

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“..with the false narrative that my mouth was merely a receptacle for a powerful man’s desire”

Who Gets to Live in Victimville? (Monics Lewinsky)

The process of this docuseries led me to new rooms of shame that I still needed to explore, and delivered me to Grief’s doorstep. Grief for the pain I caused others. Grief for the broken young woman I had been before and during my time in D.C., and the shame I still felt around that. Grief for having been betrayed first by someone I thought was my friend, and then by a man I thought had cared for me. Grief for the years and years lost, being seen only as “That Woman”—saddled, as a young woman, with the false narrative that my mouth was merely a receptacle for a powerful man’s desire. (You can imagine how those constructs impacted my personal and professional life.)

Grief for a relationship that had no normal closure, and instead was slowly dismantled by two decades of Bill Clinton’s behavior that eventually (eventually!) helped me understand how, at 22, I took the small, narrow sliver of the man I knew and mistook it for the whole. The process became meta. As the project re-examined the narratives, both personal and political, surrounding the events of 1998, so did I. I revisited then-President Bill Clinton’s famous finger-wagging Oval Office interview from early 1998, in which I was anointed “That Woman,” and was transported to my apartment in the Watergate apartment complex.

Sitting on the edge of my grandma’s bed and watching it unfold on TV, 24-year-old me was scared and hurt, but also happy that he was denying our relationship, because I didn’t want him to have to resign. (“I didn’t want to be responsible for that,” I thought at the time, absolving anyone else of responsibility.) Forty-five-year-old me sees that footage very differently. I see a sports coach signposting the playbook for the big game. Instead of backing down amid the swirling scandal and telling the truth, Bill instead threw down the gauntlet that day in the Oval Office: “I did not have sexual relations with that woman, Miss Lewinsky.” With that, the demonization of Monica Lewinsky began. As it so often does, power throws a protective cape around the shoulders of the man, and he dictates the spin by denigrating the less powerful woman.

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Just like alcohol and cocaine do.

Social Media Increases Depression And Loneliness (TI)

Ever since sites like Facebook and Instagram became part of daily life, scientists have wondered whether they contribute to mental health problems. In fact, research has hinted at a connection between social media use and depression for several years. A new study, published in the Journal of Social and Clinical Psychology, has added more evidence to the theory. [..] “Here’s the bottom line,” said Melissa G. Hunt, a psychologist at the University of Pennsylvania and lead author of the study. “Using less social media than you normally would leads to significant decreases in both depression and loneliness. These effects are particularly pronounced for folks who were more depressed when they came into the study.”

She added 18-to-22-year-olds shouldn’t stop using social media altogether, but cutting down might be beneficial. “It is a little ironic that reducing your use of social media actually makes you feel less lonely,” she said. “Some of the existing literature on social media suggests there’s an enormous amount of social comparison that happens. When you look at other people’s lives, particularly on Instagram, it’s easy to conclude that everyone else’s life is cooler or better than yours.”

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Mammals too. Semen is temperature sensitive.

Heatwaves Can ‘Wipe Out’ Male Insect Fertility (G.)

Heatwaves severely damage the fertility of male beetles and consecutive hot spells leave them virtually sterilised, according to research. Global warming is making heatwaves more common and wildlife is being annihilated, and the study may reveal a way in which these two trends are linked. The scientists behind the findings said there could also be some relevance for humans: the sperm counts of western men have halved in the last 40 years. Researchers studied beetles because their 400,000 species represent about a quarter of all known species. Insect populations are plunging worldwide as temperatures rise, falling by about 80% in 30 years in Puerto Rico’s rainforest and by 75% in German nature reserves.

Insects are such an integral part of life, as pollinators and prey, that scientists say their decline could lead to “ecological Armageddon”. Little is known about the precise causes of the decline, though climate change, habitat destruction and global use of pesticides are considered probable factors. The research, published in the Nature Communications journal, found that exposing beetles to a five-day heatwave in the laboratory reduced sperm production by three-quarters; females were unaffected. “Beetles are thought to constitute a quarter of biodiversity, so these results are very important for understanding how species react to climate change,” said Kris Sales, at the University of East Anglia, who led the work.

Other research has shown that heat can damage male reproduction in humans as well as cows, sheep and other mammals. “There could be relevance for human fertility,” said Prof Matt Gage, co-leader of the UEA research group. “The paradox is that one of the reasons the climate is warming up and we are having more heatwaves is there are too many humans. So maybe this is a leveller.” Stuart Wigby, of the University of Oxford, who was not involved in the study, said: “Given what we already know about the generality of the sensitivity of sperm to heat, there is every reason to expect that similar effects would be seen in other insects and also in mammals including humans.”

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Nov 132018
 
 November 13, 2018  Posted by at 10:10 am Finance Tagged with: , , , , , , , , , , , , , ,  3 Responses »


Vincent van Gogh Peasant burning weeds 1883

 

Dow Plunges 600 Points As Apple Leads Tech Rout (CNBC)
The Economic Consequences Of Debt (Roberts)
The Fed Supports Capital In Its Eternal War With Labor (Hunt)
China State Banks Selling Dollars In FX Market To Arrest Yuan Losses (R.)
Goldman Sachs Down Most In 7 Years On 1MDB, ‘Fear Of The Unknown'(BBG)
Banking Consolidation In Europe Is ‘Inevitable’ – UBS Chief (CNBC)
China Scours Social Media, Erases Thousands Of Accounts (R.)
Working to Protect the World from Bananas (Epsilon)
Turkey, France Spar Over Khashoggi Killing (AFP)
US Federal, State Elections Still In Flux (R.)
Rock the Vote (Kunstler)
Crucifying Julian Assange (Chris Hedges)
Stan Lee Leaves a Legacy as Complex as His Superheroes (DB)

 

 

“..the FANG trade is dead and the market is struggling to find a replacement.”

Dow Plunges 600 Points As Apple Leads Tech Rout (CNBC)

The Dow Jones Industrial Average fell 602 points on Monday after a big decline in Apple shares, a rise in the U.S. dollar and lingering worries about global trade weighed on investor sentiment. Monday’s losses bring the Dow’s decline over the past two sessions to 804 points; it closed at 25,387.18. The tech-heavy Nasdaq Composite pulled back 2.8 percent to 7,200.87 and fell back into the correction territory it first entered during the October market rout. The S&P 500 dropped 2 percent to 2,726.22 as financials tanked, led by Goldman Sachs. In late-afternoon trading, the major indexes hit their lows of the day after Bloomberg News reported the White House was circulating a draft report on auto tariffs. Shares of General Motors turned negative following the report.

Apple shares tanked by 5 percent after Lumentum Holdings, which makes technology for the iPhone’s face-recognition function, cut its outlook for fiscal second quarter 2019. Lumentum CEO Alan Lowe said one of its largest customers asked the company to “materially reduce shipments” for its products. Shares of Lumentum plunged 33 percent. The decline in Apple pressured the broader technology sector. The Technology Select Sector SPDR dropped 3.5 percent. Alphabet and Amazon shares pulled back 2.7 percent and 4.3 percent, respectively. Amazon shares fell into bear-market territory, down about 20 percent from its 52-week high. [..] Peter Boockvar, chief investment officer at Bleakley Advisory Group, said “the FANG trade is dead and the market is struggling to find a replacement.”

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I’m partial to the last graph. It shows an undeniable long term trendline.

The Economic Consequences Of Debt (Roberts)

The relevance of debt growth versus economic growth is all too evident as shown below. Since 1980, the overall increase in debt has surged to levels that currently usurp the entirety of economic growth. With economic growth rates now at the lowest levels on record, the growth in debt continues to divert more tax dollars away from productive investments into the service of debt and social welfare. It now requires nearly $3.00 of debt to create $1 of economic growth.

Another way to view the impact of debt on the economy is to look at what “debt-free” economic growth would be. In other words, without debt, there has actually been no organic economic growth.

In fact, the economic deficit has never been greater. For the 30-year period from 1952 to 1982, the economic surplus fostered a rising economic growth rate which averaged roughly 8% during that period. Today, with the economy expected to grow at just 2% over the long-term, the economic deficit has never been greater.

But it isn’t just Federal debt that is the problem. It is all debt. When it comes to households, which are responsible for roughly 2/3rds of economic growth through personal consumption expenditures, debt was used to sustain a standard of living well beyond what income and wage growth could support. This worked out as long as the ability to leverage indebtedness was an option. The problem is that when rising interest rates hit a point where additional leverage becomes problematic, further economic cannot be achieved. Given the massive increase in deficit spending by households to support consumption, the “bang point” between rates and the economy is likely closer than most believe.

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The Fed must step back as wages rise.

The Fed Supports Capital In Its Eternal War With Labor (Hunt)

For 46 years, from 1951 to 1997, we were no more and no less rich than our economy grew. Which makes sense. That’s the neutral vision of monetary policy, where you’re not trying to pull forward future growth through leverage and easy money in order to create more wealth today. For the past 20 years, however, we have had a series of wealth bubbles – first the Dot-Com bubble, then the Housing Bubble, and today the Financial Asset Bubble – that have made us richer than our economy grows. Each of these bubbles was intentionally “blown” by the Fed through monetary policy. That’s the tried and true method of creating a wealth bubble in the modern age of fiat money – you artificially lower the cost of money to encourage borrowing and leverage, which in turn pulls future growth into the present. It’s a neat trick so long as you can keep it going.

But that’s the problem, of course. The Fed can’t keep it going, not if it wants to satisfy its raison d’etre, which is to keep inflation bottled up, particularly wage inflation. Once wage inflation starts to pick up, the Fed ALWAYS stops blowing bubbles. Why? Because the Fed, like every central bank, was created to support Capital in its eternal war with Labor. It’s in the name. They are bankers. I know that sounds all Marxist and conspiratorial and all that, but it’s really not. It’s very straightforward. It’s Alexander Hamilton, not Karl Marx. In case you haven’t noticed, wage inflation has started to pick up. The Fed has stopped blowing this Financial Asset Bubble. Then isn’t the inescapable conclusion that we are now inevitably heading back to that GDP growth line? And if that IS the conclusion, then how bad could it get for investors?

