Antarctic Archives - The Automatic Earth

Theresa May appears to be on course for a crushing defeat in the House of Commons as Britain’s bitterly divided MPs prepare to give their verdict on her Brexit deal in the “meaningful vote” on Tuesday. With Downing Street all but resigned to losing by a significant margin, Guardian analysis pointed to a majority of more than 200 MPs against the prime minister. Labour sources said that unless May made major unexpected concessions, any substantial margin against her would lead Jeremy Corbyn to call for a vote of no confidence in the government – perhaps as soon as Tuesday night. But since Conservative MPs are unlikely to offer Corbyn the backing he would need to win a no-confidence vote, he would then come under intense pressure to swing Labour’s weight behind a second referendum.

Cabinet ministers have not yet been told how May plans to keep the Brexit process on track if her deal is defeated – and they remain split on how she should proceed. Leavers are convinced that the prime minister should return to Brussels and press for fresh concessions, while remainers hope she will seek a compromise with Labour. On Monday, May issued one final call to parliament to back her, urging MPs to “take a second look” at her deal and stressing that it was the only option on the table that could deliver an “orderly” exit from the EU. But there was little evidence of movement after her speech.

[..] There is growing speculation at Westminster that whichever course May pursues, she will be forced to announce that she will ask the EU27 to extend article 50. The prime minister refused to rule out doing so categorically on Monday, saying only that she didn’t believe it should be necessary. “We’re leaving on 29 March. I’ve been clear I don’t believe we should be extending article 50 and I don’t believe we should be having a second referendum,” May said. “We have an instruction from the British people to leave and it’s our duty to deliver on that, but I want to do it in a way that is smooth and orderly and protects jobs and security.”

Her own party turns against her, but May’s plans when she loses: fly to Brussels. She should leave and never come back.

• 100 Of May’s Own MPs Set To Vote Against Her Brexit Deal (Ind.)

Theresa May has made a desperate last-ditch plea begging her own MPs to back her Brexit plans in the face of an expected historic defeat. The prime minister beseeched Conservative MPs at a closed meeting to think of the future of their party and compromise, with around 100 of them considering voting against her. But Brexiteers still left the meeting determined to reject her plans, while Ms May also now faces up to 12 separate attempts from rebel and opposition MPs to re-shape her strategy before the final vote on Tuesday. She gave no indication as to her course of action if she loses, but Labour’s Jeremy Corbyn spoke to his own MPs in a room nearby restating his determination to call a motion of no confidence and trigger an election.

After 19 months of negotiation, a dozen EU summits and countless hours taking questions at the despatch box, Ms May will finally put her Brexit deal to a vote of the Commons on Tuesday. With her final chance to address all MPs coming shortly before the vote due after 7pm, she held a private gathering of Tories on Monday night to try to win over rebels. [..] Much of the opposition to her deal to focuses on the hated “Irish backstop”, which would come into play if no future trading arrangement is in place by December 2020, and could keep the UK in a customs union indefinitely. [..] On Monday night, Ms May’s deal suffered its first official parliamentary defeat in the House of Lords as peers voted by 321 votes to 152 to reject it.

Every possible outcome will mean chaos.

• No-Deal Brexit Means ‘Social And Economic Catastrophe’ -Banks (Ind.)

A no-deal Brexit would be an economic and social “catastrophe”, a senior banking industry leader has warned. Stephen Jones said leaving the European Union (EU) without an agreement could lead to a 1930s-style economic depression, with widespread job losses, homeowners unable to afford their mortgages, and mass defaults on loans. “A no-deal Brexit on 29 March, where we crash out of European Union, is a catastrophe,” the head of the UK Finance trade body told Channel 4 News. “It’s a social catastrophe, it’s an economic catastrophe.” The devastation caused by a disorderly exit would not just hurt the banks’ bottom lines, but hit ordinary people, he warned. “I don’t wish to be labelled a doom mongerer… but if our economy contracts by 10 per cent that’s 1930s-style contraction,” he said.

“That is a massive increase in credit card losses, mortgage losses, vehicle loan losses. “This is about jobs, this is about people not being able to pay their mortgages, not being able to pay back their loans, and that’s really bad news and it’s an outcome we can avoid.” Mr Jones, who leads the British banking sector’s lobby group, added: “I think there is a real risk of No Deal happening by accident… if the prime minister’s deal is voted down, we are in totally uncharted territory.” Asked if he backed Mrs May’s deal to prevent a no-deal scenario, Mr Jones would only say he backed a “solution that avoids a no-deal Brexit”. He added: “It’s not a great deal, there’s an awful lot of money being paid for a political declaration, which quite frankly is not worth the paper it is written on.”

People unsure whether epilepsy drugs for their children will be available.

• Brexit Preppers: ‘I Don’t Trust The Government To Look After Me Or My Dog’ (G.)

[..] it’s not just about food for Elgarf and her family. One of her four-year-old twins, Nora, who has been sitting happily on her mum’s lap as we talk, has a rare brain condition called polymicrogyria. She has lots of prescriptions, but without two of them – Epilim and Keppra – for her epilepsy, she would have multiple seizures a day. “She can’t do without them,” says Elgarf. Both Epilim and Keppra are imported. If she could stockpile these medicines, she would. But they are controlled, and she can only get a month’s supply at a time. “It should be all right,” she has been told by doctors and the pharmacists. But when it’s your daughter’s life that’s at stake, “it should be all right” isn’t good enough.

Many of the people who join the Facebook group have concerns about medicines, Elgarf says. There are a lot of diabetics and coeliacs among them. What they need is some reassurance. “We need to know for certain they have got a proper plan in place for anybody who depends on meds.” She has heard rumours that the most critical medicines may have to be collected from central hubs, which would be stocked on the basis of lists provided by GPs. [..] Helena, who has a politics degree and works for a charity, doesn’t come across as crazy. None of the people I speak to do. Informed: tick. Cautious: tick. Organised: tick. Very organised, in Helena’s case: she has – and shares with me – a spreadsheet, colour-coded according to what is fully purchased (eg tinned tomatoes and loo paper, alongside a note that the average person uses 110 rolls a year), part-purchased (eg cereal), waiting delivery (powdered coconut), or pending testing (dried falafel mix).

Falafel! I’m going straight round to Helena’s. She also has booze and biscuits. Brexit party in Cardiff on Friday 29 March, everyone. And she’s got makeup! We’re going to be looking good as the good ship Britannia goes down. Helena is not just prepping for herself. She is doing it for her dog, Charlie, too. And while she has about three months’ worth of supplies for herself, she is looking at more like a year for the dog, as she doesn’t see that pet food will be a priority. “I don’t really trust the government to look after me; I certainly don’t trust them to look after my dog,” she says. As well as dog food, there are treats and toys on the spreadsheet. Charlie is going to enjoy a hard Brexit.

Helena’s dog, Charlie, with his Brexit stockpile. Photograph: Gareth Phillips for the Guardian

Brexit will shake the markets.

• Global Economy Fears Grow As China And Eurozone Slump (G.)

Fears are growing over the state of the global economy after China recorded a shock fall in exports, while European factory output declined by the biggest margin in almost three years. In a sign that the worldwide slowdown is gathering pace, official figures showed Chinese exports were down 4.4% in December – the largest fall since 2016 – on the back of faltering demand in most of its key markets. Imports fell 7.6% to reflect waning domestic demand. The unexpected downturn for the biggest global exporter of manufactured products came as eurozone industrial output shrank in November.

