Jan 262020
 
 January 26, 2020  Posted by at 10:58 am Finance Tagged with: , , , , , , , , ,  22 Responses »


Jack Delano Long stairway in mill district of Pittsburgh, Pennsylvania 1941

 

Chinese Virus Deaths Rise To 56, 2,000 Infected & More Cases Abroad (RT)
Coronavirus Contagion Rate Makes It Hard To Control (R.)
No Link With Seafood Market In First Case Of China Coronavirus (SCMP)
China Stole Coronavirus From Canada And Weaponized It (GGI)
US Economic Confidence at Highest Point Since 2000 (Gallup)
Stock Market A ‘Ponzi Scheme’ That Eventually Must Collapse – Guggenheim (RT)
Neither Side Is Really Trying To Win This Trump Impeachment Trial (Turley)
Trump Defense Team Signals Focus On Schiff (Hill)
Adam Schiff Is a Dangerous Warmonger (Jacobin)
Joe Biden Lied About His Record On Social Security (IC)
VP Pence Appears To Suggest Americans, Nor Russians, Liberated Auschwitz (RT)

 

 

People’s Daily: “Chinese health authorities announced Sunday that 1,975 confirmed cases of pneumonia caused by the novel coronavirus (2019-nCoV), including 324 in critical conditions and 56 deaths, had been reported in the country by the end of Saturday.”

We’re nicely in line with the Fibonacci sequence, with Hubei infections rising from 1,400 to 2,000. 3,300 tomorrow? Note that “official” updates are provided once a day, apparently first thing in the morning. Curious that deaths the previous day rose from 26 to 41, and today to 56, i.e. by 15 in both cases. The updates are heavily controlled.

Incubation time is now estimated as up to 2 weeks, so think back at least those 14 days and think back to how safety measures were back then. Questions also arise about the origin of the virus. A dead bat, a bioweapon lab, or both? Many animals are now -officially- off the menu.


Fibonacci

Chinese Virus Deaths Rise To 56, 2,000 Infected & More Cases Abroad (RT)

The death toll from the 2019-nCoV coronavirus outbreak in China has reached 56, with hundreds of new infections detected nationwide, despite all containment efforts. A handful of news cases have also been reported outside China. The first death was reported in Shanghai, and another one in Henan Province, while 13 more people died in Hubei Province – the epicenter of the outbreak – where nearly 130 people were reportedly in serious or critical condition as of Sunday morning. In addition to hundreds of known and confirmed cases, some 7,000 people there remain under increased medical supervision due to their potentially dangerous “close contacts.”

Meanwhile, the number of those who have beaten the virus and were discharged from hospitals has increased to at least 85, according to authorities. = China is facing a “grave situation” as the new coronavirus is “accelerating its spread,” President Xi Jinping warned earlier. He added, however, that given the immense efforts to contain the outbreak, China “will definitely be able to win the battle.” Around 450 Chinese military medics, many with experience in combating SARS or Ebola, were deployed in the region to help the overworked and exhausted hospital staff, who had been on around-the-clock shifts in recent weeks. Meanwhile, local authorities are rushing to construct a new 1,000-bed facility specifically to treat victims of the deadly virus.

Chinese authorities have also imposed strict travel restrictions in the outbreak epicenter of Wuhan, as well as nearly 20 cities in Hubei Province, with nearly 50 million people virtually quarantined in the middle of the holiday season. With many mass public events canceled, additional limitations have been imposed on intercity bus routes starting Sunday. Medical staff have been tasked with checking travelers’ temperatures for any signs of fever – the most apparent symptom of coronavirus, which is followed by a dry cough and leads to shortness of breath.

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R0 rate appears to have been lowered to 2.5, from 3.8. Don’t get all happy.

Coronavirus Contagion Rate Makes It Hard To Control (R.)

Each person infected with coronavirus is passing the disease on to between two and three other people on average at current transmission rates, according to two separate scientific analyses of the epidemic. Whether the outbreak will continue to spread at this rate depends on the effectiveness of control measures, the scientists who conducted the studies said. But to be able to contain the epidemic and turn the tide of infections, control measures would have to halt transmission in at least 60% of cases. The death toll from the coronavirus outbreak jumped to 41 on Saturday, with more than 1,400 people infected worldwide – the vast majority in China.

“It is unclear at the current time whether this outbreak can be contained within China,” said Neil Ferguson, an infectious disease specialist at Imperial College London who co-led one of the studies. Ferguson’s team suggest as many as 4,000 people in Wuhan were already infected by Jan. 18 and that on average each case was infecting two or three others. A second study by researchers at Britain’s Lancaster University also calculated the contagion rate at 2.5 new people on average being infected by each person already infected. “Should the epidemic continue unabated in Wuhan, we predict (it) will be substantially larger by Feb. 4,” the scientists wrote. “Should the epidemic continue unabated in Wuhan, we predict (it) will be substantially larger by Feb. 4,” the scientists wrote.

They estimated that the central Chinese city of Wuhan where the outbreak began in December will alone have around 190,000 cases of infection by Feb. 4., and that “infection will be established in other Chinese cities, and importations to other countries will be more frequent.”

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This kind of uncertainty doesn’t help.

No Link With Seafood Market In First Case Of China Coronavirus (SCMP)

The first person known to have been infected by the Wuhan coronavirus had never visited the city’s seafood market – regarded as the epicentre of the outbreak – according to Chinese researchers, who also called for extra precautions against airborne transmission of the disease between humans. The researchers, seven of whom work at Wuhan’s Jinyintan hospital, designated for patients with the illness, revealed on Friday in The Lancet medical journal that symptoms of the new disease were first reported on December 1 – much earlier than the Wuhan government’s initial announcement on December 31 of 27 cases of the pneumonia-like infection.

According to the report, the first patient had no exposure to the Huanan seafood market which was shut down on January 1 over fears – later confirmed – that the new virus was linked to its trade in wild animals. The researchers added that none of the patient’s family had developed fever or any respiratory symptoms. There was also no epidemiological link between the first patient and the later cases, they found. The researchers analysed data from 41 patients with confirmed infections who had showed an onset of symptoms up to January 2. Six of those patients died, putting the fatality rate of the group at 15 per cent. The researchers noted that clinical presentations of the patients greatly resembled severe acute respiratory syndrome.

The first patient to die from the new coronavirus had continuous exposure to the market before he was admitted to hospital with a seven-day history of fever, cough and breathing difficulties, according to their report. Five days after the onset of symptoms, his wife, a 53-year-old woman with no known history of exposure to the market, also presented with pneumonia and was hospitalised in the isolation ward, they said. The absence of a link to the seafood market is one of the indicators for human-to-human transmission of the virus and the researchers identified another 13 patients who also had no direct exposure to the market.

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Lots of background. Viruses are potent weapons.

China Stole Coronavirus From Canada And Weaponized It (GGI)

Last year a mysterious shipment was caught smuggling Coronavirus from Canada. It was traced to Chinese agents working at a Canadian lab. Subsequent investigation by GreatGameIndia linked the agents to Chinese Biological Warfare Program from where the virus is suspected to have leaked causing the Wuhan Coronavirus outbreak. On June 13, 2012 a 60-year-old Saudi man was admitted to a private hospital in Jeddah, Saudi Arabia, with a 7-day history of fever, cough, expectoration, and shortness of breath. He had no history of cardiopulmonary or renal disease, was receiving no long-term medications, and did not smoke. Egyptian virologist Dr. Ali Mohamed Zaki isolated and identified a previously unknown coronavirus from his lungs.

After routine diagnostics failed to identify the causative agent, Zaki contacted Ron Fouchier, a leading virologist at the Erasmus Medical Center (EMC) in Rotterdam, the Netherlands, for advice. Fouchier sequenced the virus from a sample sent by Zaki. Fouchier used a broad-spectrum “pan-coronavirus” real-time polymerase chain reaction (RT-PCR) method to test for distinguishing features of a number of known coronaviruses known to infect humans. This Coronavirus sample was acquired by Scientific Director Dr. Frank Plummer of Canada’s National Microbiology Laboratory (NML) in Winnipeg directly from Fouchier, who received it from Zaki. This virus was reportedly stolen from the Canadian lab by Chinese agents.

Coronavirus arrived at Canada’s NML Winnipeg facility on May 4, 2013 from the Dutch lab. The Canadian lab grew up stocks of the virus and used it to assess diagnostic tests being used in Canada. Winnipeg scientists worked to see which animal species can be infected with the new virus. Research was done in conjunction with the Canadian Food Inspection Agency’s national lab, the National Centre for Foreign Animal Diseases which is housed in the same complex as the National Microbiology Laboratory.

In March 2019, in mysterious event a shipment of exceptionally virulent viruses from Canada’s NML ended up in China. The event caused a major scandal with Bio-warfare experts questioning why Canada was sending lethal viruses to China. Scientists from NML said the highly lethal viruses were a potential bio-weapon. Following investigation, the incident was traced to Chinese agents working at NML. Four months later in July 2019, a group of Chinese virologists were forcibly dispatched from the Canadian National Microbiology Laboratory (NML). The NML is Canada’s only level-4 facility and one of only a few in North America equipped to handle the world’s deadliest diseases, including Ebola, SARS, Coronavirus, etc.

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Elections in 9-10 months.

US Economic Confidence at Highest Point Since 2000 (Gallup)

Americans’ confidence in the U.S. economy is higher than at any point in about two decades. The latest figure from Gallup’s Economic Confidence Index is +40, the highest reading recorded since +44 in October 2000. Americans’ buoyant confidence in the economy in Gallup’s latest poll, conducted Jan. 2-15, likely reflects the U.S. unemployment rate’s continued stay at a 50-year low. Meanwhile, the Dow Jones Industrial Average continues to reach record highs — and flirts with reaching the 30,000 marker. Gallup’s Economic Confidence Index is the average of two components: Americans’ ratings of current economic conditions and their views on whether the economy is getting better or getting worse.


The index has a theoretical maximum of +100, achieved if all Americans believe the economy is excellent or good and getting better. The theoretical minimum is -100, if all Americans say the economy is poor and getting worse. The current conditions component score of +54 is the result of 62% of Americans saying the economy is “excellent” or “good” and 8% describing it as “poor.” Meanwhile, the economic outlook component score of +26 is the result of 59% saying the economy is “getting better” and 33% saying it is “getting worse.” Gallup’s tracking of economic confidence over the past 28 years has recorded index readings at or above the +40 mark in just nine other measurements, all between 1998 and 2000 — with the highest level recorded in January 2000, at +56, after a then-record high for the Dow. The latest reading of +40 is the only time the index has reached that level since 2000.

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Nothing I haven’t already said 1000 times.

Stock Market A ‘Ponzi Scheme’ That Eventually Must Collapse – Guggenheim (RT)

The rallying markets aren’t as good as they seem, says Guggenheim Partners chief Scott Minerd. He likened inflation of asset prices caused by loose money policies of central banks to a ponzi scheme that eventually must collapse. “We will reach a tipping point when investors will awake to the rising tide of defaults and downgrades,” Minerd wrote in a letter from the World Economic Forum meeting. “The timing is hard to predict, but this reminds me a lot of the lead-up to the 2001 and 2002 recession.” He cited rising defaults despite a rally in riskier assets, and reiterated a warning that BBB-rated bonds risk further downgrades.


The chief executive said that the type of debt is at a greater risk of deterioration than it was in 2007. Guggenheim Partners, which operates in the global investment and advisory space, manages more than $275 billion in assets as of September last year. The company’s fixed-income chief Anne Walsh told Yahoo Finance that 15 percent of the US economy is already in recession. According to her, the Federal Reserve’s efforts to pump liquidity into markets has created “zombie companies” that may see an outflow of capital as the utility of that money continues to diminish. The longer that this market runs, the harder the fall will be when it ends, she said.

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Don’t attack a jury.

Neither Side Is Really Trying To Win This Trump Impeachment Trial (Turley)

It is the one unbreakable rule in litigation. You can insult the defendant or the opposing attorney and, on occasion, you might even insult the judge. But the one thing you can never do is insult the jury. That is only if you want to win a jury verdict, and that may be why both legal teams in the impeachment trial of President Trump seem more eager to get the goats of Senate jurors rather than their votes. Both sides seem to be striving for the constitutional equivalent of a hung jury, not enough votes for either a bipartisan acquittal or conviction, simply the status quo. What is different is that you usually do not actually hang the jury in a hung jury strategy.

The most riveting example this week was the argument of House Judiciary Committee Chairman Jerrold Nadler, who stood in the well of the Senate and appeared to accuse Republican senators of a conspiracy to “cover up” the wrongdoing of the president. It was a moment that produced an audible gasp from the room, along with a note from Senator Susan Collins complaining to Chief Justice John Roberts, who then promptly declared that “those addressing the Senate should remember where they are.” The aspersions from Nadler alienated at least two of the four Republican senators that House impeachment managers are struggling to win over in their fight to call witnesses.

In addition to Collins, Senator Lisa Murkowski was irate and denounced the comments by Nadler as soon as she walked off the floor. Murkowski later expressed skepticism about helping House managers to call witnesses they did not seek to compel during their own investigations. That is what happens when a prosecutor incorporates the jury into the list of accomplices in an ongoing conspiracy during trial. House manager Adam Schiff produced further gasps when he repeated reports that the senators were warned that if they vote against Trump their heads “will be on a pike.” Collins and Murkowski were among those angrily responding to the “unnecessary” remarks. Other senators have had their own awkward moments.

The House managers played a clip of Senator Lindsay Graham from the Clinton impeachment trial declaring, “What is a high crime? It does not even have to be a crime. It is just when you start using your office and you are acting in a way that hurts people, you have committed a high crime.” That statement of a hurtful standard for impeachment was meant to embarrass Graham. It certainly worked. For its part, the White House could not get enough of old clips of Senator Charles Schumer promising to vote for acquittal before the Clinton trial was even scheduled. Schumer also opposed any witnesses or a full trial in the Clinton impeachment.

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He’s the face after all. They get bonus points for limiting it to 2 hours. And they seemed to do well.

Trump Defense Team Signals Focus On Schiff (Hill)

At several points during their opening argument, President Trump’s defense team trained their fire on Rep. Adam Schiff (D-Calif.), removing any doubt about their intent to make the House manager’s credibility an issue at the impeachment trial. Addressing the Senate on Saturday, Trump’s lawyers accused Schiff of repeatedly stretching the truth and creating false impressions amid his pursuit to take down the president. “Chairman Schiff has made so much of the House’s case about the credibility of interpretations that the House managers want to place on — not hard evidence — but on inferences,” said Patrick Philbin, deputy counsel to Trump.

“It is very relevant to know whether assessments of evidence he’s presented in the past are accurate,” Philbin said of Schiff. “And we would submit they have not been, and that that is relevant for your consideration.” The defense team portrayed Schiff as having first launched his overreaching efforts against Trump during former special counsel Robert Mueller’s investigation and continuing through Trump’s impeachment trial. The attacks on Schiff were perhaps unsurprising, as the House Intelligence Committee chairman has emerged as the lead prosecutor among House managers pressing the case against Trump in the Senate.

In fact, Schiff anticipated the offensive and delivered a warning to senators last night that spelled out specific attacks he expected to be lodged against him, some of which materialized Saturday. “I think the second thing you’ll hear from the president’s team is, attack the managers. Those managers are just awful. They’re terrible people,” Schiff said. “Especially that Schiff guy. He’s the worst. He’s the worst.” [..] Trump’s team today called into question whether Schiff can be trusted as an honest broker. At one point, Trump’s defense team played video of Schiff on NBC’s “Meet the Press,” saying that he had seen “evidence that is not circumstantial” that the Trump campaign had colluded in Russia’s 2016 election interference.

Trump’s lawyers contrasted Schiff’s claim with Mueller’s conclusion that his nearly two-year probe had established no coordination between the Trump campaign and Moscow. The defense team also accused Schiff and his staff of coaching the whistleblower, who raised a red flag over Trump’s July 25 phone call with the Ukrainian president that set in motion the impeachment. They paired the allegation with a clip of Schiff asserting on national television that “we have not spoken directly with the whistleblower,” a claim which fact-checkers found was false.

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The war party.

Adam Schiff Is a Dangerous Warmonger (Jacobin)

Assuring us that he is aware, actually, of what century this is, Schiff said in 2015, “Now, we’re not seeing the same bipolar world we had between communism and capitalism.” (Phew!) He then added, “But we are seeing a new bipolar world, I think, where you have democracy versus authoritarianism.” Schiff has not viewed this as a mere contest of ideas: he constantly advocated for Obama to impose tougher sanctions on Russia and give more weapons to Ukraine.

Although delicately opposed to violence in some contexts — he’s a vegan! — this isn’t the only war Schiff has championed. He supported the Afghanistan, Iraq, and Libya wars, greater US intervention in Syria, as well as the Saudi war with Yemen (although he has, in the past year, turned against the latter adventure, seeming to draw the line at sawing up journalists with bonesaws — he is a moderate after all, plus very popular with the media), and he has voted for nearly every possible increase in the defense budget.

As Jacobin’s own Branko Marcetic observed two years ago, Schiff’s bellicosity is extensively funded by arms manufacturers and military contractors. A Ukrainian arms dealer named Igor Pasternak held a $2,500 per head fundraiser for Schiff in 2013, as the late Justin Raimondo reported in a terrific analysis on Antiwar.com in 2017, at a time when Ukraine was desperately trying to counter the Obama administration’s disinterest in funding its war with Russia. Despite that disinterest, the State Department approved some very profitable dealings for Pasternak in Ukraine after that fundraiser.

And that’s only one example. In the current cycle, donations from the war industry have continued to flood his coffers. Many come from employees of firms with extensive Department of Defense contracts, including Radiance Technologies and Raytheon. PACs representing the defense industry also make a robust showing among Schiff’s contributors, according to data on Open Secrets.org; companies funneling money to Schiff — sorry, contributing to those PACs — include Lockheed Martin, Northrop Grumman, Raytheon, Radiance, and others, including L3Harris Technologies (which got in big trouble with the State Department in September and had to pay $13 million in penalties for illegal arms dealing).

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Why is everyone still talking about Biden? He’s out.

Joe Biden Lied About His Record On Social Security (IC)

Over the past few weeks, former Vice President Joe Biden has been making an effort to recast his record on Social Security as one of a champion who defended the program from assaults, rather than one who consistently argued that it ought to be cut. The value of such a revision is clear: Austerity is no longer a politically viable platform for Democrats to take in the primary. His defense of his record has included multiple television interviews, public comments, and even an ad attacking Sen. Bernie Sanders for “dishonest smears” challenging him on Social Security. In the ad, Biden makes a sweeping claim: “I’ve been fighting to protect — and expand — Social Security for my whole career. Any suggestion otherwise is just flat-out wrong.”

At Vice’s Black and Brown Forum in Iowa this week, when pressed on his proposal to freeze Social Security payments by moderator Antonia Hylton, he simply lied: “I didn’t propose a freeze.” In fact, Biden has argued for cuts or freezes to Social Security throughout much of his career. Earlier in January, The Intercept wrote about several instances in which Biden advocated for cutting Social Security over the course of his career. Biden, when he acknowledges his past support for cuts, portrays the advocacy as deep in the past. But a close inspection finds reams of more recent evidence of Biden’s support for cuts — including in Biden’s recent recounting of a conversation he had with China’s president, Xi Jinping, and in his choice of Bruce Reed, a longtime deficit hawk, as a senior policy adviser in his current presidential campaign.

Reed, a longtime Biden aide, played a central role in advocating cuts to the New Deal-era program as a co-founder of the Democratic Leadership Council, as the top staffer for a controversial commission dedicated to slashing the deficit, and then as Biden’s chief of staff during the Obama administration. In Washington, D.C., he would be the last high-level staffer a campaign would bring aboard if it was genuinely intent on expanding, not cutting, Social Security.

This past week, Biden steadily ratcheted up his revision of his record. At Vice News’s Brown and Black Forum in Iowa on Monday, he was pressed on Social Security. “Do you think though that it’s fair for voters to question your commitment to Social Security when in the past you proposed a freeze to it?” he was asked by Vice moderator Hylton. “No, I didn’t propose a freeze,” he said. “You did,” she corrected. On Tuesday, he released an ad attacking Sanders for what he called “dishonest smears.” The hit prompted a response from Sanders, who posted a short ad showing Biden boasting of his willingness to cut Social Security on the Senate floor. The Sanders ad has been viewed some 4 million times, to Biden’s less than a million.

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Does he even know?

VP Pence Appears To Suggest Americans, Nor Russians, Liberated Auschwitz (RT)

US Vice President Mike Pence’s speech on the Holocaust left the impression it was American soldiers who liberated Auschwitz, erased the Soviet Union’s well-documented act, and even used the solemn occasion to lash out at Iran. Speaking at the World Holocaust Forum in Israel on Thursday, Pence said that it was “soldiers” who opened the gates of Auschwitz on January 27, 1945. Which soldiers? Pence does not say, whether accidentally or on purpose. Pence’s omission became much more glaring a few moments later, when he honored the memory of “all the Allied forces, including more than two million American soldiers, who left hearth and home, suffered appalling casualties, and freed a continent from the grip of tyranny.”

Listening to Pence’s speech, one might be tempted to conclude that it was these American soldiers who liberated Auschwitz, or bore the brunt of the burden of liberating Europe from the Nazis. Yet if we want to talk about truly “appalling casualties,” how about the nearly 27 million soldiers and civilians of the Soviet Union who perished in that war? What about the Red Army’s 322nd Rifle Division, under General Pyotr Ivanovich Zubov, that actually kicked in the doors of Auschwitz, only to be ‘erased’ from memory by an American vice-president 75 years later? One word – “Soviet” before “soldiers” – would have sufficed to give credit where it’s due. There is nothing wrong with being an American patriot, but this sort of dissembling is at best ignorance, and at worst outright stolen valor, both entirely unbecoming of a statesman.

Pence ended his speech by praising the US alliance with Israel and urging the world to “stand strong against the Islamic Republic of Iran” as “the one government in the world that denies the Holocaust as a matter of state policy and threatens to wipe Israel off the map.” Meanwhile, at the same event, Russian President Vladimir Putin denounced the use of the Holocaust in present-day political disputes and proposed a summit of the five permanent UN Security Council members – representing the nations principally responsible for defeating Hitler and establishing the post-war world order – to address the challenges of the world today and “demonstrate our common commitment to the spirit of allied relations, historical memory and the lofty ideals and values for which our predecessors, our grandfathers and fathers fought shoulder to shoulder.”

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https://twitter.com/i/status/1221188593290366976

 

 

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Dec 202018
 


Giovanni Bellini Madonna and Child with St. John the Baptist and Female Saint 1500-04

 

It’s 100 days to Brexit (Ind.)
Powell Breaks The Market (ZH)
A Major Technical Breakdown Just Occurred In Stocks (Colombo)
Peter Schiff : Not A Bear Market But ‘A House Of Cards The Fed Built’ (MW)
Asian Shares Battered After Fed Raises Rates For Fourth Time (G.)
Short-Term Funding Bill Announced To Stop Trump’s Government Shutdown (Ind.)
Trump Plans Full Withdrawal Of US Troops From Syria (AFP)
Don’t Hold Your Breath on US Troop Withdrawal from Syria (CN)
US Occupation of Middle East Doesn’t Suppress Terrorism, It Causes It (Murray)
Big Pharma Returning To US Price Hikes In January After Pause (R.)
Italy Avoids EU Sanctions After Reaching 2019 Budget Agreement (G.)
French Police Threaten To Join Protesters (NW)
London’s Gatwick Airport Shut Down After Drones Spotted Overhead (AP)
Der Spiegel Says Top Journalist Faked Stories For Years (G.)
Finless Porpoise, China’s Smiling Angel, Fights To Survive (AFP)

 

 

Yes it is. And so of course the UK talked about one thing only. Did Corbyn call Theresa May a ‘stupid woman’ or did he say ‘stupid people’ about a group of Tories, as a whole contingent of lipreaders claimed?

They sure know what’s important, and what not.

It’s 100 days to Brexit (Ind.)

The vote of the House of Commons on the Brexit deal will now be in the week beginning 14 January, the prime minister confirmed on Monday. She hopes that her MPs are slowly coming round to the deal as the least worst option. She may also hope that Jeremy Corbyn gives his MPs a free vote, in which case enough of them may vote for her deal as a way of avoiding another referendum. It still seems more likely that Theresa May will lose, in which case the Brexit timetable will slip further. She would probably then ask the Commons to vote again after it had rejected the other options.

The one that is easiest to eliminate would be that of leaving the EU without a deal, even if it were dressed up as a “managed no deal” – at least, it ought to be easy to eliminate this option, but, until all the hoops have been jumped through, a no-deal Brexit remains the default, which is why there was such a fuss about no-deal planning at yesterday’s cabinet. The more difficult course for parliament to rule out is that of postponing Brexit and holding a referendum. If Corbyn backs a final say referendum, a Commons vote could be close, but, if May can defeat that option, she could then ask MPs to vote again on her deal. That seems to be her plan: to wear parliament down. That way she might finally win the vote at a second attempt a week later, in the week beginning 21 January – or even after that.

By then, the country would be running out of time to complete Brexit by 29 March. The problem is that a vote to approve the deal, important though it is, is only one of the things that need to be done to take us out of the EU. Once the deal has been approved, parliament also has to pass legislation to give effect to the withdrawal agreement in UK law. This will be called the EU (Withdrawal Agreement) Bill – yet another bill that sounds similar to all the others. It will be a complex and contentious bill that will be tricky to get through a hung parliament. In particular, it will contain a mechanism to entrench parts of the withdrawal agreement in UK law and make it hard for future parliaments to change them.

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Well, not really. Powell and his predecessors built such a huge zombie that it can’t be called a market. So he’s not breaking a market but a zombie, and how exactly can that be a bad thing?

Powell Breaks The Market (ZH)

“Everything was awesome” and then Jay Powell said… Some years ago, we took away the lesson that the markets were very sensitive to news about the balance sheet, so we thought carefully about how to normalize it and thought to have it on automatic pilot, and use rates to adjust to incoming data. That has been a good decision, I think, I don’t see us changing that…. we don’t see balance sheet runoff as creating problems” And everything broke…

Overnight futures show hopeful buying – “surely The Fed will deliver and capitulate… for goodness sake, someone has to rescue my FANG portfolio!!??” – But The Fed did not – cutting their rate outlook by a mere one hike, with plenty still seeing 3 hikes ahead in 2019…

The market now expects 18bps of RATE CUTS in 2020!!!

And Futures collapsed…

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Same here with my buddie Jesse: comparing what happens with today’s zombie, with functioning markets of the past, is dangerous and of limited value.

A Major Technical Breakdown Just Occurred In Stocks (Colombo)

The much-anticipated December Fed meeting has finally come and gone, and the stock market did not like what it heard. The Fed raised rates by 0.25% and cut its expectation for 2019 rate hikes from three to two. Because the Fed didn’t sound as dovish as many investors would have liked, the S&P 500 promptly fell 1.54% to a fresh 2018 low. From a technical perspective, today’s action is extremely concerning because the S&P 500 broke the key 2,550 to 2,600 support zone that I’ve been showing for the past couple months. Today’s breakdown increases the probability of further bearish action unless the index somehow manages to close back above that zone.

The longer-term S&P 500 chart shows how critical today’s breakdown is. Today’s breakdown is the second important technical breakdown in recent months (the first one being the break below the trendline that formed in early-2016, which I said was a bad omen). Assuming today’s breakdown remains intact, 2,100 (the 2015 and 2016 highs) is the next price target and support level to watch.

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Peter Schiff appears to agree with me, only he calls it a house of cards, not a zombie.

Peter Schiff : Not A Bear Market But ‘A House Of Cards The Fed Built’ (MW)

Where in the world is Peter Schiff, as the stock market entered an apparent unraveling phase? Find the chief executive of Euro Pacific Capital, a longtime gold bug and market pundit, on a beach in Puerto Rico, where he’s taken up residence as he watches the equity market get rocked. “I’m watching the U.S. economy implode from the beach,” Schiff told MarketWatch during a recent phone interview. “We’re in a lot of trouble,” he said. “This isn’t a bear market, we’re in a house of cards that the Fed built,” he said. Indeed, despite recent attempts to rebound, the Dow Jones is on track for its worst year since 2008 — down by about 3.5% — when the financial crisis brought global markets to their knees, according to Dow Jones Market Data.

The same goes for the S&P 500 which would also notch its worst year in a decade, if its roughly 4% decline thus far this year hold. Schiff is a polarizing figure on Wall Street, a man that critics say has harbored a persistent and unrealized post-crisis narrative for the Fed’s monetary policy, with predictions of soaring inflation and a dollar collapse. However, the prominent investor should be worthy of investors’ attention, on the back of his prescient calls ahead of the 2008 financial crisis, which earned him plaudits as one of the few able to spot a global economic crisis emanating from the housing market.