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A very ominous sign.

China State Banks Selling Dollars In FX Market To Arrest Yuan Losses (R.)

Major state-owned Chinese banks were seen selling dollars at around 6.97 per dollar in the onshore spot foreign exchange market in early trade on Tuesday, three traders said, in an apparent attempt to arrest sharp losses in the local currency. The onshore spot market opened at 6.9681 per dollar, weakening to a low of 6.9703 at one point in early deals. “Big banks were selling (dollars) to defend the yuan,” said one of the traders. The move by the state-run banks helped the yuan recover to 6.9550. The onshore spot yuan was trading at 6.9645 as of 0237 GMT.

Traders attributed the sharp morning losses in the yuan to broad strength in the U.S. dollar, which hit 16-month highs against a basket of six other major currencies. They also suspect the authorities are keen to prevent the yuan from weakening too sharply before U.S. President Donald Trump and his Chinese counterpart President Xi Jinping’s meeting later this month. The two countries’ leaders plan to meet on the sidelines of a G20 summit, in Argentina at the end of November for a high-stakes talk.

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The Squid got hungry.

Goldman Sachs Down Most In 7 Years On 1MDB, ‘Fear Of The Unknown'(BBG)

Goldman Sachs Group’s reputation is facing one of its biggest crises of the decade – and now its shares are, too. Since prosecutors implicated a trio of Goldman Sachs bankers in a multi-billion-dollar Malaysian fraud early this month, investors have endured an almost daily drip of news on the firm’s ties to the scandal. The barrage culminated on Monday (Nov 12) as Malaysia’s finance minister demanded a “full refund”, tipping Goldman’s shares into their biggest drop since 2011. Across Wall Street, analysts expressed surprise over the dive, noting the bank – which hasn’t been charged with wrongdoing – can probably stomach any payment that might be extracted in the case. Instead, some said, the decline appeared to be due to a combination of concern over the persistently harsh spotlight and uncertainty about what’s to come.

It was also a generally bad day in US markets. “It’s not so much the dollar amount,” said Mr Gerard Cassidy at RBC Capital Markets. “It’s more that we don’t know all of the facts yet; we don’t know all of the important points to the story at this time. It’s the fear of the unknown.” On Nov 1, at least three senior Goldman Sachs bankers were publicly implicated by the US Department of Justice in a multi-year criminal enterprise that included bribing officials in Malaysia and elsewhere and laundering hundreds of millions of dollars. The firm has said it’s cooperating with the investigations and may face “significant” fines. [..] The Malaysia probe focuses on the country’s scandal-plagued state investment company, 1Malaysia Development Bhd and the US$6.5 billion it raised in 2012 and 2013. Goldman Sachs handled the deals, reaping almost US$600 million in fees.

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“..technology will make the sector more “effective and more efficient.”

Banking Consolidation In Europe Is ‘Inevitable’ – UBS Chief (CNBC)

The European banking system needs consolidation and “as time goes by, it will become more and more inevitable,” the head of one of the largest banks in Europe told CNBC on Tuesday. Often investors, policy-makers and other industry experts refer to fragmentation as one of the biggest hurdles to European banks. UBS chief Sergio Ermotti told CNBC that the issue is “not sustainable.” “That’s something that as time goes by will become more and more inevitable, is part of the solutions. For sure consolidation needs to happen, in particular in Europe, where we see a lot of fragmentation that it is not sustainable,” Ermotti told CNBC’s Joumanna Bercetche. He further added that technology will make the sector more “effective and more efficient.”

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Self-media: social media not run by government.

China Scours Social Media, Erases Thousands Of Accounts (R.)

China’s top cyber authority has scrubbed 9,800 social media accounts of independent news providers deemed to have posted sensational, vulgar or politically harmful content on the Internet, it said late on Monday. China’s strict online censorship rules have tightened in recent years with new legislation to restrict media outlets, surveillance measures for media sites and rolling campaigns to remove content deemed unacceptable. The Cyberspace Administration of China (CAC) said in a statement that the campaign, launched on Oct. 20, had erased the accounts for violations that included “spreading politically harmful information, maliciously falsifying (Chinese Communist) party history, slandering heroes and defaming the nation’s image.”

CAC also summoned social media giants, including Tencent’s Wechat and Sina-owned Weibo, warning them against failing to prevent “uncivilized growth” and “all kinds of chaos” among independent media on their platforms. “The chaos among self-media accounts has seriously trampled on the dignity of the law and damaged the interests of the masses,” CAC said. The term “self-media” is mostly used on Chinese social media to describe independent news accounts that produce original content but are not officially registered with the authorities.

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Despair no more. Big Brother is here.

Working to Protect the World from Bananas (Epsilon)

The main story is the increased pace and arc of the Chinese system overall, not the ‘play-by-play’. With technology, even totalitarian surveillance technology, there typically is no ‘big bang’, just a bunch of independent systems coming on line, getting adopted over time, then getting networked together, resulting in a series of subtle shifts in personal behavior, and then a tipping point. Having watched this system come on line for nearly 20 years, the deployment of the Chinese technology-driven domestic surveillance system was pretty limited even up until 2010, but has been absolutely rip-roaring and accelerating over the last five years thanks to the same driving forces of most other tech advances since 2010:

• Ubiquitous handheld connected device • App adoption • Cheap sensors (inc. cameras) • Cheap massive data storage • Sophisticated statistical algorithms • Leaps forward in compute power and cost. All of these advances are so powerful for surveillance with its inherent big, unstructured data characteristics that I think we are now really close to an inflection point where the system is starting to really work in a functional day-to-day way, which will then lead to a behavioral tipping point. I don’t think the main story is that controversial at this point, i.e., I don’t think anyone, even the Chinese government, denies this system is being built, the intention of it, or that it is starting to work in a practical way.

Therefore, I think the more interesting story in many ways is the sub-story of the willful ignorance of the main story by the West. I was at an event last week where a new fancy think tank on AI ethics based here in San Francisco was presenting and expounding their tenet of “Working to protect the privacy and security of individuals”, whilst simultaneously welcoming Baidu into their organization. I’m sorry, but that’s like “Working to protect the world from bananas” while signing up Del Monte as a member. Bananas. With hypocritical sprinkles. And a big ignorant cherry on top.

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They’ve all heard the tapes, but not one of them talks about the content.

Turkey, France Spar Over Khashoggi Killing (AFP)

Turkey on Monday lashed out at “unacceptable” and “impertinent” comments by the French foreign minister who accused President Recep Tayyip Erdogan of playing a “political game” over the murder of Jamal Khashoggi. Erdogan said on Saturday that Turkey had shared recordings linked to the Saudi journalist’s murder last month with Riyadh, the United States, France, Britain and other allies, without giving details of the tapes’ specific content. In an interview with France 2 television on Monday, French Foreign Minister Jean-Yves Le Drian said he “for the moment was not aware” of any information transmitted by Ankara. Asked if the Turkish president was lying, he said: “It means that he has a political game to play in these circumstances.”

His comments provoked fury in Ankara. “We find it unacceptable that he accused President Erdogan of ‘playing political games’,” the communications director at the Turkish presidency, Fahrettin Altun, told AFP in a written statement. “Let us not forget that this case would have been already covered up had it not been for Turkey’s determined efforts.” Turkish Foreign Minister Mevlut Cavusoglu responded even more sharply, saying that his French counterpart’s accusations amounted to “impertinence”. “It does not fit the seriousness of a foreign minister,” he said, accusing Le Drian of “exceeding his authority”.

[..] Altun said Ankara had shared evidence linked to the murder with officials from a large number of countries and that France was “no exception”. “I confirm that evidence pertaining to the Khashoggi murder has also been shared with the relevant agencies of the French government,” he said. A representative of French intelligence listened to the audio recording and examined detailed information including a transcript on October 24, he added.

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The US is incapable of building a strong election system. How disgraceful is that?

US Federal, State Elections Still In Flux (R.)

Democrats took control of the U.S. House of Representatives in the Nov. 6 elections and Republicans held onto a majority in the U.S. Senate, but more than a dozen races remain undecided nearly a week later. The outcomes of two Senate races, 13 House seats and two governorships had yet to be settled on Monday. The results of Arizona’s U.S. Senate race became clear on Monday, when Democratic candidate Kyrsten Sinema declared victory and Republican candidate Martha McSally conceded after multiple media outlets called the race for Sinema. Florida ordered a recount in the race where Democratic Senator Bill Nelson trailed his Republican challenger, Florida Governor Rick Scott.

Florida also ordered a recount for its gubernatorial race, while the winner of the governor’s race in Georgia remained uncertain, with a December runoff still possible. In one of Mississippi’s U.S. Senate races, Republican Senator Cindy Hyde-Smith and her Democratic challenger, Mike Espy, will contest a runoff on Nov. 27 after neither won a majority. Vote tallies continue to trickle in for the 13 U.S. House races that appear too close to call, and there is no consensus among media outlets and data provider DDHQ that a victor has emerged. Democrats held narrow leads in eight of those races, according to unfinished tallies compiled by DDHQ.

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“.. C-Span will be livelier and more colorful than the WWE Wrestlemania round-robin, midget division.”

Rock the Vote (Kunstler)

It warmed my heart to read in The Wall Street Journal that Hillary Clinton is preparing to re-enter the Washington DC swamp from her deluxe exile in the woods of Chappaqua, New York, and make another run for the White House — though it’s hard to calculate how many porters in sandals and loincloths will be required to lug all her baggage around the campaign trail. Will hubbie hit the hustings with her? That would be rich. I can just imagine the pussy-hatted legions shrieking #MeToo at every stop. Surely there is no better way to put the Democratic Party out of its misery. The post-election melodramas in Georgia and Florida grind on, despite the various rules and laws about deadlines for certifying ballots and accounting for their origin.