The EU statistics office, Eurostat, estimated industrial production slipped 1.7% in November compared with the previous month, and 3.3% on the year, reflecting the struggles facing several European economies in recent months. The latest snapshot confirmed disappointing readings of industrial output in several major eurozone nations, raising the prospect of some of the EU’s biggest economies, including Germany and Italy, slipping into recession in the second half of 2018. Several major European economies, including the UK, have struggled with faltering levels of car production in recent months as factories adjust to handling new vehicle emissions tests introduced after the VW scandal.

Link to transcript of Lisa Page’s testimonies is here.

• Hunting for Golem (Jim Kunstler)

As another president once remarked in a different context — LBJ speaking to a hanger full of grunts in Vietnam — “go on out there, boys, and nail that coonskin to the wall!” That was around the time the war was looking like a lost cause, with 1000 soldiers a month coming home in a box and even the Rotarians of Keokuk, Iowa, starting to doubt the official story of what exactly we thought we were doing over there. It was also, arguably, around the time America stopped being, ahem, “great” and commenced the long, nauseating slide into idiocracy and collapse. The news media has taken LBJ’s place in today’s Wile E. Coyote phase of our history, cheerleading the congressional hunt for the glittering golden scalp of You-Know-Who in the White House.

[..] The CBS 60 Minutes Show took its turn last night with a puff piece on Elijah Cummings (D-Maryland), incoming chairman of the House oversight Committee, which, CBS interlocutor Steve Kroft delighted in pointing out, “can investigate any [old] thing.” And so, Rep. Cummings will be the ringmaster of this new “Greatest Show on Earth,” aimed at climaxing in an orgasmic impeachment operation. Mr. Kroft could hardly contain his glee onscreen. The facts say something a bit different about the actual reality-based Russia Collusion case, namely, that it’s been a two-year smokescreen to cover the collective ass of a rogue leadership in the Department of Justice and its step-child, the FBI, who deliberately and repeatedly broke the law in dishonestly pursuing a way to annul the 2016 election result.

It also reflects darkly on the Obama White House and its participation in all this huggermugger. Wads of information around this matter also came out in the past week — which you can be sure the news media would not touch — including congressional testimony from last July with former FBI lawyer, Lisa Page, revealing that the traffic controller for the so-called Steele Dossier was one John Carlin, Assistant Attorney General at the time, and formerly then-FBI Director Robert Mueller’s chief-of-staff. Ms. Page herself characterized Mr. Carlin as “a political appointee.” Was he Mr. Mueller’s clean-up man?

Glenn Greenwald makes a valid point comparing the Trump probe with those of Henry Wallace and George McGovern by Hoover. What he misses out on, though, is how they differ: unlike in the cases of Wallace and McGovern, the FBI is now used not just to smear a politician, but to try and oust a president.

• FBI Investigation Of Trump As National Security Threat Is A Serious Danger (GG)

It is not difficult to understand what is so ominous and even tyrannical about the FBI investigating domestic political figures whose loyalties they regard as “suspicious,” and whose political career they regard as a “national security threat,” simply because those politicians express policy positions about U.S. adversaries that the FBI dislikes or regards as insufficiently belligerent. It’s the FBI’s job to investigate possible crimes under the law or infiltration by foreign powers, not ideological sins. If a politician adopts policy views that are “threatening” to U.S. national security or which is unduly accommodating to America’s adversaries or “enemies,” that’s not a crime and the FBI thus has no business using its vast investigative powers against a politician who does that.

That’s why it’s so easy to see that Hoover’s investigative scrutiny of Henry Wallace, and George McGovern, and an endless array of domestic dissenters, was so anti-democratic and dangerous. If a politician adopts “threatening” policy views or is too subservient toward or accommodating of a foreign adversary, it’s the job of the American voting public or Congress in its political oversight and lawmaking role to take action, not the FBI’s job to criminalize policy differences through investigations. It should not be difficult for a rational brain free of partisan muck to see this same principle at play when it comes to the FBI’s investigation of Trump on the ground that he may be, in the eyes of FBI officials, a “national security threat.”

Even if you’re someone who hates Trump’s overtures toward Russia or even believes that they are the by-product of excessive subservience to the Kremlin, the dangers of having the FBI take on the role of investigating that rather than the political wings of the U.S. political system should be obvious – as obvious as they are in the case of Henry Wallace and George McGovern. [..] The person elected by the U.S. electorate to make foreign policy for the United States and to determine “America’s interests” was Donald Trump, not the FBI. It’s the role of elected officials in the White House and Congress, not the unelected police agents who report to them, to decide what is and is not in “America’s interests.” If Trump’s foreign policy is misguided or “threatening,” that’s a matter for the Congress and/or the American public, not the FBI.

More so-called revelations. It’s never been a secret what Trump thinks of NATO in its present form: he thinks the US pays too much. But now the NYT presents this as some dark conspiracy story.

Like the Guardian, the New York Times has moved beyond caring about its credibility: both think there are enough people swallowing everything they get served up.

• Trump Reportedly Said He Wanted To Pull The US From NATO (CNBC)

U.S. President Donald Trump privately said several times last year that he wanted to withdraw his country from the North Atlantic Treaty Organization, The New York Times reported on Monday. The newspaper’s findings, which cited unnamed senior administration officials, are likely to resurface worries of a breakdown in the military alliance that was created in 1949 by the United States, Canada and some European nations. Those concerns were first sparked last year when the U.S. leader hinted that he could leave the 29-member defense bloc without Congressional approval. At the time, Trump was pushing member countries to increase spending. Since then, however, the Republican has backtracked on that threat.

After a chaotic NATO meeting in July 2018, Trump claimed that allies had committed to his request and said that U.S. withdrawal from the organization would be “unnecessary.” Responding to the New York Times’ report, a White House official repeated some of Trump’s remarks from July when the president said Washington’s commitment to NATO is “very strong” and the alliance is “very important.” As the Times notes, a weakened NATO is thought to be a major geopolitical goal of Russian President Vladimir Putin. Trump’s dislike for participation in international organizations is well known to global leaders by now. Early in his White House tenure, the president withdrew the U.S. from the Paris climate accord and a massive Pacific trade pact.

If the Guardian, or another British paper, runs an entirely false story like this about you or me, we would need to raise a similar amount just to defend ourselves from such smear.

• WikiLeaks Starts Suing Guardian Over Assange-Manafort Fake News Story (RT)

WikiLeaks says it has collected enough funds to file a lawsuit against the Guardian for publishing an uncorroborated story about alleged meetings between former Trump campaign manager Paul Manafort and Julian Assange. The whistleblowing website has thanked all its supporters who contributed to its GoFundMe campaign, launched on November 27 following the publication of an article by the Guardian, which claimed that US President Donald Trump’s disgraced former campaign manager Paul Manafort had held secret talks with Julian Assange at least three times in the Ecuadorean embassy in London, where the Australian has been holed up since 2012.

The donations have recently hit the $50,000 threshold, enabling the whistleblowing site to formally launch proceedings against the renowned British newspaper, WikiLeaks said, calling on its supporters to keep the money flowing. “Legal action will now commence (but more is required to complete),” it tweeted on Monday. When it launched the campaign, WikiLeaks set up the ambitious target of $300,000. It has so far raised $51,749. WikiLeaks seeks to challenge the Guardian in court over its source-based ‘bombshell,’ co-authored by its former Moscow correspondent Luke Harding, alleging that Manafort had traveled to London three times over four years prior to the publication of the Democratic National Committee (DNC) email leaks.

The report relies on Ecuadorean intelligence sources and documents provided to the Guardian by the country’s intelligence agency. In its GoFundMe appeal, WikiLeaks suggested that the intelligence agency might have deliberately fed the British publication false information, which it was happy to take at a face value. WikiLeaks also noted that it was not the first time the Guardian put out a false story about Assange.