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“The Fed’s been a huge friend of the stock market and they are now a little bit of an enemy and will probably become worse of an enemy..”

Asian Shares Battered After Fed Raises Rates For Fourth Time (G.)

Asian stock markets have taken a battering after the US Federal Reserve voted to raise borrowing costs for the fourth time this year, signalling a further squeeze on liquidity around the world. In Tokyo, the Nikkei closed down nearly 3% to its lowest point for 14 months as the Fed’s pledge to continue with “gradual” rate hikes next year sent shivers through financial markets. Shares in Hong Kong and Seoul were both down more than 1% while stocks in Sydney finished at a two-year low. Futures trading pointed to a drop of 2% in the FTSE100 index in London and the Dax in Frankfurt when when the markets open on Thursday morning.

Investors’ confidence that the global economy is headed for a significant slowdown was further weakened when China’s central bank introduced a new lending facility for small private businesses, which was seen as a targeted rate cut designed to kickstart the spluttering economy. The move by the People’s Bank of China shows the two biggest economies are out of step with Beijing responding to a rate hike in the US with a de facto cut. The Shanghai Composite share index was down nearly 1% in afternoon trade while the yuan wad fixed 0.22% lower against the US dollar. [..] “The Fed’s been a huge friend of the stock market and they are now a little bit of an enemy and will probably become worse of an enemy before this is all over,” Bob Doll, Nuveen chief equity strategist and senior portfolio manager, told Bloomberg.

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McConnell saves the day…

Short-Term Funding Bill Announced To Stop Trump’s Government Shutdown (Ind.)

Senate Majority Leader Mitch McConnell has introduced a short-term spending bill to finance the US government and avoid a shutdown at the end of the week Mr McConnell, the leading Republican in the Senate, said that the funding bill known as a continuing resolution “will ensure continuous funding for the federal government” until 8 February. The short-term bill needs to be approved by both the Senate and the House of Representatives before it can proceed to President Donald Trump’s desk to be signed into law. Mr McConnell’s bill comes as Congress races against time before funding for the government runs out on Friday at midnight, amid a contentious push by Mr Trump to make $5bn worth in funding for his controversial border wall a requirement for any spending agreement.

But, while Mr Trump had indicated that he would take responsibility for a shutdown in order to make a point about the wall, the White House has since stepped back from that threat. We have other ways that we can get to that $5 billion”, White House Press Secretary Sarah Huckabee Sanders said on Tuesday. On the Senate floor, Mr McConnell lashed out at Democrats, who will reclaim their House majority in January, for failing to give Mr Trump any of the $5bn he has asked for. “This seems to be the reality of our political moment,” Mr McConnell said. “It seems like political spite for the president may be winning out over sensible policy.”

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We’re going to see endless and contradictory ‘analyses’ of this. It’s already drawn out the likes of Lindsey Graham and Mario Rubio and exposed them as deep state soldiers.

Trump Plans Full Withdrawal Of US Troops From Syria (AFP)

The United States will withdraw its troops from Syria, a US official told AFP on Wednesday, after President Donald Trump said America has “defeated ISIS” in the war-ravaged country. The stunning move will have extraordinary geopolitical ramifications and throws into question the fate of US-backed Kurdish fighters who have been tackling Islamic State jihadists. “We have defeated ISIS in Syria, my only reason for being there during the Trump Presidency,” the Republican president tweeted. The US official told AFP that Trump’s decision was finalized Tuesday. “Full withdrawal, all means all,” the official said when asked if the troops would be pulled from all of Syria.

Currently, about 2,000 US forces are in Syria, most of them on a train-and-advise mission to support local forces fighting IS. The official would not provide a timeline for a withdrawal, saying only: “We will ensure force protection is adequately maintained, but as quickly as possible.” Echoing Trump, White House spokeswoman Sarah Sanders said IS has been defeated territorially, noting the US-led coalition that includes dozens of nations would continue fighting IS. “These victories over ISIS in Syria do not signal the end of the Global Coalition or its campaign,” Sanders said in a statement. “We have started returning United States troops home as we transition to the next phase of this campaign.”

[..] Republican Senator Lindsey Graham, a Trump ally, said the president’s decision was shortsighted. “President @realDonaldTrump is right to want to contain Iranian expansion,” Graham said on Twitter. “However, withdrawal of our forces in Syria mightily undercuts that effort and put our allies, the Kurds at risk.” Charles Lister, a senior fellow at the Middle East Institute, called the decision “extraordinarily short-sighted and naive.” “This move will look like a ‘withdrawal,’ not a ‘victory,’ and yet more evidence of the dangerous unpredictability of the US president,” Lister said. “This is not just a dream scenario for ISIS, but also for Russia, Iran and the Assad regime, all of whom stand to benefit substantially from a US withdrawal.”

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It is quite possible that the deep state will eventually swallow Trump’s announcement whole. However, if he had gone through the usual channels to make his announcement, they would have caught it before it became public. That’s why he has Twitter.

Don’t Hold Your Breath on US Troop Withdrawal from Syria (CN)

The announcement on Wednesday that the U.S. will withdraw all remaining troops from Syria within the next month looked at first like a rare victory for Donald Trump in his admittedly erratic opposition to senseless wars of adventure. “We have defeated ISIS in Syria, my only reason for being there,” the president tweeted with an unmistakable air of triumph. Don’t get your hopes up. Just about everything in these initial reports is either wrong or misleading. One, the U.S. did not defeat the Islamic State: The Syrian Arab Army, aided by Russia, Iran, and Hezbollah militias did. Two, hardly was ISIS the only reason the U.S. has maintained a presence in Syria. The intent for years was to support a coup against the Assad government in Damascus—in part by training and equipping jihadists often allied with ISIS.

For at least the past six months, the U.S. military’s intent in Syria has been to counter Iranian influence. Last and hardly least, the U.S. is not closing down its military presence in Syria. It is digging in for an indefinite period, making Raqqa the equivalent of the Green Zone in Baghdad. By the official count, there are 503 U.S. troops stationed in the Islamic State’s former capital. Unofficially, according to The Washington Post and other press reports, the figure is closer to 4,000—twice the number that is supposed to represent a “full withdrawal” from Syrian soil. It would be nice to think Washington has at last accepted defeat in Syria, given it is preposterous to pretend otherwise any longer.

Damascus is now well into its consolidation phase. Russia, Iran, and Turkey are currently working with Staffan de Mistura, the UN’s special envoy for Syria, to form a committee in January to begin drafting a new Syrian constitution. It would also be nice to think the president and commander-in-chief has the final say in his administration’s policies overseas, given the constitution by which we are supposed to be governed. But the misleading announcement on the withdrawal of troops, followed by Trump’s boastful tweet, suggest something close to exactly the opposite. As Trump finishes his second year in office, the pattern is plain: This president can have all the foreign policy ideas he wants, but the Pentagon, State, the intelligence apparatus, and the rest of what some call “the deep state” will either reverse, delay, or never implement any policy not to its liking.

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The Grand Coalition includes the media.

US Occupation of Middle East Doesn’t Suppress Terrorism, It Causes It (Murray)

Even the neo-con warmongers’ house journal The Guardian, furious at Trump’s attempts to pull US troops out of Syria, in producing a map to illustrate its point, could only produce one single, uncertain, very short pen stroke to describe the minute strip of territory it claims ISIS still control on the Iraqi border. Of course, the Guardian produces the argument that continued US military presence is necessary to ensure that ISIS does not spring back to life in Syria. The fallacy of that argument can be easily demonstrated. In Afghanistan, the USA has managed to drag out the long process of humiliating defeat in war even further than it did in Vietnam.

It is plain as a pikestaff that the presence of US occupation troops is itself the best recruiting sergeant for resistance. In Sikunder Burnes I trace how the battle lines of tribal alliances there today are precisely the same ones the British faced in 1841. We just attach labels like Taliban to hide the fact that invaders face national resistance. The secret to ending the strength of ISIS in Syria is not the continued presence of American troops. It is for America’s ever closer allies in Saudi Arabia and the Gulf to cut off the major artery of money and arms, which we should never forget in origin and for a long time had a strong US component. The US/Saudi/Israeli alliance against Iran is the most important geo-political factor in the region today.

It is high time this alliance stopped both funding ISIS and pretending to fight it; schizophrenia is not a foreign policy stance. There has been no significant Shia Islamic terrorist or other threat against the West in recent years. 9/11 was carried out by Saudi Sunni militants. Al Qaida, ISIS, Al Nusra, Boko Haram, these are all Sunni groups, and all Saudi sponsored. It is a matter of lunacy that the West has adopted the posture that it is Iran – which has sponsored not one attack on the West in recent memory – which is the threat in the Middle East.

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Trump will have to act, or risk looking like a fool.

Big Pharma Returning To US Price Hikes In January After Pause (R.)

Novartis and Bayer are among nearly 30 drugmakers that have taken steps to raise the U.S. prices of their medicines in January, ending a self-declared halt to increases made by a pharma industry under pressure from the Trump administration, according to documents seen by Reuters.The hikes will pose a new challenge to President Donald Trump’s pledge to lower the costs of prescription medications in the world’s most expensive pharmaceutical market. The U.S. Department of Health and Human Services (HHS) has proposed a slew of policies aimed at lowering prices and passing more of the discounts negotiated by health insurers on to patients.

Those measures are not expected to provide relief to consumers in the short-term, however, and fall short of giving government health agencies direct authority to negotiate or regulate drug prices. 28 drugmakers filed notifications with California agencies in early November disclosing that they planned to raise prices in 60 days or longer. Under a state law passed last year, companies are required to notify payers in California if they intend to raise the U.S. list price on any drug by more than 16 percent over a two-year period. [..] “Requests and public shaming haven’t worked” to lower drug prices, said Michael Rea, chief executive of RX Savings Solutions, which helps health plans and employers seek lower cost prescription medicines. “We expect the number of 2019 increases to be even greater than in past years.”

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I think Salvini will get away with presenting this as a victory. But I may be wrong. How far removed is it from what Tsipras pulled in summer 2015? And how much is it like Macron and the yellow vests?

Italy Avoids EU Sanctions After Reaching 2019 Budget Agreement (G.)

Italy has managed to avert EU sanctions after reaching a compromise with the European commission over its 2019 budget. The Italian prime minister, Giuseppe Conte, said the government had managed to reach an agreement to reduce the deficit target to 2.04% of GDP from 2.4%. This has been achieved without making drastic changes to key budget proposals such as the promise of a universal basic income and lowering the pension age. “Over the last few weeks we worked to bring the positions closer without ever moving backwards with respect to the objectives the Italian people set us in the 4 March election,” Conte said.

“The economic-financial estimates about the measures that attracted the most attention of our European partners revealed that the resources [needed] were less than forecast.” The yield, or effective interest rate, on Italian 10-year government bonds fell to 2.79%, the lowest level since September. Less than two months ago the yield, the price the Italian government has to pay to borrow, rose to 3.8%. However, Valdis Dombrovskis, a European commission vice-president, described the agreement with Italy as a “borderline compromise” that fails to provide long-term solutions to the country’s economic problems. “But it enables us, for now, to avoid opening a debt procedure, as long as the negotiated measures are fully applied,” he said at a press conference in Brussels.

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Hilarious: “Police have accumulated some 23 million hours of overtime that is yet to be paid.”

French Police Threaten To Join Protesters (NW)

The French government is desperately trying to keep its exhausted police force onside following weeks of violent protests demanding economic reforms, improved living standards and the resignation of President Emmanuel Macron. On Wednesday, French officials met with police trade union leaders to work out a deal to soothe anger in law enforcement ranks regarding overwork, unpaid overtime and difficult working conditions, Le Monde reported. But some activists are calling on police to walk out on government negotiations, close down police stations and join the “gilets jaunes”—or yellow vest—protesters with whom they have been facing off since November 17. Negotiations between three unions—Alliance, UNSA-Police and Unity-SGP-FO—and Interior Minister Christophe Castaner on Tuesday failed to reach a settlement.

As talks resumed on Wednesday, France 24 reported that activists were calling on forces across the country to commit to a “slowdown” and only respond to emergencies until the dispute had been settled. Police have accumulated some 23 million hours of overtime that is yet to be paid. According to The Local France, police union leader Frédéric Lagache explained, “Faced with this irresponsibility [of the government], we are forced to be irresponsible in our actions.” The Alliance and Unity-SGP-FO unions called for a “black day for the police” on Wednesday. The Alliance is using Twitter and Facebook to rally support for what it calls “Act 1” of the police protests, using the name given to the ongoing demonstrations held by the gilets jaunes. The group has also threatened to hold “Act II” and “Act III” if required.

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I’m thinking one word here: copycats. Too easy not to try at home.

London’s Gatwick Airport Shut Down After Drones Spotted Overhead (AP)

London’s Gatwick Airport shut down late Wednesday while officials urgently investigated reports that two drones were flying above the airfield. The airport suspended all flights, causing severe disruptions just days before Christmas during one of the heaviest travel times of the year. Police and aviation authorities were still investigating early Thursday as incoming flights were diverted to other locations in Britain and nearby countries. Passengers complained on Twitter that their flights had landed at London Heathrow, Manchester, Birmingham and other cities. Other flights were sent to France and the Netherlands. One traveler whose flight was diverted tweeted that passengers were not being told when they could continue to their destination.

Gatwick advised travelers via Twitter to check flights scheduled for Thursday before heading to the airport. It also advised anyone planning to pick up arriving passengers to check first. Any problem at Gatwick causes a ripple effect throughout Britain and continental Europe, particularly during a holiday period when the air traffic control system is under strain. It is a busy airport 27 miles south of London, hosting a variety of short- and long-haul flights and serving as a major hub for the budget carrier easyJet. Gatwick normally operates throughout the night but the number of flights is restricted because of noise limitations. The airport website says it usually handles 18 to 20 flights overnight during the winter months.

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Yes, it’s priceless to read the Guardian on fake news.

Craig Murray tweets: ..The Guardian today published a story about a German journalist who invented stories, but still has never apologised for its own 100% fabricated Luke Harding piece about Manafort’s “visits to Assange in the Embassy”, and Harding and Viner are still employed..

Der Spiegel Says Top Journalist Faked Stories For Years (G.)

The German news magazine Der Spiegel has been plunged into chaos after revealing that one of its top reporters had falsified stories over several years. The media world was stunned by the revelations that the award-winning journalist Claas Relotius had, according to the weekly, “made up stories and invented protagonists” in at least 14 out of 60 articles that appeared in its print and online editions, warning that other outlets could also be affected. Relotius, 33, resigned after admitting to the scam. He had written for the magazine for seven years and won numerous awards for his investigative journalism, including CNN Journalist of the Year in 2014.

Earlier this month, he won Germany’s Reporterpreis (Reporter of the Year) for his story about a young Syrian boy, which the jurors praised for its “lightness, poetry and relevance”. It has since emerged that all the sources for his reportage were at best hazy, and much of what he wrote was made up. The falsification came to light after a colleague who worked with him on a story along the US-Mexican border raised suspicions about some of the details in Relotius’s reporting, having harboured doubts about him for some time.

The colleague, Juan Moreno, eventually tracked down two alleged sources quoted extensively by Relotius in the article, which was published in November. Both said they had never met Relotius. Relotius had also lied about seeing a hand-painted sign that read “Mexicans keep out”, a subsequent investigation found. Other fraudulent stories included one about a Yemeni prisoner in Guantanamo Bay, and one about the American football star Colin Kaepernick.

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Sometimes I think that if all my friends are leaving, why would I stay behind?

Finless Porpoise, China’s Smiling Angel, Fights To Survive (AFP)

In an oxbow lake along the middle reaches of the Yangtze River, a breathy sigh pierces the surface stillness as one of China’s most endangered animals comes up for a gulp of hazy air. A slick black back with no dorsal fin arches briefly above the water line before plunging back down. Such glimpses of the shy Yangtze finless porpoise, the only aquatic mammal left in China’s longest river and known in Chinese as the “smiling angel” for its perma-grin, are increasingly rare. Pollution, overfishing, hydroelectric dams and shipping traffic have rendered them critically endangered, worse off even than China’s best-known symbol of animal conservation, the panda.


AFP Photo/Johannes EISELE

China’s government estimates there were 1,012 wild Yangtze finless porpoises in 2017, compared to more than 1,800 giant pandas, which is no longer endangered. But researchers see signs of hope. Porpoise numbers fell by nearly half from 2006-2012 to an estimated 1,040. But the rate of decline has slowed markedly since then, suggesting that conservation may be making a dent. A central component of the rescue effort is the introduction of porpoises to several conservation areas off the busy river, where researchers say numbers have been actually increasing. [..] Chinese officials are keen to avoid a repeat of the “baiji”, or Yangtze dolphin, the river’s only other aquatic mammal, which since 2006 has been considered extinct in a huge conservation setback for China. Losing the “smiling angel” would be a further tragedy, conservationists say.

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May 042018
 


Herri met de Bles c1510-after 1555 Saint Jerome medidating

 

Fed’s QE Unwind Accelerates Sharply (WS)
The Root of It All (Batnick)
Tesla Is A Zombie Company (F.)
With No Letup In Home Prices, The California Exodus Surges (MW)
Demand For US Soybeans Remains Strong Despite China (CNBC)
US Charges VW Ex-CEO With Conspiracy And Fraud (G.)
Mueller’s Questions for Trump Show Folly of Special-Counsel Appointments (NR)
Why We Need To Be Propagandized For Our Own Good (CJ)
Neocons Form Brand New Russia-Bashing ‘Think’ Tank (RI)
UK Pushes To Strengthen Anti-Russia Alliance (G.)
Nobel Prize For Literature Postponed Amid Swedish Academy Turmoil (BBC)
Jacinda Ardern Pledges Shelter For All Homeless People Within Four Weeks (G.)

 

 

As most voices seem convinced QT would be madness.

Fed’s QE Unwind Accelerates Sharply (WS)

The QE Unwind is ramping up toward cruising speed. The Fed’s balance sheet for the week ending May 2, released this afternoon, shows a total drop of $104 billion since the beginning of the QE Unwind in October – to the lowest level since June 11, 2014. During the years and iterations of QE, the Fed acquired $3.4 trillion in Treasury securities and mortgage-backed securities. The mortgages underlying those MBS are guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The “balance sheet normalization,” as the Fed calls it, was nudged into motion last October. But the pace accelerates every quarter until it reaches up to $50 billion a month in Q4 this year.

This would trim the balance sheet by up to $420 billion this year, and by up to $600 billion in 2019 and every year going forward, until the Fed considers the balance sheet to be adequately “normalized” — or until something big breaks, whichever comes first. [..] The balance of Treasury securities fell by $17.6 billion in April. This is up 60% from March, when $11 billion “rolled off.” Since the beginning of the QE-Unwind, $70 billion in Treasuries “rolled off.” Now at $2,395 billion, the balance of Treasuries has hit the lowest level since June 18, 2014.

[..] Residential MBS are different from regular bonds. Holders receive principal payments on a regular basis as the underlying mortgages are paid down or are paid off. At maturity, the remaining principal is paid off. Over the years, to keep the MBS balance from declining, the New York Fed’s Open Market Operations (OMO) has been continually buying MBS. But settlement of those trades occurs two to three months later. The Fed books the trades on an as-settled basis. The time lag between the trade and settlement causes the large weekly fluctuations on the Fed’s balance sheet. And it also delays when MBS that “rolled off” actually disappear from the balance sheet.

[..] Total assets on the Fed’s balance sheet dropped by $30 billion in April, and by $104 billion since the beginning of the QE-Unwind, to $4,356 billion. This is the lowest since June 11, 2014. Note that total assets are now down by $160 billion from the peak in January 2015:

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“The poor stay poor, the rich get rich. That’s how it goes. Everybody knows.”

The Root of It All (Batnick)

Steven Pinker wrote, “In almost every year from 1992 through 2015, an era in which the rate of violent crime plummeted, a majority of Americans told pollsters that crime was rising. In late 2015, large majorities in eleven developed countries said that “the world is getting worse.” But crime isn’t rising, and the world is objectively getting better. And while life is improving at the macro level, at the micro level, people aren’t feeling so great. So what gives? We tend to expect the worst as a way to insulate ourselves from disappointment. Life is not about good or bad, it’s about better or worse, so if things don’t turn out as bad as we imagine, we’re pleasantly surprised. If you were asked to think about how your life could improve, a few things might come to mind.

But imagine how your life could get worse, and a barrage of negative possibilities fills your brain. The risk and reward of every day life is asymmetrical. This is why being a pessimist feels safe and being an optimist feels reckless. [..] While the news certainly isn’t doing anyone any favors, there are legitimate reasons why people don’t feel like things are getting better. For too many, they aren’t. The chart below shows the change in real income since 1980. This chart is the root of all the negative things facing our society. People in the top 20% saw their income increase by 60%. People in the bottom 20% saw their income rise by just 5% over the same time. As Leonard Cohen said, “The poor stay poor, the rich get rich. That’s how it goes. Everybody knows.”

Real income increased 38% from 1980-2016, or just 0.87% per year, and 70% of that increase went to people in the top 20%. Things are better, especially around the world, but in our country, way too many people are getting left behind. Extreme poverty is collapsing, but relative poverty is exploding, and everything in life is relative. If things don’t feel better than they were two hundred years ago, it’s because people compare themselves to their neighbors, not to their ancestors.

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As simple as that.

Tesla Is A Zombie Company (F.)

Tesla’s quarter was terrible from a financial perspective, as I had expected. The controlling figure I use, operating cash flow (operating loss plus depreciation minus capital expenditures,) was reported as -$836 million in the quarter, which very nearly approximates one quarter of 2017’s full year cash outflow of $3.4 billion. Things are not improving at Tesla from a financial perspective, and the second quarter is likely to be just as bad as the first. For the third consecutive quarter, Tesla posted negative EBITDA (-$180 million) and if this were any other company, there would be an active death watch on the Street. Tesla’s bonds have dropped sharply in today’s trading, now quoted at 87 cents on the dollar.

This is not surprising given that Tesla is not even remotely close to earning enough profit to cover its interest expense, which management estimated would be $160 million in the second quarter. Tesla added $346 million to its now $10 billion debt pile in the quarter, and the management’s weasel-worded projection of “positive net income excluding non-cash stock based compensation in Q3 and Q4” would still leave Tesla short of covering its debt service costs, by my calculations. So, from a financial perspective, Tesla is a zombie company. There is simply no justification for Tesla’s current market capitalization of $47.2 billion, and the market eventually figures these things out. It’s actually been a slow burn for Tesla shares, not a plummet, but that can be just as painful.

On September 12, 2014, Teslashares closed at $279.20 and the Nasdaq Composite closed at 4567.60. As of this writing, Tesla is trading at $279.04 and the Nasdaq is trading at 7011.00. So that’s where the value destruction Musk has wrought is evident. His shares are down slightly in a period in which his peer companies have collectively risen 53.5%.

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Housing bubbles break communities.

With No Letup In Home Prices, The California Exodus Surges (MW)

Over a million more people moved out of California from 2006 to 2016 than moved in, according to a new report, due mainly to the high cost of housing that hits lower-income people the hardest. “A strong economy can also be dysfunctional,” noted the report, a project of Next 10 and Beacon Economics. Housing costs are much higher in California than in other states, yet wages for workers in the lower income brackets aren’t. And the state attracts more highly-educated high-earners who can afford pricey homes. There are many reasons for the housing crunch, but the lack of new construction may be the most significant.

According to the report, from 2008 to 2017, an average of 24.7 new housing permits were filed for every 100 new residents in California. That’s well below the national average of 43.1 permits per 100 people. If this trend persists, the researchers argued, analysts forecast the state will be about 3 million homes short by 2025. California homeowners spend an average of 21.9% of their income on housing costs, the 49th worst in the nation, while renters spend 32.8%, the 48th worst. The median rent statewide in 2016 was $1,375, which is 40.2% higher than the national average. And the median home price was — wait for it — more than double that of the national average.

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Globally, supple has a hard time keeping up with demand. Everybody involved knows this.

Demand For US Soybeans Remains Strong Despite China (CNBC)

Demand for U.S. soybeans remains strong, regardless of worries China could target the crop in retaliation over Trump administration tariffs. China has canceled several shipments of U.S. soybeans in the last month, raising questions over whether the country is taking preemptive action against the U.S. by reducing purchases. But analysts say the reduction is a minor amount and is not that surprising from a seasonal perspective. The “U.S. accounts for 37 percent of total soybean exports throughout the world. Beyond Brazil, there’s really nobody else,” said Rich Nelson, director of research at Allendale, an agricultural market research and trading firm. “Despite the trade concerns, there’s really nobody else. You’re just simply not going to have a massive decline in U.S. soybean exports,” he said.

Chinese cancellations of U.S. soybean orders for the week ended April 26 resulted in a decline of 133,700 metric tons in net sales to China, USDA Foreign Agricultural Service data showed Thursday. But 66,000 metric tons of those soybeans were sent to Vietnam instead, the data showed. Meanwhile, the U.S. sold 82,700 metric tons of soybeans in new sales to Mexico, 68,800 to Taiwan, 60,000 to Argentina and 52,600 to the Netherlands. Although Argentina is the third-largest exporter of soybeans, a severe drought has reduced production by 7 million tons to 40 million, according to USDA estimates. “That just goes to show we’re not dependent on China for soybean exports,” said Michael Stumo, head of Coalition for a Prosperous America, a nonprofit representing the interests of those in manufacturing, agriculture and labor unions.

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Germany doesn’t extradite its citizens.

US Charges VW Ex-CEO With Conspiracy And Fraud (G.)

US authorities have charged Volkswagen’s former chief executive officer Martin Winterkorn with conspiracy and wire fraud in relation to the car company’s efforts to cheat on US diesel emissions tests. Winterkorn, who resigned in 2015 as the scandal was revealed, conspired to defraud the US and violate the Clean Air Act, federal laws designed to control air pollution, according to an indictment unsealed on Thursday in a Michigan federal court. Five other VW executives were also charged in the indictment. He becomes the highest-ranking executive to be charged over “dieselgate” – a scheme where VW used software to trick government emissions testers.

“The indictment unsealed today alleges that Volkswagen’s scheme to cheat its legal requirements went all the way to the top of the company,” said US attorney general Jeff Sessions. “These are serious allegations and we’ll prosecute this case to the full extent of the law.” When news of the scheme broke Winterkorn said he was “stunned that misconduct on such a scale was possible in the Volkswagen Group”. He denied any knowledge of the scandal – which was used to evade pollution limits on nearly 600,000 diesel vehicles. Last December, Oliver Schmidt, a senior Volkswagen executive, was jailed for seven years and fined $400,000 for his part in the scheme. Schmidt, who had returned to Germany, was arrested while on holiday in Florida. VW pleaded guilty as a corporation in March, agreeing to pay a record $4.3bn in fines.

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“If Bob Mueller wants that kind of control over the executive branch, he should run for president. Otherwise, he is an inferior executive official who has been given a limited license — ultimately, by the chief executive — to investigate crime. If he doesn’t have an obvious crime, he has no business inventing one, much less probing his superior’s judgment. He should stand down.”

Mueller’s Questions for Trump Show Folly of Special-Counsel Appointments (NR)

I am assuming the authenticity of the questions that Special Counsel Robert Mueller reportedly wants to ask President Trump. The questions indicate that, after a year of his own investigation and two years of FBI investigation, the prosecutor lacks evidence of a crime. Yet he seeks to probe the chief executive’s motives and thought processes regarding exercises of presidential power that were lawful, regardless of one’s view of their wisdom. If Bob Mueller wants that kind of control over the executive branch, he should run for president. Otherwise, he is an inferior executive official who has been given a limited license — ultimately, by the chief executive — to investigate crime. If he doesn’t have an obvious crime, he has no business inventing one, much less probing his superior’s judgment. He should stand down.

The questions, reported by the New York Times, underscore that the special counsel is a pernicious institution. Trump should decline the interview. More to the point, the Justice Department should not permit Mueller to seek to interrogate the president on so paltry and presumptuous a showing.

When should a president be subject to criminal investigation? It is a bedrock principle that no one is above the law. The Framers made clear that this includes the president. But, like everything else, bedrock principles do not exist in a vacuum. They vie with other principles. Two competing considerations are especially significant here. First, our law-enforcement system is based on prosecutorial discretion. Under this principle, the desirability of prosecuting even a palpable violation of law must be balanced against other societal needs and desires. We trust prosecutors to perform this cost-benefit analysis with modesty about their mission and sensitivity to the disruption their investigations cause.

Second, the president is the most essential official in the world’s most consequential government. That government’s effectiveness is necessarily compromised if the president is under the cloud of an investigation. Not only are the president’s personal credibility and capability diminished; such an investigation discourages talented people from serving in an administration, further undermining good governance. The country is inexorably harmed because a suspect administration’s capacity to execute the laws and pursue the interests of the United States is undermined.