What is a ballot after all but a mere scrap of paper, easily reproducible, and interchangeable. Sometimes, they make strange journeys out of election headquarters in trucks and SUVs, seeking fun and excitement, and they have been known to mysteriously turn up by the hundredweight in broom closets where they retreat to caucus. Only one thing is certain: the ballot fiasco is a billable hours bonanza for DC lawyers arriving on the scene to sort things out — which they may not manage anyway. If the vote count somehow remains in favor of the provisional winners — Republicans Rick Scott, Ron DeSantis (Fla), and Brian Kemp (Ga) — you can be sure we’ll be in a frenzy of sore loserdom that will make the Medieval ergot outbreaks of yore look like episodes of Peewee’s Playhouse.

If the provisional votes get overturned, the attorneys billable hours will quickly exceed the national debt, and we’ll find ourselves in a new era where the free citizens of this republic can‘t be trusted to the simple task of counting ballots, or even holding elections in the first place. [..] Meanwhile, the new Democratic majority congress prepares to ramp up its longed-for multi-committee inquisition against Trump and Trumpism, and the Republican Senate will counter-punch with binders of criminal referrals against the superstars of the Resistance. C-Span will be livelier and more colorful than the WWE Wrestlemania round-robin, midget division.

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The role of the MSM demands much more scrutiny.

Crucifying Julian Assange (Chris Hedges)

Assange was once feted and courted by some of the largest media organizations in the world, including The New York Times and The Guardian, for the information he possessed. But once his trove of material documenting U.S. war crimes, much of it provided by Chelsea Manning, was published by these media outlets he was pushed aside and demonized. A leaked Pentagon document prepared by the Cyber Counterintelligence Assessments Branch dated March 8, 2008, exposed a black propaganda campaign to discredit WikiLeaks and Assange.

The document said the smear campaign should seek to destroy the “feeling of trust” that is WikiLeaks’ “center of gravity” and blacken Assange’s reputation. It largely has worked. Assange is especially vilified for publishing 70,000 hacked emails belonging to the Democratic National Committee (DNC) and senior Democratic officials. The Democrats and former FBI Director James Comey say the emails were copied from the accounts of John Podesta, Democratic candidate Hillary Clinton’s campaign chairman, by Russian government hackers. Comey has said the messages were probably delivered to WikiLeaks by an intermediary. Assange has said the emails were not provided by “state actors.”

The Democratic Party—seeking to blame its election defeat on Russian “interference” rather than the grotesque income inequality, the betrayal of the working class, the loss of civil liberties, the deindustrialization and the corporate coup d’état that the party helped orchestrate—attacks Assange as a traitor, although he is not a U.S. citizen. Nor is he a spy. He is not bound by any law I am aware of to keep U.S. government secrets. He has not committed a crime.

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Enough controversy for ten.

Stan Lee Leaves a Legacy as Complex as His Superheroes (DB)

He was born Stanley Martin Lieber in the Bronx. For nearly 22 years, beginning almost immediately after graduating from DeWitt Clinton High School, he labored in obscurity as a writer, editor, and art director in a publishing industry just one cultural rung above pornography: comic books. And then, in 1961, he became one of the pivotal 20th century figures who elevated comics into the first draft of American pop culture. Stan Lee, who died Monday, November 12 at age 95, is synonymous with Marvel Comics. Nearly every movie released by Hollywood upstart-turned-juggernaut Marvel Studios can trace part of its creative origins to Lee. (The exceptions are the Captain America, Guardians of the Galaxy, and forthcoming Captain Marvel franchises.)

Among people who shaped the legacy of the Disney company, which purchased Marvel in 2009 for $4 billion, Lee is probably second only to Walt Disney himself. George Lucas is third because of the debts Star Wars owes to the comics creations of Lee’s greatest creative partner and bitterest foe, Jack Kirby. Lee’s legacy at Marvel is immortal. But so too is the debate and controversy over what that legacy specifically is. In some quarters in comics, and especially to devotees of Kirby, Stan Lee is a supervillain–a man who stole credit, and corresponding fortunes, from the people who truly shaped Marvel creatively in the ’60s, relegating them to also-ran obscurity.

Aspects of that critique, uncomfortably, have merit. Lee had a maestro’s instincts for what we now call branding, and it cast a shadow long enough to keep his Marvel collaborators in darkness. In press interviews, his endless public appearances, and his own writing, Lee portrayed himself as the driver of the Marvel Universe, rendering artists like Kirby and Spider-Man co-creator Steve Ditko as afterthoughts.

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Nov 012018
 
 November 1, 2018  Posted by at 8:38 am Finance Tagged with: , , , , , , , , , , ,  12 Responses »


Francisco Goya Witches’ Sabbath 1797-98

 

US Wages And Salaries Jump By 3.1%, Highest Level In A Decade (CNBC)
Chinese Yuan Tumbles To New Cycle Low Amid Signs Of Capital Outflows (ZH)
Southern California Suffers Its Worst Housing Slump In Over A Decade (CNBC)
Rise In ‘Zombie Firms’ Is Fueling Fears For The Global Labor Market (CNBC)
UK, EU Agree Tentative Brexit Deal On Financial Services (R.)
GOP Senators Want Trump To Halt Nuclear Technology Talks With Saudis (CNBC)
New Zealand Is Best Place To Do Business – World Bank (G.)
Europe Torn Over Islamic State Children In Syria (R.)
Tim Berners-Lee Says Tech Giants May Have To Be Split Up (R.)
Oceans ‘Soaking Up 60% More Heat Than Estimated’ (BBC)
70% Of World’s Last Remaining Wilderness In Just Five Countries (Ind.)

 

 

This means two things: 1) more fed rate hikes, and 2) ever slimmer chance of a blue wave in the midterms.

US Wages And Salaries Jump By 3.1%, Highest Level In A Decade (CNBC)

Employment costs rose more than expected in the third quarter in a sign that more inflation could be brewing in the U.S. economy. The Labor Department’s employment cost index rose 0.8 percent for the period, ahead of the estimate of 0.7 percent from economists surveyed by Refinitiv. Wages and salaries rose 0.9 percent, well ahead of expectations for 0.5 percent. Benefit costs were up 0.4 percent. On a yearly basis, wages and salaries jumped 3.1 percent, the biggest increase in 10 years. Wage increases have been the missing link in the economy since the recovery began in mid-2008. Average hourly earnings have been rising steadily but have stayed below the 3 percent level as slack has remained in the labor market.

However the unemployment rate is now at 3.7 percent, the lowest since 1969, and wage pressures have begun to build. The Federal Reserve has been raising interest rates in an effort to stave off future inflationary pressures, though the central bank’s preferred gauge of inflation rose just 2.5 percent in the third quarter, including a 1.9 percent increase for health benefits. “The employment cost index data adds to the broader evidence that wage growth has continued to trend gradually higher over recent quarters,” Michael Pearce, senior U.S. economist at Capital Economics, said in a note. “And with labor market conditions still tightening, we expect wage growth will accelerate further from here.”

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“2019 big year for China. centenary of founding of CCP [..] Being seen to succumb to Trump’s WH is just not on. Expect both sides to dig in further..”

Chinese Yuan Tumbles To New Cycle Low Amid Signs Of Capital Outflows (ZH)

As Chinese markets began to wake, yuan just broke below 6.98/USD for the first time in this downswing, despite PBOC liquidity withdrawals sending money market rates spiking (to squeeze yuan shorts). [..] if former UBS Chief Economist George Magnus is right, any hopes for the G20 meeting between Trump and Xi should be extinguished. In a series of tweets, Magnus warned… “Trump and Xi are supposed to meet at the G20 in Buenos Aires at end month. Will they talk trade? They need to cos Trump has already threatened to subject the other of 50% of imports from China to punitive tariffs. This is how he prepares the ground, telling Fox News: “I think that we will make a great deal with China and it has to be great, because they’ve drained our country,”.

Designed to turn XJP frostier, be even less inclined to bring something to the table, and more anxious not to be seen to be succumbing to foreign pressure. So I think, barring something going on in the background, these talks are set up to fail, assuming they happen. The 10% tariff rate is due to go to 25% on 200bn $ of goods on 1 Jan anyway, and we shd probably expect WHY to go for the remaining 250bn $ of imports in new year… 2019 big year for China. centenary of founding of CCP. and rivals Soviet CP’s 72 years in power. Xi’s Chinese Dream of Rejuvenation of Chinese Ppl isn’t just a slogan. Being seen to succumb to Trump’s WH is just not on. Expect both sides to dig in further

Begs question as what China will do next. Xant tit for tat any more, as they have run out of room. @davidjlynch in @washingtonpost reminds us that tourism cd be a target. Targeting US firms also could be cranked up. Yuan depreciation also poss tho v risky at home too … Much longer discussion and background written up in Red Flags, just out in the US this month….the details change with the news and announcements, but the substance is sadly all too clear.

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Should we pity the fools who bought the overpriced crap? The entire westernworld is filled with people who grossly overpaid on the back of ultra-low rates. They’re all going to claim they’re victims, and there’s so many of them they may actually be bailed out, at the cost of those who haven’t been so stupid.

Southern California Suffers Its Worst Housing Slump In Over A Decade (CNBC)

Higher mortgage rates and overheated home prices hit Southern California home sales hard in September. The number of new and existing houses and condominiums sold during the month plummeted nearly 18 percent compared with September 2017, according to CoreLogic. That was the slowest September pace since 2007, when the national housing and mortgage crisis was hitting. Sales have been falling on an annual basis for much of this year, but this was the biggest annual drop for any month in almost eight years. It was also more than twice the annual drop seen in August. “The double whammy of higher prices and rising mortgage rates has priced out some would-be buyers and prompted others to take a wait-and-see stance,” said Andrew LePage, a CoreLogic analyst, in the release.