Just the tip of the iceberg. Happy driving.

• Antarctic Losing 500% More Ice A Year Than In 80s – NASA (Ind.)

The Antarctic ice sheet is losing six times as much ice each year as it was in the 1980s and the pace is accelerating, one of the most comprehensive studies of climate change effects on the continent has shown. More than half an inch has been added to global sea levels since 1979, but if current trends continue it will be responsible for metres more in future, the Nasa-funded study found. The international effort used aerial photos, satellite data and climate models dating back to the 1970s across18 Antarctic regions to get the most complete picture to date on the impacts of the changing climate. It found that between 1979 and 1990 Antarctica lost an average of 40 gigatonnes (40 billion tonnes) of its mass each year.

Between 2009 and 2017 it lost an average 252 gigatonnes a year. This has added 3.6mm per decade to sea levels, or around 14mm since 1979, the study shows. “That’s just the tip of the iceberg, so to speak,” Professor Eric Rignot from University of California, Irvine and lead author of the study published in Nature Geoscience. “As the Antarctic ice sheet continues to melt away, we expect multi-metre sea level rise from Antarctica in the coming centuries.”

“..the wall “may very well lead to the extinction of the jaguar, ocelot … and other species”..”

• Wildlife: The Real Crisis At The US-Mexico Border (PI)

While debate swirls around the border wall — whether it’s immoral, whether it even works — one huge impact, while understood, is just not being discussed: The wall is already an ecological catastrophe, devastating rare and endangered species, carving up critical habitats, exacerbating flooding, even worsening climate change. The Center for Biological Diversity estimates that the wall “may very well lead to the extinction of the jaguar, ocelot … and other species” in America. This is tragic, as the 2,000-mile border, stretching from the Pacific to the Gulf of Mexico along the Rio Grande, passes through three mountain chains, North America’s two largest deserts, and the Tijuana Estuary, a salt marsh that offers habitat for 400 species of birds.

An astonishing 25 million acres of protected public lands lies near the border on the American side, including wildlife refuges, national parks, and wilderness areas with large refuges on the Mexican side as well, all created by the long, hard work of many organizations and agencies aiming to protect land that is biologically unique and fragile. It’s a diverse area, too: A 2011 study documented 134 mammal, 178 reptile, and 57 amphibian species living in the wall region; 56 of these species that already been hurt by the wall, including five that are at risk for extinction, one the jaguarundi, a small cat.

The jaguar, that cat’s bigger cousin, is the poster child for the wall’s ecological impact. Once hunted to extinction in the U.S., jaguars in northern Mexico have been spotted moving back into Arizona. Protected both here and in Mexico, its U.S. recovery plan — written by the federal government (!) — calls for free movement of these 300-pound predators across the border. The few cats that have reclaimed their American habitat will not recover if they cannot return to Mexico to find mates.

Fernando Llano / AP

And there’s no panic. There’s hardly any concern. The web of life is disappearing and we watch TV.

• 98% Of Ground Insects Vanish From Puerto Rican Rainforest In 35 Years (G.)

Scientist Brad Lister returned to Puerto Rican rainforest after 35 years to find 98% of ground insects had vanished “We knew that something was amiss in the first couple days,” said Brad Lister. “We were driving into the forest and at the same time both Andres and I said: ‘Where are all the birds?’ There was nothing.” His return to the Luquillo rainforest in Puerto Rico after 35 years was to reveal an appalling discovery. The insect population that once provided plentiful food for birds throughout the mountainous national park had collapsed. On the ground, 98% had gone. Up in the leafy canopy, 80% had vanished. The most likely culprit by far is global warming.

“It was just astonishing,” Lister said. “Before, both the sticky ground plates and canopy plates would be covered with insects. You’d be there for hours picking them off the plates at night. But now the plates would come down after 12 hours in the tropical forest with a couple of lonely insects trapped or none at all.” “It was a true collapse of the insect populations in that rainforest,” he said. “We began to realise this is terrible – a very, very disturbing result.” Earth’s bugs outweigh humans 17 times over and are such a fundamental foundation of the food chain that scientists say a crash in insect numbers risks “ecological Armageddon”. When Lister’s study was published in October, one expert called the findings “hyper-alarming”.

The Puerto Rico work is one of just a handful of studies assessing this vital issue, but those that do exist are deeply worrying. Flying insect numbers in Germany’s natural reserves have plunged 75% in just 25 years. The virtual disappearance of birds in an Australian eucalyptus forest was blamed on a lack of insects caused by drought and heat. Lister and his colleague Andrés García also found that insect numbers in a dry forest in Mexico had fallen 80% since the 1980s. “We are essentially destroying the very life support systems that allow us to sustain our existence on the planet, along with all the other life on the planet,” Lister said. “It is just horrifying to watch us decimate the natural world like this.”

Debt Rattle April 3 2018

Apr 032018

April 3, 2018 Posted by Raúl Ilargi Meijer at 9:30 am Finance Tagged with: Amazon, Antarctic, cashlessness, China, confiscations, debt, dolphins, Erdogan, psychographics, Puigdemont, Sanders, stocks, Trump 7 Responses »

Vincent van Gogh Field with Irises near Arles 1888

• Stocks’ Second-Quarter Start Is the Worst Since the Great Depression (BBG)

• Stocks Lose Critical Buyer at Worst Time (BBG)

• Rising Rates Sounding Alarm Bells for Debt-Laden US Consumers (BBG)

• China’s State-Owned Banks Told To Stop Local Government Loans (SCMP)

• Chinese Families Are Racking Up Debt On An Unprecedented Scale (SCMP)

• Young Lose Out In Britain’s Housing Wealth Boom (Times)

• Swedes Turn Against Cashlessness (G.)

• Bernie Sanders Agrees With Trump: Amazon Has Too Much Power (NW)

• German Prosecutors Ask Court To Extradite Carles Puigdemont To Spain (G.)

• The Peril of Psychographics (New Yorker)

• Erdogan ‘Has Gone Completely Crazy’ – Greek Defense Minister (K.)

• Greek Confiscations Target State Debtors With Small Arrears (K.)

• ‘Sentinel’ Dolphins Die in Brazil Bay. Some Worry a Way of Life Has, Too (NYT)

• Underwater Melting Of Antarctic Ice Far Greater Than Thought (G.)

How’s that for a headline?

• Stocks’ Second-Quarter Start Is the Worst Since the Great Depression (BBG)

If you feel like the second quarter began badly, you’d be right. U.S. stocks had their worst April start since 1929, according to data compiled by Bloomberg. The S&P 500 index slumped 2.2%, a rout exceeded only by its 2.5% decline 89 years ago, a prelude to the devastating crash later that year that brought on the Great Depression. (Back then, the index only comprised 90 stocks.) China’s retaliatory trade tariffs combined with President Donald Trump’s criticism of Amazon.com Inc. to send equities into a tailspin Monday.

Shares in the online retailer tumbled, encouraging a sell-off in consumer discretionary and technology stocks. The S&P 500 closed below its 200-day moving average – a key technical support – and volatility climbed. The stock slide also looked pretty bad when compared to the beginning of other quarters. Equities lost more than on any other quarterly first day since October 2011, when stocks plummeted 2.8%, Bloomberg data show.

Is there a buyback blackout? Or, better question: should stocks depend on buybacks to such an extent?