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Caitlin Johnstone on the Atlantic Council.

Why We Need To Be Propagandized For Our Own Good (CJ)

I sometimes try to get establishment loyalists to explain to me exactly why we’re all meant to be terrified of this “Russian propaganda” thing they keep carrying on about. What is the threat, specifically? That it makes the public less willing to go to war with Russia and its allies? That it makes us less trusting of lying, torturing, coup-staging intelligence agencies? Does accidentally catching a glimpse of that green RT logo turn you to stone like Medusa, or melt your face like in Raiders of the Lost Ark? “Well, it makes us lose trust in our institutions,” is the most common reply. Okay. So? Where’s the threat there? We know for a fact that we’ve been lied to by those institutions. Iraq isn’t just something we imagined. We should be skeptical of claims made by western governments, intelligence agencies and mass media. How specifically is that skepticism dangerous?

Trying to get answers to such questions from rank-and-file empire loyalists is like pulling teeth, and they are equally lacking in the mass media who are constantly sounding the alarm about Russian propaganda. All I see are stories about Russia funding environmentalists (the horror!), giving a voice to civil rights activists (oh noes!), and retweeting articles supportive of Jeremy Corbyn (think of the children!). At its very most dramatic, this horrifying, dangerous epidemic of Russian propaganda is telling westerners to be skeptical of what they’re being told about the Skripal poisoning and the alleged Douma gas attack, both of which do happen to have some very significant causes for skepticism.

When you try to get down to the brass tacks of the actual argument being made and demand specific details about the specific threats we’re meant to be worried about, there aren’t any to be found. Nobody’s been able to tell me what specifically is so dangerous about westerners being exposed to the Russian side of international debates, or of Russians giving a platform to one or both sides of an American domestic debate. Even if every single one of the allegations about Russian bots and disinformation are true (and they aren’t), where is the actual clear and present danger? No one can say. No one, that is, except the Atlantic Council.

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The entire MSM can’t get the job done?!

Neocons Form Brand New Russia-Bashing ‘Think’ Tank (RI)

A group of neocon heartthrobs have banded together with an eclectic array of Russiagaters to form a visionary organization committed to protecting Western democracy. You can also pre-order their book, according to their website. Chaired by pompous chess wizard turned Kremlinologist Garry Kasparov, the brand-new Renew Democracy Initiative (RDI) is the latest three-letter-initialism non-profit devoted to “the defense of democratic freedom and prosperity.” The trailblazing think tank has already sent shockwaves through Washington, DC and every European capital. Celebrated war cheerleader Max Boot, who serves on RDI’s board of directors, announced the creation of this highly original organization in a Washington Post op-ed.

Interestingly, the unveiling started with a laundry list of 10 other groups that are already “protesting Trump and championing democracy.” So why does the world need RDI, then? Because RDI is different – some might even say “special.” Unlike the dozens of other well-financed bastions of status-quo thinking, RDI aims to “unite both the center-left and center-right” by promoting “liberty, democracy and sanity in an age of discord.” And where will this much-needed sanity come from? From RDI’s all-star team of important intellectuals and free thinkers, of course – some of whom just happen to be really tight with the other 10 groups mentioned in Boot’s WaPo piece. Dear Mr. Boot: does fighting Putin with the Committee to Investigate Russia allow enough spare time to fight Putin with the Renew Democracy Initiative? Curious minds want to know.

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It’s contagious.

UK Pushes To Strengthen Anti-Russia Alliance (G.)

The UK will use a series of international summits this year to call for a comprehensive strategy to combat Russian disinformation and urge a rethink over traditional diplomatic dialogue with Moscow, following the Kremlin’s aggressive campaign of denials over the use of chemical weapons in the UK and Syria. British diplomats plan to use four major summits this year – the G7, the G20, Nato and the European Union – to try to deepen the alliance against Russia hastily built by the Foreign Office after the poisoning of the former Russian double agent Sergei Skripal in Salisbury in March. “The foreign secretary regards Russia’s response to Douma and Salisbury as a turning point and thinks there is international support to do more,” a Whitehall official said.

“The areas the UK are most likely to pursue are countering Russian disinformation and finding a mechanism to enforce accountability for the use of chemical weapons.” Former Foreign Office officials admit that an institutional reluctance to call out Russia once permeated British diplomatic thinking, but say that after the poisoning of Skripal and his daughter, Yulia, that attitude is evaporating. A cross-party alliance in parliament has developed which sees the question of Russian corruption no longer through the prism of finance, but instead as a security and foreign policy threat, requiring fresh sanctions even if this causes short-term economic damage to the UK.

[..] For some old hands in the Foreign Office with deep experience of Russia, however, demonising Russia is a disastrous strategy. Sir Anthony Brenton, the British ambassador to Russia between 2004 and 2008, insists a fruitful common agenda with Moscow on issues such as nuclear disarmament, Islamist terrorism and cyberwarfare is still possible. “What on earth was her majesty’s foreign secretary doing comparing the Russian World Cup with Hitler’s 1936 Olympics?” he asked. “If you are looking for a single statement really calculated to infuriate the Russians there it is, or indeed the defence secretary telling Russia to shut up. Elementary diplomacy goes a long way with the Russians and we need to get back to that.

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Still feels like a weird story.

Nobel Prize For Literature Postponed Amid Swedish Academy Turmoil (BBC)

The organisation that decides the Nobel Prize for Literature has said it will not announce an award this year, after it was engulfed in a scandal over sexual assault allegations. The Swedish Academy has been in crisis over its handling of allegations against the husband of a member. She has since quit, as have the academy’s head and four other members. The academy says it will now announce the 2018 winner along with the 2019 winner next year.

The scandal is the biggest to hit the prize since it was first awarded in 1901. The academy said the decision had been made due to a lack of public confidence. Some academy members had argued that the prize should proceed to protect the tradition, but others said the institution was in no state to present the award. Apart from six years during the world wars, there has been only one year when the prize was not awarded. No worthy winner was found in 1935.

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You go girl. The only right thing to do.

Jacinda Ardern Pledges Shelter For All Homeless People Within Four Weeks (G.)

The New Zealand government has promised to get the country’s homeless population off the streets and into shelter in time for winter. In a joint announcement on Friday, housing minister Phil Twyford and prime minister Jacinda Ardern announced a NZ$100m emergency housing package to tackle the ballooning problem. An estimated 40,000 people live in cars, tents and garages amid a chronic housing shortage in the nation of 4.7 million people. “We’re pulling out all the stops to support people in need and urgently increase housing supply this winter,” said housing minister Phil Twyford. “Our government will make sure everyone is helped to find warm, dry housing this winter.”

With winter starting on 1 June in the southern hemisphere, less than four weeks away, the government has put out an urgent call for anyone with additional accommodation that may be suitable to house homeless people. Seasonal worker accommodation such as shearers quarters, private rental properties, motor camps and maraes (Maori meeting houses) would all be considered. New Zealand has the highest rates of homelessness in the OECD, with more than 40,000 people living on the streets, in emergency housing or in substandard conditions. Per capita New Zealand’s homeless population is almost twice as bad as Australia, which is placed third on the list. More than half of New Zealand’s homeless population live in Auckland but it is also growing in smaller cities such as Rotorua, Tauranga, Queenstown and Wellington.

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Nov 232017
 
 November 23, 2017  Posted by at 9:43 am Finance Tagged with: , , , , , , , , , , , ,  8 Responses »


Roger Viollet Great Paris Flood, Avenue Daumesnil 1910

 

Fed Fears New Record High Credit Bubble – Danielle DiMartino Booth (USAW)
Global Debt Is Rising, Especially in Emerging Economies (St. Louis Fed)
Pressure on US Households Intensifies (DDMB)
Zombie Firms Roam Europe Because Banks Help Keep Them Undead
China Is Pumping A Lot Of Cash Into Its Economy To Calm Investors (CNBC)
Chinese Investors Eye Leverage to Juice U.S. CLO Returns (BBG)
China’s $3.4 Trillion Corporate Bond Market Faces Rocky 2018 (BBG)
Worst Growth In Decades Pushes UK To Inject £25bn Into Economy (Ind.)
Budget Shows Tories Are Unfit For Office – Corbyn (G.)
Facebook To Let Users See If They ‘Liked’ Russian Accounts (R.)
Putin Tell Russian Firms To Be Ready For War Production (Ind.)
PNG Police Move In On Closed Australia Refugee Camp On Manus (AFP)
Night Being Lost To Artificial Light (BBC)

 

 

“I don’t think any of us know what the implications are for a $50 trillion debt build since the great financial crisis (of 2008). It is impossible to say. We have never dealt with anything of this magnitude.”

Fed Fears New Record High Credit Bubble – Danielle DiMartino Booth (USAW)

Former Federal Reserve insider Danielle DiMartino Booth says the record high stock and bond prices make the Fed nervous because it’s fearful of popping this record high credit bubble. DiMartino Booth says, “The Fed’s biggest fear is they know darn well this much credit has built up in the background, and the ramifications of the un-wind for what has happened since the great financial crisis is even greater than what happened in 2008 and 2009. It’s global and pretty viral. So, the Fed has good reason to be fearful of what’s going to happen when the baby boomer generation and the pension funds in this country take a third body blow since 2000, and that’s why they are so very, very intimidated by the financial markets and so fearful of a correction.”

Why will the Fed not allow even a small correction in the markets? DiMartino Booth says, “Look back to last year when Deutsche Bank took the markets to DEFCON 1. Maybe you were paying attention and maybe you weren’t, but it certainly got the German government’s attention. They said the checkbook is open, and we will do whatever we need to do because we can’t quantify what will happen when a major bank gets into a distressed situation. I think what central banks worldwide fear is that there has been such a magnificent re-blowing of the credit bubble since 2007 and 2008 that they can’t tell you where the contagion is going to be. So, they have this great fear of a 2% or 3% or 10% (correction) and do not know what the daisy chain is going to look like and where the contagion is going to land.

It could be the Chinese bond market. It could be Italian insolvent banks or it might be Deutsche Bank, or whether it might be small or midsize U.S. commercial lenders. They can’t tell you where the systemic risk lies, and that’s where their fear is. This credit bubble is of their making.” In short, the Fed does not know what is going to happen, and according to DiMartino Booth, nobody does. DiMartino Booth contends, “I don’t think any of us know what the implications are for a $50 trillion debt build since the great financial crisis (of 2008). It is impossible to say. We have never dealt with anything of this magnitude.”

“2017 is the record for quantitative easing (money printing) globally. We have never, not even in the darkest days of the financial crisis, central banks have never injected as much money as they have into the markets. . . . I am not a gold bug, but we do know that in times of corrections that there is no place to hide in traditional asset classes that you can get at your Merrill Lynch brokerage. Gold and silver in the precious metals complex are the only places to hide and get true diversification and safety.”

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They do know what’s going on.

Global Debt Is Rising, Especially in Emerging Economies (St. Louis Fed)

The world has become used to cheap credit. And the increase in borrowing by emerging economies could pose a risk as monetary policy normalizes. In response to the most recent recession, central banks around the world decreased their main policy rates to almost zero, as seen in the figure below.

[..] The downward trend in short-term and long-term interest rates has made borrowing cheaper over time. As a result, global debt has increased substantially since 2007. According to Bank for International Settlements (BIS) data, total debt of the nonfinancial sector (that is, households, government and nonfinancial corporations) amounted to $145 trillion in the first quarter of 2017, an increase of 40% since the first quarter of 2007. Most of this increase has been driven by an increase in total debt in emerging economies, especially in China, as seen in the following figure.

Furthermore, emerging economies have borrowed heavily in foreign currency, mainly in U.S. dollars, shown in the figure below.

According to the BIS, total dollar-denominated debt outside the U.S. reached $10.7 trillion in the first quarter of 2017, and about a third of this debt is owed by the nonfinancial sector of emerging economies. Analysts have stressed that the rapid accumulation of debt in emerging economies could pose risks for the global economy in the presence of U.S. monetary policy normalization. Market expectations of a rapid increase in the policy rate and the reduction of the Federal Reserve’s balance sheet could lead to higher borrowing costs and an appreciation of the U.S. dollar. This, in turn, would increase the cost of refinancing debt in emerging economies. If these risks materialized, there could be an increase in the demand for safe assets, particularly U.S. Treasuries. This would lead to a decrease in long-term rates. In times of monetary normalization, the yield curve would flatten, and banks profitability could be eroded.

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After the storms…

Pressure on US Households Intensifies (DDMB)

The full effects of Hurricanes Harvey and Irma are rapidly showing up in the data. In September, according to Black Knight, the number of mortgages either past due or in foreclosure rose by 214,000, or 9%, compared with August. At 5.1%, the combined rate is far off the previous month’s 4.7% and the most recent low of 4.5% recorded in March 2007. October’s numbers have brought the picture more clearly into focus. More than 229,000 past-due mortgages are tied to the storms. Hurricane Irma accounted for 163,000 and Harvey, 66,000. To place the damage to households in context, before the storms, Florida and Texas ranked 22nd and 20th among non-current mortgage states. As of October, Florida has risen to second place and Texas is in fifth place.

The economy has also enjoyed a rush of car sales as sufficiently-collateralized and insured drivers immediately replaced vehicles destroyed by the storms. According to the latest retail data, car sales slowed to a 0.7% growth rate in October, far below September’s blistering 4.6-percent pace. Nonetheless, the next development could be a further deterioration in auto delinquencies attributed to storm victims. The most recent third-quarter data from the New York Fed suggest struggling households continue to buckle under the strains of their monthly payments. The delinquency rate for subprime loans originated by auto-finance companies, as opposed to banks, hit 9.7% in the three months ended in September.

With one in four auto loans outstanding going to subprime borrowers, the rate has been rising since 2013 and is at a seven-year high. What’s most notable is that these delinquency rates are being recorded outside recession, all but ensuring 2009’s peak of 10.9% will be breached in the next downturn. And while credit-card delinquencies are nowhere near their crisis-era double-digit peaks, the New York Fed noted that serious delinquencies have been on the rise for one year. The serious delinquency rate hit 4.6% in the third quarter, up from 4.4% the prior quarter. Adjusted for inflation, the growth of U.S. credit-card spending has outpaced that of incomes for 26 straight months.

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Anyone shorting Italy for real yet?

Zombie Firms Roam Europe Because Banks Help Keep Them Undead

So-called zombie firms – companies that would be out of business or painfully restructured in a competitive economy – have become a key issue for policy makers grappling with sluggish productivity growth in developed economies. The fear is that those “zombies” are sucking up capital that could otherwise go to more productive firms. A new study by the OECD helps explaining how banks favor the spread of zombie firms. It shows that weak companies tend to be connected to weak banks which prefer to roll over or restructure bad loans rather than declaring them delinquent and writing them off. The OECD’s research by Dan Andrews and Filippos Petroulakis lends new urgency to the ECB’s efforts to slash non-performing loans in the region.

Supervisors have asked for detailed plans of how NPLs will be cut and are mulling requiring banks to set aside more capital for soured loans. “In order to facilitate the unwinding of the zombie problem, it is essential that bank balance sheets are strong, underlining the need for fast recapitalizations after crises and other measures to reduce NPLs,” write the authors. “The zombie firm problem in Europe may at least partly stem from bank forbearance.” Weak productivity matters in an ageing continent like Europe, where a shrinking working population is expected to support an ever increasing number of retirees. This can’t happen unless technology and education make it possible to squeeze more and more output from labor and capital.

The OECD has been investigating the impact of living-dead companies for years. It argues that zombification leads to capital misallocation, as weak banks tend to steer less capital to healthier and more productive firms. This in turn leads to low productivity and returns, making it more difficult to get credit even for innovative companies. Andrews and Petroulakis also say that, in addition to forcing banks to work down their NPLs and bolster capital, efficient laws on insolvency are needed. It is not a coincidence that Italy – the European country with the largest NPL problem – overhauled its bankruptcy rules last month to make them quicker and more efficient.

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Mr. Xi, sir, it’s time to be careful.

China Is Pumping A Lot Of Cash Into Its Economy To Calm Investors (CNBC)

China has been pumping a lot of cash into its system to lift market sentiment, as the world’s second-largest economy walks a thin line between curbing debt and keeping everything running smoothly. Last week, the People’s Bank of China injected cash totaling 810 billion Chinese yuan ($122.4 billion) in five straight days of daily liquidity management operations. Those actions, which represented the largest weekly net increase since January, were in part a Beijing response to its 10-year sovereign bond yields spiking to multiyear highs, experts said. “Surging Chinese government bond yields hit the nerve of policymakers, so in order to further prevent a greater surge, they injected liquidity into the system to improve market sentiment,” said Ken Cheung, a foreign exchange strategist at Mizuho Bank who focuses on Chinese currencies and monetary policies.

Nomura analysts said last week in a note that the bond rout was due to fears of regulatory tightening from Beijing. Bond yields, which move inversely to prices, briefly hit 4% in China for the first time in three years. A rise in the benchmark government bond yield threatens to drive up overall borrowing costs — and potentially worsen the country’s debt situation. On Monday and Tuesday of this week, the PBOC injected a net 30 billion yuan ($4.5 billion), but it didn’t expand that money supply on Wednesday. Analysts said that pause may have been due to market sentiment seemingly stabilizing, but it may be short-lived. As Chinese 10-year yields are still near the psychologically important 4% level, Cheung told CNBC he expects more injections ahead if necessary, as Beijing needs to “maintain liquidity to please the market.”

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“It’s dangerous territory. Leveraging BB-rated bonds – is that a good idea?”

Chinese Investors Eye Leverage to Juice U.S. CLO Returns (BBG)

The last time Asian investors borrowed money to invest in structured-credit products – during the run-up to the financial crisis – it didn’t work out so well. Now, a new set of buyers from China are hoping things turn out differently. Instead of snapping up packages of risky derivatives tied to U.S. home loans, they’re buying collateralized loan obligations that bundle together corporate loans to highly leveraged companies. And while such CLOs weathered the last crisis relatively well, there’s already concern that these investors are being tempted to deploy leverage to amplify their returns. The problem is that even the riskiest pieces of CLOs can yield less than the 8 to 10% targets Chinese investors have grown accustomed to in their markets, according to Collin Chan, a CLO analyst at Bank of America Corp.

So CLOs, the junk-rated slices of which yield just 5.5 percentage points more than Libor, “may not be crazily attractive” to them, said Chan, whose team has trekked to China multiple times this year to pitch the products to investors there. On a recent trip to China, potential new investors expressed interest in the idea of applying leverage for the purchase of CLOs, even at the riskier BB level, Chan said. He estimates levered returns for the BB-rated CLO slice may be almost 20%. Leverage is employed using the repo financing market, where short-term loans allow investors to borrow money by lending securities. It’s the latest evidence of the search for yield that has engulfed credit markets and provided a significant boost for CLO sales this year. China and its many types of financial institutions now look like promising buyers for a product that in Asia has typically been bought by Japanese banks and Korean insurers.

“It wouldn’t be wise for the Chinese to use leverage at this stage,” said Asif Khan, head of CLO origination and distribution at MUFG. “It’s dangerous territory. Leveraging BB-rated bonds – is that a good idea? Any potential use of leverage by Chinese investors could pose potential risk in case of severe volatility.” [..] Chinese investors have yet to enter the CLO market en masse. However signs point to their growing participation. In some cases, investment banks and CLO managers have made as many as five trips to Asia this year, adding on special CLO-focused investor conferences in mainland China for the first time ever to raise the product’s profile. The demand to diversify into dollar assets has grown from a wide range of investors, despite Chinese-government capital controls limiting deployment of capital abroad.

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$3.4 trillion sounds low.

China’s $3.4 Trillion Corporate Bond Market Faces Rocky 2018 (BBG)

China’s deleveraging campaign is finally starting to bite in the nation’s corporate-bond market, a shift that will make 2018 a clearer test of policy makers’ appetites to let struggling companies fail. Yields on five-year top-rated local corporate notes have jumped about 33 basis points since the month began, to a three-year high of 5.3%, according to data compiled by clearing house ChinaBond. Government bonds, which have far greater liquidity, had already moved last month as the central bank warned further deleveraging was needed. With more than $1 trillion of local bonds maturing in 2018-19, it will become increasingly expensive for Chinese companies to roll over financing – and all the tougher for those in industries like coal that the nation’s leadership wants to shrink.

Two companies based in Inner Mongolia, a northern province that’s suffered from a debt-and-construction binge, missed bond payments on Tuesday, in a demonstration of the kind of pain that may come. In the long haul, that all may be good for China. Allowing more defaults could see its bond market become more like its overseas counterparts, with a greater differentiation in price. And that could mean it channels funds more productively. “The deleveraging campaign and the new rules on the asset management industry will further differentiate good and bad quality credits, and make the onshore credit market more efficient,” said Raymond Gui at Income Partners Asset Management. “Weaker companies will find it harder to roll over their debts because funding costs will stay high.” Gui predicts yields will keep climbing. The average for top-rated corporate bonds is already 2.2 percentage points above what investors demanded to hold them in October last year.

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More austerity.

Worst Growth In Decades Pushes UK To Inject £25bn Into Economy (Ind.)

Britain faces its worst period of economic growth in more than half a century after official data revealed a country hamstrung by feeble productivity and Brexit. Dismal figures released alongside Philip Hammond’s Budget led the Chancellor to announce a £25bn cash injection to strengthen the ailing economy. The major giveaway will see money head towards housebuilding, preparing Whitehall for Brexit, the NHS and boosting the tech sector. But despite the extra cash most government departments will still experience deep cuts over the next five years, as Mr Hammond struggles to get the public finances under control. Mr Hammond tried to put a positive sheen on progress towards reducing net debt and abolishing the deficit, but data suggested Britain would now fail to achieve a budget surplus before 2031.

Forecasts from the Office for Budget Responsibility indicated GDP would grow by 1.5% in 2017, down from the 2% forecast in March. The Government’s official financial auditor said growth would drop to 1.4% next year – as low as 1.3% in 2019 and 2020 – and then pick up to 1.5% in 2021 and 1.6% in 2022. The OBR said the main downward pressure on growth was a big fall in the UK’s projected productivity, intensifying public spending cuts and Brexit uncertainty. The body was established in 2010 by then-Chancellor George Osborne to end a system under which the Treasury produced its own economic growth estimates. The latest predictions are the gloomiest that the auditor has ever given, and they are also smaller than any produced by the Treasury since 1983. Institute for Fiscal Studies director Paul Johnson said the 1.4% average growth forecast over the period was “much worse than we have had over the last 60 or 70 years”.

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“.. the reality will be – a lot of people will be no better off. And the misery that many are in will be continuing.”

Budget Shows Tories Are Unfit For Office – Corbyn (G.)

In his response to the budget, Corbyn – it is the leader of the opposition who traditionally speaks rather than the shadow chancellor – said Hammond had completely failed to tackle a national crisis of stagnation and falling wages. “The test of a budget is how it affects the reality of people’s lives all around this country,” the Labour leader said. “And I believe as the days go ahead, and this budget unravels, the reality will be – a lot of people will be no better off. And the misery that many are in will be continuing.” Largely eschewing direct focus on Hammond’s specific announcements in favour of a broader critique of the government’s wider economic approach, Corbyn castigated Hammond for again missing deficit reduction targets, and for a continued spending squeeze on schools and the police.

Speaking about housing, Corbyn said rough sleeping had doubled since 2010, and that this Christmas 120,000 children would be living in temporary accommodation. “We need a large-scale publicly funded housebuilding programme, not this government’s accounting tricks and empty promises.” Summing up, he said: “We were promised a revolutionary budget. The reality is nothing has changed. People were looking for help from this budget. They have been let down. Let down by a government that, like the economy they’ve presided over, is weak and unstable and in need of urgent change. They call this budget ‘Fit for the Future’. The reality is this is a government no longer fit for office.”

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Mish commented on Twitter he’d be more interested in seeing which CIA propaganda sites he’d liked.

Question is: should we trust Facebook’s assessment of what is Russian and what not? I don’t think so.

Facebook To Let Users See If They ‘Liked’ Russian Accounts (R.)

Facebook said on Wednesday it would build a web page to allow users to see which Russian propaganda accounts they have liked or followed, after U.S. lawmakers demanded that the social network be more open about the reach of the accounts. U.S. lawmakers called the announcement a positive step. The web page, though, would fall short of their demands that Facebook individually notify users about Russian propaganda posts or ads they were exposed to. Facebook, Alphabet Inc’s Google and Twitter are facing a backlash after saying Russians used their services to anonymously spread divisive messages among Americans in the run-up to the 2016 U.S. elections. U.S. lawmakers have criticized the tech firms for not doing more to detect the alleged election meddling, which the Russian government denies involvement in.

Facebook says the propaganda came from the Internet Research Agency, a Russian organization that according to lawmakers and researchers employs hundreds of people to push pro-Kremlin content under phony social media accounts. As many as 126 million people could have been served posts on Facebook and 20 million on Instagram, the company says. Facebook has since deactivated the accounts. Facebook, in a statement, said it would let people see which pages or accounts they liked or followed between January 2015 and August 2017 that were affiliated with the Internet Research Agency. The tool will be available by the end of the year as “part of our ongoing effort to protect our platforms and the people who use them from bad actors who try to undermine our democracy,” Facebook said.

The web page will show only a list of accounts, not the posts or ads affiliated with them, according to a mock-up. U.S. lawmakers have separately published some posts. It was not clear if Facebook would eventually do more, such as sending individualized notifications to users.

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NATO is a real threat.

Putin Tell Russian Firms To Be Ready For War Production (Ind.)

Russian business should be prepared to switch to production to military needs at any time, said Vladimir Putin on Wednesday. The Russian president was speaking at a conference of military leaders in Sochi. “The ability of our economy to increase military production and services at a given time is one of the most important aspects of military security,” Mr Putin said. “To this end, all strategic, and simply large-scale enterprise should be ready, regardless of ownership.” A day earlier, the president had spoken of a need to catch up and overtake the West in military technology. “Our army and navy need to have the very best equipment — better than foreign equivalents,” he said. “If we want to win, we have to be better.”

Since the 2008 Georgian war, which was a difficult operation, the Russian military has undergone extensive modernisation. Ageing Soviet equipment has gone. There is a new testing regime. There are new command structures. The budget has also increased exponentially. This year, military expenses will cross 3 trillion roubles, or 3.3% of GDP. This would be a record were it not for one-off costs in 2016. Over the next two years, spending is forecast to be cut back slightly, to approximately 2.8% of GDP. Though that budget remains less than 30% of the combined Nato budget in Europe, many countries are increasing their military spending in response to the “Russian threat”. Nato military command has also been restructured — it says in response to Russian cyber and military threats.

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First thing that needs to happen is Australian media reporting on this. Then people must protest. New Zealand recently offered to take a whole group of these people, Australia declined. Many need medical treatment. Australia refuses.

PNG Police Move In On Closed Australia Refugee Camp On Manus (AFP)

Papua New Guinea police moved into the shuttered Australian refugee camp on the country’s Manus Island Thursday in the most aggressive push yet to force hundreds of men to leave, the Australian government and detainees said. The police operation was confirmed by Australia’s Immigration Minister Peter Dutton, who said Canberra was “very keen for people to move out of the Manus regional processing centre”. “I think it’s outrageous that people are still there,” he told Sydney commercial radio station 2GB. “We want people to move.” Iranian Behrouz Boochani tweeted from inside the camp earlier Thursday, writing that “police have started to break the shelters, water tanks and are saying ‘move, move'”.

“Navy soldiers are outside the prison camp. We are on high alert right now. We are under attack,” he said, adding that two refugees were in need of urgent medical treatment. Other refugees posted photos to social media sites showing police entering the camp, which Australia declared closed on October 31 after the PNG Supreme Court declared it unconstitutional. [..] Australia had shut off electricity and water supplies to the camp and demanded that some 600 asylum-seekers detained there move to three nearby transition centres. Around 400 of the asylum-seekers have refused to leave, saying they fear for their safety in a local population which opposes their presence on the island. They also say the three transition centres are not fully operational, with a lack of security, sufficient water or electricity.

[..] Canberra has strongly rejected calls to move the refugees to Australia and instead has tried to resettle them in third countries, including the United States. But so far, just 54 refugees have been accepted by Washington, with 24 flown to America in September. Despite widespread criticism, Canberra has defended its offshore processing policy as stopping deaths at sea after a spate of drownings.

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Oh, the lights will go out eventually…

Night Being Lost To Artificial Light (BBC)

A study of pictures of Earth by night has revealed that artificial light is growing brighter and more extensive every year. Between 2012 and 2016, the planet’s artificially lit outdoor area grew by more than 2% per year. Scientists say a “loss of night” in many countries is having negative consequences for “flora, fauna, and human well-being”. A team published the findings in the journal Science Advances. Their study used data from a Nasa satellite radiometer – a device designed specifically to measure the brightness of night-time light. It showed that changes in brightness over time varied greatly by country. Some of the world’s “brightest nations”, such as the US and Spain, remained the same. Most nations in South America, Africa and Asia grew brighter. Only a few countries showed a decrease in brightness, such as Yemen and Syria – both experiencing warfare.