“There was one caveat to last month’s sharp annual sales decline — this September had one less business day for recording transactions. Adjusting for that, the year-over-year decline would be about 13 percent, still the largest in four years.” On a monthly basis, sales fell 22 percent in September compared with August. Sales usually fall about 10 percent from August to September. Sales of newly built homes are suffering more than sales of existing homes, likely because fewer are being built compared with historical production levels. Newly built homes also come at a price premium. Sales of newly built homes were 47 percent below the September average dating back to 1988, while sales of existing homes were 22 percent below their long-term average.

The median price of Southern California homes sold in September, $505,000, was still 3.6 percent higher than it was a year ago. That was the lowest annual gain for any month in more than three years. “Price growth is moderating amid slower sales and more listings in many markets,” LePage said. “This is welcome news for potential homebuyers, but many still face a daunting hurdle – the monthly mortgage payment, which has been pushed up sharply by rising mortgage rates.”

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They’re everywhere that debt is cheap.

Rise In ‘Zombie Firms’ Is Fueling Fears For The Global Labor Market (CNBC)

A rise in so-called “zombie firms,” alongside higher interest rates, has led several experts to warn of the impact it could have on employment in developed nations. Zombie firms, as they are often called, are companies that would have defaulted in a normal economic cycle but continue to function due to an ultra-low interest rate environment. “Like the characters after which they are named, zombie firms are creatures that really should have shuffled off to the next realm some time ago. Instead of embracing death, they soldier on, usually wreaking havoc on the rest of society,” Eoin Murray, head of investment at Hermes Investment Management, said in a research note Wednesday.

Economists define a zombie firm as one which is at least 10 years old but is unable to cover its costs with its profits. Murray described collapsed facilities management and construction services company Carillion as one. Ever since the financial crisis, these firms have taken on huge pile of debts as borrowing became so cheap on the back of low interest rates. The numbers of such firms are currently on the rise, according to a report from the Bank of International Settlements (BIS) released last month. Decades of falling interest rates have led to a sharp increase in the number of zombie firms that are potentially threatening economic growth and preventing interest rates from rising, the report stated.

“Our analysis suggests that this increase is linked to reduced financial pressure, which in turn seems to reflect in part the effects of lower interest rates,” the research said, adding that these “zombies” weigh on economic performance because they are “less productive and because their presence lowers investment in and employment at more productive firms.”

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What’s the use without an Irish border deal?

UK, EU Agree Tentative Brexit Deal On Financial Services (R.)

British Prime Minister Theresa May has struck a tentative deal with the European Union that would give UK financial services companies continued access to European markets after Brexit, the Times reported on Thursday. British and European negotiators have reached tentative agreement on all aspects of a future partnership on services, as well as the exchange of data, the British newspaper reported, citing government sources. The services deal would give UK companies access to European markets as long as British financial regulation remained broadly aligned with the EU’s, the Times reported. The British pound jumped as much as 0.5 percent against the dollar following the report.

Global banks operating in the UK have had to reorganize their operations around Britain’s departure from the European Union, due to take place in March next year. Many have set up new European hubs and begun to move operations, senior executives and staff to ensure they can continue to serve their continental clients if Britain leaves the bloc without a deal. According to the Times’ report, EU will accept that the UK has “equivalent” regulations to Brussels, and UK financial services companies will be allowed to operate as they now do in Europe. EU officials have said that the EU’s financial market access system, known as “equivalence,” under which Brussels grants access to foreign banks and insurers if their home rules converge with the bloc’s, is probably Britain’s best bet.

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Yeah, let’s hand MbS some nukes.

GOP Senators Want Trump To Halt Nuclear Technology Talks With Saudis (CNBC)

Five Republican senators have asked the Trump administration to suspend talks to transfer U.S. nuclear technology to Saudi Arabia following the killing of journalist Jamal Khashoggi at the kingdom’s consulate in Turkey. The lawmakers, led by Senator Marco Rubio, threatened to block any agreement to export civilian nuclear technology to Saudi Arabia, potentially setting up a showdown with the White House. The Trump administration has courted the Saudis as they seek to build 16 nuclear power reactors over the next 25 years, an endeavor that would generate tens of billions of dollars in economic activity.

In a letter to President Donald Trump, the senators say the slaying of Khashoggi, as well as other foreign policy issues, raise questions about whether the Saudi leadership should be entrusted with U.S. nuclear technology and know-how. “The ongoing revelations about the murder of Saudi journalist Jamal Khashoggi, as well as certain Saudi actions related to Yemen and Lebanon, have raised further serious concerns about the transparency, accountability, and judgment of current decisionmakers in Saudi Arabia,” the lawmakers wrote in a letter to Trump. “We therefore request that you suspend any related negotiations for a U.S.-Saudi civil nuclear agreement for the foreseeable future.”

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Number 1 in a list that includes UAE and Georgia. Nobody should want that. Nice going, Jacinda.

New Zealand Is Best Place To Do Business – World Bank (G.)

New Zealand has topped the World Bank’s ranking of the best countries to start and run a business in 2018, ahead of Singapore, Denmark and Hong Kong. The World Bank said New Zealand had retained its position in its Doing Business report ahead of 190 other countries, despite not implementing any reforms in the last year. The UK slipped to ninth place while Norway climbed to seventh in a year when the World Bank said governments pressed ahead with a record number of reforms to business regulations and tax rules to support private businesses. Georgia, the former Soviet satellite state, retained its position at number six in the rankings, despite persistent criticism from aid agencies that the World Bank was rewarding a country with high levels of inequality, showing that a business-friendly environment is not in and of itself a means of alleviating poverty.

Macedonia, the United Arab Emirates, Malaysia and Mauritius are also among the business-friendly countries in the World Bank’s top 20 that rank among the highest in Oxfam’s list of unequal nations. The Organisation for Economic Cooperation and Development criticised Mauritius last year for acting as a tax haven and leaching tax revenues from mainland African nations. Singapore, often held up as a model for post-Brexit Britain, recently topped Oxfam’s list of unequal nations. The World Bank Group’s president, Jim Yong Kim, said the private sector played an important role in “creating sustainable economic growth and ending poverty around the world”.

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Even the US is ahead of Europe on this.

Europe Torn Over Islamic State Children In Syria (R.)

For years, they heard little from daughters who went to join Islamic State. Now dozens of families across Europe have received messages from those same women, desperate to return home from detention in Syria. They are among 650 Europeans, many of them infants, held by U.S.-backed Kurdish militias in three camps since IS was routed last year, according to Kurdish sources. Unwanted by their Kurdish guards, they are also a headache for officials in Europe. In letters sent via the Red Cross and in phone messages, the women plead for their children to be allowed home to be raised in the countries they left behind. In one message played by a woman at a cafe in Antwerp, the chatter of her young grandchildren underscores their mother’s pleas.

Another woman in Paris wants to care for three grandchildren she has never met, born after her daughter left for Syria in 2014, at the age 18. “They are innocent,” she said. “They had no part in any of this.” Like other relatives of those held in Syria, the two mothers asked to remain anonymous – afraid of being linked to IS and worried their daughters may face reprisals. The United States has taken custody of some citizens, as have Russia and Indonesia, and wants Europe to do the same – fearing the camps may breed a new generation of militants. “We are telling European governments: ‘Take your people back, prosecute them. … They are more of a threat to you here than back home,’” a senior U.S. counterterrorism official said.

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“If you put a drop of love into Twitter it seems to decay but if you put in a drop of hatred you feel it actually propagates much more strongly.”

Tim Berners-Lee Says Tech Giants May Have To Be Split Up (R.)

Silicon Valley technology giants such as Facebook and Google have grown so dominant they may need to be broken up, unless challengers or changes in taste reduce their clout, the inventor of the World Wide Web told Reuters. The digital revolution has spawned a handful of U.S.-based technology companies since the 1990s that now have a combined financial and cultural power greater than most sovereign states. Tim Berners-Lee, a London-born computer scientist who invented the Web in 1989, said he was disappointed with the current state of the internet, following scandals over the abuse of personal data and the use of social media to spread hate.

“What naturally happens is you end up with one company dominating the field so through history there is no alternative to really coming in and breaking things up,” Berners-Lee, 63, said in an interview. “There is a danger of concentration.” But he urged caution too, saying the speed of innovation in both technology and tastes could ultimately cut some of the biggest technology companies down to size. “Before breaking them up, we should see whether they are not just disrupted by a small player beating them out of the market, but by the market shifting, by the interest going somewhere else,” Berners-Lee said.

“I am disappointed with the current state of the Web,” he said. “We have lost the feeling of individual empowerment and to a certain extent also I think the optimism has cracked.” Facebook CEO Mark Zuckerberg apologized after the Cambridge Analytica scandal and pledged to do more to protect users’ data. But social media, Berners-Lee said, was still being used to propagate hate. “If you put a drop of love into Twitter it seems to decay but if you put in a drop of hatred you feel it actually propagates much more strongly. And you wonder: ‘Well is that because of the way that Twitter as a medium has been built?’”

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Not at all surprised, but I have some trouble with this sentence: “..we have put about 150 times the amount of energy used to generate electricity globally into the seas..”

Oceans ‘Soaking Up 60% More Heat Than Estimated’ (BBC)

The world has seriously underestimated the amount of heat soaked up by our oceans over the past 25 years, researchers say. Their study suggests that the seas have absorbed 60% more than previously thought. They say it means the Earth is more sensitive to fossil fuel emissions than estimated. This could make it much more difficult to to keep global warming within safe levels this century. According to the last major assessment by the Intergovernmental Panel on Climate Change (IPCC), the world’s oceans have taken up over 90% of the excess heat trapped by greenhouse gases.

But this new study says that every year, for the past 25 years, we have put about 150 times the amount of energy used to generate electricity globally into the seas – 60% more than previous estimates. That’s a big problem. Scientists base their predictions about how much the Earth is warming by adding up all the excess heat that is produced by the known amount of greenhouse gases that have been emitted by human activities. This new calculation shows that far more heat than we thought has been going into oceans. But it also means that far more heat than we thought has been generated by the warming gases we have emitted. Therefore more heat from the same amount of gas means the Earth is more sensitive to CO2.