• Stocks Lose Critical Buyer at Worst Time (BBG)

The stock market’s missing a key participant as the second quarter kicks off with a rout. Corporate America is stuck on the sidelines as the S&P 500 Index plunges to its lowest level since early February. That’s to comply with regulations under which companies refrain from discretionary stock buybacks for about five weeks before reporting earnings through the 48 hours that follow. So, with first-quarter reporting season kicking into high gear in two weeks, companies must sit on their hands while the market fizzles. The timing of discretionary buybacks has gained traction in recent years with corporate appetite dwarfing all other investors as the biggest source of demand for U.S. stocks. Strategists such as Goldman Sachs’s David Kostin have pointed out that it’s no coincidence the late-January selloff occurred during a blackout period.

S&P 500 firms have bought back almost $4 trillion of their own shares since the bull market began nine years ago, data compiled by S&P Dow Jones Indices show. That demand helped mitigate damage in early February when stocks tumbled into the first correction in two years. Goldman Sachs’ buyback desk had its busiest week ever during the rout and companies were called “basically the only buyers.” Volume in S&P 500 stocks was about 7% above the 30-day average Monday. Not everyone agrees that the buyback blackout is partly to blame for Monday’s selloff. According to Marko Kolanovic, JPMorgan’s global head of quantitative and derivative strategy, the majority of buybacks are usually done through preset programs that are not subject to blackout.

Moreover, stocks typically go up more when repurchases are announced than when the transactions actually occur. “The whole story about blackout is misconception,” Kolanovic wrote in an email. So, what could be behind the selloff? Kolanovic’s team last week attributed the recent downturn to an “irrational response” to global trade tensions. The S&P 500 is trading at below-average valuations even as earnings growth is picking up, a sign that any weakness would be worth buying, the strategists wrote in a March 27 note.

“..an estimated $350 trillion of contracts are based on Libor..”

• Rising Rates Sounding Alarm Bells for Debt-Laden US Consumers (BBG)

A healthy economy can be a dangerous thing. Americans have a history of loading up on debt in good times, then paying dearly when the bills come due. Adding to the pain: A booming economy is often accompanied by rising interest rates, which make mortgages, credit cards and other debt much more expensive. As the U.S. Federal Reserve raises rates, there are signs that consumers could be putting themselves in peril. “When consumers are confident, or over-confident, is when they get into credit-card trouble,” said Todd Christensen at Debt Reduction Services in Boise, Idaho. The nonprofit credit counseling service has seen a noticeable uptick in people looking for help with their debt, he said.

Spending on U.S. general purpose credit cards surged 9.4% last year, to $3.5 trillion, according to industry newsletter Nilson Report. Card delinquencies are also rising. U.S. household debt climbed in the fourth quarter at the fastest pace since 2007, according to the Federal Reserve. “There are warning signs out there,” said Kevin Morrison, senior analyst at the Aite Group. Especially concerning is a surge in student and auto loans over the past decade, he said. Meanwhile, the Federal Reserve is steadily hiking rates, most recently on March 21 when the federal funds rate rose a quarter point to a target range of 1.5% to 1.75%.

Libor, a benchmark rate the world’s biggest banks charge each other, is also on the rise. The 3-month Libor reached 2.3% last week, the highest since November 2008. That could be a problem for companies, especially those with lower credit ratings, looking to refinance debt. Overall, an estimated $350 trillion of contracts are based on Libor, according to its administrator, ICE.

So the shadow banks can take over?

• China’s State-Owned Banks Told To Stop Local Government Loans (SCMP)

The central Chinese government has sent a blunt message intended to dissolve the marriage between banks and local governments, the nexus in China’s debt-fuelled growth model. In a directive full of “must nots”and “shalls” posted on its website last week, China’s Ministry of Finance, under the newly appointed minister Liu Kun, told state-owned financial institutions not to provide any funding to local governments, with the exception of buying government bonds. At the first meeting of the Central Economic and Financial Commission, the supreme economic decision making body headed by Xi Jinping on Monday, the Chinese president said local governments and state-owned enterprises must cut debt further.

China’s state-owned banks were told to check the registered capital of projects sponsored by local authorities, to appraise borrowers’ real repayment capabilities and not to accept local government’s guarantees for repayment or return, according to the ministry’s directive. Banks “must not provide any form of funding directly to local governmental departments or directly via local state-owned enterprises and institutions” and “must not increase new loans to local government financing vehicles irregularly”, according to the notice. It added that banks must not lend any money to local governments to be used as capital in projects, government investment funds or public-private partnership projects, it added.

Yin Zhongqing, deputy director of the financial and economic affairs committee at the National People’s Congress, told the South China Morning Post last month that at least 20 trillion yuan of “hidden debt” had been accumulated in the past three years. The national institution of finance and development under the Chinese Academy of Social Sciences last week estimated the total liabilities of local government financing vehicles was 30 trillion yuan, while another 10 trillion yuan of debt could be buried in public-private partnerships.

“A man with a 50,000 yuan debt is responsible; 200,000 yuan of debt is financially savvy; 1 million yuan of debt is a homeowner; 10 million yuan of debt is classy; and a 1 billion yuan debt is chairman of a listed company … if you don’t have any debt, you must be a total loser.”

• Chinese Families Are Racking Up Debt On An Unprecedented Scale (SCMP)

Chinese families with their long tradition of saving money are now accumulating debt at a rate never been seen before, according to data compiled by a state-backed think tank in Beijing. But the National Institution for Finance and Development also said mounting debt was not a concern because Chinese households still had far more savings than debts. The country’s household leverage ratio – or the ratio between debt incurred by families and GDP – surged to 49% at the end of last year from 17.9% at the end of 2008, going up about 3.5 percentage points annually, the think tank said in a report released on Thursday.

So in the period from 1993, when the data became available, to 2008, the household debt ratio went from 8.3% to 17.9%, with an annual rise of 0.65 percentage points. But in 2016 and 2017, that annual increase accelerated to about 4.9 percentage points, the think tank said. The rapid accumulation of household debt was the biggest factor behind the rise in China’s overall leverage last year, as the corporate sector’s debt ratio fell and local government borrowing was reined in, at least on the surface, it said.

Liu Lei, a researcher with the think tank, said at a briefing on Thursday that real household debt could be “8 percentage points” higher if special housing funds, peer-to-peer lending programmes and private micro loans were factored in. In August, Shanghai-based brokerage Haitong Securities said in a report that while China’s actual household debt ratio was not high compared to many developed countries such as the US and UK, its rate of increase was dangerous. “It took 40 years for the household debt ratio in the US to rise from a level of 20% to about 50%, but it took only less than 10 years in China,” according to the Haitong economists led by Jiang Chao.

[..] China’s excessive money printing in the last decade and skyrocketing property prices have benefited those who maximised their leverage to buy real estate, while the country’s savers bore the brunt of monetary easing, leading to a dramatic shift in attitude on saving versus borrowing. That change in attitude can be seen in a popular saying widely circulated on Chinese social media in recent years: “A man with a 50,000 yuan debt is responsible; 200,000 yuan of debt is financially savvy; 1 million yuan of debt is a homeowner; 10 million yuan of debt is classy; and a 1 billion yuan debt is chairman of a listed company … if you don’t have any debt, you must be a total loser.”

There’s so much wrong here, where to begin? Get out while you can.

• Young Lose Out In Britain’s Housing Wealth Boom (Times)

Three quarters of housing wealth in Britain is held by the over-50s, according to research revealing the generational divide in the property market. Such homeowners hold £2.8 trillion of equity. The over-65s own 43 per cent of housing wealth, £1.6 trillion, the study by the estate agent Savills found. Lawrence Bowles, a research analyst at the company, said: “The extent to which wealth is concentrated in older hands is something we have not seen in a long time.” Owners have piled up equity by living longer, paying off their mortgages and watching as prices grew steadily in the final decades of the last century. “It is looking likely that we will see more people downsizing in order to free up that equity,” Mr Bowles said.