The nocturnal satellite images – of glowing coastlines and spider-like city networks – look quite beautiful but artificial lighting has unintended consequences for human health and the environment. Lead researcher Christopher Kyba from the German Research Centre for Geoscience in Potsdam said that the introduction of artificial light was “one of the most dramatic physical changes human beings have made to our environment”. He and his colleagues had expected to see a decrease in brightness in wealthy cities and industrial areas as they switched from the orange glow of sodium lights to more energy-efficient LEDs; the light sensor on the satellite is not able to measure the bluer part of the spectrum of light that LEDs emit.

“I expected that in wealthy countries – like the US, UK, and Germany – we’d see overall decreases in light, especially in brightly lit areas,” he told BBC News. “Instead we see countries like the US staying the same and the UK and Germany becoming increasingly bright.” Since the satellite sensor does not “see” the bluer light that humans can see, the increases in brightness that we experience will be even greater than what the researchers were able to measure.


UK, Netherlands, Belgium

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Nov 172017
 
 November 17, 2017  Posted by at 9:50 am Finance Tagged with: , , , , , , , , , ,  5 Responses »


Arthur Rothstein Night view, downtown section. Dallas, Texas 1942

 

America’s Racial Wealth Gap Is Staggering – And Government-Created (BI)
Australia’s Private Debt Juggernaut Rolls On (LFE)
John Malone says Amazon is a ‘Death Star’ (CNBC)
Einhorn Says Issues That Caused the Crisis Are Not Solved (BBG)
Corporate Zombies Are Threatening The Eurozone Economy (ZH)
Wall St. Bankers Secretly Used Chat Rooms To Rig Treasury Bond Trades (NYP)
Electricity Consumed To Mine Bitcoin Rose 43% Since October (BBG)
Saudi Arabia Offers Arrested Royals A Deal: Your Freedom For Lots Of Cash (ZH)
Fed Insiders Seek Radical Policy Review as Powell Era Dawns (BBG)
200,000 Gallons of Oil Spill From Keystone Pipeline (Atl.)
Greek Taxpayers Have Paid Dearly For €720 Million ‘Social Dividend’ (K.)
EU Handling Of Greek Bailouts “Generally Weak”, Say Its Own Auditors (R.)
James Hansen Calls For Wave Of Climate Lawsuits (G.)

 

 

Don’t think a lot of people were aware of this.

America’s Racial Wealth Gap Is Staggering – And Government-Created (BI)

The term “public housing” is generally associated with poor, disaffected US minorities — but it turns out its origins were very much white and middle-class. Explicitly racist housing policies at the federal, state and local levels, first during the Great Depression and then after World War II, helped deepen and exacerbate a wealth gap between the races that has accelerated over the decades. Those policies also led to a sharp rise in racial segregation across many US cities, according to Richard Rothstein, a research associate of the Economic Policy Institute and author of “The Color of Law: A Forgotten History of How our Government Segregated America.”

“There was a systematic pattern that we’ve forgotten by which every metropolitan area in this country has been segregated not by the accident of personal choices or economic differences but by very explicit federal, state and local policy designed to create a segregated landscape everywhere we look,” Rothstein said during his keynote speech at a recent conference sponsored by the Federal Reserve Bank of Minneapolis. The Fed is putting increasing efforts into community development as the unemployment rate falls to historically low levels, forcing policymakers to face more intractable social issues that are not always directly amenable to monetary or even fiscal policy. America’s racial wealth gap today is almost hard to fathom:

Black families on average hold a paltry 10% of the wealth owned by the average white family, a level of inequality that eclipses anything seen in other rich nations. Rothstein argues that a big part of that gap comes from discriminatory housing policies that allowed whites to build gains from homeownership while blacks were forced to rent. Here’s what the data look like, according to the Urban Institute:

Rothstein argued that the roots of inequality in housing wealth were very much racial and completely intentional, not the result of self-segregation by choice. “Housing was built on a segregated basis, very often creating segregation in communities that hadn’t known it before or at least where it wasn’t nearly as intense as it later became,” he said. President Harry Truman proposed a massive expansion of the public housing program in 1949 in order to house returning veterans, Rothstein said. The 1949 Housing Act was passed “as a segregated program, and the government used that act to continue to segregate all its housing programs for the next ten years.”

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This is about Australia, but take a look at debt service ratio’s in countries like Denmark and the Netherlands. And then just for fun compare them to the US, Italy.

Australia’s Private Debt Juggernaut Rolls On (LFE)

In the post-GFC era, more attention has been given to private credit (debt) whereas previously, almost all commentary focused upon public debt. The ruptures caused by the global financial crisis (GFC) is strongly responsible for this shift in perspective, including the research by heterodox economists. Fortunately, the mass media in Australia have done a fairly good job at bringing attention to private debt even though they are, ironically, staunch cheerleaders of inflated land prices. As is now commonly recognised, Australia’s household sector is heavily indebted. The household debt to GDP ratio is the second-highest globally at 122%, has the second-equal highest household sector debt service ratio (DSR), and the fifth-highest debt to income ratio. In absolute terms, household debt amounts to $2.1 trillion dollars; the vast majority consists of mortgage debt with a small remainder of personal debt.

The household debt to income ratio is 172%, which is below the commonly-cited RBA ratio which registers at 190%. This is due to the different measure of debt used (the numerator). The Bank of International Settlements (BIS) only considers debt instruments in line with the UN SNA (System of National Accounts), whereas the RBA uses all household liabilities from the ABS Financial National Accounts. This is neither correct nor incorrect, just different. In compiling its debt database, the BIS must adhere to international standards.

The debt service ratio is an estimate of both aggregate principal and interest payments, using household income, debt and the average interest rate (FISIM-adjusted) variables as inputs. The BIS notes the DSR demonstrates a strongly negative correlation between household consumption and debt, for obvious reasons.

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“Amazon is a ‘Death Star’ moving in ‘striking range of every industry on the planet'”.

John Malone says Amazon is a ‘Death Star’ (CNBC)

Liberty Media Chairman John Malone believes Amazon will dominate the future and is the only company that has a chance to beat Netflix. Netflix CEO Reed Hastings “has been successful in throwing hail Mary passes and then growing into them. And I think he is going to continue doing that. He’s got a great service. He’s disintermediating the studio industry by going directly to the talent,” Malone said in an exclusive interview with CNBC’s David Faber Thursday at the Liberty Media annual investor meeting. “The only outfit right now that has a chance of overtaking them would be Amazon.” The investor noted the cable industry missed its opportunity to compete with Netflix in the past and said “it’s way too late” now. He added that in today’s media world Netflix has the lead position due to its size and subscriber base.

The internet “makes scale even more important in the media business, where scale always was important. It’s all about scale,” he said. Netflix was “the first wave. And I think Jeff [Bezos] is gonna be the most disruptive. As [his] Death Star moves into striking range of every industry on the planet.” He explained that Amazon’s business dominance is growing stronger. Malone said any company that sells products to consumers is at risk of being crushed by the e-commerce giant. “If you’re in the B2C business, if you’re selling anything to any consumer anywhere on the planet, you gotta believe that Amazon is gonna have a look at that opportunity to commoditize you to use scale to serve the public,” he said. Bezos is “reducing cost to the consumer and providing great convenience … You just got to take your hat off and envy what he has built.”

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And that should raise a lot more fear than it does at present.

Einhorn Says Issues That Caused the Crisis Are Not Solved (BBG)

Hedge-fund manager David Einhorn said the problems that caused the global financial crisis a decade ago still haven’t been resolved. “Have we learned our lesson? It depends what the lesson was,” Einhorn, the co-founder of New York-based Greenlight Capital, said at the Oxford Union in England on Wednesday. Einhorn said he identified several issues at the time of the crisis, including the fact that institutions that could have gone under were deemed too big to fail. The scarcity of major credit-rating agencies was and remains a factor, Einhorn said, while problems in the derivatives market “could have been dealt with differently.” And in the “so-called structured-credit market, risk was transferred, but not really being transferred, and not properly valued.”

“If you took all of the obvious problems from the financial crisis, we kind of solved none of them,” Einhorn said to a packed room at Oxford University’s 194-year-old debating society. Instead, the world “went the bailout route.” “We sweep as much under the rug as we can and move on as quickly as we can,” he said. [..] Briefly touching the rise of computer-driven strategies in the financial industry, the billionaire said machines were usually good at spotting short-term trading patterns, something Greenlight isn’t focused on. “Our goal here is to find things that are widely misunderstood by a large margin. So we are not really competing with that kind of technology, because I don’t think we would beat them.”

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Central bankers who create zombies, and then warn about the danger of .. zombies. In other words, nothing out of the ordinary.

Corporate Zombies Are Threatening The Eurozone Economy (ZH)

The recovery in Eurozone growth has become part of the synchronised global growth narrative that most investors are relying on to deliver further gains in equities as we head into 2018. However, the “Zombification” of a chunk of the Eurozone’s corporate sector is not only a major unaddressed structural problem, but it’s getting worse, especially in…you guessed it…Italy and Spain. According to the WSJ.

The Bank for International Settlements, the Basel-based central bank for central banks, defines a zombie as any firm which is at least 10 years old, publicly traded and has interest expenses that exceed the company’s earnings before interest and taxes. Other organizations use different criteria. About 10% of the companies in six eurozone countries, including France, Germany, Italy and Spain are zombies, according to the central bank’s latest data. The percentage is up sharply from 5.5% in 2007. In Italy and Spain, the percentage of zombie companies has tripled since 2007, the OECD estimated in January. Italy’s zombies employed about 10% of all workers and gobbled up nearly 20% of all the capital invested in 2013, the latest year for which figures are available.

The WSJ explains how the ECB’s negative interest rate policy and corporate bond buying are keeping a chunk of the corporate sector, especially in southern Europe on life support. In some cases, even the life support of low rates and debt restructuring is not preventing further deterioration in their metrics. These are the true “Zombie” companies who will probably never come back from being “undead”, i.e. technically dead but still animate. Belatedly, there is some realisation of the risks.

Economists and central bankers say zombies undercut prices charged by healthier competitors, create artificial barriers to entry and prevent the flushing out of weak companies and bad loans that typically happens after downturns. Now that the European economy is in growth mode, those zombies and their related debt problems could become a drag on the entire continent. “The zombification of the corporate sector and banks (is) a risk for future living standards,” Klaas Knot, a European Central Bank governor and the head of the Dutch central bank, said in an interview. In some ways, zombie firms are an unintended side effect of years of easy money from the ECB, which rolled out aggressive stimulus policies, including negative interest rates, to support lending and growth. Those policies have been sharply criticized in some richer eurozone countries for making it easier for banks to keep struggling corporate borrowers alive.

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Jail time.

Wall St. Bankers Secretly Used Chat Rooms To Rig Treasury Bond Trades (NYP)

Wall Street banks secretly shared client information in online chat rooms in order to rig auctions for the $14 trillion US Treasurys market, according to an explosive lawsuit filed in Manhattan federal court on Wednesday. The move wrongly fattened the banks’ profits and picked profits from clients, the suit claims. The new accusations, leveled by several pension funds and wealthy individual investors, are contained in an expanded class-action suit originally filed in July 2015 — and include an unusual twist: Some of the evidence came from confidential informants and one of the banks sued in the earlier action. That bank is now cooperating with the plaintiffs in the massive civil action, and is providing an in-depth look into how Wall Street allegedly conspired to rig Treasury bond trades.

The revised lawsuit expands on details on how the banks conspired to set Treasury bond prices — like moves to manipulate the price of the bonds higher on days when there was a lot of demand, and vice versa, court papers claim. The banks worked their scam for years until The Post first reported in June 2015 of the existence of a government investigation into the alleged actions, the updated lawsuit claims. The funds, representing retirees and public workers, also claim the banks conspired to rig the secondary Treasury markets beginning in the 1990s through tightly controlled electronic platforms that inhibited more competitive trading — a new allegation that wasn’t in the original suit but mirrors similar complaints filed against banks in other markets, like stock loans.

The amended suit tightens its focus on a select number of banks, naming Goldman Sachs, Morgan Stanley, the Royal Bank of Scotland, BNP Paribas, and UBS, among others, as the firms behind the rigging, which they allege occurred from Jan. 1, 2007 to mid-2015. Last year, the judge presiding over the class-action suit had questioned whether the claims were strong enough to proceed. The funds continue to allege the banks mined their own customers’ bids for Treasury bonds to get a bigger share of the auction, and sell the bonds for more profit. Probes on the auction practices are being conducted by the Justice Department, the Securities and Exchange Commission and other federal, state and overseas regulators, sources said. No regulator has accused any bank of wrongdoing.

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It will keep rising. No hydro project will stop that.

Electricity Consumed To Mine Bitcoin Rose 43% Since October (BBG)

A green-energy startup says it can solve bitcoin’s surging electricity consumption without boosting pollution, an issue threatening to halt the meteoric rise of the virtual currency. Austria’s HydroMiner GmbH raised $2.8 million after closing its first initial coin offering on Wednesday, according to its website. The cash will be used to install high-powered computers at hydropower plants, where the company says it can mine new digital currencies at a cheaper cost and with lower environmental impacts. “A lot of people are worried about the high energy consumption of cryptocurrencies,” said Nadine Damblon, the co-founder and chief executive officer of HydroMiner in Vienna. “It’s a huge factor.”

The electricity needed by the global network of computers running the blockchain technology behind bitcoin has risen more than two-fifths since the beginning of October, to about 28 terawatt-hours a year, according to the Digiconomist website. That’s more power than all of Nigeria’s 186 million people consume each year. Much of the electricity feeding bitcoin projects is coming from generators fed by fossil fuels. Even as bitcoin approaches $8,000, the price required for mining to be marginally profitable may reach a jaw-dropping $300,000 to $1.5 million by 2022, according to Christopher Chapman at Citigroup. He based his estimate on current growth rates for mining and the electricity consumed by computers doing the work. At that pace, the power consumption implied by bitcoin’s growth may eventually match what Japan uses.

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My piece from November 8: How Broke is the House of Saud? Sounds like an extremely volatile situation. Taking all those billions away from the rich will not be appreciated. MBS is playing with fire.

Saudi Arabia Offers Arrested Royals A Deal: Your Freedom For Lots Of Cash (ZH)

Saudi Arabia just introduced a 70% wealth tax. It did so in a most original way… As we noted shortly after the Crown Prince’s purge of potential rivals within Saudi Arabia’s sprawling ruling family, while the dozens of arrests were made under the pretext of an “anti-corruption crackdown”, Mohammed bin Salman’s ulterior motive was something else entirely: Replenishing the Kingdom’s depleted foreign reserves, which have been hammered for the past three years by low oil prices, with some estimating that the current purge could potentially bring in up to $800 billion in proceeds. Furthermore, the geopolitical turmoil unleashed by the unprecedented crackdown helped push oil prices higher, creating an ancillary benefit for both the kingdom’s rulers and the upcoming IPO of Aramco.

And, in the latest confirmation that the crackdown was all about cash, the Financial Times reports today that the Saudi government has offered the new occupants of the Riyadh Ritz-Carlton a way out…. and it’s going to cost them: In some cases, as much as 70% of their net worth. “Saudi authorities are negotiating settlements with princes and businessmen held over allegations of corruption, offering deals for the detainees to pay for their freedom, people briefed on the discussions say. In some cases the government is seeking to appropriate as much as 70% of suspects’ wealth, two of the people said, in a bid to channel hundreds of billions of dollars into depleted state coffers. The arrangements, which have already seen some assets and funds handed over to the state, provide an insight into the strategy behind Crown Prince Mohammed bin Salman’s dramatic corruption purge.”

[..] Some of the suspects, most of whom have been rounded up at the Ritz-Carlton hotel in Riyadh since last week, are keen to secure their release by signing over cash and corporate assets, the FT’s sources say. “They are making settlements with most of those in the Ritz,” said one adviser. “Cough up the cash and you will go home.” One multi-billionaire businessman held at the Ritz-Carlton has been told to hand over 70% of his wealth to the state as a punishment for decades of involvement in allegedly corrupt business transactions. He wants to pay, but has yet to work out the details of transferring those assets to the Saudi state.”

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Just look at the nonsense spouted: “The move formalized a policy they’d been following in practice for several years, and it was backed by careful logic: 2% is high enough to ensure that workers continue to get raises and to give the Fed some cushion against deflation.” It did none of that.

Fed Insiders Seek Radical Policy Review as Powell Era Dawns (BBG)

Federal Reserve officials are pushing for a potentially radical revamp of the playbook for guiding U.S. monetary policy, hoping to seize a moment of economic calm and leadership change to prepare for the next storm. While the country is enjoying its third-longest expansion on record, inflation and interest rates are still low, meaning the central bank has little room to ease policy in a downturn before hitting zero again. With Jerome Powell nominated to take over as Fed chairman in February, influential officials including San Francisco Fed chief John Williams and the Chicago Fed’s Charles Evans have taken the lead in calling for reconsidering policy maker’s 2% inflation target. “It’s a good time given the shift in leadership,” Atlanta Fed President Raphael Bostic told reporters on Tuesday in Montgomery, Alabama.

“The new guy comes in and they are able to really think about, how should this work, how do I think this should work, and is it compatible with where we’ve been and where we are trying to get to?” The Fed in 2012 officially settled on 2% inflation as an explicit target for the price stability half of its dual mandate from Congress. The other goal is maximum sustainable employment. The move formalized a policy they’d been following in practice for several years, and it was backed by careful logic: 2% is high enough to ensure that workers continue to get raises and to give the Fed some cushion against deflation. Other advanced economies aim for a similar level. Yet Fed officials have been urging the policy-setting Federal Open Market Committee to revisit that approach.

“I do think that’s a very important thing that we should all be starting to think about, to prepare ourselves and evaluating,” Cleveland Fed President Loretta Mester told a monetary policy conference at the Cato Institute Thursday in Washington. “The Bank of Canada rethinks its framework every five years. It seems to me that’s not a bad thing.”

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This is not Keystone XL, but it’s terribly scary.

200,000 Gallons of Oil Spill From Keystone Pipeline (Atl.)

The Keystone pipeline was temporarily shut down on Thursday, after leaking about 210,000 gallons of oil into Marshall County, South Dakota*, during an early-morning spill. TransCanada, the company which operates the pipeline, said it noticed a loss of pressure in Keystone at about 5:45 a.m. According to a company statement, workers had “completely isolated” the section and “activated emergency procedures” within 15 minutes. Brian Walsh, a state environmental scientist, told the local station KSFY that TransCanada informed the South Dakota Department of Environment and Natural Resources about the spill by 10:30 a.m. TransCanada estimates that the pipeline leaked about 5,000 barrels of oil at the site, Walsh said. A barrel holds 42 U.S. gallons of crude oil.

The Keystone pipeline is nearly 3,000 miles long and links oil fields in Alberta, Canada, to the large crude-trading hubs in Patoka, Illinois, and Cushing, Oklahoma. It was completed in 2010. The entirety of its northern span—which travels through North Dakota, South Dakota, Nebraska, Kansas, Oklahoma, Missouri, and Illinois—would stay closed until the leak was fixed, the company said. TransCanada said it was still operating the pipeline’s southern span, which connects Oklahoma to export terminals along the Gulf Coast. The pipeline’s better-known sister project—the Keystone XL pipeline—was proposed in 2008 as a shortcut and enlargement of the Keystone pipeline.

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A country being crushed by creative accounting.

Greek Taxpayers Have Paid Dearly For €720 Million ‘Social Dividend’ (K.)

It took 2.7 billion euros in new taxes and pension cuts for the government to beat the primary surplus target by 1.9 billion euros this year. In total, 6.2 million taxpayers were forced to pay an average of 410 euros each for the government to distribute an average handout of 180 euros branded the “social dividend” to fewer taxpayers (almost 4 million). The relevant bill that was tabled in Parliament on Tuesday does not specify how the handout will be distributed. Cripplingly high taxes and social security contributions, combined with a freeze on investments, gave the prime minister the chance to issue a nominal social dividend of 1.4 billion euros, which actually amounts to 720 million for low-income people – as the rest goes toward covering government obligations.

For this surplus primary surplus to be attained, the government did the following:
– Hiked solidarity levy rates, mainly for annual incomes in excess of 30,000 euros.
– Lowered the tax-free limit for pensioners and salary workers.
– Raised taxation on oil, gasoline, coffee and tobacco. The latest data show that increasing the special consumption taxes on beer and on coffee has fetched 140 million and 40 million euros respectively.
– Hiked value-added tax rates to the effect that 62.4% of goods and services are now in the top VAT bracket (24%), compared to 33.6% up until last year.
– Slashed the heating oil allowance by about 50%.
– Cut pensions and almost abolished the allowance for low-pension retirees (EKAS).
– Raised the retirement age and social security contributions.

Also the erroneous estimate of Single Social Security Entity (EFKA) revenues turned its deficit of 1 billion euros into a 200-million-euro surplus.

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“Creditors initially estimated that Greece would return to growth in 2012”

But so what? They just raise the burden on Greeks a bit more each time they screw up.

EU Handling Of Greek Bailouts “Generally Weak”, Say Its Own Auditors (R.)

The European Union’s handling of three bailout programs for Greece during the eurozone’s financial crisis had several weaknesses and was only partly successful, European auditors said on Thursday. EU and international creditors have channeled over €350 billion ($412.1 billion) of financial aid to Greece since 2010 to prevent the country’s default and reduce contagion to the rest of the eurozone. To get the funds, Athens had to embark on sweeping structural reforms and unpopular belt-tightening measures. The programs “promoted reform and avoided default by Greece, but the country’s ability to finance itself fully on the financial markets remains a challenge,” the European Court of Auditors (ECA) said in a report on the Greek bailouts. The ECA is responsible for assessing EU finances.

Last year, it said the Commission’s management of the bailouts for Ireland, Portugal, Hungary, Latvia and Romania was “generally weak.” The third Greek program is still ongoing as Athens completes agreed reforms. The €86 billion bailout ends in August, and Greece is by then expected to have fully regained access to market funding. The ECA report, which focused on the work of the European Commission, said the programs “only helped Greece to recover to a limited extent.” The ECB, which together with eurozone states and the IMF contributed to the programs, was not assessed because it declined to provide data, questioning the auditors’ mandate to ask for it, ECA said. The auditors found “weaknesses” in the design of the Greek programs. “Some key measures were not sufficiently justified,” the report said. The ECA stressed that a large chunk of the €45 billion pumped into the banking system may never be recovered.

“For other (measures), the Commission did not comprehensively consider Greece’s implementation capacity in the design process and thus did not adapt the scope and timing accordingly,” it said. In a written reply included in the ECA report, the Commission said that “the design and implementation of crucial reforms took place in the wider context of the prevailing difficult economic situation as well as severe instability in the financial markets.” The Greek bailouts were carried out during the worst financial and economic crisis since the World War II. The Commission also stressed that the application of the programs was complicated by the political crisis that struck Greece during the bailouts, causing the collapse of governments. The Commission concluded that, despite the complex circumstances, the key objectives of the programs were achieved by averting Greece’s default and ensuring financial stability in the eurozone.

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“The judiciary is the branch of government in the US and other countries that is relatively free of bribery. And bribery is exactly what is going on..”

James Hansen Calls For Wave Of Climate Lawsuits (G.)

One of the fathers of climate science is calling for a wave of lawsuits against governments and fossil fuel companies that are delaying action on what he describes as the growing, mortal threat of global warming. Former Nasa scientist James Hansen says the litigate-to-mitigate campaign is needed alongside political mobilisation because judges are less likely than politicians to be in the pocket of oil, coal and gas companies. “The judiciary is the branch of government in the US and other countries that is relatively free of bribery. And bribery is exactly what is going on,” he told the Guardian on the sidelines of the UN climate talks in Bonn. Without Hansen and his fellow Nasa researchers who raised the alarm about the effect of carbon emissions on global temperatures in the 1980s, it is possible that none of the thousands of delegates from almost 200 countries would be here.

But after three decades, he has been largely pushed to the fringes. Organisers have declined his request to speak directly to the delegates about what he sees as a threat that is still massively underestimated. Instead he spreads his message through press conferences and interviews, where he cuts a distinctive figure as an old testament-style prophet in an Indiana Jones hat. He does not mince his words. The international process of the Paris accord, he says, is “eyewash” because it fails to put a higher price on carbon. National legislation, he feels, is almost certainly doomed to fail because governments are too beholden to powerful lobbyists. Even supposedly pioneering states like California, which have a carbon cap-and-trade system, are making things worse, he said, because “half-arsed, half-baked plans only delay a solution.”

For Hansen, the key is to make the 100 big “carbon majors” – corporations like ExxonMobil, BP and Shell that are, by one account, responsible for more than 70% of emissions – pay for the transition to cleaner energy and greater forests. Until governments make them do so by introducing carbon fees or taxes, he says, the best way to hold them to account and generate funds is to sue them for the damage they are doing to the climate, those affected and future generations. Hansen is putting his words into action. He is involved in a 2015 lawsuit against the US federal government, brought by his granddaughter and 20 others under the age of 21. They argue the government’s failure to curb CO2 emissions has violated the youngest generation’s constitutional rights to life, liberty, and property.

[..] Hansen believes Donald Trump’s actions to reverse environmental protections and withdraw from the Paris accord may be a blessing in disguise because the government will now find it harder to persuade judges that it is acting in the public interest. “Trump’s policy may backfire on him,” he said. “In the greater scheme of things, it might just make it easier to win our lawsuit.”

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Sep 242017
 
 September 24, 2017  Posted by at 9:00 am Finance Tagged with: , , , , , , , , , , ,  4 Responses »


Elliott Erwitt Gateway Center Demolition Area Pittsburgh 1950

 

All The Bubbles That Are About To Pop In One Chart (Dillian)
America’s $20 Trillion Debt In Global Context (HowMuch)
Accounting Error Spells Chaos For Global Economy (Graeber)
The American Golden Calf (PL)
Boobs on Credit (Jim Quinn)
Bernanke Past the Point of No Return (AM)
Janet Yellen’s 78-Month Plan for US National Monetary Policy (AM)
A Private Solution For China’s Zombie Company Problem? Unlikely (R.)
More Chinese Cities Impose Property Control Measures (R.)
The Tide Is Starting To Turn Against The World’s Digital Giants (G.)
Why Uber’s Fate Could Herald Backlash Against ‘Digital Disruptors’ (G.)
France’s Far-Left Leader Urges French ‘Resistance’ Against Macron (R.)
Spain Rebuffed in Boosting Control Over Catalonia’s Police (BBG)
No Storm Ever Destroyed a Grid Like Maria Ruined Puerto Rico’s (BBG)

 

 

It’s big graphs day today. This is Jared Dillian’s.

All The Bubbles That Are About To Pop In One Chart (Dillian)

It wasn’t always this way. We never used to get a giant, speculative bubble every seven to eight years. We really didn’t. In 2000, we had the dot-com bubble. In 2007, we had the housing bubble. In 2017, we have the everything bubble. I did not coin the term “the everything bubble.” I do not know who did. Apologies (and much respect) to the person I stole it from. Why do we call it the everything bubble? Well, there is a bubble in a bunch of asset classes simultaneously. And the infographic below that my colleagues at Mauldin Economics created paints the picture best. I don’t usually predict downturns, but this time I bet my reputation that a downturn is coming. And soon.

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Private debt would be more useful. But okay…

America’s $20 Trillion Debt In Global Context (HowMuch)

The U.S. federal government just passed a record $20 trillion in publicly held debt. That’s bigger than the entire economy of every country in the European Union, combined. The debt will only grow higher unless President Trump and the U.S. Congress can agree to unprecedented spending cuts combined with tax increases. Don’t count on that happening anytime soon. Most people think that an eye-popping $20+ trillion debt is insurmountable, and in fact, it is the largest in the world by far. But when you look at another fiscal measure—the ratio of debt-to-GDP—the U.S. is not in the worst situation. Our visualization allows you to quickly see how the U.S. government’s debt compares to other countries around the world. The size of the country correlates to the size of the debt. The U.S. and Japan stand out because they have the highest debts in the world ($20.17T and $11.59T, respectively).

Other countries, like Germany and Brazil, appear much smaller because their debts are comparatively tiny ($2.45T and $1.45T, respectively). We then color-coded each country according to its debt-to-GDP ratio. Green countries have a healthy margin, but dark red and fuchsia countries have debts that are even bigger than their entire economies. The debt-to-GDP ratio is a critical metric for evaluating a country’s fiscal health. It makes a lot of sense for the American government to have a higher debt than a much smaller country, like Germany. That’s why it’s important to consider the GDP of each country, a number which represents the sum of all transactions occurring in the economy. Once you understand the public debt as a percentage of GDP, you get a level playing field for countries on different economic scales. When you think about it like this, the U.S. isn’t even among the ten worst sovereign debts in the world.