More heat means less oxygen in the water which could have implications for many species. Photo Victor Huang

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Well, and seas. “..more than 77 per cent of land – excluding Antarctica – and 87 per cent of the ocean has been modified by the direct effects of human activities..”

70% Of World’s Last Remaining Wilderness In Just Five Countries (Ind.)

More than 70 per cent of our planet’s remaining areas of wilderness are contained in just five countries and are at the mercy of political decisions regarding their future, new research has warned. Urgent international action is required to ensure the preservation of these last pockets of intact ecosystems, the study says, which calls for mandated conservation targets. The places where the greatest remaining tracts of wilderness containing mixes of species at near-natural levels of abundance were identified as being in Russia, Canada, Australia, the US and Brazil.

Produced by the University of Queensland (UQ) and the Wildlife Conservation Society (WCS), the study published in the journal Nature, says these areas are “increasingly important buffers against changing conditions… Yet they aren’t an explicit target in international policy frameworks.” The study also examines the huge future value these areas are likely to have for our planet. “They are also the only areas supporting the ecological processes that sustain biodiversity over evolutionary timescales,” it says. “As such, they are important reservoirs of genetic information, and act as reference areas for efforts to re-wild degraded land and seascapes.”

Professor James Watson, from UQ’s School of Earth and Environmental Sciences, said the work provides the first full global picture of how little wilderness remains, and he was alarmed at the results. “A century ago, only 15 per cent of the Earth’s surface was used by humans to grow crops and raise livestock,” he said. “Today, more than 77 per cent of land – excluding Antarctica – and 87 per cent of the ocean has been modified by the direct effects of human activities. It might be hard to believe, but between 1993 and 2009, an area of terrestrial wilderness larger than India – a staggering 3.3 million square kilometres – was lost to human settlement, farming, mining and other pressures.”

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Oct 102018
 


Paul Klee Angelus Novus 1920 (see last article)

 

Trump “Doesn’t Like What The Fed Is Doing” (ZH)
Chinese Yuan Could Reach A Record Low Against The Dollar (MW)
China’s (Non-Government) Business Survey Collapses As Trade War Strikes (ZH)
Chinese Firms Now Hold Stakes In Over A Dozen European Ports (NPR)
UK Public Finances Are Among Weakest In The World – IMF (G.)
IMF Warns Italy Not To Breach EU Spending Rules In Next Budget (G.)
Bank of England Warns EU Over Brexit Risk To Financial Stability (G.)
One Good Thing About Brexit: Leaving Disgraceful EU Farming System (Monbiot)
UK Fracking Rules On Earthquakes Could Be Relaxed (G.)
Shell CEO: Mass Reforestation Needed To Limit Temperature Rises To 1.5C (G.)
Florida Panhandle Bracing for Category 4 Hit from Michael (WU)
The Emergency Brake (Sperber)

 

 

Sorry, but I see nothing other than Trump reaffirming the Fed’s independence.

Trump “Doesn’t Like What The Fed Is Doing” (ZH)

With the dollar spiking and rates surging to 7 years highs, President Trump doubled down on his criticism of the Fed and on his way to a rally in Iowa, said the Federal Reserve is moving too fast with interest rates increases, dismissing concerns about inflation. “I don’t like what the Fed is doing”, Trump told reporters at the White House. “I think we don’t have to go as fast” on rate hikes. “I like low interest rates,” Trump said. Trump also said that rates are too high because there’s no inflation, but said that he has not talked to Chair Powell about it because he doesn’t want to get involved. Trump’s comments echoed prior criticisms of the Fed.

When the Fed announced its third increase of the year in September, Trump said he was “not happy” about it. Trump has publicly criticized the Fed’s interest-rate increases on several occasions, breaking with more than two decades of White House tradition of avoiding comments on “independent” monetary policy. Some commented that this is another sly move by the president to preemptively shift blame on the Fed chair ahead of what may be a turbulent 2019 when rates are expected to keep rising, potentially resulting in a sharp slowdown in the economy and/or a stock market crash.

Separately, hours after Nikki Haley announced her departure as US ambassador to the UN, Trump said he would consider Goldman’s Dina Powell for the post. “Dina is certainly a person I would consider,” Trump told reporters at the White House on the way to board the presidential helicopter as he embarked on a trip to Iowa. But he added there are others he would also consider. Earlier CNBC reported that Dina Powell, a Goldman Sachs exec and Trump’s former deputy national security advisor, has had discussions with senior members of the administration about possibly replacing Nikki Haley as U.S. ambassador to the United Nations.

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Manipulation?

Chinese Yuan Could Reach A Record Low Against The Dollar (MW)

The pressure on China’s currency continues to mount as the world’s second-largest economy shows more signs of slowing and traders bet that the dollar will soon buy a record amount of yuan in the offshore market. As the country returned to work on Monday after the Golden Week holiday, the People’s Bank of China cut the Reserve Ratio Requirement, the percent of deposit liabilities owed to its customers banks are required to hold, for the fourth time this year. While that may spur banks to lend more, it sent the Chinese yuan another leg lower, moving toward its August low against the greenback and in sight of the psychological 7.00 level. A move through 7.00 would be a record low in offshore trading.

The yuan has already posted six straight monthly declines against the dollar, including a drop of 0.6% in September. The slide in the yuan comes as the economy shows more signs of slowing. A closely watched economic activity indicator, the official Purchasers Manufacturing Index, fell to 52 in September, from 52.2 in August, according to Wei Yao, an economist at Société Générale. Magnifying concerns around the Chinese economy was a steeper-than-expected drop in China’s foreign-exchange holdings during September, to $3.087 trillion. A decline in the country’s reserves raises concerns that the PBOC could not defend the yuan in should a large amount of money flee the country.

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“For most, business has never been worse.”

China’s (Non-Government) Business Survey Collapses As Trade War Strikes (ZH)

As China returns from its Golden Week vacation, it is not just its currency and stock market that is collapsing… As Bloomberg reports, an indicator produced by a Beijing-based business school in the style of the closely-watched purchasing managers index plunged last month, adding to concerns about the slowing economy and raising the question of whether business conditions may be worse than official statistics show. The index is based on a survey of CKGSB students and graduates who are executives at companies operating in China. The respondents represent around 300 privately-owned small and mid-sized enterprises across several sectors of the economy.

“Most surveyed companies are now experiencing unprecedented difficulties and have become increasingly pessimistic about business prospects for the next six months,” Li Wei, the economics professor at CKGSB who oversees the survey, said in a commentary accompanying the September survey results. “For most, business has never been worse.”

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Next up: military presence?

Chinese Firms Now Hold Stakes In Over A Dozen European Ports (NPR)

In the past decade, Chinese companies have acquired stakes in 13 ports in Europe, including in Greece, Spain and, most recently, Belgium, according to a study by the OECD. Those ports handle about 10 percent of Europe’s shipping container capacity. It is part of China’s 21st Century Maritime Silk Road, which aims to better connect the country to commercial hubs in Africa, Asia, Europe and Oceania. China is the European Union’s biggest source of imports and its second-largest export market, adding up to more than $1 billion in trade per day. And sea shipping outweighs rail or air freight. But this is about more than just moving cargo, analysts say. President Xi Jinping’s new silk road, named after the ancient trade route, has sped up China’s advance toward becoming a superpower of the seas, spreading not just commercial ships but naval power and influence to more and more areas of the world.

For instance, Chinese investments in the ports of Djibouti, Sri Lanka and Pakistan have been followed by Chinese naval deployments. While there are no public plans to turn European ports into Beijing’s military bases, Chinese warships have already paid a friendly visit to Greece’s Piraeus port. This all raises a slew of questions about issues ranging from military defense to labor conditions. “The main issue is for Europe to decide how it wants to deal with China’s influence,” says Frans-Paul van der Putten, a China expert at the Netherlands Institute of International Relations. “What degree of China’s influence is unavoidable and acceptable especially in sectors such as ports?”

[..] COSCO, with the world’s fourth-largest container shipping fleet, is leading the charge in Europe, beginning with Piraeus. In 2016, after years of investment, the company bought a majority stake in the Piraeus Port Authority in a concession agreement that runs until at least 2052. It is now in charge of container terminals, cruise ship piers and ferry quays. “A few years ago, when COSCO first became involved in Greece, the European view was it was good because Greece was in a lot of financial difficulties and at least someone wanted to invest there,” van der Putten says. “Piraeus was not a top-ranking port. People in Brussels thought it wouldn’t have a lot of significance.”

Today, about 20 million passengers go through Piraeus each year. Since COSCO’s takeover, it has become the fastest-growing port in the world, according to the industry news outlet Seatrade Maritime. COSCO’S chief executive in Piraeus, Capt. Fu Cheng Qui, says he wants to make it the largest in the Mediterranean.

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“corporation liabilities from zero in 2007 to 189% of GDP in 2008..”

UK Public Finances Are Among Weakest In The World – IMF (G.)

Britain’s public finances are among the weakest in the world following the 2008 financial crash, according to a fresh assessment of government assets and liabilities by the IMF. The Washington-based lender said a health check on the wealth of 31 nations found almost £1tn had been wiped off the wealth of the UK’s public sector – equivalent to 50% of GDP – putting it in the second weakest position, with only Portugal in a worse state. In calculations that combine measures of wealth and stress tests that mimic those applied to the banking sector, the IMF said the bailout of UK banks and the growth of Britain’s public sector pension liabilities were significant factors in the UK’s low ranking.

The tests are an effort by the IMF to show the balance of assets and liabilities in relation to a nation’s overall income to judge how well governments are prepared for economic shocks. Norway ranked as the most secure nation with a war chest built on its publicly held oil wealth, in contrast to the UK, which allowed private sector companies to extract North Sea oil reserves and spent the tax revenues during the 1980s and 1990s. The Gambia, Uganda and Kenya rank above the UK because while they have smaller assets and liabilities than Britain, they have a higher net wealth relative to GDP.