At the other end of the spectrum, homeowners under 35 hold just £221 billion of equity but owe £223 billion in mortgage debt. This age group holds £6 of equity in every £100 compared with £75 held by their parents. First-time buyers face prices that are 5.2 times higher than average incomes, while in London prices are about 14 times higher than average earnings. In most regions, it takes about eight years for the typical first-time buyer to save a deposit. This rises to nine years in the southeast and to nearly ten in London, where the average 20 per cent deposit is now above £80,000.

“If Putin invades…”

• Swedes Turn Against Cashlessness (G.)

It is hard to argue that you cannot trust the government when the government isn’t really all that bad. This is the problem facing the small but growing number of Swedes anxious about their country’s rush to embrace a cash-free society. Most consumers already say they manage without cash altogether, while shops and cafes increasingly refuse to accept notes and coins because of the costs and risk involved. Until recently, however, it has been hard for critics to find a hearing. “The Swedish government is a rather nice one, we have been lucky enough to have mostly nice ones for the past 100 years,” says Christian Engström, a former MEP for the Pirate Party and an early opponent of the cashless economy.

“In other countries there is much more awareness that you cannot trust the government all the time. In Sweden it is hard to get people mobilised.” There are signs this might be changing. In February, the head of Sweden’s central bank warned that Sweden could soon face a situation where all payments were controlled by private sector banks. The Riksbank governor, Stefan Ingves, called for new legislation to secure public control over the payments system, arguing that being able to make and receive payments is a “collective good” like defence, the courts, or public statistics. “Most citizens would feel uncomfortable to surrender these social functions to private companies,” he said. “It should be obvious that Sweden’s preparedness would be weakened if, in a serious crisis or war, we had not decided in advance how households and companies would pay for fuel, supplies and other necessities.”

The central bank governor’s remarks are helping to bring other concerns about a cash-free society into the mainstream, says Björn Eriksson, 72, a former national police commissioner and the leader of a group called the Cash Rebellion, or Kontantupproret. Until now, Kontantupproret has been dismissed as the voice of the elderly and the technologically backward, Eriksson says. “When you have a fully digital system you have no weapon to defend yourself if someone turns it off,” he says. “If Putin invades Gotland [Sweden’s largest island] it will be enough for him to turn off the payments system. No other country would even think about taking these sorts of risks, they would demand some sort of analogue system.”

In this sense, Sweden is far from its famous concept of lagom – “just the right amount” – but instead is “100% extreme”, Eriksson says, by investing so much faith in the banks. “This is a political question. We are leaving these decisions to four major banks who form a monopoly in Sweden.”

A few days ago Elizabeth Warren agreed with Trump on China, now Sanders agrees about Amazon. What’s happening to the world?

• Bernie Sanders Agrees With Trump: Amazon Has Too Much Power (NW)

Independent Vermont senator and 2016 presidential hopeful Bernie Sanders echoed President Donald Trump in expressing concern about retail giant Amazon. Sanders said that he felt Amazon had gotten too big on CNN’s “State of the Union” Sunday, and added that Amazon’s place in society should be examined. “And I think this is, look, this is an issue that has got to be looked at. What we are seeing all over this country is the decline in retail. We’re seeing this incredibly large company getting involved in almost every area of commerce. And I think it is important to take a look at the power and influence that Amazon has,” said Sanders. The senator’s comments came on the heels of a number of tweets from Trump, who has long criticized the online retailer.

WIll Europe start chasing elected politicians?

• German Prosecutors Ask Court To Extradite Carles Puigdemont To Spain (G.)

German prosecutors have asked a court to permit the extradition of former Catalan separatist leader Carles Puigdemont to Spain. Prosecutors in the northern town of Schleswig said on Tuesday they have submitted a request to the regional court following “intensive examination” of the European arrest warrant issued by Spain. Puigdemont has been detained in Germany since 25 March. Spain accuses the 55-year-old of rebellion in organising an unauthorised referendum. The Schleswig court is likely to take several days to decide whether to extradite Puigdemont. His lawyers have urged the German government to intervene in the case, citing the “political dimension.”

Just stop collecting the data. Problem solved.

• The Peril of Psychographics (New Yorker)

In September, 2016, Alexander Nix, the C.E.O. of Cambridge Analytica, the data and messaging company that was working at the time with Donald Trump’s supposedly flagging Presidential campaign, explained his firm’s work like this: “If you know the personality of the people you’re targeting, you can nuance your messaging to resonate more effectively with those key audience groups.” The fancy term for this is psychographic targeting. A few weeks later, Trump won the Presidency, against all odds and predictions, sending political operatives and journalists scrambling for explanations. “There was a huge demand internally for people to see how we did it,” Brittany Kaiser, Cambridge Analytica’s former business-development director, told the Guardian last Friday. “Everyone wanted to know: past clients, future clients.”

Whether Cambridge Analytica’s targeting work actually swayed the outcome of the election has been a subject of debate since then—because the firm’s record is spotty, psychographic targeting in political campaigns is a relatively new concept, and it has not yet been definitely shown that C.A. successfully used these methods on behalf of Trump’s campaign. Christopher Wylie, the former C.A. employee who recently came forward to detail how the company improperly acquired personal data from fifty million Facebook users, has said that the company used that data to create a “psychological warfare mindfuck tool.”

But Aleksandr Kogan, the Cambridge University researcher who provided the company with the Facebook data, has described it as “not that accurate at the individual level.” Kogan’s conclusion tracks with research that has been done by the U.K.-based Online Privacy Foundation, whose research director, Chris Sumner, recently told me that psychographics are much more accurate for groups rather than individual people.

The US and France are turning their backs on Turkey. Feel emboldened by that?

• Erdogan ‘Has Gone Completely Crazy’ – Greek Defense Minister (K.)

Raising the incendiary rhetoric another notch, Defense Minister Panos Kammenos lashed out against Recep Tayyip Erdogan Monday, saying that the Turkish president “has gone completely crazy.” Speaking to journalists outside the Parliament in Athens about the fate of the two Greek soldiers held in Turkey and Ankara’s provocations in the Aegean, Kammenos said there are no lines of communication with Erdogan. “We’re talking about Erdogan, who goes out and publicly insults the US and [Israeli Prime Minister Benjamin] Netanyahu,” he said, adding that “Turkey has no courts while its justice system works under the orders of the sultan [Erdogan].”

The two soldiers, he said, could, under these circumstances, be held there for 15 years. “You cannot answer to a madman,” he said, referring to the Turkish leader. The two soldiers have been held for a month in Turkey without any charges being brought against them yet. Kammenos, who is also the leader of the right-wing junior coalition partner, Independent Greeks (ANEL), said Turkish authorities have so far found nothing to prosecute the two soldiers but warned of a worst-case scenario reminiscent of the film “Midnight Express,” based on the travails of an American who served time in a Turkish prison in the 1970s.

“If you watch ‘Midnight Express,’ you will see that they kept on making up charges against him,” he said, adding that “nothing works democratically there [Turkey].” He also expressed concern that an incident could occur in the Aegean. “They may want to provoke this but you must know that the Turkish military is in a dire state at this moment,” he said, adding that, for its part, Greece “is ready.” He clarified that Greece will not take the bait but noted that if Turkey violates Greek national sovereignty, then “we will respond as we should.”

On the poorest in Greece: “..the state conducted 1.72 million confiscations of salaries, pensions and rent payments last year..”

See, the poor owe €1.2 billion. 40,000 rich individuals and companies owe €90 billion.

• Greek Confiscations Target State Debtors With Small Arrears (K.)