Top 10 countries with the Worst Debt-to-GDP Ratios
1. Japan (245% at $11.59B)
2. Greece (173% at $338B)
3. Italy (138% at $138B)
4. Portugal (133% at $274B)
5. Belgium (111% at $111B)
6. Spain (106% at $106B)
7. Canada (106% at $106B)
8. Ireland (105% at $105B)
9. France (98% at $98B)
10. Brazil (82% at $82B)

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Dave Graeber suggests (strongly) that official UK numbers miss -intentionally or not- a huge chunk of household debt. Government debt could be involved, but even then.

Accounting Error Spells Chaos For Global Economy (Graeber)

The thing that always struck me is how much the morality of debt—that anyone in debt has only themselves to blame, that deadbeats are contemptible—stubbornly refuses to die. Even now, when the situation is largely engineered by government policy, the first impulse of pundits and other popular moralists is invariably to assume the real problem must, somehow, be a bunch of lazy freeloaders, living beyond their means. As a result, by the standards of public discourse that exist today—that is, the sort of things it’s considered acceptable coming from the mouth of a politician or TV commentator or government economist—it’s not really legitimate to worry about rising levels of household debt simply because it causes misery or deprivation, if it means millions of actual flesh and blood human beings will be living lives of fear, anxiety, and constant humiliation.


Illustration Rachel Bolton

It’s only really legitimate to worry about rising levels of household debt insofar as it might be likely to cause another financial crisis. (Such a crisis, after all, might well affect the lives of the rich and upper reaches of the professional and managerial classes, that is, the kind of lives that policy-makers feel they have to take account of.) And even then, it must be posed as a moral problem caused by irresponsible self-indulgence—as one Daily Mail headline recently put it: “Your neighbour’s shiny new SUV is about to crash the economy!” Yet the two impulses are clearly in tension. To look at debt in macro-economic terms does make it easier to see it as a structural problem, as the result of self-conscious policy decisions. As a result, everyone seems to want to minimise the problem. Here are the numbers that they published in 2017, which a friend of mine who works in the City translated into handy tabular form:

The attentive reader will note that the image is symmetrical. Up to around 2014, at least, the top and bottom half exactly mirror one another. This is exactly as things should be: it’s an “accounting identity”, as in a ledger sheet, debits and credits have to add up. The remarkable thing is that after 2014, they don’t, and in the projected future, the top and bottom are actually quite different. When I first saw this diagram I was startled and confused. Was I missing something? Was there something about the math I didn’t understand? I passed the image on to two different economists and asked just that: isn’t there something wrong with the numbers here?

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A version of the ugly duckling. Behind Trump’s words on athletes and the anthem. Many people like the athletes, but some 75% of Americans think they should respect the flag. Trump thought this through.

The American Golden Calf (PL)

As a young boy, I enjoyed my family’s bantam chickens that laid very small eggs and hatched very small chicks. Theirs was a small and miniature world. One day one of my bantams started sitting on eggs to hatch its chicks. Something happened to her eggs but she continued to sit, so I decided to put a duck egg under her. Duck eggs are at least three times bigger than bantam eggs and take a few days longer to hatch, but she dutifully sat on the egg several days longer. She hatched the duckling and, as you can imagine, it thought that his world was normal and that the bantam hen was his mother. The duckling eventually grew into a full sized mallard duck, probably five or six times the size of its bantam mother. The full-grown duck would follow its hen mother around as would normal chicks. It was a funny sight to watch.

But I remember thinking, even as a small boy, that the duck’s entire reality was that the bantam hen was his mother and that was the way the world worked. He had no need to consider anything else. This is the world of the American people today. Their perceptions of reality control them and they who control their perceptions control the American people. Our perception of America has always been that she is the mother country and ordained by God, good and just and a beacon of freedom. This is hammered into our psyches from our early days. From pre-school up, we are taught to worship the state. I don’t know if it is still done, but in the public (non)education system, for many years, schoolchildren across the South — and elsewhere, I suppose — recited the Pledge of Allegiance each morning.

Political rallies and government meetings are still often begun with a recitation of the pledge. People say it with patriotic fervor, with their hands placed dutifully on their hearts. Sporting events, political rallies and other public venues are often kicked off with the playing and/or singing of the Star Spangled Banner. Before the song begins, people are instructed to rise, men to remove their hats,and people place their hands over their hearts. They don’t realize its value as a propaganda tool. We have come to equate the flag, the pledge and the national anthem with patriotism, and patriotism with government, country and support for government, support for foreign wars and veterans. Anything less is “un-American.”

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“What happens when a bimbo defaults on her boob loan? How narrow minded of me.”

Boobs on Credit (Jim Quinn)

As I was driving to work yesterday morning on the Schuylkill Expressway a commercial comes on the radio from a plastic surgeon advertising for anyone looking for a better set of boobs. I had never heard a plastic surgeon commercial before, so I thought that was unusual. But, that wasn’t the best part. This plastic surgeon was offering no money down 18 month interest free financing on your new boobs. I wonder if they are moving boobs with subprime debt the same way the auto companies have used subprime debt to move cars. Of course, when a deadbeat defaults on an auto loan the car is easily repossessed. What happens when a bimbo defaults on her boob loan? How narrow minded of me. What happens when some dude who wants to be a bimbo defaults on his/her loan? I guess it was just a matter of time before breast enhancement met debt enhancement in this warped world of materialism, narcissism, financialization, and delusions.

Now that revolving credit has reached a new all-time high of $1 trillion and total consumer debt outstanding has exceeded it’s 2008 peak at $12.8 trillion, the Fed has completed its job of helping the average American again in-debt themselves up to their eyeballs. This is considered a success story in this twisted, perverted, bizarro world we call America today. The solution to an epic debt induced global financial catastrophe caused by Federal Reserve easy money, Wall Street fraud, and Washington DC corruption has been to increase global debt by 50% since 2007, with virtually all of it created by central bankers and the governments they control. In what demented Ivy League educated academic mind would piling $68 trillion more debt on the backs of taxpayers as a cure for a disease caused by the initial $149 trillion of debt be considered rational and sustainable? It’s like having pancreatic cancer and trying to cure it with a self inflicted gunshot.

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The following two pieces are fom the same article.

Bernanke Past the Point of No Return (AM)

In late November 2008, Federal Reserve Chairman Ben Bernanke put in place a fait accompli. But he didn’t recognize it at the time. For he was blinded by his myopic prejudices. Bernanke, a self-fancied Great Depression history buff with the highest academic credentials, gazed back 80 years, observed several credit market parallels, and then made a preconceived diagnosis. After that, he picked up his copy of A Monetary History of the United States by Milton Friedman and Anna Schwartz, turned to the chapter on the Great Depression, and got to work expanding the Fed’s balance sheet. Now here is something all those “Great Depression experts” always neglect to mention: the Fed’s holdings of government securities expanded my more than 400% between late 1929 and early 1933.

Friedman’s often repeated assertion that the Fed “didn’t pump enough” in the early 1930s – which is held up as the gospel truth by nearly everyone – is simply untrue. It is true that the money supply collapsed anyway – but not because the Fed didn’t try to pump it up. Many contingent circumstances mitigated against money supply expansion: too many banks went bankrupt, taking all their uncovered deposit money to money heaven, as there was no FDIC insurance; only 50% of all banks were even members of the Federal Reserve system; no-one wanted to borrow or lend in view of the massive economic contraction and the Hoover administration’s ill-conceived interventionism. We can also tentatively conclude that the economy’s pool of real funding was under great pressure, which was exacerbated as a result of the trade war triggered by the protectionist Smoot-Hawley tariff enacted in June 1930.

The collapse in international trade and investment meant that the pool of savings of the rest of the globe was no longer accessible. Bernanke’s dirty deed commenced with the purchase of $600 billion in mortgage-backed securities, using digital monetary credits conjured up from thin air. By March 2009, he’d run up the Fed’s balance sheet from $900 billion to $1.75 trillion. Then, over the next five years, he ballooned it out to $4.5 trillion. All the while, Bernanke flattered his ego with platitudes that he was preventing Great Depression II. Did it ever occur to him he was merely postponing a much-needed financial liquidation and rebalancing? Did he comprehend that his actions were distorting the economy further and setting it up for an even greater bust?

Perhaps Bernanke understood exactly what he was doing. As many readers have insisted over the years, the Fed works for the big banks and big money interests. Not Main Street. Regardless, the Fed recognizes that the optics of its $4.5 trillion balance sheet have become a bit skewed. The Great Recession officially ended over eight years ago. Why is the Fed’s balance sheet still extremely bloated?


US broad true money supply TMS-2 and assets held by the Federal Reserve

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A 6.5 year plan.

Janet Yellen’s 78-Month Plan for US National Monetary Policy (AM)

By our back of the napkin calculation, starting with October’s initial $10 billion reduction, then incrementally increasing the reduction by $10 billion each quarter until hitting $50 billion per month, and then contracting by $50 billion a month from there, it will take 78-months for the Fed to get its balance sheet back to $900 billion (i.e., where it was before Bernanke’s act of depravity). Thus, in roughly six and a half years, or in March 2024, monetary policy will be back to normal. If you recall, the Soviets operated under five-year plans for the development of the national economy of the USSR. Now, Yellen, an ardent central planner and control freak, has charted the Fed’s 78-month plan for the national monetary policy of the United States. Have you ever heard of something so ridiculous?

However, while the Soviets were zealous believers in their plans, we suspect the Fed will be as committed to the cause as a fat person to a New Year’s Day diet. In truth, the Fed will never, ever reduce its balance sheet to $900 billion. They won’t even get close; they are well past the point of no return. In the early 1930s the Soviet planners under Stalin had a great idea: why not fulfill the 5 year plan in four years? This showed that nothing was impossible for the “new Soviet man” and two plus two was henceforth five. As Marxists will explain, this is in perfect keeping with the rules of polylogism. Even the laws of mathematics must bend to proletarian logic. For starters, financial markets will not allow the Fed to execute its 78-month tightening program according to plan. At some point, credit markets will have a severe reaction.

This would ripple through stock markets and nearly all assets that are propped up by cheap credit. What’s more, if this doesn’t panic the Fed from its master 78-month monetary policy plan, the economy will. No doubt, at some point within the next 78-months the U.S. economy will shrink. What will the Fed do then? Will they continue to tighten in the face of a contracting economy? No way. They will ease, and then they will ease some more. They won’t stop until it is near impossible for an honest person to work hard, save their money, and pay their way in life. Many fine fellows were already pickled over by the Fed in the last easing cycle and lost their way. More are bound to follow.


Guess who’s lying in wait… it will be found out that a creature long held to be extinct was merely hibernating in its cave, sharpening its claws.

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China’s just shifting debt around, hoping it’ll end up under a carpet some place. But the zombies merely start infecting healthy businesses.

A Private Solution For China’s Zombie Company Problem? Unlikely (R.)

China’s latest push to revive its bloated state-owned sector is set to pick up pace this year, with bankers and investors expecting possible spin-offs and asset sales to follow a key Communist Party Congress in October. But the effort is likely to only involve a limited role for private money, even as Beijing has been promoting it as crucial for reforming state-owned enterprises (SOEs), according to people familiar with China’s plans. Beijing would likely lean on cash-rich SOEs like China Life Insurance and Citic Group to bail out the largest of the struggling companies, the people said. They cited China Life stepping in to help China Unicom raise $12 billion last month. A limited role for private capital would raise questions about the depth of any overhaul of the SOEs.

China hopes to speed up the reforms in order to meet ambitious economic growth targets and manage its corporate debt burden. “The current model allows winners, companies doing better, to partially own those doing worse,” said Alicia Garcia-Herrero, chief Asia Pacific economist at Natixis. “In other words, this is a reshuffling of profit, loss among SOEs to a large extent.” China Life is in talks with China Three Gorges New Energy, a unit of the country’s top hydropower developer, according to sources familiar with the matter. China’s state-run companies dominate the country’s key industries, from banking to insurance, energy, and telecoms. They retain an edge over their private rivals in investing both locally and overseas, in part thanks to easier financing.

But they also produce lower returns than their private counterparts and account for the biggest proportion of the bad loans on the books of the country’s banks. The fund raising by Unicom, a state-owned telecoms group, had sparked hopes for the mixed ownership effort, as outlined in a 2015 government plan. The partial privatization of Unicom in August, involving 14 investors, including the tech giants Alibaba and Tencent, was welcomed by markets. But, as Beijing balanced the need for cash with the need for control, China Life ended up with a 10.6 percent stake in the company, nearly a third of the total sold. New investors, including China Life, were given three of 15 board seats.

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Feels half ass.

More Chinese Cities Impose Property Control Measures (R.)

A number of second-tier cities in China have rolled out property speculation curbs in an effort to cool home property sales, according to the official Xinhua News Agency and documents published by some municipal governments. The city of Shijiazhuang, southwest of Beijing, has banned investors from selling newly bought homes for up to five years, while Changsha in Hunan province banned homeowners from buying a second property for up to three years from the time of their first home purchase, Xinhua said. Changsha has also limited property sales to non local residents to one unit per person. The city of Chongqing, as well as Nancang in the southern province of Jiangxi, meanwhile, banned transactions of new and second-hand homes for two years after purchase.

The various measures took effect last week. Additionally, Xian in Shaanxi province has asked real estate developers from Monday to report home prices to local price-monitoring departments before sale and reiterated its pledge to crack down on property price manipulation and speculation. The latest property clampdowns follow moves in June by two Chinese cities, Xian in Shaanxi and Zhenzhou in Henan province, to cool their property markets. Average new home prices in China’s 70 major cities rose 0.2 percent in August from a month ago, data from the statistics bureau showed.

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I’m not convinced. Besides, Google and Facebook already are branches of the intelligence industry.

The Tide Is Starting To Turn Against The World’s Digital Giants (G.)

In his wonderful book The Swerve: How the Renaissance Began, the literary historian Stephen Greenblatt traces the origins of the Renaissance back to the rediscovery of a 2,000-year-old poem by Lucretius, De Rerum Natura (On the Nature of Things). The book is a riveting explanation of how a huge cultural shift can ultimately spring from faint stirrings in the undergrowth. Professor Greenblatt is probably not interested in the giant corporations that now dominate our world, but I am, and in the spirit of The Swerve I’ve been looking for signs that big changes might be on the way. You don’t have to dig very deep to find them. Some are pretty obvious. In 2014, for example, the European Court of Justice decided that EU citizens had the so-called “right to be forgotten” and that Google would have to comply if it wanted to continue to do business in Europe.

In May this year, the European commission fined Facebook €110m for “providing misleading information” about its takeover of WhatsApp. And in June the commission levied a whopping €2.4bn fine on Google for abusing its monopoly in search. Since the European commission is the only regulator in the world that seems to have the muscle and inclination to take on the internet giants, these developments were relatively predictable. What’s more interesting are various straws in the wind that show how digital behemoths are losing their shine. Many of these relate to Brexit and the election of Donald Trump, and to the dawning of a realisation that Google and Facebook in particular may have played some role in these political earthquakes.

This was not because the leadership of the two companies actively sought these outcomes, but because people began to realise that the infrastructure they had built for their core business of extracting users’ data and selling it to companies for ad-targeting purposes could be – and was – “weaponised” by political actors in order to achieve political goals. Public concern about these discoveries was not exactly mollified by the responses of the companies’ bosses – which were variously dismissive, evasive (“it’s just the algorithms – nothing to do with us”), disingenuous, inept and politically naive. They had to be like that, because a franker response would reveal that taking responsibility for what happens on their platforms would vaporise the business model that has made them so rich and powerful.

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Why let Uber grow as big as it has and only then act?

Why Uber’s Fate Could Herald Backlash Against ‘Digital Disruptors’ (G.)

In the mind of many Uber supporters, the Transport for London (TfL) decision – coming a few days before Khan’s appearance at the Labour party conference – revealed an organisation in thrall to established labour interests. Sources told the Observer that the decision was communicated to Uber only two minutes before it was announced and that there had been only one meeting in the last year between the company and the senior team at TfL who insisted that the licence renewal could not be discussed. “TfL has once again caved into pressure from unions who never miss an opportunity to rip off passengers,” said Alex Wild, research director at the rightwing pressure group Taxpayers’ Alliance. The pushback against the laissez-faire philosophy of the US west coast’s tech community is being waged on both sides of the Atlantic.

In the US, calls to regulate technology companies have made strange bedfellows of Democratic senator Elizabeth Warren and ex-White House aide and Breitbart chief Steve Bannon. Last week the former chief strategist to Donald Trump reiterated his view that firms such as Facebook and Google should be regulated like “public utilities”. Meanwhile progressives such as Warren warn of the monopolistic behaviour of Google, Amazon, and Apple while pushing for a renewed debate over antitrust laws. “Silicon Valley is going from being heroes to villains,” said Vivek Wadhwa, a distinguished fellow and adjunct professor at Carnegie Mellon University. “It’s been brewing for quite a while, but there’s a big shift happening.” But, still, the speed of this shift has surprised many. “In our wildest dreams we didn’t think TfL would refuse the licence,” said Maria Ludkin, legal director at the GMB union. “We thought they’d attach conditions to make sure Uber would improve passenger and driver safety.”

[..] Ironically, while many drivers like Abdul have leapt to Uber’s defence, it was the company’s treatment of them that drew attention to the aggressive corporate culture which brought about its downfall in the capital. Last October, following a case brought by the GMB that has wide-ranging implications for all companies in the gig economy, an employment tribunal ruled that Uber’s UK drivers should be classed as workers rather than as self-employed. “We’d had an epidemic of companies saying their people are self-employed when in fact, when you examine their rights and responsibilities, the way they’re acting each day, it’s pretty clear they’re either fully employed or are workers entitled to sickness pay, etc,” Ludkin said. “We brought the Uber case because we had so many drivers coming to us. We looked at their contracts and thought it was a ludicrous idea that 30,000 of them were self-employed, which was Uber’s position.”

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Let’s see what’s left of the famed French protests. Note: the US is not alone in contesting crowd sizes.

France’s Far-Left Leader Urges French ‘Resistance’ Against Macron (R.)

French far-left opposition party leader Jean-Luc Melenchon drew tens of thousands to a rally on Saturday against President Emmanuel Macron’s labor reforms, aiming to reinforce his credentials as Macron’s strongest political opponent. Trade union protests against Macron’s plan to make hiring and firing easier and give companies more power over working conditions seem to be losing steam, but Melenchon said his “France Unbowed” party was calling on unions to join them and together “keep up the fight”. “The battle is not over, it is only starting,” Melenchon told the crowd gathered on the Place de la Republique where the rally against what Melenchon has called “a social coup d‘etat” ended.

In a warning to Macron, who has said he will not bow to street pressure, Melenchon said: “It is the street that defeated the kings, it is the street that defeated the Nazis,” while the crowd chanted “Resistance! Resistance!” It remains to be seen whether Melenchon and his party have the capacity to mobilize the kind of street resistance which forced the last two presidents to dilute their own attempts to loosen the labor code. Melenchon tweeted that over 150,000 demonstrators had turned up while police put the number at 30,000. A campaign rally in March, weeks before the presidential election, drew some 130,000 people, party officials had said.

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Pitting police forces against each other is a recipe for trouble. Peaceful resistance is teh way to go for Catalonia. But…

Spain Rebuffed in Boosting Control Over Catalonia’s Police (BBG)

Police in Spain’s rebel region of Catalonia rejected giving more control to the central government in defiance of authorities in Madrid who are trying to suppress an independence referendum on Oct. 1. The SAP union, the largest trade group for the 17,000-member Mossos d’Esquadra regional force, said it would resist hours after prosecutors Saturday ordered that it accept central-government coordination. The rejection echoed comments by Catalan separatist authorities. “We don’t accept this interference of the state, jumping over all existing coordination mechanisms,” the region’s Interior Department chief Joaquim Forn said in brief televised comments. “The Mossos won’t renounce exercising their functions in loyalty to the Catalan people.”

The disobedience may fuel speculation the Mossos aren’t committed to work with the national Civil Guard in Spain’s largest regional economy. The standoff came a day after Prime Minister Mariano Rajoy’s government acknowledged it’s sending more reinforcements to help control street demonstrations and carry out a separate court order to halt the vote. Officials in Madrid have quietly rented cruise ships including the Rhapsody and moored them in Catalan ports as temporary housing for riot police and other security officials being sent to the region in what El Correo newspaper said may ultimately exceed the number of Mossos by the referendum date.

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“100% of the system run by the Puerto Rico Power Authority is offline”. How long till people will start dying in hospitals?

No Storm Ever Destroyed a Grid Like Maria Ruined Puerto Rico’s (BBG)

You don’t even have to leave the airport to see that Hurricane Maria has laid waste to Puerto Rico’s power grid. On Friday, the San Juan airport was abandoned. No electricity meant no air conditioning, and no air conditioning meant hot and muggy air wafting through the terminals. Ceilings were leaking. Floors were wet. Only the military, relying on its own sight and radar systems, was landing planes. The airport is one of the first places crews will restore power – whenever they can get to it. Hundreds are still waiting for the all-clear to move in and start the arduous task of resurrecting Puerto Rico’s grid. The devastation that Maria exacted on Puerto Rico’s aging and grossly neglected electricity system when it slammed ashore as a Category 4 storm two days ago is unprecedented – not just for the island but for all of the U.S.

100% of the system run by the Puerto Rico Power Authority is offline, because Maria damaged every part of it. The territory is facing weeks, if not months, without service as utility workers repair power plants and lines that were already falling apart. “I have seen a lot damage in the 32 years that I have been in this business, and from this particular perspective, it’s about as large a scale damage as I have ever seen,” said Wendul G. Hagler II, a brigadier general in the National Guard, which is assisting in the response. No federal agency dared on Friday to estimate how long it’ll take to re-energize Puerto Rico. If it’s any indication of how far they’ve gotten, the island’s power authority known as Prepa is only now starting to assess the damage.

“We are only a couple of days in from the storm – there could be lots of issues and confusion at the beginning of something like this,” said Kenneth Buell, a director at the U.S. Energy Department who is helping lead the federal response in Puerto Rico. “We are in the phase where we have people queued up and lining up resources.” What Buell does know is Puerto Rico’s power plants seem inexplicably clustered along the island’s south coast, a hard-to-reach region that was left completely exposed to all of Maria’s wrath. A chain of high-voltage lines thrown across the island’s mountainous middle connect those plants to the cities in the north.

Puerto Rico’s rich hydropower resources have also taken a hit. On Friday, the National Weather Service pleaded for people to evacuate an area in the northwest corner of the island after a dam burst. “All areas surrounding the Guajataca River should evacuate NOW. Their lives are in DANGER!,” the service said on Twitter. And that’s not to mention the state of Puerto Rico’s grid before the storm. Government-owned Prepa, operating under court protection from creditors, has more than $8 billion in debt but little to show for it. Even before the storm, outages were common, and the median plant age is 44 years, more than twice the industry average.

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Aug 102017
 
 August 10, 2017  Posted by at 9:18 am Finance Tagged with: , , , , , , , ,  1 Response »


Dorothea Lange Rooms for Rent, Mission District. Slums of San Francisco, California 1936

 

An Indicator of Peril (Lebowitz)
Former CBO Director: Fall 2017 Will Be “Very Scary”, Expect A Market Crash (ZH)
US Still Stuck Firmly In The Great Recession (BI)
10 Years After Crisis, Another Crash Is ‘Almost Inevitable’ – Steve Keen (RT)
This $5 Trillion Time Bomb Will Devastate Americans (IM)
New Report Raises Big Questions About Last Year’s DNC Hack (N.)
Unverified ‘Russiagate’ Allegations a Grave Threat to America (Stephen Cohen)
European Commission Spending Thousands On ‘Air Taxis’ For Top Officials (G.)
Refugee Crisis Triggers Heightened Risk Of Slavery In EU Supply Chains (G.)

 

 

“The data point, Real Value Added, is currently in negative territory and may, therefore, be a harbinger of an economic downturn. If it is a false signal, it would be the first in a 70-year history of observations.”

An Indicator of Peril (Lebowitz)

Gross Value Added (GVA) and Real Value Added (RVA). GVA is a measure of economic activity, like GDP, but formulated from the production side of the economy. It measures the dollar value of all goods and services produced less all the costs required to produce those goods or services. For example, if 720Global buys $100 worth of wood, $20 worth of other materials and employs $30 worth of labor to build a chair, we have produced a good for $150. If that good is sold for $200, 720Global has created $50 of economic value. Gross Domestic Product (GDP), the more popular measure of economic activity, calculates the level of commerce based on the dollar value of the final goods and services produced. It may help to think of GDP as economic activity measured from the demand side and GVA as measured from the supply side.

Despite the differences, the levels of economic activity reported are remarkably consistent. Since 1948, nominal GDP has averaged annual growth of 6.55% while GVA has averaged 6.50%. It is important to note that, while they track each other very well over the longer term, they are less correlated quarter to quarter. Economists prefer to measure economic activity without the effect of inflation. If inflation were rampant when making the chair in the example above, some of the incremental value was due to the general trend of rising prices and not value added by 720Global. To strip out the effect of inflation and compute a pure measure of value added, it is commonplace to subtract inflation from GVA. The result is Real Value Added (RVA = GVA less CPI). The graph below plots RVA since 1948. Periods deemed recessionary by the National Bureau of Economic Research (NBER) are denoted in gray.

Currently, three of the last four quarters have produced negative RVA levels. Real GDP is not producing similar results, having averaged 2% growth over the same quarters. As mentioned earlier, RVA and Real GDP may not be well correlated over short time frames. RVA is just one source of data arguing that economic trouble lies ahead, therefore, we would be wise not to read too much into this one indicator. Of concern, however, is that negative RVA readings have an impeccable pattern of signaling recession as a coincident indicator.

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Debt ceiling solution far from done.

Former CBO Director: Fall 2017 Will Be “Very Scary”, Expect A Market Crash (ZH)

Rudy Penner, the former director of the Congressional Budget Office and the person described by MarketNews international as “one of Washington’s most respected fiscal policy experts”, told MNI Wednesday in an exclusive interview that he expects a “very scary” fall 2017 due to fiscal issues, with market-disrupting battles ahead on both the debt ceiling and fiscal year 2018 spending. Penner directed the CBO under president Reagan, worked at high level posts in the White House budget office, and the Council of Economic Advisers. He is currently a fellow at the Urban Institute and sits on the board of the Committee for a Responsible Federal Budget. “There are so many politically hard issues and so little consensus on budget and tax policy. I assume we’ll somehow get through this, but not without getting frightened on a regular basis,” Penner said.

“Probably the best we can hope for is muddling through the (FY 2018) budget and the debt limit and getting very limited health, tax, and infrastructure legislation. There is not going to be significant stimulus coming out of Washington in the foreseeable future,” he said, echoing what many other pundits have said before. Penner said a “bipartisan negotiation is badly needed” to forge even a limited FY 2018 spending agreement. But he’s not certain this will occur. “Even a very limited spending agreement might be an impossible dream. We may just stumble into a series of short-term CRs,” he said, referring to temporary spending bills to keep the government funded. While the “record polarization” rhetoric is familiar, the clock is starting to tick ever louder: the 2018 fiscal year begins on October 1, 2017 and extends until September 30, 2018. None of the 12 annual spending bills for FY 2018 have yet been approved by Congress.

On to the debt ceiling, the one item on the calendar which Morgan Stanley (and others) have said will be the biggest hurdle for the market in the next two months, Penner said he believes it will be “very challenging” for Congress to pass legislation this fall to increase the statutory debt ceiling. Treasury Secretary Steve Mnuchin has asked Congress to lift the debt ceiling by the end of September. Penner countered that a “plausible path” for dealing with the debt ceiling is to pass legislation in September to suspend the debt ceiling until after the November 2018 mid-term elections. However, such legislation, he said, may have to be negotiated by an unusual coalition assembled by House Speaker Paul Ryan, a Republican, and House Minority Leader Nancy Pelosi, a Democrat. Such an agreement, Penner said, “could put Speaker Ryan’s job in peril” by conservative Republicans who oppose it. He said he believes the debt ceiling is “an incredibly stupid law that makes no logical sense.”

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What happens when you save banks only.

US Still Stuck Firmly In The Great Recession (BI)

Expectations are everything, especially in economics. That’s why a distinct lack of progress in a few basic measures of economic progress, particularly relative to pre-crisis expectations, has left many Americans questioning how much they have personally benefitted from the economic recovery. A new report from the Roosevelt Institute, a liberal think tank in Washington, highlights a number of ways in which “the recovery since 2009 is, in a sense, a statistical illusion.” The study finds the nation’s total economic output, its gross domestic product, “remains about 15% below the pre-recession trend, a larger gap than at the bottom of the recession.” The first chart below shows that lag, while the second offers insights into just how badly the crisis dented expectations about the future.