Cruder measures taking a snapshot of a country’s assets and liabilities showed Italy and Greece, which were excluded from the broader tests, fared worse than the UK. Barbados was another country with a lower rating. But most other countries were in a better position relative to their national income, the IMF said. [..] The report said: “The United Kingdom balance sheet expanded massively during the crisis. Most of the expansion in the balance sheet was the result of large-scale financial sector rescue operations that resulted in reclassification of the rescued private banks into the public sector. [This] increased (non–central bank) public financial corporation liabilities from zero in 2007 to 189% of GDP in 2008, with similar [falls] in financial assets.”

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Austerity still rules. Sovereignty, not so much.

IMF Warns Italy Not To Breach EU Spending Rules In Next Budget (G.)

The International Monetary Fund has thrown its weight behind Brussels in its battle with Italy’s coalition government over plans to increase the indebted country’s borrowing in its next budget. The Washington-based lender of last resort, which is holding its annual conference in Bali this week, warned Rome to abide by the EU’s financial rulebook or risk a rebellion by investors that could trigger a debt default. Italy’s populist coalition is targeting a deficit of 2.4% of GDP next year, tripling the previous government’s target, as it pledges more spending despite a huge debt pile, which at about 130% of GDP is the biggest in the eurozone behind Greece.

Brussels has rejected the idea of Italy running a larger budget deficit – the gap between income from taxes and government spending – than previously planned over the next three years. Rome is due to submit its draft budget by 15 October to the EU commission, the bloc’s executive arm, which will check whether it is in line with EU rules. The government has said it wants to use a spending boost to kickstart investment and consumer spending to fuel growth. The IMF’s chief economist, Maurice Obstfeld, said it was important to maintain the confidence of international money markets, especially when the risks of an escalating trade war and a damaging no-deal Brexit were rising.

The IMF’s intervention could prove significant while both sides seek allies in the budget battle as it is considered an important ally by governments as they seek to persuade electorates that debt-fuelled spending could lead to a collapse in confidence and rising borrowing costs. Obstfeld said EU rules that prevented governments adding to already sky-high levels of debt to GDP should be maintained in the current unstable economic climate.

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Only £70 trillion in derivatives?!

Bank of England Warns EU Over Brexit Risk To Financial Stability (G.)

The Bank of England has issued its strongest warning yet to the EU that its lack of adequate planning for Brexit has created growing risks for almost £70tn of complex financial contracts. Threadneedle Street said the bloc had made only limited progress to protect the financial system and time was running out, with little more than six months before the UK is due to leave the EU. Stressing the urgency of the situation in a statement from its financial policy committee, the Bank said: “In the limited time remaining, it is not possible for companies on their own to mitigate fully the risks of disruption to cross-border financial services.”

Without action, the contracts governing the financial derivatives – currently sold across the UK-EU border by banks to companies looking to protect themselves from movements in interest rates and changes in global markets – could be rendered illegal the moment Britain leaves, it warned. EU firms have about £69tn of outstanding derivatives contracts that are handled through a process known as “clearing” in the UK, while as much as £41tn mature after Britain exits the EU in March 2019. In a corner of the finance industry worth more than three times the overall value of the EU economy, the process of clearing derivatives involves banks organising their trades through a central third-party organisation – known as a clearing house – which takes on the risk of either party defaulting.

Clearing has become increasingly important since the financial crisis as the EU introduced rules forcing banks to trade greater volumes via clearing houses, with the idea of improving transparency and to avoid the confusion of banks going bust with complex webs of contracts with multiple parties – as was the case in 2008. EU-authorised clearing houses must handle EU banks’ trades, but UK organisations such as the London Stock Exchange’s LCH handle the bulk of business and could fall outside the rules in the event of a hard Brexit. As much as 90% of EU firms’ interest rate swaps – one of the most common types of financial derivative – are cleared in the UK.

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Don’t think I’ve ever understood how this got so out of hand.

One Good Thing About Brexit: Leaving Disgraceful EU Farming System (Monbiot)

I’m a remainer, but there’s one result of Brexit I can’t wait to see: leaving the EU’s common agricultural policy. This is the farm subsidy system that spends €50bn (£44bn) a year on achieving none of its objectives. It is among the most powerful drivers of environmental destruction in the northern hemisphere. Because payments are made only for land that’s in “agricultural condition”, the system creates a perverse incentive to clear wildlife habitats, even in places unsuitable for farming, to produce the empty ground that qualifies for public money. These payments have led to the destruction of hundreds of thousands of hectares of magnificent wild places across Europe.

It is also arguably the most regressive transfer of public money in the modern world. Farmers are paid by the hectare for owning or using land; so the more you have, the more you get. While in the UK benefits for poor people are capped at £20,000 (outside London), these benefits for the rich are uncapped. Some landowners receive £1m or more. You don’t even have to live in the EU to take this money: you just have to own land here. Among the benefit tourists sucking up public funds in the age of austerity are Russian oligarchs, Saudi princes and Texas oil barons.

It is hard to discern any just principle behind an occupational qualification for receiving public money. Some farmers are poor, but seldom as poor as rural people who have no land, no buildings and no jobs. Why should one profession be supported when others aren’t? Yet even farmers have been hurt by these payments. European subsidies have helped turn farmland into a speculative honeypot, making it highly attractive to City financiers. The price of land has more than doubled since payments by the hectare were introduced, pushing it out of reach of most farmers. By reinforcing economies of scale, these subsidies have driven out small farmers and accelerated the consolidation of land ownership.

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Craziest headline in ages.

UK Fracking Rules On Earthquakes Could Be Relaxed (G.)

Rules designed to halt fracking operations if they trigger minor earthquakes could be relaxed as the shale industry begins to expand, the UK energy minister, Claire Perry, has said. A series of small tremors seven years ago prompted tough regulations that mean even very low levels of seismic activity now require companies to suspend fracking. The shale gas firm Cuadrilla plans to start fracking near Blackpool this week if it can see off a last-minute legal challenge on Thursday. If seismic sensors detect anything above 0.5 magnitude on the Richter scale – far below what people can feel at the surface – the company would have to stop and review its operations.

But Perry has told a fellow Conservative MP that the monitoring system was “set at an explicitly cautious level … as we gain experience in applying these measures, the trigger levels can be adjusted upwards without compromising the effectiveness of the controls”. The comments were made in a letter to Kevin Hollinrake, the MP for Thirsk and Malton, whose constituency has several prospective fracking sites. The letter was obtained by Greenpeace’s investigative unit, Unearthed. Hollinrake, who is pro-fracking if it can be done safely, told the Guardian: “We’d need to be very careful about any revision to the regulations put in place. I’d want to understand why we were doing that and take plenty of evidence. We certainly wouldn’t want to see those rules being relaxed now.”

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Or close down your business?

Shell CEO: Mass Reforestation Needed To Limit Temperature Rises To 1.5C (G.)

The boss of Shell has said a huge tree-planting project the size of the Amazon rainforest would be needed to meet a tougher global warming target, as he argued more renewable energy alone would not be enough. Ben van Beurden said it would be a major challenge to limit temperature rises to 1.5C (equivalent to a rise of 2.7F), which a landmark report from the UN’s climate science panel has said will be necessary to avoid dangerous warming. “You can get to 1.5C, but not by just by pulling the same levers a little bit harder, because they are being pulled roughly as fast and and as hard as we are currently imagining. What we think can be done is massive reforestation. Think of another Brazil in terms of rainforest: you can get to 1.5C,” he told an oil and gas industry audience in London.

“It’s not what some people sometimes think: we’ll just do a little bit more solar, a bit more wind and we’ll get there,” he added. Reforestation is seen as essential in the scenarios outlined this week by the UN’s intergovernmental panel on climate change, if the world is to restrict warming to 1.5C. But Van Beurden stressed that meeting the challenge would be an uphill battle, because while it was “technically about doable”, it would not be commercially viable without changes to government policies and regulation. “Already to get to less than 2C will be [a] quite unimaginable, unprecedented scale of collaboration. Getting to 1.5C is a major challenge on top of it,” he said.

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Florida Panhandle has never seen a Cat 4 storm make landfall since records began 167 years ago.

Florida Panhandle Bracing for Category 4 Hit from Michael (WU)

Just hours away from an expected Wednesday afternoon landfall, Hurricane Michael became ever stronger and more organized on Tuesday night over the eastern Gulf of Mexico. Michael’s high winds, torrential rain, and very large storm surge were pushing briskly toward the Florida Panhandle and the Big Bend region just to the east, the areas in line to experience the worst impacts. Update (2 am EDT Wednesday): Michael has been upgraded to Category 4 strength as of 2 am EDT, with top sustained winds of 130 mph. Some additional strengthening is possible before landfall.

Satellite images of Michael’s evolution on Tuesday night were, in a word, jaw-dropping. A massive blister of thunderstorms (convection) erupted and wrapped around the storm’s eye, which has taken taking a surprisingly long time to solidify. A layer of dry air several miles above the surface being pulled into Michael from the west may have been one of the factors that kept Michael from sustaining a classic, fully closed eyewall (see embedded tweet below). A closed eyewall is normally a prerequisite for a hurricane to intensify robustly, but somehow Michael managed to reach Category 3 status without one.

[..] If Michael reaches the coast with top winds of at least 130 mph (minimal Category 4 strength), it will be the strongest hurricane landfall ever recorded in the Florida Panhandle, as well as along most of Florida’s Gulf Coast—all the way from the Alabama border to Punta Gorda—in records going back to 1851.

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See the painting at the top of this Debt Rattle.