Over 3.3 million taxpayers owe the tax authorities amounts of less than 3,000 euros each. According to figures published by the Independent Authority for Public Revenue, the state conducted 1.72 million confiscations of salaries, pensions and rent payments last year, mostly concerning small debtors. Debtors owing up to 3,000 euros account for 80.5% of all debtors, and they owe 1.2 billion euros. These debts were run up in recent years and mainly stem from failure to pay income tax and the Single Property Tax (ENFIA), whereas bigger debts to the tax authorities concern 40,000 individuals and companies and add up to 90 billion euros, originating from fines and activated guarantees. It is quite impressive that the number of state debtors has increased by some 3 million in the years of the financial crisis, climbing from 1 million in 2010 to 4.1 million today.

“Nostalgia aside..” Nostalgia? What? Nostalgic for life? When everything’s dead, we go and be nostalgic?

• ‘Sentinel’ Dolphins Die in Brazil Bay. Some Worry a Way of Life Has, Too (NYT)

Something ominous was happening in the turquoise waters of Sepetiba Bay, a booming port outside Rio de Janeiro. Beginning late last year, fishermen were coming across the scarred and emaciated carcasses of dolphins, sometimes five a day, bobbing up to the surface. Since then, scientists there have discovered more than 200 dead Guiana dolphins, or Sotalia guianensis, a quarter of what was the world’s largest concentration of the species. The deaths, caused by respiratory and nervous system failures linked to a virus, have subsided, but scientists are working to unravel the mystery behind them. How, they ask, did a virus that might ordinarily have claimed a handful of dolphins end up killing scores of them?

And does part of the answer, scientists and local residents ask, lie in the bay itself, at once a testament to Brazil’s economic power and a portent of environmental risk. The dolphins are “sentinels,” said Mariana Alonso, a biologist at the Biophysics Institute at the Federal University of Rio de Janeiro, one of a number groups working to understand the epidemic. “When something is wrong with them, that indicates the whole ecosystem is fractured.” [..] Sepetiba Bay, 40 miles west of downtown Rio, became one of the principal gateways for Brazilian exports over the past generation. In 2017, 39 million tons of iron ore and other commodities shipped from there.

The wooden fishing boats that crisscross the bay now weave around massive merchant ships loaded with iron and steel. Though people still swim in its waters, four ports and a constellation of chemical, steel and manufacturing plants have risen on its shores. One of world’s most prominent iron ore producers, Vale, occupies a new terminal in an old fishing spot on nearby Guaiba Island. “When I was a child, buffalo roamed the farms around my village, and we had apples and coconuts,” said Cleyton Ferreira Figueiredo, 28, a convenience store cashier who, nostalgia aside, also sees advantages in the development. “Now everything is more urban, with schools and facilities. There are more jobs, and it takes me 15 minutes to get home when I finish.”

A little scary.

• Underwater Melting Of Antarctic Ice Far Greater Than Thought (G.)

Hidden underwater melt-off in the Antarctic is doubling every 20 years and could soon overtake Greenland to become the biggest source of sea-level rise, according to the first complete underwater map of the world’s largest body of ice. Warming waters have caused the base of ice near the ocean floor around the south pole to shrink by 1,463 square kilometres – an area the size of Greater London – between 2010 and 2016, according to . The research by the at the University of Leeds suggests climate change is affecting the Antarctic more than previously believed and is likely to prompt global projections of sea-level rise to be revised upward.

Until recently, the Antarctic was seen as relatively stable. Viewed from above, the extent of land and sea ice in the far south has not changed as dramatically as in the far north. But the new study found even a small increase in temperature has been enough to cause a loss of five metres every year from the bottom edge of the ice sheet, some of which is more than 2km underwater. “What’s happening is that Antarctica is being melted away at its base. We can’t see it, because it’s happening below the sea surface,” said Professor Andrew Shepherd, one of the authors of the paper. “The changes mean that very soon the sea-level contribution from Antarctica could outstrip that from Greenland.”

The study measures the Antarctic’s “grounding line” – the bottommost edge of the ice sheet across 16,000km of coastline. This is done by using elevation data from the European Space Agency’s CryoSat-2 and applying Archimedes’s principle of buoyancy, which relates the thickness of floating ice to the height of its surface.

Debt Rattle November 10 2017

Nov 102017

November 10, 2017 Posted by Raúl Ilargi Meijer at 9:52 am Finance Tagged with: Antarctic, China, crypto, Facebook, Greece, junk, Monsanto, paradise, refugees, Russia, Saudi 11 Responses »

Edward S. Curtis A smoky day at the Sugar Bowl—Hupa c. 1923

• Stock-Market Investors Are Starting To Freak Out About Junk Bonds (MW)

• China’s New Way To Hide Debt: Call It Equity (ZH)

• China To Remove Foreign Ownership Limit In Chinese Banks, Brokers (BBG)

• Why Have We Built A Paradise For Offshore Billionaires? (Thomas Frank)

• We Should Tax Them On Transactions – Steve Keen (RT)

• Kleptocrat-Owned Media Pick Out ‘Incrimination’ To Target Russia – Keiser (RT)

• ‘$300 Million In Cryptocurrency’ Accidentally Lost Forever Due To Bug (G.)

• Monsanto Sued By Brazilian Soybean Farmers Over GMO Seed (RT)

• Monsanto In Court Again: New Herbicide Kills 3.6 Million Acres Of Crops (ZH)

• Lebanon PM’s Resignation Is Not All It Seems (Fisk)

• Saudi Arabia Is Blocking Aid To The World’s Worst Humanitarian Crisis

• Antarctica Is Being Rapidly Melted From Below (Ind.)

• Next Round Of Greek Pension Cuts To Reach Up To 18% In 2019 (K.)

• EU Parliamentarians Warn Refugees May Die on Greek Islands (GR)

• Facebook: God Only Knows What It’s Doing To Our Children’s Brains (Axios)

is this where it’ll all blow up?

• Stock-Market Investors Are Starting To Freak Out About Junk Bonds (MW)

Wall Street bears are sounding alarms about a recent drop in non-investment-grade bonds, popularly referred to as junk bonds. The SPDR Bloomberg Barclays High Yield Bond ETF, an exchange-traded fund that tracks junk bonds, is on track to finished at its lowest level since March 24. Another well known junk-bond ETF, the iShares iBoxx $ High Yield Corporate Bond ETF also carved out late-March nadir, according to FactSet data. Both ETFs fell below their 200-day moving averages early this month, signaling that momentum in fixed-income products is bearish. Technical analysts tend to follow short- and long-term averages in an asset to help determine bullish and bearish trends. The moves for JNK and HYG, referencing their widely used tickers, come as the S&P 500 index and the Dow Jones Industrial Average have been testing fresh highs.

Normally, junk bonds and stocks are positively correlated, or move in the same direction, because junk bonds are considered a proxy for risk appetite in the market. Junk bonds had been drawing interest, particularly in an environment of ultralow bonds, with the 10-year Treasury and the 30-year Treasury bond offering yields below their historic averages, even as the Federal Reserve embarks upon efforts to lift interest rates from crisis-era levels. Bonds with the highest yields tend to be the riskiest and therefore offer a commensurate compensation in exchange for that perceived risk. Bond prices and yields move in opposition. However, a recent divergence between junk bonds and stocks, taking hold in late October, has raised eyebrows among Wall Street investors.

This cannot end well.