Strong employment gains in recent months have brought the jobless rate down to a historically-low 4.3%. However, this decline has not been accompanied by rising incomes or consumer prices, generally associated with a sustainable economic boom. Some Federal Reserve policymakers have found this trend puzzling, while many labor economists point to underlying weaknesses in the job market, including high levels of underemployment and long-term joblessness, as drags on income. Stagnant wages amid rising profits have meant that the wage share in US national income has fallen from 63% to 57% in the last 15 years, according to the report. “It is impossible for the wage share to ever rise if the central bank will not allow a period of ‘excessive’ wage growth,” writes J.W. Mason, who authored the report. “A rise in the wage share necessarily requires a period in which wages rise faster than would be consistent with longterm macroeconomic stability.”

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Zombie-to-be economies.

10 Years After Crisis, Another Crash Is ‘Almost Inevitable’ – Steve Keen (RT)

Speaking to RT, Keen said another financial crisis could be just around the corner unless a fundamentally different approach to debt is adopted. He says we are too focused on government debt, when what actually caused the crisis was “run-away private debt.” “The economy in the UK is not stable. It’s in the aftermath of the biggest financial crisis since the great depression, and there’s still a lack of awareness in the political classes about what actually caused the crisis in the first place,” Keen said. “The Tories were incredibly successful in convincing the electorate that the crisis was caused by government spending, which is absurd. That is technically saying government spending in the UK caused the financial crisis in the United States. Which is just nonsense. “And that gave us austerity for the last 10 years. That austerity has actually further weakened the economy.”

Keen says the level of private debt in the UK peaked at about 195% of GDP post-crisis. While it is now down to about 170% of GDP, it is roughly three times the level of debt England carried before the Margaret Thatcher era, he says. “That’s the stuff that’s being ignored. Nothing is really being done about that. With the amount of debt just sitting there we are still likely to have another crisis – but more likely, we are going to have stagnation.” What is cause for concern, Keen says, is what he calls the “zombie-to-be” economies, such as Australia, Belgium, China, Canada, and South Korea, which avoided the 2008 crisis by borrowing their way through it. Now they have a bigger debt burden to deal with when the next crisis hits, which could be between 2017 and 2020, he says.

“[The ‘zombie-to-be’ economies] are roughly equivalent in size to the American economy. So when they fall, then there will be a crisis that affects the rest of the world, including the UK.” Keen sees China as a terminal case. It has expanded credit at an annualized rate of around 25% for years on end. With private sector debt exceeding 200% of GDP, China resembles the over-indebted economies of Ireland and Spain prior to 2008. He also has little hope for his native Australia, whose credit and housing bubbles failed to burst in 2008. Last year, Australian private sector credit nudged above 200% of GDP, up more than 20 percentage points since the global financial crisis. Australia shows “that you can avoid a debt crisis today only by putting it off until tomorrow,” Keen says.

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Pensions.

This $5 Trillion Time Bomb Will Devastate Americans (IM)

Over 3,000 millionaires have fled Chicago in recent months. This is the largest outflow of wealthy people from any US city right now. It’s also one of the largest outflows of wealthy people in the world. But it’s not just millionaires… Every five minutes someone leaves Illinois. In a recent poll, 47% of people in Illinois said they want to leave the state. Over the last decade, more than half a million people have done just that. This is the largest outflow of people from any state in the country. The people who leave are generally better educated, more skilled, and earn more money than those who stay. Entire towns of affluent Illinois refugees have sprouted up in Florida, Arizona, and other states. Illinois is bleeding productive people. This is a major warning sign. Wealthy people are often the first to leave a bad situation. They have the means to simply get up and go.

And when they do, they take their money and their businesses with them. This hurts the local property market and the rest of the local economy. Many of Illinois’ millionaires own businesses that employ large numbers of people. As they leave, there are fewer people and businesses left to shoulder the state’s enormous and growing financial burdens. Many of these people are leaving for one simple reason: rising taxes. Illinois’ leftist tax-and-spend politicians are continuing to increase all sorts of taxes, which were already high in the first place. The state just passed a 32% income tax hike. Rising taxes are pushing more and more productive people to make the chicken run… and at the worst possible moment for the state’s coffers. Illinois is the most financially distressed state in the US. Every month, it spends $600 million more than it takes in.

It’s now $15 billion behind on its bills and counting. Illinois is about to become America’s first failed state. Even its governor has described it as a “banana republic.” Today, Illinois can’t pay contractors to fix the roads. It doesn’t have enough cash to pay lottery winners. (What happened to the money it collected selling lottery tickets?) The state can’t even afford food for its prisoners. Here are the sad facts. Illinois has: Nearly $15 billion in overdue bills (including $800 million in interest). A $7 billion budget deficit. And an eye-watering $250 billion bottomless pit of unfunded pension obligations. This $250 billion tab is one of the worst public pension crises in the US.

[..] While Illinois has the worst pension situation, it’s not the only state or city in crisis. California’s public pension system is also broken beyond repair. It’s $750 billion underfunded. State pension plans in Connecticut, Pennsylvania, New Jersey, and many other states are taking on water, too. Unfunded public pension liabilities in the US have surpassed $5 trillion. And that’s during an epic stock and bond market bubble.

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A long overview of all the evidence.

New Report Raises Big Questions About Last Year’s DNC Hack (N.)

It is now a year since the Democratic National Committee’s mail system was compromised—a year since events in the spring and early summer of 2016 were identified as remote hacks and, in short order, attributed to Russians acting in behalf of Donald Trump. A great edifice has been erected during this time. President Trump, members of his family, and numerous people around him stand accused of various corruptions and extensive collusion with Russians. Half a dozen simultaneous investigations proceed into these matters. Last week news broke that Special Counsel Robert Mueller had convened a grand jury, which issued its first subpoenas on August 3. Allegations of treason are common; prominent political figures and many media cultivate a case for impeachment.

The president’s ability to conduct foreign policy, notably but not only with regard to Russia, is now crippled. Forced into a corner and having no choice, Trump just signed legislation imposing severe new sanctions on Russia and European companies working with it on pipeline projects vital to Russia’s energy sector. Striking this close to the core of another nation’s economy is customarily considered an act of war, we must not forget. In retaliation, Moscow has announced that the United States must cut its embassy staff by roughly two-thirds. All sides agree that relations between the United States and Russia are now as fragile as they were during some of the Cold War’s worst moments. To suggest that military conflict between two nuclear powers inches ever closer can no longer be dismissed as hyperbole.

All this was set in motion when the DNC’s mail server was first violated in the spring of 2016 and by subsequent assertions that Russians were behind that “hack” and another such operation, also described as a Russian hack, on July 5. These are the foundation stones of the edifice just outlined. The evolution of public discourse in the year since is worthy of scholarly study: Possibilities became allegations, and these became probabilities. Then the probabilities turned into certainties, and these evolved into what are now taken to be established truths. By my reckoning, it required a few days to a few weeks to advance from each of these stages to the next. This was accomplished via the indefensibly corrupt manipulations of language repeated incessantly in our leading media.

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America still ignores its no. 1 Russia expert.

Unverified ‘Russiagate’ Allegations a Grave Threat to America (Stephen Cohen)

Considering all these unprecedented factors, it needs to be emphasized again: President Trump is right about this “all-time low & very dangerous” moment in US-Russian relations. Having recently returned from Russia, Cohen reports that the political situation there is also worsening, primarily because of the Cold War fervor in Washington, including the politics of Russiagate and and new sanctions. Contrary to opinion in the American political-media establishment, Putin has long been a moderate, restraining factor in the new Cold War, but his political space for moderation is rapidly diminishing. His reaction to the congressional sanctions—reducing the number of personnel in US official outposts in Russia to the far lesser number of Russians in American ones—was the least he could have done.

Far harsher political and economic countermeasures are being widely discussed in Moscow, and urged on Putin. For now, he resists, explaining, “I do not want to make things worse,” but he too has a surrounding political elite and it is playing a growing role against any accommodation or restraint in regard to US policy. Meanwhile, the pro-American faction in Russian governmental circles is being decimated by Washington’s actions; and, as always happens in times of escalating Cold War, the space for Russian opposition and other dissident politics is rapidly shrinking.

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Well, if you build yourselves €1 billion offices, who cares?

European Commission Spending Thousands On ‘Air Taxis’ For Top Officials (G.)

Jean-Claude Juncker and his top officials are spending tens of thousands of euros on chartering private planes, according to documents detailing the European commission’s travel expenses. After three years of battling with transparency campaigners fighting for full disclosure, the EU’s executive has released two months of travel costs for 2016, revealing regular use of chartered planes to transport Brussels’ 28 commissioners. The most expensive mission for which details have been released was in the name of Federica Mogherini, the EU’s high representative for foreign affairs. It cost €77,118 for her and aides to travel by “air taxi” to summits in Azerbaijan and Armenia between 29 February and 2 March 2016.

A two-day visit by Juncker, the European commission president, with a delegation of eight people to see Italy’s political leaders in Rome in February 2016 cost €27,000, again due to the chartering of a private plane. Mina Andreeva, a commission spokeswoman, said the use of air taxis was only allowed where commercial flights were either not available or their flight plans did not fit in with a commissioner’s agenda. Security concerns would also allow the chartering of a private plane under commission rules. She said of Juncker’s trip that there had been “no available commercial plane to fit the president’s agenda” in Italy, where he met the Italian president and prime minister, among other dignitaries. The spokeswoman added that the EU’s total spending on such administrative costs was publicly available and that the organisation led the way in being transparent in their work.

The commission was not able to provide details of how many planes are chartered by Brussels every year, although she insisted the number was limited. The travel costs accumulated by the commissioners come out of the general budget, agreed by the member states. [..] According to documents relating to the two months in 2016, total travel and accommodation costs for visits by commissioners to European parliament sessions in Strasbourg, the World Economic Forum in Davos and official missions to countries came to €492.249, an average of €8,790 a month per commissioner.

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That’ll teach them to stay home.

Refugee Crisis Triggers Heightened Risk Of Slavery In EU Supply Chains (G.)

The migrant crisis has increased the risk of slavery and forced labour tainting supply chains in three-quarters of EU countries over the past year, researchers have found. Romania, Italy, Cyprus and Bulgaria – all key entry points into Europe for migrants vulnerable to exploitation – were identified by risk analysts as particularly vulnerable to slavery and forced labour. The annual modern slavery index, produced by Verisk Maplecroft, assessed the conditions that make labour exploitation more likely. Areas covered by the index include national legal frameworks and the severity, and frequency, of violations. Countries outside Europe, such as North Korea and South Sudan, were judged to be at the greatest risk of modern slavery, but the researchers said the EU showed the largest increase in risk of any region over the past year.

“In the past, the slavery story has been in supply chains in countries far away, like Thailand and Bangladesh,” said Dr Alexandra Channer, a human rights analyst at Verisk Maplecroft. “But it is now far closer to home and it something that consumers, governments and businesses in the EU have to look out for. With the arrival of migrants, who are often trapped in modern slavery before they enter the workplace, the vulnerable population is expanding.” The International Labour Organisation estimates that 21 million people worldwide are subject to some form of slavery. The biggest global increase in the risk of slavery was in Romania, which rose 56 places in the indexand is the only EU country classified as “high risk”. Turkey came a close second, moving up 52 places, from medium risk to high risk.

The influx of hundreds of thousands of Syrians fleeing war, combined with Turkey’s restrictive work permit system, has led to thousands of refugees becoming part of an informal workforce, said the study. The government, which is focused on political crackdown, does not prioritise labour violations, further adding to the risk. Over the past year, several large brands from Turkish textile factories have been associated with child labour and slavery. The picture in Romania is more complex, researchers said. The country’s high risk category reflects more severe and frequent instances of modern slavery, but also reflects a greater number of criminal investigations in Romania, usually in collaboration with EU enforcement authorities. Both Romania and Italy, which rose 17 places, have the worst reported violations in the EU, including severe forms of forced labour such as servitude and trafficking, the study said.

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Jul 302017
 
 July 30, 2017  Posted by at 8:33 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle July 30 2017


Gertrude Käsebier Young negro woman, Newport, Rhode Island 1902

 

Wall Street Isn’t Ready For A 1,100-Point Tumble In The Dow Industrials (MW)
Dangerous Game: Shorting the VIX (Barron’s)
Zombie Companies Littering Europe May Tie the ECB’s Hands for Years (BBG)
Markets Relax Merrily on a Powerful Time Bomb (WS)
US Economic Resilience Is An Exaggeration (DDMB)
The Quest To Prove Collusion Is Crumbling (WaPo)
What’s The Matter With Democrats – Thomas Frank (IBT)
Decades From Now, They’ll Say He Had “The Tweets” (Jim Kunstler)
Leasehold Tycoon Whose Firms Control 40,000 UK Homes (G.)
Companies Abandon Nearly One Million Hectares of Alberta Oilsands (CP)
EU Accused Of ‘Wilfully Letting Refugees Drown’ In The Mediterranean (Ind.)

 

 

And it never will be.

Wall Street Isn’t Ready For A 1,100-Point Tumble In The Dow Industrials (MW)

The U.S. stock market has been on such a parabolic march higher that Wall Street investors may have forgotten what a typical, sharp downturn feels like. Indeed, much has been made about the lack of volatility. The CBOE Volatility Index otherwise known as the “fear gauge,” had been flirting with its lowest close on record, implying that market expectations for a sharp, sudden fall are near rock bottom, as the Dow Jones Industrial Average, S&P 500 and the Nasdaq Composite Index scale new heights. (The Dow notched a fresh record on Friday to end the week 1.2% higher.) The recent level of complacency permeating the market has pundits talking about the lack of 5% falls in the market—an occurrence that isn’t unusual in a normal market environment. However, a 5% tumble, while normal, isn’t that common either. It has occurred at least 75 times over the course of the blue-chip index’s, according to WSJ Market Data Group, using data going back to 1901.

The Dow, however, hasn’t experienced a 5% decline since 2011, and before that a 5% drop hadn’t happened since 2008, when there were 9 such drops: At this point, with the Dow just 200 points shy of 22,000, a 5% selloff would equate to a 1,100-point, one-day slide in the gauge. Is the market ready for that sort of sudden jolt lower, given the optics of a quadruple-digit downturn and how it might rattle investment psyche? Art Hogan, chief market strategist at Wunderlich Securities, doesn’t think so. “I would say no because we’re out of practice. Your usual standard garden-variety volatility just hasn’t been around, and we haven’t seen it for 12 months,” Hogan told MarketWatch. “Quiet markets have been the norm and not the exception and I think a major pullback is going to feel a whole lot larger for lack of experience and the numbers are larger,” he said.

Even a 2.5% drop in the Dow, adding up a 550-point decline, could be unsettling, market participants said. Those sorts of tumbles are far more frequent, with 564 such moves of that magnitude occurring in the Dow since 1901. The most recent slump of at least 2.5% was on June 24, 2016, when the Dow tumbled about 610 points, or 3.4%, a day after U.K. citizens voted to end the country’s membership in the EU. There were 3 falls for the Dow of at least 2.5% in 2015. Hogan said it is even hard to imagine what the landscape of the market would like in the face of a plunge of the same magnitude of the 1987 crash, when the Dow lost 22.6% of its value, or 508 points, in a single session. “That’s why it is hard for investors to think about it intuitively. We have no muscle memory for it. It’s hard to harken back to 30 years ago. We have been lulled to sleep,” he said.

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What always happpens when everyone is on the same side of the boat.

Dangerous Game: Shorting the VIX (Barron’s)

As stocks keep dancing around record highs, and the CBOE Volatility Index remains historically low, some investors are preparing for a violent end to one of the world’s most popular trades: shorting volatility. A one-day Standard & Poor’s 500 correction of 3% to 4% could force some funds that short futures on the index, such as the ProShares Short VIX Short-term Future s exchange-traded fund (ticker: SVXY) and the VelocityShares Daily Inverse VIX ST ETN (XIV), to cover their positions. That could make the VIX skyrocket. If the weighted-average of 30-day VIX futures sharply jumped—say by 80% in one day—it would, in turn, trigger an “acceleration event” that would force more funds to buy back short VIX futures contracts. Some VIX funds could face margin calls.

And a chain reaction would likely explode across the volatility spectrum and ultimately the stock market, pushing down share prices and boosting volatility further. So many institutional investors use strategies that increase portfolio leverage as equity volatility declines that Marko Kolanovic, JPMorgan’s top quantitative strategist, fears the markets are nearing a turning point. “While these strategies include concepts like ‘risk control’, ‘crisis alpha’, etc. in various degrees they rely on selling into market weakness to cut losses. This creates a ‘stop-loss order’ that gets larger in size and closer to the current market price as volatility gets lower,” Kolanovic wrote last week. The S&P 500’s realized volatility–the level that’s materialized already—is the lowest since 1966. That influences expectations for future, or implied, volatility.

In fact, CBOE Volatility Index levels are so meager that relatively small point moves can create big percentage changes, creating a major problem for VIX funds. “The one-day percentage change is a big deal in the VIX complex because the levered and inverse VIX ETFs and ETNs rebalance daily, based on the percentage change, and some of the thresholds for forced [unwinding of positions] are based on the percentage change. This is why lower volatility creates higher risk,” Christopher Metli, a Morgan Stanley quantitative derivatives strategist, recently warned clients.

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But Draghi gets praised for saving the EU economy. Well, you can’t have it both ways. Decide.

Zombie Companies Littering Europe May Tie the ECB’s Hands for Years (BBG)

Watch out for the zombies. The plethora of companies propped up by the ECB will limit policy makers’ ability to withdraw monetary stimulus that’s been supporting the continent’s bond market since the financial crisis, according to strategists at Bank of America. About 9% of Europe’s biggest companies could be classified as the walking dead, companies that risk collapse if the support dries up, according to the analysts. After the crash of Lehman Brothers sent global markets into a tailspin, a decade of easy-money policies gave breathing room for nations to get their balance sheets in check and allowed for a spirited revival in corporate profits. But as central bankers look to pull back stimulus for fear of overheating, the potentially grim outlook for vulnerable companies may give them pause, according to Bank of America.

“Monetary support in Europe over the last five years has allowed companies with weak profitability to continue to refinance their debt and stave off defaults,” analysts led by Barnaby Martin wrote in a note Monday. “This supports the point that our economists have been making: that the ECB will likely be very slow and patient in removing their extraordinary stimulus over the next year and a half.” The strategists classify zombies as non-financial companies in the Euro Stoxx 600 with interest-coverage ratios – earnings relative to interest expenses – at 1 or less. The thinking goes that companies in this category are particularly vulnerable to rising interest rates. About 6% of European companies had a coverage ratio of less than 1 on the eve of Lehman’s downfall, a %age that fell to as low as 5% in 2013 when the euro-area sovereign debt crisis cooled.

Zombies shot up to as high as 11% in June 2016 before easing in recent months. Energy companies, thanks to weak oil prices, and those based in southern Europe –particularly smaller firms faced with weak profit generation amid feeble growth – make up a disproportionate share of the zombie world, according to Bank of America. To be sure, different metrics tell different stories about the health of corporate leverage, with some investors citing growth projections and yardsticks like net debt to earnings as reasons bond buyers can be more sanguine. But the coverage ratio is particularly useful in projecting how companies can cover debt costs from their earnings as interest costs rise.

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Leverage kills.

Markets Relax Merrily on a Powerful Time Bomb (WS)

Stock and bond market leverage is everywhere. Some of it is transparent, such as NYSE margin debt which was $539 billion as of the June report. But the hottest form of stock and bond market leverage is opaque, offered by financial firms that usually don’t disclose the totals: securities-based loans (SBLs) — or “shadow margin” because no one knows how much of it there is. But it’s a lot. And it’s booming. These loans can be used for anything – pay for tuition, fix up that kitchen, or fund a vacation. The money is spent, the loan remains. When security prices fall, the problems begin. Finra, the regulator for brokerages, doesn’t track this shadow margin, nor does the SEC. Both, however, have been warning about the risks. No one knows the overall amount of this shadow margin, but some details have been reported:

Morgan Stanley had $36 billion of these loans on its balance sheet as of the end of 2016, up 26% from 2016, and more than twice the amount in 2013. • Bank of America Merrill Lynch had $40 billion in SBLs on the balance sheet at the end of 2016, up 140% from 2010; • UBS and Wells Fargo “also have made billions in such loans, people familiar with those banks” told the Wall Street Journal. Raymond James, Stifel Nicolaus… they’re all doing it. • Fidelity used to fund its own SBLs for its clients, but three years ago partnered with US Bancorp. • Even the little ones are trying to get their slice of the pie: In April, robo-advisory startup Wealthfront, with less than $6 billion, announced that it would offer SBLs to its clients.

And now Goldman Sachs, which has been offering SBLs to its 12,000 super-wealthy clients through its Private Banking unit — accounting “for more than half of the unit’s $29 billion in loans outstanding,” according to the Wall Street Journal — announced on Thursday that this wasn’t enough and that it is partnering with Fidelity Investments to spread these loans far and wide.

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No. It’s an outright lie. Pure make believe.

US Economic Resilience Is An Exaggeration (DDMB)

Are US Federal Reserve stress tests leading economic indicators? That certainly seems to be the case. Just ask Capital One. As of the first quarter, credit card loss provisions at Capital One were above 5%, a six-year high. The company recorded some improvement for the second quarter, yet Fed stress tests of the bank’s overall loan portfolio in a deep downturn show losses topping 12%. That explains Capital One’s “conditional” passing score, a black eye that prompted a reduced share buy-back plan and no increase in its dividend. Most economists today applaud the resilience of the current recovery, which has stretched into its eighth year, the third-longest in postwar history. Resilience and rising household defaults, though, don’t tend to go hand in hand.

Pressures have been building in the background for some time. When adjusted for inflation, credit card usage has grown faster than incomes for 18 months. According to Fed data, that time frame coincides with the upturn in revolving credit, a proxy for credit card debt. In November 2015, outstanding revolving credit crossed above the $900-billion threshold for the first time since December 2009. By May of this year, annual growth was clocking 8.7%. Meanwhile, credit card balances hit $1.02 trillion, the highest level in almost eight years. Whether by choice or force, the aftermath of the financial crisis prompted households to ratchet back their usage of credit cards. As the recovery got underway, frugality prevailed, punctuated by an increase in debit card purchases.

It is thus notable that Bank of America data find debit card usage has weakened in recent years as households grew more comfortable rebuilding their credit card balances. “Confidence” is the term most associated with the rising credit card debt. But it’s fair to ask why confident households would choose to pay so dearly for the privilege. At 15.83%, the average rate on credit card balances is at a record high. It is more likely that households are increasingly tapping their credit cards to cover the cost of necessities, that they are less confident and more anxious about their future finances.

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This should be presented as a major mea culpa by WaPo, but no, it’s not them, it’s “the media” who screwed up. NYT runs similar piece. WIll they all fit through the exit door at the same time?

The Quest To Prove Collusion Is Crumbling (WaPo)

While everyone is fixated on President Trump’s unbecoming and inexplicable assault on Attorney General Jeff Sessions, the media has been trying to sneak away from the “Russian collusion” story. That’s right. For all the breathless hype, the on-air furrowed brows and the not-so-veiled hopes that this could be Watergate, Jared Kushner’s statement and testimony before Congress have made Democrats and many in the media come to the realization that the collusion they were counting on just isn’t there. As the date of the Kushner testimony approached, the media thought it was going to advance and refresh the story. But Kushner’s clear, precise and convincing account of what really occurred during the campaign and after the election has left many of President Trump’s loudest enemies trying to quietly back out of the room unnoticed.

Cable news airtime and in-print word count dedicated to the nonexistent collusion story appear to be dwindling. Democrats and their allies in the media seem less eager to talk about it, and when they do, they say something to the effect of “but, but, but … Kushner didn’t answer every question … He wasn’t under oath … There are still more witnesses … What about this or that new gadfly?” They are stammering. And it hasn’t taken long for news producers and editors to realize that the story is fading. At last, the story that never was is not happening. There are a few showstoppers from Kushner’s testimony that make it obvious to any fair-minded, thinking person that there was no collusion with Russia. In his own words, Kushner makes it clear that his actions were innocent but, at times, misguided and ill-conceived.

He plainly states he had “hardly any” contacts with Russians during the campaign and found his June 2016 meeting with Donald Trump Jr. and the infamous Russian lawyer to be an absolute “waste of time.” Democrats and their allies in the media have exhausted themselves building a scandalous narrative surrounding the Russian lawyer meeting, but according to Kushner, the meeting was so useless that he “actually emailed an assistant from the meeting after [he] had been there for ten or so minutes and wrote ‘Can u pls call me on my cell? Need excuse to get out of meeting.”’ Maybe the collusion didn’t take very long, or maybe he realized what the lawyer had to say was a useless farce and he wanted to get on with his day.

Much to the dismay of Trump’s haters, Kushner’s account of events even further proves just how far the media has stretched the collusion story. When the campaign received an official note of congratulations from Russian President Vladimir Putin the day after the election, Kushner had to send Dimitri Simes of the Center for the National Interest an email asking for the name of the Russian ambassador so that he could reach out and confirm the message’s authenticity. So, that’s that. If you can’t remember your handler’s name, you can’t be guilty of nefariously colluding with that person. How much collusion could Kushner have possibly done with someone whom he had so little communication with that he could not remember his name and did not know how to contact him?

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From interview with David Sirota. Party has no future. Get out or go down with it.

What’s The Matter With Democrats – Thomas Frank (IBT)

Basically, I think the Democratic party is in deep trouble. The evidence of that is now plain, I think, to everyone — that they’re in a state of historic wipe-out across the country and in both of Houses of Congress, and of course, they lost the presidency, too… The leadership of the party have persuaded themselves that they don’t really have a problem, that all they have to do is wait for [Donald] Trump to screw up and they’ll waltz right back in, and so they don’t have to do anything different. I think Trump represents the culmination of a long-term shift of working people, working-class people away from the Democratic Party.

[..] The way I look at it is that this is a long-term problem. This is a culmination of a very long-term problem with the Democrats very gradually, but definitely, abandoning the interests of working-class voters, identifying themselves instead with a more affluent group, with the affluent white-collar professionals. It starts in the 1970s with the Democrats removing organized labor from its structural position in the Democratic party, and then it goes up through Bill Clinton getting NAFTA done, the free trade deals that the Democrats have … By the way, in my opinion, free trade or the trade agreements, I should say, was probably the issue that if there was one issue that really did Hillary in, I think that’s what it was: the trade deals under the Clinton administration, Obama sort of dropping the ball on labor’s various issues, doing these incredible favors for Wall Street while he blew off the concerns of union.

[..] Bailouts. The Wall Street bailout was the worst. This was, of course, George W. Bush … No, take a step back further. The deregulation under Clinton. Do you remember, bank deregulation was something that we now think of it as one of the central elements of neoliberalism, but Reagan couldn’t get it done. Reagan tried. They put some dents in Glass Steagall when Reagan was president, but it took a Democrat to really get it done, Bill Clinton, and it wasn’t just blowing up Glass-Steagall. There was this whole series of bank deregulatory measures when he was president. By the end of his term in office, basically, Wall Street was more or less openly identified with the Democratic Party. This is an enormous historical shift…

The Democratic party [used to be] this sworn enemy of Wall Street. Franklin Roosevelt broke up all of these banks, the Glass Steagall Act, put all these banks out of business, and set up the Securities and Exchange Commission to regulate these guys, all of these regulatory measures. That’s the Democratic heritage. That’s the legacy of the New Deal. Up until the days of Clinton, that’s really who the Democratic Party was. They had a very populist tone, and they would never identify themselves with Wall Street. Barack Obama comes in, and I was one of these people who thought that he represented a turn back in the other direction and that he would be, very shortly would be, getting tough with Wall Street. He had all the bailouts were underway. He had total authority over these guys, and he didn’t do it. Instead, he appointed all these various Clinton people to come in and manage the bailout situation.

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Like that line.

Decades From Now, They’ll Say He Had “The Tweets” (Jim Kunstler)

I know I’m not the first to point out how Anthony Scaramucci, President Trump’s brand new Communications Director, is suddenly and eerily carrying on like his namesake, the arch-rascal / buffoon of the Old World Commedia dell’Arte in lashing out at his fellow scamps and bozos in the clown school that the White House has become. Of course, these antics only reflect the astounding violent vulgarity of current US culture in general, especially as it recursively re-amplifies itself in the distorting echo chamber of TV. It’s how we roll nowadays – right up the collective butt-hole of history until some fateful event provokes a last frightful purging of our own bullshit. Still, it was rather shocking to hear Scaramucci refer to White House Chief of Staff Rance Priebus as “a fucking paranoid schizophrenic” and Trump ultra-insider Steve Bannon as someone who “enjoys sucking his own cock.”