The Emergency Brake (Sperber)

Because we seem to be living through a stretch of history in which history is threatening to extinguish history itself, an examination of the 20th century philosopher and critic Walter Benjamin’s concept of the angel of history, and his interrelated notion of the emergency brake, may point to a way. Evoked by the Swiss artist Paul Klee’s watercolor Angelus Novus, Benjamin introduced the figure of the angel of history in his final essay, “Theses on the Philosophy of History.”Appearing with its face “turned toward the past,” hurtling backward through space by “a storm blowing from paradise,” the angel is unable to close its wings and determine its own movement. Overpowered by this storm, it can do little more than watch impotently as catastrophic wreckage (the manifestation of history and progress) piles up at its feet.

That is, caught in the storm blowing from paradise, the storm of history is preventing the angel from doing what it desires to do. But just what does it desire? As Benjamin writes: the angel “would like to stay, awaken the dead, and make whole what is smashed.” Although prevented from doing so by the storm of progress that determines (and undermines) its flight, the angel’s utopian desire is to repair the world – not in order to restore paradise (a longstanding tendency of utopian messianism), but, rather, to restore life and autonomy to a social world destroyed by the coercive and destructive forces of history and ideology. While the angel desires this, however, the ecocidal storm (the bulldozer of progress, as the Supreme Court Justice William O. Douglas phrased the world-ravaging forces of history and technology) is far too powerful.

This is where the messianic notion of the emergency brake enters the picture – rupturing history and releasing its utopian essence. As Benjamin famously put it in his essay’s paralipomena; “Marx said that revolutions are the locomotive of world history. But perhaps things are very different. It may be that revolutions are the act by which the human race traveling in the train applies the emergency brake.” That is, the emergency brake would stop the “bulldozer of progress,” would cut off the ecocidal storm of history, and thereby allow the revolutionary potential of the angel (and humanity) to realize itself.

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Aug 102018
 
 August 10, 2018  Posted by at 8:05 am Finance Tagged with: , , , , , , , , , , ,  15 Responses »


John French Sloan Sunset, West Twenty-Third Street 1905-6

 

The Myth Of Market Cap (Berversdorf)
The Looming Threat of a Yuan Depreciation (Magnus)
Russia Blasts New US Sanctions As ‘Theatre Of The Absurd’ (G.)
US Curbs On Russian Banks Would Be Act Of Economic War – Medvedev (R.)
US Must Turn to Russia to Contain China (Rickards)
Pakistan Is On The Brink Of Economic Disaster (CNBC)
Tesla Board Plans To Tell Elon Musk To Recuse Himself (CNBC)
US, EU Laying Groundwork For New Trade Deal (CNBC)
US Judge Orders Deportation Plane Turnaround (BBC)
Germany Inks Deal With Spain To Return Registered Migrants (AFP)
New Zealand To Ban Single-Use Plastic Bags (AFP)

 

 

Apple does record buybacks. Amazon invests in becoming a better company.

Hadn’t heard from Thad Beversdorf for quite a while. Good to see you, my friend!

The Myth Of Market Cap (Berversdorf)

Why do CEO’s distribute cash to secondary market speculators? These speculators haven’t provided any capital to the balance sheet and haven’t added to the income statement or cash flow statement of the companies they are speculating on. So why do CEO’s spend so much effort and capital appeasing them? Market cap is the benchmark by which a company distributes cash (i.e. div yield). But market cap, as determined in the secondary markets, is a theoretical asset that doesn’t generate revenue, profit or cash flow for the firm. Meaning cash payments are tied to an ‘asset’ that has no relevance to a firm’s operations. Paying dividends against an non-producing asset i.e. market cap that generates no return for the company is incredibly destructive.

There becomes a dangerous disconnect between the return on capital the company raised/invested and the cash distribution. In this sense, market cap is a massive hindrance to the firm’s capacity for productive investment as capital is eaten up paying out against an asset that hasn’t generated any return. The destructive force of this connect is exacerbated by the stock buy backs whose sole purpose is to drive market cap higher. And for what benefit? What does a higher market cap or a higher valuation do to improve the operation and long term success of the business? Historically market cap was a represenation of operational performance and expected future growth but it has now become the objective. Apple’s numbers are mediocre. But they are distributing $110 billion in cash this year so it doesn’t matter.

They hit a trillion dollar market cap. That puts its price-to-sales in line with Amazon, which has a 3 year revenue growth rate 7x higher than Apple’s (32% vs. 4.5%). Amazon’s growth rate continues to accelerate while Apple actually lost overall marketshare dropping from second largest to the third largest seller of smartphones, something that hasn’t ever happened. And so why would a firm that is losing marketshare not be putting its capital to work? The proof is in the pudding. Amazon doesn’t distribute cash to speculators. It attracts speculators by driving expected future growth. The rest of the market is attracting speculators by paying them cash. In effect, CEO’s are investing in market cap today rather than growth tomorrow. The result is that Amazon is in a league of its own, trouncing incumbants in any sector it enters because it invests in being better.

The moral of the story is that when market cap becomes the objective of capital rather than a representation of productive capital allocation, productive investment is replaced with financial investment. When market cap is being driven by something other than expected future growth derived from productive investment it is coming at the cost of expected future growth due to lack of productive investment. Read that again.

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The netire region depends on China to a huge degree.

The Looming Threat of a Yuan Depreciation (Magnus)

When the Asian financial crisis occurred 20 years ago, many nations in East and Southeast Asia succumbed because they were following inconsistent domestic and international economic and financial policies. But one trigger was the 50% fall in the Japanese yen against the dollar between the end of 1995 and the summer of 1998 amid the American stock market’s bull run that lasted until 2002. Fast forward to today, and the dollar is on a roll again, thanks to a strong economy and tensions between its fiscal and monetary policies. Higher U.S. interest rates and a stronger dollar are already raising debt interest costs for Asian borrowers, but this time the falling Chinese yuan looms as a proximate cause of trouble.

Asia’s vulnerability to developments in U.S. financial markets has been widely noted. It is true that unlike the Asian financial crisis of 1997-1998, most countries in the region have stronger foreign exchange reserves. They are better positioned when measured against important indicators such as months of import cover, short-term debt and foreign debt ratios. Most Asian countries have current account surpluses, and even those with deficits, such as India, Indonesia, Myanmar and the Philippines do not look overly challenged. But while the sensitivity to shocks is lower than it was 20 years ago, there is no cause for complacency. And there is still a potential spoiler, the yuan, which is now under downward pressure, but which was an agent of calm in the last Asian crisis.

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The US wants access to Russian facilities. Sure. They’re going to see OK, if we get access to yours.

Russia Blasts New US Sanctions As ‘Theatre Of The Absurd’ (G.)

Russian officials reacted with outrage and markets slumped on Thursday morning following the announcement of tough new US sanctions over Russia’s alleged use of a nerve agent in the Salisbury attack. President Vladimir Putin’s spokesman, Dmitry Peskov, said the sanctions were “absolutely unlawful and don’t conform to international law”, as politicians vowed to respond with countermeasures, which could include bans on the exports of rockets or resources for manufacturing. “The theatre of the absurd continues,” tweeted Dmitry Polyanskiy, first deputy permanent representative of Russia to the UN. “No proofs, no clues, no logic, no presumption of innocence, just highly-likelies. Only one rule: blame everything on Russia, no matter how absurd and fake it is. Let us welcome the United Sanctions of America!”

A member of the Duma’s foreign affairs committee, Leonid Slutsky, said Russia could block exports of RD-180 rocket engines to the US as a potential countermeasure, the RIA Novosti news agency reported. The United States announced on Wednesday that it would impose restrictions on the export of sensitive technology to Russia because of its use of a nerve agent in the attempted murder of a former Russian spy and his daughter in Britain. The State Department said the new sanctions would come into effect on 22 August and would be followed by much more sweeping measures, such as suspending diplomatic relations and revoking Aeroflot landing rights, if Russia did not take “remedial” action within 90 days.

Moscow is not expected to agree to the response required by US legislation, which includes opening up Russian scientific and security facilities to international inspections to assess whether it is producing chemical and biological weapons in violation of international law.

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Russia is losing patience.

US Curbs On Russian Banks Would Be Act Of Economic War – Medvedev (R.)

Russia would consider any U.S. move to curb the operations of Russian banks or their foreign currency dealings a declaration of economic war, Prime Minister Dmitry Medvedev said on Friday. The United States announced a new round of sanctions on Wednesday targeting Russia that pushed the rouble to two-year lows and sparked a wider sell-off over fears Russia was locked in a spiral of never-ending sanctions. Separate legislation introduced last week in draft form by Republican and Democratic senators proposes curbs on the operations of several state-owned Russian banks in the United States and restrictions on their use of the dollar.

Medvedev said Moscow would take economic, political or other retaliatory measures against the United States if Washington targeted Russian banks. “I would not like to comment on talks about future sanctions, but I can say one thing: If some ban on banks’ operations or on their use of one or another currency follows, it would be possible to clearly call it a declaration of economic war,” said Medvedev. “And it would be necessary, it would be needed to react to this war economically, politically, or, if needed, by other means. And our American friends need to understand this,” he said, speaking on a trip to the Russian Far East.

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Someday people will recognize how well Russia is coping with all the nonsense.

US Must Turn to Russia to Contain China (Rickards)

Vladimir Putin stands accused in the media and global public opinion of rigging his recent reelection, imprisoning his political enemies, murdering Russian spies turned double-agent, meddling in Western elections, seizing Crimea, destabilizing Ukraine, supporting a murderous dictator in Syria and exporting arms to terrorist nations like Iran. At the same time, the country of Russia is more than Mr. Putin, despite his authoritarian and heavy-handed methods. Russia is the world’s 12th-largest economy, with a GDP in excess of $1.5 trillion, larger than many developed economies such as Australia (No. 13), Spain (No. 14) and the Netherlands (No. 18). Its export sector produces a positive balance of trade for Russia, currently running at over $16 billion per month.