• China’s New Way To Hide Debt: Call It Equity (ZH)

The legacy of the soon-to-retire PBoC governor, Zhou Xiochuan, will be that in sharp contrast to his western brethren, he warned that China’s credit bubble would burst before the fact. Two weeks ago, Zhou warned during the Party Congress that China’s financial system could be heading for a “Minsky moment” due to high levels of corporate debt and rapidly rising household debt. “If we are too optimistic when things go smoothly, tensions build up, which could lead to a sharp correction, what we call a ‘Minsky moment’. That’s what we should particularly defend against.” Perhaps sensing that nobody in the Middle Kingdom was paying attention, we noted two days ago his lengthy essay published on the PBoC website. It contained another warning that latent risks are accumulating in the Chinese system, including some that are “hidden, complex, contagious and hazardous.”

He also highlighted “debt finance disguised as equity” as a concern. Talking of which, there’s a new growth market in the gargantuan Chinese corporate debt market – we are referring to perpetual notes. Are you ready for the clever part about perpetual notes – they are debt but it’s permissible under Chinese accounting regulations to classify them as “equity” – et voila, corporate gearing has fallen. Under pressure to trim borrowings, China’s companies have found a way to reduce their lofty debt burdens – even if some of the risk remains. Sales of perpetual notes – long-dated securities that can be listed as equity rather than debt on balance sheets given that in theory they could never mature – have soared to a record this year as Beijing zeros in on leverage and the threat it poses to the financial system.

The bonds are so popular that issuance by non-bank firms has jumped to the equivalent of 433 billion yuan ($65 billion), more than seven times sales by companies in the U.S. “Chinese issuers love perpetual bonds because they are under great pressure to deleverage,” said Wang Ying, a senior director at Fitch Ratings in Shanghai. “Sophisticated investors should do their homework and shouldn’t be misled by the numbers in accounting books.

China signals it needs money, badly.

• China To Remove Foreign Ownership Limit In Chinese Banks, Brokers (BBG)

China took a major step toward the long-awaited opening of its financial system, removing foreign ownership limits on its banks and asset-management companies, and allowing overseas firms to take majority stakes in local securities ventures and insurers. Regulators are drafting detailed rules, which will be released soon, Vice Finance Minister Zhu Guangyao said at a briefing in Beijing on Friday. Foreign firms will be allowed to own up to 51% in securities ventures and life-insurance companies, caps that will be removed gradually over time, he said. China’s steps look poised to end years of frustration for foreign banks, who have long been marginal players in Asia’s largest economy. The announcement could be seen as a major win for U.S. President Donald Trump, whose first official visit to China was followed by a string of Sino-U.S. deals.

“This is a milestone in China’s progress of opening up its economy,” said Larry Hu at Macquarie in Hong Kong. Announcing this during Trump’s visit shows the world that “China and the U.S. are in a business and trade cooperation rather than confrontation,” Hu said. On Thursday, China’s Foreign Ministry foreshadowed the latest moves, with a statement saying that entry barriers to sectors such as banking, insurance, securities and funds will be “substantially” eased. Those comments came following a meeting between Trump and his counterpart Xi Jinping. The moves would be encouraging to foreign banks, asset managers and insurers, who have long been kept on the margins in China, the world’s second-largest economy, by various barriers. Global banks are currently limited to owning 49% of local securities joint ventures, frustrating their attempts to compete effectively with Chinese rivals.

“This is their democracy today. We just happen to live in it.”

• Why Have We Built A Paradise For Offshore Billionaires? (Thomas Frank)

It’s not enough to say, in response to the Paradise Papers revelations, that we already knew that rich people parked their money in offshore tax havens, where their piles accumulate far from the scrutiny of our government. Nor is it enough to say that we were already aware that we live in a time of “inequality.” What we have learned this week is the clinical definition of the word. What we have learned is how much the rich and the virtuous have been hiding away and where they’re hiding it. Yes, there are sinister-looking Russian capitalists involved. But there’s also our favorite actors and singers. Our beloved alma mater, supposedly a charitable institution. Everyone with money seems to be in on it. We’re also learning that maybe we’ve had it backwards all along.

Tax havens on some tropical island aren’t some sideshow to western capitalism; they are a central reality. Those hidden billions are like an unseen planet whose gravity is pulling our politics and our economy always in a certain direction. And this week we finally began to understand what that uncharted planet looks like; we started to grasp its mass and its power. Think about it like this. For decades Americans have been erupting in anger at what they can see happening to their beloved middle-class world. We think we know what the culprit is; we can see it vaguely through a darkened glass. It’s “elitism.” It’s a “rigged system.” It’s people who think they’re better than us. And for decades we have lashed out. At the immigrant next door. At Jews. At Muslims. At school teachers. At public workers who are still paid a decent wage. Our fury, unrelenting, grows and grows.

We revolt, but it turns out we have chosen the wrong political leader. We revolt again: this time, the leader is even worse. This week we are coming face to face with a big part of the right answer: it’s that the celebrities and business leaders we have raised up above ourselves would like to have nothing to do with us. Yes, they are grateful for the protection of our laws. Yes, they like having the police and the Marine Corps on hand to defend their property. Yes, they eat our food and breathe our air and expect us to keep these pure and healthy; they demand that we get educated before we may come and work for them, and for that purpose they expect us to pay for a vast system of public schools. They also expect us to watch their movies, to buy their products, to use their software. They expect our (slowly declining) middle class to be their loyal customers.

[..] Our leaders raised up a tiny class of otherworldly individuals and built a paradise for them, made their lives supremely delicious. Today they hold unimaginable and unaccountable power. We endure potholes and live in fear of collapsing highway bridges because our leaders wanted these very special people to have an even larger second yacht. Our kids sit in overcrowded classrooms in underfunded schools so that a handful of exalted individuals can relax on their own private beach. Today it is these same golden figures with their offshore billions who host the fundraisers, hire the lobbyists, bankroll the think tanks and subsidize the artists and intellectuals. This is their democracy today. We just happen to live in it.

“So the only way we can really stop it – is by forgetting about taxing them with income. Income tax works for workers – it doesn’t work for a corporation; it doesn’t work for the wealthy.”

• We Should Tax Them On Transactions – Steve Keen (RT)

Steve Keen, Professor of Economics at Kingston University says the findings of the so-called Paradise Papers haven’t been surprising as “Tax evasion by the wealthy has been going on for decades, and we’ll never stop it. “We simply have to find a way to bring tax revenue back into the government that they can’t evade. And it will always manage to evade income tax,” he told RT. Keen adds though that it won’t be easy to stop this thing from happening. Partly that’s “because we don’t understand how taxation actually works.” “We think taxation is necessary to finance government spending. In fact, the government can spend regardless of taxation – the taxation simply takes large amounts of the money out of the system that government has spent into it because if we didn’t tax, we would have a risk of inflation.”

“Once you look at it that way, what the rich are actually doing – are siphoning off money that has been created by the government, accumulating it in offshore accounts and hanging onto the wealth, which should be recycled back into the economy. So the only way we can really stop it – is by forgetting about taxing them with income. Income tax works for workers – it doesn’t work for a corporation; it doesn’t work for the wealthy. We should tax them on transactions, and then they can’t evade unless they stop having transactions. If they stop having transactions, they will stop being wealthy,” he said. RT: What are the chances of that happening? SK: It just takes politicians to understand how money is created. So I think it is almost virtually impossible. They continue spreading this myth that they have got to tax us to be able to spend, running austerity, which is unnecessary. All this fits in to actually loading the pockets of the rich. Maybe there is a connection…

Part 2 of the article above.

• Kleptocrat-Owned Media Pick Out ‘Incrimination’ To Target Russia – Keiser (RT)

Let’s talk about some numbers there. To put this into a broader context, the Tax Justice Network did a study a couple of years ago. They determined that between $21 and $31 trillion is held offshore. This means that hundreds of billions of dollars of taxes go uncollected. It means those who are paying tax are paying for the entire tax burden for various countries infrastructures, military, etc. You end up with what I would call apartheid, where you have got approximately 200,000 people in the world, who pay no tax and are able to invest without paying any tax. So they are compounding money at 20-22% a year without paying tax. So the billionaire class is escalating, we know this.