It’s kind of like Paulie Walnuts of “The Sopranos” wandered into the West Wing of “Veep.” Somebody’s gonna get whacked, and it’ll be a laugh-riot when it happens. We need a little comic relief in these midsummer horse latitudes of the mind as the ill-starred Trump Show appears to enter its ceremonial death dance. There’s also something satisfyingly Napoleonesque about Scaramucci. Here’s a guy who cuts through the odious blubber of US politics right to the bone of things with a flensing blade of profane righteousness. Personally, I’d like to see him take some whacks at a few more deserving targets, and I can even imagine a somewhat farfetched scenario where the little guy shoves Trump out during a concocted national emergency and manages to declare himself First Citizen, or some such innovative title allowing him to run things for a while – say, until the generals toss him out a window.

Or maybe he’ll last less than a week in his current position. I would not be surprised, either, if Mr. Bannon beats little Mooch to death with an Oval Office fireplace poker right in front of the Golden Golem of Greatness himself. The mills of the gods grind slowly, but they grind exceedingly fine – in this case, inexorably toward the restorative medicine of the 25th amendment. There is, after all, that hoary old artifact called the national interest lurking somewhere offstage aside of all this colorful mummery, especially as the Russian Meddling gambit appears to be dribbling away to nothing. It’s more than self-evident that poor Trump is in so far over his head that he’s come down with something like the bends, a debilitating systemic disorder rendering him unfit to execute the powers of office. Decades from now, they’ll say he had “the tweets.”

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You do know you live in a feudal society, right?

Leasehold Tycoon Whose Firms Control 40,000 UK Homes (G.)

He does not appear on any rich list but he has built a property empire that rivals that of the Duke of Westminster. Companies controlled by James Tuttiett, aged 53, have quietly snapped up the freeholds of tens of thousands of houses and flats in almost every city in Britain, which are now at the centre of controversy over spiralling ground rents. The scale of Tuttiett’s property empire has never been previously disclosed. Documents at Companies House reveal that he is frequently the sole director of companies that own the freehold of large-scale developments in Newcastle, Birmingham, Leeds, Coventry and London. Leaseholders are obliged to pay ground rents to his company, E&J Estates, that in some cases will soar to £10,000 a year per home.

The government this week proposed a ban on new-build leaseholds, and said ground rents on new apartments should fall towards zero. At the launch of an eight-week consultation, the communities secretary, Sajid Javid, said: “It’s clear that far too many new houses are being built and sold as leaseholds, exploiting homebuyers with unfair agreements and spiralling ground rents.” “Enough is enough. These practices are unjust, unnecessary and need to stop,” said Javid, adding on BBC Radio 4’s Today programme that ground rent had been used “as an unjustifiable way to print money”. [..] Research by Guardian Money found an extraordinary web of 85 ground rent companies controlled by Tuttiett, where the freeholds include not just homes but also schools, health clubs and petrol stations.

In 2016 one of these 85 companies, SF Funding Ltd, recorded an £80m increase in the value of its ground rents from the year before, taking them to £267.4m. Tuttiett is the sole director of the company, which has no other employees. The financing of Tuttiett’s property empire is helped by low-interest loans totalling £336m made by an insurance company, Rothesay Life, spun out of Goldman Sachs, in which the US investment bank remains the largest shareholder. Among the Rothesay Life loans made to E&J is one at £128m with a stated interest rate of just 0.95% a year, although it is understood the real rate paid is likely to be higher. The existence of the Rothesay loans opens a back door into Tuttiett’s interests, as Companies House lists all the properties over which Rothesay has a charge.

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Lenders are getting out. But not because they care about the earth.

Companies Abandon Nearly One Million Hectares of Alberta Oilsands (CP)

In another sign the bloom is off the boom for the oilsands, the industry has returned almost one million hectares of northern Alberta exploration leases to the province over the past two years. The total area covered by oilsands leases remained constant at about nine million hectares between 2011 and 2014. But it fell to 8.5 million hectares in 2015 and 8.1 million in 2016, following the crash in world oil prices from over US$100 to under $60 per barrel in 2014. Most of the returned acreage either represents expired or surrendered leases, according to Alberta Energy. Observers were surprised by the size of the lease returns which they attributed to industry cost-cutting and disinterest in spending to develop new prospects when there’s no money to build projects already on the books.

“It costs money to maintain these lands,” said Brad Hayes, president of Petrel Robertson Consulting in Calgary. “You can’t convince shareholders to continue to put that money out if there’s no prospect for success.” Alberta’s oilsands have been getting little respect lately, thanks to the exit of large foreign companies, the province’s hard cap on oilsands emissions, increasing carbon taxes and the stumbling price of crude oil. Its troubles have been welcomed by environmentalists who point out the industry’s outsized impact on air, land and water pollution. “This is good news. It’s a sign that investment dollars are shifting out of carbon-intensive energy,” said Keith Stewart, senior energy strategist with Greenpeace Canada.

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Feels like all they do is try to create an ever bigger mess. Throw in another €100 million and say: We tried!

EU Accused Of ‘Wilfully Letting Refugees Drown’ In The Mediterranean (Ind.)

Aid workers have accused the EU of “wilfully letting people drown in the Mediterranean” as they face being forced to suspend rescue missions for refugees attempting the world’s deadliest sea crossing. Italy is attempting to impose a code of conduct on NGOs operating ships in the search and rescue zone off the coast of Libya, which is now the main launching point for migrants trying to reach Europe on smugglers’ boats. Humanitarian groups have argued the code will impede their work by banning the transfer of refugees to larger ships, which allows vessels to continue rescues, and forcing them to allow police officers on board. A revised code of conduct is expected to be presented by the Italian interior ministry on Monday, following meetings between officials and NGOs.

The 11-point plan, which has been approved by the European Commission and border agency Frontex, could see any groups refusing to sign up denied access to Italian ports or forbidden from carrying out rescues. They are currently deployed by officials at Rome’s Maritime Rescue and Coordination Centre (MRCC) and charities fear any move to restrict their operations, leaving just Italian coastguard and naval ships, will dramatically reduce rescue capacity during peak season. German charity Sea-Watch announced the deployment of a second rescue vessel in response to the plans, which it called a “desperate reaction” by a country abandoned on the frontline of the refuge crisis by its European allies. “The EU is wilfully letting people drown in the Mediterranean by refusing to create a legal means of safe passage and failing to even provide adequate resources for maritime rescue,” said CEO Axel Grafmanns.

“The NGOs are currently bearing the brunt of the humanitarian crisis and they are being left alone.” Médecins Sans Frontières (MSF), which has staff on two rescue ships, said it was engaging with Italian authorities in an “open and constructive way” over the proposed code but had serious concerns over several clauses. “MSF employees are humanitarian workers, not police officers, and that for reasons of independence they will do what is strictly requested by the law but nothing more so as to protect our independence and neutrality,” a spokesperson said.

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Jul 262017
 
 July 26, 2017  Posted by at 9:24 am Finance Tagged with: , , , , , , , , ,  4 Responses »


Jackson Pollock Greyed Rainbow 1953

 

The Rise And Fall Of The Property-Owning Democracy (FCFT)
Case-Shiller Home Prices Disappoint But Hit New Record High (ZH)
Australian Housing Affordability the Worst in 130 Years (Soos/David)
There Are More ‘Zombie’ Companies In Europe Now Than Pre-Lehman (CNBC)
Netherlands and UK Are Biggest Channels For Corporate Tax Avoidance (G.)
US Sanctions Have Taken A Big Bite Out Of Russia’s Economy (CNBC)
The Value of Everything (Jim Kunstler)
Bolivia’s President Declares ‘Total Independence’ from World Bank and IMF (AHT)
Germany Fails To Honour Its Part Of The Greek Bailout Deal (Bilbo)
Insolvent Greece Goes To Market 2.0 (Varoufakis)
Nine Out Of 10 People Call For ‘Plastic-Free Aisle’ In Supermarkets (Ind.)
Sperm Counts In The West Plunge By 60% In 40 Years (Ind.)

 

 

The article is somewhat confusing to me, bear of little brain and unpopular in China. But it’s good to make the point that bubbles spark poverty.

The Rise And Fall Of The Property-Owning Democracy (FCFT)

Sometime in the late 1980s, a friend who was on the libertarian right of the Conservative Party explained the idea of the property-owning democracy to me. The point, he said, was to detach the respectable working class from their poorer neighbours, encourage them to identify with the middle-class and thereby turn them into Tories. It worked for a while. Middle earners had been doing relatively well since the 1970s and home ownership was within the reach of many once mortgages became more readily available. Helped along by cheap council house sales, home ownership rose. In recent years, though, things have started shifting back the other way. The property-owning democracy is now looking like a one-off event rather than the ongoing process it was meant to be. Property analyst Neal Hudson pointed out that, as a proportion of all tenure, home ownership peaked in 2003 but mortgage ownership peaked in 1996. As older property owners paid off their housing debts, they were not being replaced at the same rate by new mortgagors.

[..] As the Resolution Foundation comments: The typical mortgagor AHC income is now twice that of the typical social renter, and over the past decade this income has grown by 17% compared to just 4% growth for the typical private renter. Even more than was the case before the financial crisis, the living standards split between those who own their own home and those who do not has become a key divide. While the proportion of households owning their own homes has fallen generally, that decline has been sharper among those on low to middle incomes. (Defined by the Resolution Foundation as working-age households with someone in work but with less than the median household income.) In the mid 1990s, over half of those on low to middle incomes were mortgagors. Now that has fallen to a third. Over the same period, private renting among this group rose.

Last week’s report on poverty and inequality by the Institute for Fiscal Studies notes that most of those in poverty (defined as income less than 60% of the median) are now from households where someone is in work. “[R]elative poverty among children and working-age adults has increased and, over the past 20 years or so, has increasingly become an in-work phenomenon due to declines in worklessness, low earnings growth and widening earnings inequality.”

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What bubble?

Case-Shiller Home Prices Disappoint But Hit New Record High (ZH)

Great news ‘Murica – your house has never been worth more than it was in May (according to Case-Shiller’s national home price index). On the slightly less silver-lining side of the equation, April’s 0.28% gain in price was revised to 0.18% MoM drop and May’s proint disappointed at just 0.1% rise MoM. The 20-city property values index increased 5.7% y/y (est. 5.8%). All cities in the index showed year-over-year gains, led by a 13.3% advance in Seattle, an 8.9% increase in Portland and a 7.9% gain in Denver.

After seasonal adjustment, Seattle had the biggest month-over-month increase, at 0.9%, while New York posted a 0.6% decline. “Home prices continue to climb and outpace both inflation and wages,” David Blitzer, chairman of the S&P index committee, said in a statement. “The small supply of homes for sale, at only about four months’ worth, is one cause of rising prices. New home construction, higher than during the recession but still low, is another factor in rising prices.”

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Just keep paying the piper.

Australian Housing Affordability the Worst in 130 Years (Soos/David)

The astronomical bubble in Australian housing prices has generated plenty of commentary regarding the current lack of affordability. This state of affairs clearly concerns aspiring home buyers everywhere, and Sydney and Melbourne in particular. First home buyers (FHBs) face almost insurmountable odds: the highest price to income and deposit to income ratios, the lowest savings rates, runaway dwelling prices, weak wage growth, including a political and economic establishment hell-bent on ensuring land prices keep on inflating no matter the wider cost to the economy. The legion of vested interests – basically 99% of commentators – choose to contend housing is actually more affordable today than back in the days of high mortgage interest rates, especially when rates peaked at 17% in 1989.

This is demonstrated by the standard mortgage payment to household income formula shown above, assuming 80% loan to value ratio (LVR). Their contention is bogus, however, because the metric is a static one, displaying mortgage payments to income at a particular point in time. The peak in 1989, for instance, is very high if, and only if, prices, interest rates and incomes remain constant over the life of the mortgage. Yet, these variables change by the next period. So, a more dynamic approach is required to assess housing affordability. The correct method was advocated by Glenn Stevens in 1997, Guy Debelle in 2004 and other economists like Dean Baker, who identified the US housing bubble and predicted the Global Financial Crisis in 2002. The important factor to consider is the effect wage inflation has upon mortgage payments.

While high mortgage interest rates result in large mortgage payments relative to income, this only occurs in the early years of the mortgage as high wage growth inflates away the burden. In contrast, borrowers facing high housing prices with low interest rates and poor wage growth face a greater burden across the life of the mortgage due to greater payments to income. This housing affordability analysis is applied to long-term annual data between 1880 and 2016, anchored to the median house price at an LVR of 80% at the start of each decade thereon. While data on mortgage interest rates and wage growth for the years after 2016 cannot be known, they are assumed to hold still at the present rates: 5.4% for the mortgage interest rate and 1.4% for wages. The following chart illustrates the outcome of applying this method, demonstrating the proportion of aggregate mortgage payments to household income over the 25 years of the mortgage. The results are overpowering.

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Well, that’s what Draghi’s QE guarantees.

There Are More ‘Zombie’ Companies In Europe Now Than Pre-Lehman (CNBC)

The ECB needs to beware of raising interest rates too quickly as there are a significant number of “zombie firms” in Europe that have become too dependent on cheap credit, according to analysis by the Bank of America Merrill Lynch. Barnaby Martin, head of European Credit Strategy at BofA Merrill Lynch, said businesses in Europe which have benefited from the ECB’s corporate bond purchase program would struggle once the bank raises interest rates, expected sometime in 2018. “The worst kept secret in the market is Mario Draghi is going to be tapering monetary policy next year and yet last week he was super, super dovish so I think that we’ve forgotten that monetary policy in Europe is on its way out,” he told CNBC on Tuesday, adding “there’s clearly political pressure for him to move away from this extraordinary era.”

“So the question becomes ‘can we handle a rapid rise in interest rates?’,” he said. ECB stimulus measures as part of its quantitative easing program designed to boost the European economy currently amount to €60 billion ($69.9 billion) a month. Some of this money goes into purchasing corporate bonds. While these purchases have enabled companies to continue to operate and invest, aiding a recovery in the European economy, the bank’s purchases have been credited for keeping ailing companies alive, hence the name “zombies.” The ECB started purchasing corporate bonds in June 2016 as part of its “corporate sector purchase program” (CSPP) and, as of June 7, 2017, its CSPP holdings stood at €92 billion, the bank said.

In a note examining “The rise of the Zombies” BofA Merrill Lynch’s credit strategists Martin, Ionnis Angelakis and Souhair Asba noted that 9% of non-financial companies in Europe (by market cap of Stoxx 600) are zombies, with “very weak interest coverage metrics.” “Note that this is still quite a high number: It was around 6% pre-Lehman, and fell to 5% in late 2013 after the peripheral crisis had faded,” they said. “The plethora of monetary support in Europe over the last 5 years has allowed companies with weak profitability to continue to refinance their debt and stave off defaults.” The analyst team also noted that bond issuance had been concentrated in “the hands of a few.” “Year-to-date, the top 20 bonds issuers have accounted for 40% of supply. In 2015 and 2016, the number was closer to 25%. The result has been that “superfirms” have been quietly building across the credit market,” they noted.

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“The Netherlands says they won’t let the UK be an offshore tax haven. That’s because they don’t want them taking their business.”

Netherlands and UK Are Biggest Channels For Corporate Tax Avoidance (G.)

Almost 40% of corporate investments channelled away from authorities and into tax havens travel through the UK or the Netherlands, according to a study of the ownership structures of 98m firms. The two EU states are way ahead of the rest of the world in terms of being a preferred option for corporations who want to exploit tax havens to protect their investments. The Netherlands was a conduit for 23% of corporate investments that ended in a tax haven, a team of researchers at the University of Amsterdam concluded. The UK accounted for 14%, ahead of Switzerland (6%), Singapore (2%) and Ireland (1%). Every year multinationals avoid paying £38bn-£158bn in taxes in the EU using tax havens. In the US, tax evasion by multinational corporations via offshore jurisdictions is estimated to be at least $130bn (£99bn) a year.

The researchers reported that there were 24 so-called “sink” offshore financial centres where foreign capital was ultimately stored, safe from the tax authorities. Of those, 18 are said to have a current or past dependence to the UK, such as the Cayman Islands, Bermuda, the British Virgin Islands and Jersey. The tax havens used correlated heavily to which conduit country was chosen by the multinational’s accountants. The UK is a major conduit for investments going to European countries and former members of the British Empire, such as Hong Kong, Jersey, Guernsey or Bermuda, reflecting the historical links and tax treaties enjoyed by firms setting up in Britain. The Netherlands is a principal conduit for investment ending in Cyprus and Bermuda, among others. Switzerland is used as a conduit to Jersey. Ireland is the route for Japanese and American companies to Luxembourg.

[..] Dr Eelke Heemskerk, who led the research, said that the work showed the importance of developed countries cleaning up their financial sectors. He said: “In the context of Brexit, where you have the UK threatening, unless they get a deal, to change their model to be attractive to companies who want to protect themselves from taxes, well, they are already doing it. “The Netherlands says they won’t let the UK be an offshore tax haven. That’s because they don’t want them taking their business.”

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Russia’s getting an invaluable lesson in self-suffciency. There’s nothing like it.

US Sanctions Have Taken A Big Bite Out Of Russia’s Economy (CNBC)

Congress moved Tuesday to step up sanctions on a shrinking Russian economy that is already struggling under the weight of low oil prices, high inflation and a battered currency that has sent capital fleeing. In response to Moscow’s interference in the 2016 U.S. presidential election, the House voted overwhelmingly to tighten existing economic sanctions imposed in 2014 following the Russian invasion of Crimea. Among other things, the measures freeze assets and prohibit transactions with specific Russian companies and individuals, restrict financial transactions with Russian firms, and ban certain exports that are used in oil and gas exploration or have possible military uses.

Those 2014 U.S. sanctions were paired with related measures imposed by the European Union, which placed restrictions on business with Russia’s financial, defense and energy sectors. Today, Russia’s economy is still feeling the harsh impact of those measures, which coincided with a crash in global oil prices that cut deeply into revenues from the country’s main export. The loss of oil revenues – a drop of as much as 60%, according to a 2017 Congressional Research Service report — helped spark a collapse in Russia’s currency, the ruble, sending the prices of Russian consumer goods soaring. The Russian economy has also been hurt by a wave of capital flight out of the country, as individual Russians sought to move money offshore and convert their shrinking rubles to dollars and euros to protect their wealth. That money flow slowed in 2014 as U.S. and European sanctions took hold.

Though U.S. sanctions have put pressure on the Russian economy, the impact on American business has been limited because Russia makes up less than 1% of U.S. exports. Only six U.S states count Russia as a significant market for goods and services. Washington, the most reliant, sells roughly 1% of its total exports to Russia, consisting mostly of machinery and farm products. That’s half the level before the 2014 sanctions took effect. European nations, which export greater volumes to Russia than the U.S., imposed their own set of sanctions response to the Crimean annexation.

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“The floundering non-elite masses have not learned the harsh lesson of our time that the virtual is not an adequate substitute for the authentic..”

The Value of Everything (Jim Kunstler)

We are looking more and more like France on the eve of its revolution in 1789. Our classes are distributed differently, but the inequity is just as sharp. America’s “aristocracy,” once based strictly on bank accounts, acts increasingly hereditary as the vapid offspring and relations of “stars” (in politics, showbiz, business, and the arts) assert their prerogatives to fame, power, and riches — think the voters didn’t grok the sinister import of Hillary’s “it’s my turn” message? What’s especially striking in similarity to the court of the Bourbons is the utter cluelessness of America’s entitled power elite to the agony of the moiling masses below them and mainly away from the coastal cities. Just about everything meaningful has been taken away from them, even though many of the material trappings of existence remain: a roof, stuff that resembles food, cars, and screens of various sizes.

But the places they are supposed to call home are either wrecked — the original small towns and cities of America — or replaced by new “developments” so devoid of artistry, history, thought, care, and charm that they don’t add up to communities, and are so obviously unworthy of affection, that the very idea of “home” becomes a cruel joke. These places were bad enough in the 1960s and 70s, when the people who lived in them at least were able to report to paying jobs assembling products and managing their distribution. Now those people don’t have that to give a little meaning to their existence, or cover the costs of it. Public space was never designed into the automobile suburbs, and the sad remnants of it were replaced by ersatz substitutes, like the now-dying malls. Everything else of a public and human associational nature has been shoved into some kind of computerized box with a screen on it.

The floundering non-elite masses have not learned the harsh lesson of our time that the virtual is not an adequate substitute for the authentic, while the elites who create all this vicious crap spend millions to consort face-to-face in the Hamptons and Martha’s Vineyard telling each other how wonderful they are for providing all the artificial social programming and glitzy hardware for their paying customers. The effect of this dynamic relationship so far has been powerfully soporific. You can deprive people of a true home for a while, and give them virtual friends on TV to project their emotions onto, and arrange to give them cars via some financing scam or other to keep them moving mindlessly around an utterly desecrated landscape under the false impression that they’re going somewhere — but we’re now at the point where ordinary people can’t even carry the costs of keeping themselves hostage to these degrading conditions.

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The kind of independence that tends to be bad for a man’s health.

Bolivia’s President Declares ‘Total Independence’ from World Bank and IMF (AHT)

Bolivia’s President Evo Morales has been highlighting his government’s independence from international money lending organizations and their detrimental impact the nation, the Telesur TV reported. “A day like today in 1944 ended Bretton Woods Economic Conference (USA), in which the IMF and WB were established,” Morales tweeted. “These organizations dictated the economic fate of Bolivia and the world. Today we can say that we have total independence of them.” Morales has said Bolivia’s past dependence on the agencies was so great that the IMF had an office in government headquarters and even participated in their meetings. Bolivia is now in the process of becoming a member of the Southern Common Market, Mercosur and Morales attended the group’s summit in Argentina last week.

Bolivia’s popular uprising known as the The Cochabamba Water War in 2000 against United States-based Bechtel Corporation over water privatization and the associated World Bank policies shed light on some of the debt issues facing the region. Some of Bolivia’s largest resistance struggles in the last 60 years have targeted the economic policies carried out by the IMF and the World Bank. Most of the protests focused on opposing privatization policies and austerity measures, including cuts to public services, privatization decrees, wage reductions, as well the weakening of labor rights. Since 2006, a year after Morales came to power, social spending on health, education, and poverty programs has increased by over 45%.

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A tour de force by Bill Mitchell. Germany’s profiting so much off of Greece’s despair that it can hide its own economic pitholes with it.

Germany Fails To Honour Its Part Of The Greek Bailout Deal (Bilbo)

Effectively the “German Federal Government – through KfW” is providing funds to Greece as part of the bailout. On May 20, 2014, the KfW issued a further press statement – Institution for Growth in Greece (IfG) – which further details the way in which German government bailout support is channeled through the KfW. For example, in relation to the “three planned IfG sub-funds … The Hellenic Republic and KfW — on behalf of the German Federal Government — will each contribute EUR 100 million in funding debt to this sub-fund.” Clear enough. The Süddeutsche Zeitung article says that since 2010, these loans granted to Greece through the KfW have generated 393 million euros of interest income net of refinancing costs [..] A handy sum. And what is more – the profits generated have not been transferred to the Greek government.

Further gains were made on the Greek bailouts via the ECB’s Securities Market Program (SMP), which has generated German gains of around $€952 million, through ECB distributions of the profits to the Member State central banks. A similar story appeared in the English-version of the Handelsbatt next day (July 12, 2017) – Germany Profits From Greek Debt Crisis. It essentially sourced the Süddeutsche Zeitung and made the story more accessible (repeating it in English). It says that: “The German government has long been accused by critics of profiting from Greece’s debt crisis. Now there are some new numbers to back it up: Loans and bonds purchased in support of Greece over nearly a decade have resulted in profits of €1.34 billion for Germany’s finance ministry.”

The issue became public because the Greens parliamentary representatives have challenged the morality of the German government’s decision not to redistribute the profits and the role played by the KfW. The Greens representative was reported as saying that: “The profits from collecting interest must be paid out to Greece … Wolfgang Schäuble cannot use the Greek profits to clean up Germany’s federal budget …” It has long been claimed that “Greece’s crisis has helped” Schäuble keep the German fiscal balance in surplus. The KfW have been part of that. We knew back in 2015 that the KfW was helping the Finance Ministry generate fiscal surpluses.

On March 5, 2015, the German daily newspaper Rheinische Post published a report – So geht es den Griechen wirklich – presented a summary of a 40-page document that the German Finance Ministry had provided in response to a demand for information from the Linksfraktion (German Left Party Die Linke). The Finance Ministry document conceded that: “Between 2010 to 2014, the KfW has paid out around 360 million euro in revenues to the German government and in the coming years the federal government is expecting around 20 million euro per year on interest revenues.”

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The Greek economy is worse than ever, but now people trust it?

Insolvent Greece Goes To Market 2.0 (Varoufakis)

Why do I refuse to be impressed by the news of Greece’s return to the markets? “It is because the Greek state and the Greek banks remain deeply insolvent. And, their return to the money markets is a harbinger of the next terrible phase of Greece’s crisis, rather than a cause for celebration”. The above was my answer in a BBC interview on 9th April… 2014! It is also the only answer that fits today’s announcement of Greece’s new bond issue. Indeed, why script a new article, when that old post offers a most helpful response to the question: “What should the world think of Greece’s new bond issue?”

The only thing I need to add to these circa 2014 posts is this: The Tsipras government today is simply rolling over precisely the same bond that the Samaras-Venizelos-Stournaras government issued in 2014 – the subject matter of my criticism above. This is a remarkable U-turn by Mr Tsipras and his ministers. In 2014 they had sided entirely with my criticism of the then government’s argument that Greece’s return to the markets, with the issue of that one bond, was a sign the country was achieving escape velocity from the gravitational pull of its debt-deflationary crisis. Now, they are not only parroting the same arguments as Samaras-Venizelos-Stournaras but they are, lo and behold, rolling over the same bond! I rest my case.

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It’s not that hard.

Nine Out Of 10 People Call For ‘Plastic-Free Aisle’ In Supermarkets (Ind.)

Nine out of 10 people want supermarkets to introduce a “plastic-free aisle”, according to a new poll amid rising concern about pollution. The survey – of 2,000 British adults by Populus – was commissioned by campaign group A Plastic Planet, which said it was clear that the public wanted an alternative to “goods laden with plastic packaging”. Evidence of the synthetic substance’s harmful effects on the natural world is growing. Since 1950, humans have produced 8.3 billion tons of the stuff, with 6.3 billion tons being sent to landfill sites or simply being dumped in what scientists described as an “uncontrolled experiment” on the planet. Plastic, which acts like a magnet for toxic chemicals in the environment, breaks down into tiny pieces that are capable of passing through animals’ gut walls and into their body tissue.

The UN warned in a report last year that “the presence of microplastic in foodstuffs could potentially increase direct exposure of plastic-associated chemicals to humans and may present an attributable risk to human health”. A third of seabirds in the North Sea were also found to be suffering “widespread breeding failure”, largely because of plastic waste. The new poll found 91% of people supported aisles free from plastic packaging and 81% said they were concerned “about the amount of plastic packaging that is thrown away in the UK”. Sian Sutherland, a co-founder of A Plastic Planet, said: “It’s becoming increasingly clear that the Great British public wants a fresh alternative to goods laden with plastic packaging. Too much of our plastic waste ends up in oceans and landfill.

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Am I a bad person for thinking that maybe this isn’t such a bad thing? Who wants more of us?

I like the term “semen parameters”. Name for a band. Double billing with Pussy Riot.

Sperm Counts In The West Plunge By 60% In 40 Years (Ind.)

Sperm counts have plunged by nearly 60% in just 40 years among men living in the West, according to a major review of scientific studies that suggests the modern world is causing serious damage to men’s health. Pesticides, hormone-disrupting chemicals, diet, stress, smoking and obesity have all been “plausibly associated” with the problem, which is associated with a range of other illnesses such as testicular cancer and a generally increased mortality rate. The researchers who carried out the review said the rate of decline had showed no sign of “levelling off” in recent years. The same trend was not seen in other parts of the world such as South America, Africa and Asia, although the scientists said fewer studies had been carried out there.

One expert commenting on the study said it was the “most comprehensive to date”, and described the figures as “shocking” and a “wake-up call” for urgent research into the reasons driving the fall. Writing in the journal Human Reproduction Update, the researchers – from Israel, the US, Denmark, Brazil and Spain – said total sperm count had fallen by 59.3% between 1971 and 2011 in Europe, North America, Australia and New Zealand. Sperm concentration fell by 52.4%. “Sperm count and other semen parameters have been plausibly associated with multiple environmental influences, including endocrine disrupting chemicals, pesticides, heat and lifestyle factors, including diet, stress, smoking and body-mass index,” the paper said. “Therefore, sperm count may sensitively reflect the impacts of the modern environment on male health throughout the life course.”