Russia has not had a trade deficit in over 20 years. Russia is also the world’s largest oil producer, with output of 10.6 million barrels per day, larger than both Saudi Arabia and the United States. Russia has the largest landmass of any country in the world and a population of 144 million people, the ninth largest of any country. Russia is also the third-largest gold-producing nation in the world, with total production of 250 tons per year, about 8% of total global output and solidly ahead of the U.S., Canada and South Africa. Russia is highly competitive in the export of nuclear power plants, advanced weaponry, space technology, agricultural products and it has an educated workforce.

Russia’s government debt-to-GDP ratio is 12.6%, which is trivial compared with 253% for Japan, 105% for the United States and 68% for Germany. Russia’s external dollar-denominated debt is also quite low compared with the huge dollar-debt burdens of other emerging-market economies such as Turkey, Indonesia and China. Under the steady leadership of central bank head Elvira Nabiullina, the Central Bank of Russia has rebuilt its hard currency reserves after those reserves were severely depleted in 2015 following the collapse in oil prices that began in 2014. Total gold reserves rose from 1,275 tons in July 2015 to about 2,000 tons today. Russia’s gold-to-GDP ratio is the highest in the world and more than double those of the U.S. and China.

In short, Russia is a country to be reckoned with despite the intense dislike for its leader from Western powers. It can be disliked but it cannot be ignored. Russia is even more important geopolitically than these favorable metrics suggest. Russia and the U.S. are likely to improve relations and move closer together despite the current animosity over election meddling and the attempted murders of ex-Russian spies. The reason for this coming thaw has to do with the dynamics of global geopolitics. There are only three countries in the world that are rightly regarded as primary powers — the U.S., Russia and China. These three are the only superpowers. Some analysts may be surprised to see Russia on the superpower list, but the facts are indisputable.

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China exports the Silk Road. And creates dependencies that way.

Pakistan Is On The Brink Of Economic Disaster (CNBC)

Pakistan is on the brink of economic disaster, experts say. Foreign exchange reserves are at four-year lows, pressuring the local rupee and triggering worries that Islamabad may soon be unable to finance monthly import bills. The developing country is also awash in external debt, having taken on loans from China for the $62 billion China-Pakistan Economic Corridor. To avoid a full-blown balance of payments crisis, Islamabad needs outside help. It has two options: the IMF or Beijing. Neither, however, may solve its economic woes in the long run. The South Asian nation is no stranger to IMF bailouts — it has gone through 21 programs in total, with the most recent one ending two years ago.

If the administration of incoming Prime Minister Imran Khan seeks out another loan, estimated at $10 billion, the country will be subject to the IMF’s strict austerity measures that’re likely to hurt growth. It also wouldn’t bode well politically for Khan, who called on the campaign trail for Pakistan to become self-sufficient. The U.S., meanwhile, has taken issue with the idea of IMF funds going toward Pakistan’s Chinese debt obligations. “There’s no rationale for IMF tax dollars — and associated with that, American dollars that are part of the IMF funding — for those to go to bail out Chinese bondholders or China itself,” Secretary of State Mike Pompeo told CNBC last week.

In response, Pakistan’s finance ministry has refuted Pompeo’s linkage of IMF assistance with the China-Pakistan Economic Corridor. Alternatively, Khan’s government could turn to China for fresh loans. But that would mean Islamabad wading even deeper into the so-called “Chinese debt trap” — a frequent criticism of Beijing’s infrastructure spending spree that’s known as the Belt and Road Initiative, of which the CPEC is a part. Last month, the Asian giant loaned Pakistan $1 billion to boost its shrinking foreign currency reserves. For the current fiscal year thus far, China’s lending to Pakistan is set to exceed $5 billion, according to Reuters.

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They’ve never seen an actual plan.

Tesla Board Plans To Tell Elon Musk To Recuse Himself (CNBC)

The Tesla board of directors plans to meet with financial advisors next week to formalize a process to explore Elon Musk’s take-private proposal, according to people familiar with the matter. Musk announced via Twitter this week that he hopes to take the automaker private, in what would be one of the biggest such deals in history. The board is likely to tell Musk, the Tesla chairman and CEO, to recuse himself as the company prepares to review his take-private proposal, according to these people, who asked not to be named because the conversations are private. The board has told Musk that he needs his own separate set of advisors, one of the people said. Tesla’s board will likely develop a special committee of a smaller number of independent directors to review the buyout details, the people added.

Musk previously talked with Saudi Arabia’s sovereign wealth fund about a take-private deal, said one of the people. Saudi’s Public Investment Fund bought a 3% to 5% stake in the electric car maker, The Financial Times reported earlier this week. It isn’t yet known whether Saudi’s Public Investment Fund has agreed to commit money to the transaction. It also still isn’t clear if Tesla has committed financing. Musk tweeted he had “funding secured” on Tuesday when he said he was considering taking the company private at $420 per share. Tesla has declined to comment on funding for the transaction, leading to speculation Musk doesn’t have committed financing and drawing a request for more information from the SEC.

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US involvement in Nordstream 2?

US, EU Laying Groundwork For New Trade Deal (CNBC)

Two weeks after reaching a handshake agreement to calm trade talks and back off new tariffs, the United States and European Union are beginning to lay the formal groundwork underpinning any deal. On Tuesday, the State Department sent a cable to U.S. embassies across Europe, directing them to identify business areas ripe for lowering of tariffs or cutting of red tape, according to a readout of the cable provided to CNBC. The communication placed particular emphasis on deals that would increase U.S. energy and soybean exports, two areas highlighted in a joint statement the U.S. and the EU put out following the July 25 meeting.

One of the ideas that had been discussed is potential American involvement in a Russian natural gas pipeline into Germany that President Donald Trump had criticized. European Commission President Jean-Claude Juncker told Trump at the White House last month that “most” EU countries disagreed with German Chancellor Angela Merkel’s decision to broker the deal with Russia, according to a senior administration official. The State Department declined to comment, citing a policy not to confirm or deny internal communications. But the move represents an effort to source deliverables for talks set to take place when a delegation from the European Union visits Washington later this month.

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It’s a good idea to hold Sessions in contempt. But he’s the AG!.

US Judge Orders Deportation Plane Turnaround (BBC)

A federal judge has ordered a mother and her daughter be flown back to the United States, after learning they had been deported mid-appeal. The two were being represented in a lawsuit by the American Civil Liberties Union (ACLU), who said they had fled “extreme sexual and gang violence”. The judge said it was unacceptable they had been removed during their appeal. He reportedly also said Attorney General Jeff Sessions could be held in contempt of court for the deportation. The mother and daughter were part of a case filed by the ACLU and the Centre for Gender and Refugee Studies on behalf of 12 mothers and children who said they had fled violence, but were at risk of deportation.

A tightening of rules in June by Mr Sessions means victims of domestic abuse and gang violence no longer generally qualify for US asylum. The government had pledged not to deport anyone in the case before Friday at the earliest, ACLU said. But ACLU said they learned during Thursday’s emergency hearing that the mother and daughter had already been put on a flight back to El Salvador by US authorities. Washington DC District Court Judge Emmet Sullivan said that it was unacceptable that people claiming asylum had been removed while lawyers argued their case. He branded the situation “outrageous” and ordered the pair be returned immediately, according to reports. An official from the Department of Homeland Security told the Reuters agency that the agency worked to comply with the court’s order.

“Upon arrival in El Salvador, the plaintiffs did not disembark and are currently en route back to the United States,” the department said in an emailed statement. The mother and daughter are said to have arrived back in Texas, where they were being held, by Thursday night.

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It’s a market place. Supply and demand.

Germany Inks Deal With Spain To Return Registered Migrants (AFP)

Berlin has concluded a deal with Madrid for Spain to take back migrants who had been registered by Spanish authorities, a German interior ministry spokeswoman said Wednesday, as Germany seeks to curb new arrivals. Under the accord, which will enter in to force on Saturday August 11, the migrants “could be sent back to Spain within 48 hours,” said interior ministry spokeswoman Eleonore Petermann, adding that Madrid did not lay down any condition in exchange. The deal is part of a series of bilateral agreements that Germany is seeking with EU partners, after a broader accord for the bloc proved elusive.

Chancellor Angela Merkel has been under pressure to reduce the number of new arrivals after a record influx of a million asylum seekers between 2015 and 2016 unsettled Germany. Besides Spain, Greece – another key arrival country for migrants who had undertaken the perilous sea journey crossing the Mediterranean – has also in principle agreed to such a deal, Berlin said in June. Italy’s new right-wing government has been more reluctant, as it is putting its focus on boosting controls at the EU’s external borders. Discussions with both Athens and Rome are “not over,” said Petermann. But Interior Minister Horst Seehofer had said in an interview published Sunday that talks with his Italian and Greek colleagues were ongoing “in a good atmosphere”.

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“10 million plastic bags per minute.”

New Zealand To Ban Single-Use Plastic Bags (AFP)

New Zealand became the latest country Friday to outlaw single-use plastic shopping bags, with Prime Minister Jacinda Ardern saying they will be phased out over the next year as a “meaningful step” towards reducing pollution. New Zealand uses “hundreds of millions” of single-use plastic bags each year, many of which end up harming marine life, Ardern said. “We need to be far smarter in the way we manage waste and this is a good start,” she said. “We’re phasing-out single-use plastic bags so we can better look after our environment and safeguard New Zealand’s clean, green reputation.”

Ardern said her coalition government, which includes the Green Party, was facing up to environmental challenges and “just like climate change, we’re taking meaningful steps to reduce plastics pollution so we don’t pass this problem to future generations.” Single-use plastic bags are among the most common items found in coastal litter in New Zealand and the environmental group Greenpeace welcomed the decision to outlaw them. “This could be a major leap forward in turning the tide on ocean plastic pollution and an important first step in protecting marine life such as sea turtles and whales, from the growing plastic waste epidemic,” Greenpeace Oceans Campaigner Emily Hunter said. A United Nations report in June said up to five trillion grocery bags are used globally each year, which is nearly 10 million plastic bags per minute.

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