Read more …

May 082017
 
 May 8, 2017  Posted by at 9:32 am Finance Tagged with: , , , , , , , , , , ,  1 Response »


RCA TV test pattern 1939

 

Macron Banks On De Gaulle’s ‘Majority Amplifier’ To Govern (R.)
In France, The Run Of Macron’s Life Starts Monday (Pol.)
Euro Gives Up Gains As Investors Look To Post-Election France (G.)
US Economy Can’t Even Match the “Sclerotic Statism” of France (CEPR)
Expect Dramatically Lower Stock Market Returns Over Next Decade (CNBC)
UK Consumer Spending Weakens With Sharp Slowdown in April (BBG)
Brexit Boom Gives Britain More Billionaires, Inequality Than Ever (G.)
China Tycoons Are Setting Up Shop In The US (BBG)
Hedge Funds Bail Just Before OPEC-Driven Oil Rally Vanishes (BBG)
Warning For Boomers: Your Gen X Kids Are Coming Back Home – For Good (MW)
Australia To Hold New Inquiry Into ‘Big Four’ Banks (R.)
How Zombie Companies Stop Productivity Growth (BBG)
German Army To Search All Barracks After Nazi Memorabilia Found (R.)
Greek PM Tsipras Rushes To Get Bailout Deal To Parliament With Eye On QE (K.)
1 Million Child Refugees Flee South Sudan’s Civil War (BBG)
Growing Numbers of Refugees In Northern Syria in Urgent Need of Aid (Kom)

 

 

Anyone would have won against Le Pen.

Macron Banks On De Gaulle’s ‘Majority Amplifier’ To Govern (R.)

Unknown just three years ago, and with a party only 12 months old, Emmanuel Macron has seized the presidency against all the odds. His challenge now is to govern. To do that he must build a parliamentary majority that supports his election pledges in June legislative elections, when France’s two established parties will put their huge machines to work. Macron has at least one thing in his favor: the “majority amplifier” effect of an electoral system designed by post-war leader Charles de Gaulle specifically to maximize presidential independence from parliament. Last week, the first opinion survey for the legislative elections showed Macron’s new movement “En Marche!” could win between 249 and 286 mainland France seats in the lower house. Even a figure at the bottom of that range would be a good outcome for him.

He only needs 289 for an absolute majority, and the poll excluded 42 seats in Corsica and overseas. It foresaw centrist and conservative parties winning around 200-210 mainland seats, the far-right National Front 15-25 and the Socialists 28-43. “In the lowest-case scenario, En Marche would still be the largest political grouping, which would be enough to try to constitute a majority. The question would then be how and with whom,” said OpinionWay’s Bruno Jeanbart, who directed the poll. En Marche is only a year old and has never fielded candidates before. Only 14 have been named so far, and at first glance a majority looks unlikely. But that reckons without de Gaulle’s amplifier – known as the “fait majoritaire” by French political scientists. [..] The last legislative vote in 2012 also showed the “fait majoritaire” in action.

Socialist Francois Hollande garnered less than 30% in the first rounds of both the presidentials and the legislatives, yet came away with over 40% of the second-round legislative vote and, with help from 17 Green party MPs, governed with a comfortable majority. “Macron can totally have an extremely solid majority of at least 350 MPs,” said Xavier Chinaud, an electoral expert. He added that to reach that number, the president would have to employ tactics like poaching popular MPs from other parties. The old parties will put up a fight, especially the conservative Republicans [..] Now led by Francois Baroin, they hope for enough seats to force Macron into France’s fourth “cohabitation” since 1958. Cohabitation does not have to mean paralysis, but rather that the prime minister and his camp in parliament have the upper hand over the president.

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“En Marche doesn’t have the money to finance a full-blown parliamentary run. It must ask its candidates to invest not only their time but also their money in the upcoming blitz campaign.”

In France, The Run Of Macron’s Life Starts Monday (Pol.)

Winning the presidency now looks like the easy bit. If Emmanuel Macron makes his way to the Élysée Palace, as expected, in the second round of France’s presidential election Sunday, another bruising political battle is looming. To be able to govern and not be sidelined by a hostile parliament, Macron’s nascent political movement En Marche will have to cobble together a majority in the National Assembly in an election beginning on June 11. And unlike in the second round of the presidential ballot — in which parties from across the political spectrum have urged their supporters to vote for him over his far-right opponent Marine Le Pen — Macron’s rivals will be devoting all their energies to defeating him.

The 39-year-old former economy minister will be counting on his army of 250,000 En Marche volunteers, and a crew made up mostly of political novices. And while Macron hopes that a victory in the presidential election will draw others to his banner, for a movement that was launched a little over a year ago, winning control of parliament looks like a tall order. The stakes are high. If Macron can’t clinch a majority, he won’t be able to appoint a prime minister of his liking. He’ll spend his term largely as a figurehead, his dreams of reforming France all but sunk. Macron needs 289 deputies to be ensured of an absolute majority in the lower house of parliament. So far, En Marche, the movement he still refuses to call a party, has endorsed 14.

True to form, Macron exudes a sense of confidence that the momentum of his election will carry over to the parliamentary polls, allowing him to clinch a majority just six weeks later. This may not be out of reach. A survey conducted this week by OpinionWay, although preliminary, indicated that En Marche could well obtain more than half the seats in the National Assembly. By weaving in electoral results from past elections with a recent poll, OpinionWay estimates that the next Parliament would be dominated by En Marche and the conservative Républicains party. The ruling Socialist Party would be decimated, and Le Pen’s National Front would obtain 25 MPs at most – due to France’s electoral system.

Sill, obstacles abound. En Marche will be facing an energized right. Both the mainstream center-right Républicains party and Le Pen’s National Front will emerge from the presidential election feeling that Macron has robbed them of a victory they at some point considered theirs. François Fillon’s failed campaign has left deep wounds in the Républicains, but one way to try to heal them could be to make Macron their common target in June. [..] En Marche doesn’t have the money to finance a full-blown parliamentary run. It must ask its candidates to invest not only their time but also their money in the upcoming blitz campaign. Political parties in France are provided with public funding according to their performance in previous elections. En Marche, founded a little over a year ago, has never put up a candidate for office before.

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Not THAT much trust perhaps.

Euro Gives Up Gains As Investors Look To Post-Election France (G.)

The euro rose to a six-month high in the wake of Emmanuel Macron’s convincing victory in the French election but the upside for the single currency could be short-lived, analysts warned. In Asian trading on Monday, the euro rose as high as $1.1024 , its highest since 9 November, and also jumped to a one-year high of 124.58 yen against its Japanese counterpart. But it had slipped almost 0.3% to $1.096 against the dollar by 5.30am GMT and lost a similar amount to the yen with traders remarking that gains had already been largely priced in thanks to Macron’s strong showing in the first round of voting two weeks ago. “The market already priced in the victory of Macron,” said Masafumi Yamamoto, chief currency strategist for Mizuho Securities in Tokyo.

“We saw some additional rise of the euro this morning, but considering the difficulty for Macron’s party to get a majority in the national assembly election, he may not bring higher growth.” Looking at positioning in the euro, he said, “the market has squared its short positions, but there are no fresh reasons to take long positions, as there will likely be no new positive developments, and limited scope for upside for the euro”. The muted analysis was partly based on an acknowledgment of the problems facing Macron, a 39-year-old former banker who has never held elected office. He was economy minister under outgoing president François Hollande but failed to turn around the fortunes of the beleaguered government. He has pledged to reform the country’s rigid labour laws – long seen by pro-market economists as a hindrance to growth – but such change was beyond the Hollande administration, despite a lengthy struggle.

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Reality check.

US Economy Can’t Even Match the “Sclerotic Statism” of France (CEPR)

The Washington Post has long pushed the view that a dollar (or euro) that is in the pocket of a middle class person is a dollar that should be in the pockets of the rich. (They are okay with crumbs for the poor.) In keeping with this position, in its lead editorial today the Post complained about the “sclerotic statism” of the French economy. It then called for increasing employment, “through reforms of the labor code, not by protectionism or restriction of immigration.” It is worth bringing a little bit of data to the fact free zone of the Washington Post opinion pages. France actually has consistently had a higher employment rate for its prime age workers (ages 25 to 54) than the United States.

As can be seen, the employment rate for prime age workers in France was roughly 2 percentage points higher in 2003. The gap expanded to almost 7 percentage points following the downturn, but it has in more recent years narrowed again to just under 2 percentage points. France does have much lower employment rates among younger and older workers than the United States, but this is due to policy choices. College is largely free in France and students get stipends from the government. Therefore many fewer young people work. France also makes it much easier for people to retire in their early sixties than in the United States, with largely free health care and earlier pensions. The merits of these policies can be debated, but they are not evidence of a sclerotic economy.

It is also not clear that the Washington Post’s desire to weaken protections for workers (euphemistically described as “reforms of the labor code”) will have a significant effect in reducing unemployment or raising employment. Extensive research has shown there is little relationship between worker protections and employment. It is also worth noting that the Post denounced protectionism in this editorial, but it is fine with protectionism in the form of ever longer and stronger copyright and patent protection, which benefit people it likes.

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Expect losses.

Expect Dramatically Lower Stock Market Returns Over Next Decade (CNBC)

Enjoy the stock indexes riding at record highs for now, but get ready for much stingier markets in the years to come. That’s the message consistently conveyed these days by investment counselors and finance scholars, who argue that with today’s starting equity valuations and low interest rates, the coming decade should produce dramatically lower returns than the historical average. The leaders of Vanguard Group, overseers of some $4 trillion in client assets, have been advising investors to expect a typical 60% stocks/40% bonds portfolio to deliver two- to- three percentage points less in nominal annual returns than its long-term norm. (Since 1926, such an asset mix has returned better than 8.5% annualized.)

Other forecasts are even less generous. Research Affiliates, a quantitative and “smart beta” fund manager, projects that U.S. stocks might only offer one% a year for the next decade, after inflation. This is based largely on the so-called Shiller P/E, a ratio of the S&P 500 index to its trailing ten-year average earnings, which is now above 29 and higher than any period aside from the run-up to the 1929 and 2000 market peaks. Jeremy Grantham of institutional value manager GMO has, by his admission, been wrong for years in assuming that corporate profit margins and equity valuations would revert to their pre-1990s trend levels. Yet even accounting for some more permanent upward shift in these gauges, he sees real (after inflation) returns of 2-3% a year looking out two decades.

And a simple plot of the market’s forward P/E ratio against subsequent market returns shows that, since 1978, when starting at today’s multiple of around 17.5 forecast earnings, ensuing seven- and 15-year nominal returns (before inflation) have been clustered in the mid- to low-single digits. These forward-return calculations vary in their approach and assumptions, but all are anchored on today’s stock valuations, long-term norms in corporate-profit growth and current interest rates. Stocks, even during the depths of the last bear market, never got dramatically cheap compared to prior cycles and certainly didn’t stay inexpensive for very long. And with risk-free 10-year government debt yielding a skimpy 2.3% in the U.S. and far less elsewhere, all other financial assets have repriced for skimpier future returns as well.

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The consumer is toast.

UK Consumer Spending Weakens With Sharp Slowdown in April (BBG)

U.K. consumer-spending growth slowed in April and is forecast to remain weak in the coming months, according to a report from Visa. Its index showed spending rose an annual 0.5% in April, down from 1% in March and marking one of the slowest rates of growth in the past three years. Weaker household demand is also taking a toll on retailers. A separate report from the Institute for Chartered Accountants in England and Wales showed while there was a jump in business confidence this quarter, retailing was the laggard among nine sectors covered. “The trend of relatively modest expenditure growth is likely to extend in to the coming months, as consumers are squeezed by both rising living costs and relatively lackluster wage growth,” said Annabel Fiddes, an economist at IHS Markit, which compiles the consumer index.

Inflation was at 2.3% last month and is forecast to keep accelerating through this year, outpacing wage increases and leaving workers facing a drop in real incomes. The Bank of England may raise its forecast for consumer-price growth this week, which could indicate an even bigger squeeze on households. The overall business sentiment gauge by the ICAEW jumped the highest in almost a year this quarter. Yet despite firms being more confident, the report showed they are still reluctant to make long-term commitments. While Brexit is dominating the agenda in the buildup to the U.K. election on June 8, the institute said all parties must spell out how they will “address the problem of business investment head-on.”

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No wonder consumer spending’s down.

Brexit Boom Gives Britain More Billionaires, Inequality Than Ever (G.)

Britain has more billionaires than ever in what equality campaigners said was a clear sign the UK economy is only working for the few at the top. There are now 134 billionaires based in the UK according to this year’s Sunday Times Rich List, 14 more than the previous highest total, as the super-rich reap the benefits of a “Brexit boom”. Fifteen years ago, there were 21. The annual rich list showed that the wealthiest 1,000 individuals and families in Britain have combined wealth of £658bn, up from £575bn last year, despite fears that the Brexit vote last June would plunge the economy into a fresh turmoil. The Equality Trust said the £83bn increase in wealth among the richest 1,000 people over the past year could pay the energy bills of all UK households for two and a half years and would be enough for the grocery bills for all food bank users for 56 years.

Wanda Wyporska, the executive director of the trust, said that an elite was sitting on mountains of wealth in the fifth largest economy of the world. “The super-rich continue to streak away from the rest of us, while the poorest see their wealth shrink. This is an economy working for the few, not the many,” she said. “Record numbers of people visited food banks last year, millions are locked out of a decent home and two-thirds of children in poverty are in working households. “We know that inequality damages our economy and society, and makes it harder for ordinary people and their children to get on. With the general election fast approaching, our politicians need to decide the sort of country they want to build. One where we can all prosper or one where we’re picking crumbs from the super-rich’s table.”

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China Shadow Banking Assets Estimated at 64.5t Yuan or 87% of GDP: Moody’s.

China Tycoons Are Setting Up Shop In The US (BBG)

When a new hedge fund opened in Mountainside, New Jersey, a leafy suburb that still holds an annual little-league parade, few would have guessed where much of its funding came from: Chinese billionaire Cai Kui. The credit hedge fund, Westfield Investment, was founded by former Goldman Sachs Managing Director Renyuan Gao and managed $139 million as of January. It’s part of a new crop of asset management firms that are expanding China’s reach on Wall Street as money has poured into the U.S. from the world’s second-biggest economy. China’s marquee names are among those setting up shop in the U.S. Chen Feng, who controls the HNA Group airline and hotel conglomerate, has opened a U.S. money management firm. China Vanke, the mainland’s second-largest residential developer, has indirectly taken a major stake in a manager.

All told, about 324 firms with financial ties to the mainland and Hong Kong had registered with regulators by last year, more than double the number in 2012, filings show. They are riding the wave of capital that left China on concerns about bank debt, a real estate bubble and the yuan, which plummeted about 11% against the dollar in the last two years. The currency flight was reflected in balance of payments data where capital outflows tripled to $220 billion last year from $70 billion in 2014, according to Derek Scissors, a China economist at the American Enterprise Institute. “There is so much Chinese money floating around the U.S. now,” Scissors said. “If you’re a Chinese money manager, why wouldn’t you come here?” The migration comes amid a Chinese shopping spree for an array of U.S. companies, including financial firms like New York’s Cowen Group and the Chicago Stock Exchange.

Chongqing Casin Enterprise led the purchase of the exchange, which was founded in 1882. The deal was reviewed by a U.S. panel on national security grounds and eventually cleared in December. In another deal with political overtones, a subsidiary of Chen’s HNA Group agreed in January to buy a stake in Anthony Scaramucci’s SkyBridge Capital, a New York fund of hedge funds firm. The announcement came after reports that Scaramucci had been tapped for a top job in the White House, stirring speculation that HNA’s motives were partly political. The registration of the China-linked firms with the SEC hasn’t drawn such scrutiny. The SEC began requiring hedge funds and buyout firms to sign up with the agency in 2012 as a result of the Dodd-Frank Act. About 30% of the Chinese firms that registered by 2016 are full-fledged money managers. The rest filed as exempt advisers that operate in the U.S. on a more limited basis.

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OPEC is fast losing what remained of its credibility.

Hedge Funds Bail Just Before OPEC-Driven Oil Rally Vanishes (BBG)

Hedge funds jumped out of the oil market just in time. Before West Texas Intermediate crude nosedived on Thursday, wiping out the rally driven by OPEC’s deal, money managers slashed bets on rising prices by 20%, according to U.S. Commodity Futures Trading Commission data. Now they may soon be well poised to start betting on the next rally. “We are moving toward a positioning where these money managers are no longer over-invested,” Tim Evans at Citi Futures Perspective in New York, said. “This opens up the potential for them to start buying again.” Oil collapsed Thursday amid concerns that OPEC has failed to ease a supply glut as U.S. shale drillers ramp up output. Shares of U.S.-based producers got crushed as investors worry they might be repeating the same pattern that led to the market crash in 2014.

Earlier this year, billionaire wildcatter Harold Hamm urged colleagues to take a “measured” approach to lifting production, or risk a new glut. In a gamble that things could get worse, about $7 million worth of options changed hands Friday that will pay off if WTI falls beneath $39 a barrel by mid-July, according to data compiled by Bloomberg. Hedge funds decreased their net-long position, or the difference between bets on a price increase and wagers on a drop, to 203,104 futures and options in the week ended May 2, the CFTC data show. Longs fell about 7%, while shorts surged 37%, following a 26% jump a week earlier. [..] Oil’s tumble to a five-month low was driven purely by technical trading and supply is still getting tighter, according to Citigroup and Goldman Sachs. The current price plunge began when WTI broke through its 200-day moving average. Once that gave way, another key technical indicator called a Fibonacci retracement was breached, paving the way to the low of the year and then $45 a barrel.

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Multigenerational households are the model of the past and the future. Come look in Greece.

Warning For Boomers: Your Gen X Kids Are Coming Back Home – For Good (MW)

Remove the door knockers. Pull down the shutters. Pretend no one’s home. Your adult children are coming back – for good. One-in-nine baby boomer parents said their adult children returned home within the last year, according to a new report from financial services firm Fidelity Investments and Stanford Center on Longevity, which surveyed 9,000 employees.The adult children save money on rent and household goods, but their parents are the ones who appear to be suffering: 68% said they were more stressed, 53% said they were less happy and another 53% said they had less leisure time after the return of their “boomerang kids.” More than three-quarters (76%) said they took on higher expenses, too. Even people who are now in their 40s and 50s are considering mom and dad an option.

Older millennials are 2.7 times more likely to live in their parents’ home than people under 55 years old than in 1999, while Generation-Xers, who are now in their mid-30s to early 50s, were 2.2 times as likely to live with their parents, according to separate data released last week by real estate site Trulia. “No parent is going to want to say no to a child who needs help, but certainly being realistic about the financial situation is important,” said Katie Taylor at Fidelity. More American adults are living with their parents and grandparents than ever before — 19% of the U.S. population (or nearly 61 million people) lived in a multigenerational household, up from 17% (42 million) in 2009 and 12% (27.5 million) in 1980, according to the Pew Research Center, nonprofit think tank based in Washington, D.C.

But not all millennials are as “lazy” or “entitled,” as they are often accused of being. About one in four 25- to 34-year-olds who live at home and are not working or going to school do so because of a health-related reason or because they are acting as caregivers to their family members. And more than a third of Americans, including millennials, expect to financially help their parents within the next few years, another survey found. Some are even making efforts to help their parents save for retirement.

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Wow, great timing! We’re coming to you live from the barn, and there’s not a horse in sight.

Australia To Hold New Inquiry Into ‘Big Four’ Banks (R.)

Australia will hold an inquiry into competition in the country’s financial system, following a series of scandals in the banking sector and public allegations against the “Big Four” banks of abuse of market power. The latest inquiry is part of a number of government measures since last year aimed at alleviating public concerns about the power of the big banks, after revelations of misconduct in the industry. Australia’s four major lenders – Commonwealth Bank of Australia, Westpac, ANZ and National Australia Bank – have come under fire recently following several scams involving misleading financial advice, insurance fraud and interest-rate rigging, as well as for refusing to pass on official interest rate cuts in full. The four together control 80% of Australia’s lending market and have posted record profits for years.

Westpac, NAB and ANZ all reported a rise in half-yearly cash profits this month, taking their total to about A$8.5 billion. CBA will report limited third-quarter figures on Tuesday. “The high concentration and degree of vertical integration in some parts of the Australian financial system has the potential to limit the benefits of competition…and should be proactively monitored over time,” Treasurer Scott Morrison said in a statement on Monday. “The Government is committed to ensuring that Australia’s financial system is competitive and innovative. That is why I have tasked the Productivity Commission to hold an inquiry into competition in Australia’s financial system.” The inquiry will consider the degree of concentration in key segments of the financial system, examine barriers to innovation in the system and look into competition in personal deposits and mortgages for households and small businesses.

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The benefits of ZIRP.

How Zombie Companies Stop Productivity Growth (BBG)

The global economy is picking up steam, but that’s deceptive. The foundations of expansion are soft, marked by weak productivity growth and inequality. The two are related. The productivity problem confronting the world’s advanced economies predates the financial crisis more than a decade ago. When we look beyond the headline statistics, patterns emerge. Advanced economies have become less dynamic and are at risk of becoming sclerotic unless the ambition for reform is revived. It’s essential that we understand three sources of the current productivity slump in particular, and identify the key reforms necessary to address them. First, the productivity slowdown masks a widening performance gap between more productive and less productive firms, as the chart below shows (the picture for service sector firms is even worse).

This divergence is not just driven by firms at the frontiers of their industry, pushing the technological boundaries, but also by stagnating productivity growth at what can be called laggard companies that have failed to adopt the leaders’ best practices. This is also bad news for inclusiveness, since rising wage inequality can be largely traced to the growing differentials in average wages paid across companies, with high-productivity ones paying high wages and low-productivity businesses paying low wages. Second, in well-functioning markets we would expect strong incentives for productive companies to aggressively expand and drive out less productive ones. The opposite has happened. The propensity for high-productivity companies to expand and low-productivity companies to downsize or exit the market has declined over time.

This pattern is evident in the U. S. and is particularly stark in southern Europe, where scarce capital has been increasingly misallocated to low-productivity firms. Third, across the 35 countries in the OECD, we are seeing a drop in the dynamism of the business sector. Not only has the share of recent entrants into the market declined, but marginal companies, which would typically exit or be restructured in a competitive market, are more likely to remain. At the same time, the average productivity of these marginal businesses has fallen. In other words, it has become easier for weak companies that do not adopt the latest technologies to survive. The survival of weak companies drags down average productivity, but the consequences for growth are even worse. Since such firms take up scarce resources, their prolonged survival (or their delayed restructuring) inflates wages relative to productivity, depresses market prices and undermines investment – all of which deters the expansion of productive companies, particularly startups, and amplifies the mismatch of skills.

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They’ve known about this for decades.

German Army To Search All Barracks After Nazi Memorabilia Found (R.)

The head of Germany’s armed forces has called for an inspection of all army barracks after investigators discovered Nazi-era military memorabilia in a garrison, broadening a scandal about right-wing extremism among soldiers. The discovery at a barracks in Donaueschingen, in southwest Germany, was made in an investigation that began after similar Nazi-era items were found in the garrison of an army officer arrested on suspicion of planning a racially motivated attack. As a result, General Inspector Volker Wieker ordered a wider search of barracks. “The General Inspector has instructed that all properties be inspected to see whether rules on dealing with heritage with regard to the Wehrmacht and National Socialism are being observed,” a Defence Ministry spokesman said. Defence Minister Ursula von der Leyen said the military must root out right-wing extremism.

“We must now investigate with all due rigor and with all candor in the armed forces,” the minister told broadcaster ARD on Sunday evening. “The process is starting now, and more is sure to come out. We are not through the worst of it yet.” Displaying Nazi items such as swastikas is punishable under German law, although possession of regular Wehrmacht items is not. Von der Leyen said last week, however, she would not tolerate the veneration of the Wehrmacht in today’s army, the Bundeswehr. Von der Leyen said the arrested officer – who had falsely registered as a Syrian refugee – had likely worked with others to squirrel away 1,000 rounds of ammunition, but the chief federal prosecutor was still investigating the matter. The suspect’s goal, she said, had likely been to carry out an attack and then pin the blame on migrants.

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Don’t hold your breath.

Greek PM Tsipras Rushes To Get Bailout Deal To Parliament With Eye On QE (K.)

After rallying his ministers, Prime Minister Alexis Tsipras must now get coalition MPs behind him for a new multi-bill of austerity measures that is set to go to Parliament this coming week. Although some lawmakers have expressed reservations about the deal, which foresees further cuts to pensions and more tax increases, along with changes to the energy and labor markets, it is widely expected that Tsipras will get the support he needs to push the bill into law. A raft of so-called countermeasures – social welfare interventions that will come into effect in 2019 if the government meets budget targets – will be voted on separately and is sure to get the support of coalition MPs. The government has also appealed to the main political opposition New Democracy to back the offsetting measures but ND has refused to oblige.

According to government sources, Tsipras is already looking beyond the vote, expected on May 15 or 16, and beyond a scheduled Eurogroup summit on May 22 where the agreement between Greece and its creditors is expected to be rubber-stumped. Aides to the prime minister said he is considering a cabinet reshuffle to give his government a lift and inspire investors as talks on lightening Greece’s debt and the inclusion of Greek bonds in the ECB’s QE program are next on the agenda. It remains unclear whether Tsipras is considering a “cosmetic” shake-up or a radical overhaul, or whether key cabinet members such as Finance Minister Euclid Tsakalotos would keep their posts. But it appears that the government is keen to send out a message that it is turning a page following the completion of a tough bailout review that dragged on for months.

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Our times, and our very selves, are defined by refugees and famine more than anything else. But we don’t like to look at what defines us.

1 Million Child Refugees Flee South Sudan’s Civil War (BBG)

More than 1 million children have fled South Sudan’s civil war, two United Nations agencies said Monday, part of the world’s fastest growing refugee crisis. Another 1 million South Sudanese children are displaced within the country, having fled their homes due to the civil war, said the U.N.’s child and refugee agencies in a statement Monday. “The future of a generation is truly on the brink,” said Leila Pakkala, UNICEF’s Regional Director for Eastern and Southern Africa. “The horrifying fact that nearly one in five children in South Sudan has been forced to flee their home illustrates how devastating this conflict has been for the country’s most vulnerable.”

Roughly 62% of refugees from South Sudan are children, according to the U.N. statement, and more than 75,000 children are alone or without their families. Roughly 1.8 million people have fled South Sudan in total. “No refugee crisis today worries me more than South Sudan,” said Valentin Tapsoba, UNHCR’s Africa Bureau Director. “That refugee children are becoming the defining face of this emergency is incredibly troubling.” For children still living in South Sudan, the situation is still grim. Nearly three quarters of children are out of school, according to the U.N. statement, which is the highest out-of-school population in the world. An official famine was declared in two counties of South Sudan in February, and hundreds of thousands of children are at risk of starvation in the absence of food aid, according to the U.N.

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Why Russia’s safety zones make sense.

Growing Numbers of Refugees In Northern Syria in Urgent Need of Aid (Kom)

The co-chair of the Syrian Democratic Council (SDC), Ilham Ehmed, said that the operations to push out the Islamic State (IS) has resulted in refugee flows into the northern parts of Syria controlled by the Kurdish-led Syrian Democratic Forces (SDF) and that the displaced people are in urgent need of aid. “We have gathered the refugees that came recently in two camps,” Ehmed said to ANF. “In one of the camps, 50 thousand refugees are living. A number of aid organisations are present but there are no serious aid efforts. Many of the organisations receive funding from Europe but they still don’t help,” she said. “One can’t help wondering if they want Syrians to die, if there is a plan to kill them first with war and then with hunger. And if that fails from the heat and the cold. That’s the sad conclusion one draws from the situation.”

The SDC co-chair said they had discussed the urgent needs of food, housing and health with the US-led coalition without any results. “This is not acceptable, they should at least provide support for the refugee camps,” she said, stressing that preparations must be made as the operation to evict IS from Raqqa will give rise to many more refugees. “38 refugees coming from Raqqa have already died, some were children. It’s a tragedy. The European countries and the coalition must take their responsability.” Ehmad stressed the need of mediaction, clinics and doctors in the camps. “This is really urgent. Some will be able to return after the area has been liberated but those who lost their homes will stay, so we must make preparations.”

Ehmad also criticized Europe for giving in to what she called Turkey’s “blackmailing.” “There is an approach to the issue which goes something like this: ‘Let’s give them [Turkey] money so that no refugees will come here’. But everyone knows that the refugees are remaining in our region [Syria] at the moment.” Last year, the United Nations estimated that more than 6 million were internally displaced within Syria, and over 4,8 million were refugees outside of the country.

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