Meanwhile, the poverty levels are continuing to rise because people are being ripped off by these corrupt countries in cahoots with these billionaires, who are placing the entire cost of running a society on those who can least afford it. And into the mix comes the social uprising – more violence, because naturally, if you have everything stolen from you, you have nothing to lose, so you become violent. Now, to specifically answer your question about Russia being targeted by selectively picking out … here’s an elegant phrase – you’re trying to pick a fly poop from the pepper. So they look at this big scattershot of information, and with little tweezers, they try to pick out what they perceive to be incriminating data points.

Then they build a scenario, and then the corporations that are owned by the same people that are hiding the wealth… There are only approximately six major media companies in America. Those are owned by the same kleptocrats that are hiding all these billions of dollars. They then put that story out there to deflect and confuse the average mainstream media watcher that “oh my Gosh, Russia is involved in this scandal! Russia is involved in Black Lives Matter! Russia is involved with Hillary losing the election because she is completely inept. Russia, Russia, Russia…”

Confidence.

• ‘$300 Million In Cryptocurrency’ Accidentally Lost Forever Due To Bug (G.)

More than $300m of cryptocurrency has been lost after a series of bugs in a popular digital wallet service led one curious developer to accidentally take control of and then lock up the funds, according to reports. Unlike most cryptocurrency hacks, however, the money wasn’t deliberately taken: it was effectively destroyed by accident. The lost money was in the form of Ether, the tradable currency that fuels the Ethereum distributed app platform, and was kept in digital multi-signature wallets built by a developer called Parity. These wallets require more than one user to enter their key before funds can be transferred. On Tuesday Parity revealed that, while fixing a bug that let hackers steal $32m out of few multi-signature wallets, it had inadvertently left a second flaw in its systems that allowed one user to become the sole owner of every single multi-signature wallet.

The user, “devops199”, triggered the flaw apparently by accident. When they realised what they had done, they attempted to undo the damage by deleting the code which had transferred ownership of the funds. Rather than returning the money, however, that simply locked all the funds in those multisignature wallets permanently, with no way to access them. “This means that currently no funds can be moved out of the multi-sig wallets,” Parity says in a security advisory. Effectively, a user accidentally stole hundreds of wallets simultaneously, and then set them on fire in a panic while trying to give them back. Some are pushing for a “hard fork” of Ethereum, which would undo the damage by effectively asking 51% of the currency’s users to agree to pretend that it had never happened in the first place.

That would require a change to the code that controls ethereum, and then that change to be adopted by the majority of the user base. The risk is that some of the community refuses to accept the change, resulting in a split into two parallel groups. Such an act isn’t unheard of: another hack, two years ago, of an Ethereum app called the DAO resulted in $150m being stolen. The hard fork was successful then, but the money stolen represented a much larger portion of the entire Ethereum market than the $300m lost to Parity. The lost $300m follows the discovery of bug in July that led to the theft of $32m in ether from just three multisignature wallets. A marathon coding and hacking effort was required to secure another $208m against theft. Patching that bug led to the flaw in Parity’s system that devops199 triggered by accident.

Lawsuit after lawsuit after lawsuit. At what point will we say it’s enough?

• Monsanto Sued By Brazilian Soybean Farmers Over GMO Seed (RT)

Growers in Brazil’s largest soybean producing state Mato Grosso have asked a court to cancel Monsanto’s Intacta GMO seed patent. They claim irregularities, including the company’s alleged failure to prove it brings de facto technological innovation. The Mato Grosso branch of Aprosoja, the association representing the growers, has filed a lawsuit in a federal court in Brasilia. The growers claim Monsanto’s Intacta RR2 PRO patent “does not fully reveal the invention so as to allow, at the end of the exclusivity period, for any person to freely have access to it.” That requirement “avoids that a company controls a technology for an undetermined period of time,” Aprosoja said, adding Intacta’s patent protection extends through October 2022. It cited data from consultancy Agroconsult, saying that about 53% of Brazil’s soy area was planted with Intacta technology in the 2016/17 crop cycle.

Around 40% of the crop is grown with Monsanto’s Roundup Ready seed technology (Intacta’s predecessor), and only seven% is non-GM. Brazilian farmers have been continually urging the replacement of genetically modified soybeans with non-GM seeds. Recently they asked Monsanto and other producers of pest-resistant corn seeds to reimburse them for money spent on additional pesticides when the bugs killed the crops instead of dying. Several years ago five million Brazilian soybean farmers sued Monsanto, claiming the genetic-engineering company was collecting royalties on crops it unfairly claims as its own. In 2012, the Brazilian court ruled in favor of the Brazilian farmers, saying Monsanto owes them at least $2 billion since 2004. After the legal disputes, Monsanto stopped collecting royalties linked to its first-generation Roundup Ready technology, and some farmers agreed to get a discount rate to use Intacta seeds.

How is Monsanto not a criminal enterprise?

• Monsanto In Court Again: New Herbicide Kills 3.6 Million Acres Of Crops (ZH)

[..] as the Wall Street Journal points out today, after allegedly wiping out millions of acres of farm ground across the Midwest, Monsanto once again finds itself in a familiar spot: the courtroom. Monsanto’s new version of the herbicide called dicamba is part of a more than $1 billion investment that pairs it with new genetically engineered seeds that are resistant to the spray. But some farmers say their nonresistant crops suffered after neighbors’ dicamba drifted onto their land. The agricultural giant in October sued the Arkansas State Plant Board following the board’s decision to bar Monsanto’s new herbicide and propose tougher restrictions on similar weed killers ahead of the 2018 growing season. Monsanto claims its herbicide is being held to an unfair standard.

Arkansas has been a flashpoint in the dispute: About 900,000 acres of crops were reported damaged there, more than in any other state. About 300 farmers, crop scientists and other attendees gathered in Little Rock on Wednesday for a hearing on Arkansas’s proposed stiffer dicamba controls, which Monsanto and some farmers are fighting. The proposed restrictions are subject to the approval of a subcommittee of state legislators.

As we pointed out previously, the EPA has reported that farmers in 25 states submitted more than 2,700 claims to state agricultural agencies that neighbors’ dicamba spraying shriveled 3.6 million acres of soybeans. The herbicide is also blamed for damaging other crops, such as cantaloupe and pumpkins. The massive crop damage prompted Arkansas’s Plant Board to propose the idea of prohibiting dicamba use from mid-April through the end of October to safeguard growing plants. The state has also refused to approve Monsanto’s dicamba product for use in Arkansas, saying it needs further analysis by University of Arkansas researchers.

Of course, delays didn’t sit well with Monsanto which stands to make some $350 million a year in dicamba and related seed sales according to Jonas Oxgaard, an analyst with Bernstein who described the products as “their big moneymaker.” Meanwhile, farmers are exploring their own legal options with some joining a class-action lawsuit against Monsanto and BASF, seeking compensation for damaged crops.

Follow the money: ..the kingdom owes Hariri’s “Oger” company as much as $9bn..

• Lebanon PM’s Resignation Is Not All It Seems (Fisk)

When Saad Hariri’s jet touched down at Riyadh on the evening of 3 November, the first thing he saw was a group of Saudi policemen surrounding the plane. When they came aboard, they confiscated his mobile phone and those of his bodyguards. Thus was Lebanon’s prime minister silenced. It was a dramatic moment in tune with the soap-box drama played out across Saudi Arabia this past week: the house arrest of 11 princes – including the immensely wealthy Alwaleed bin Talal – and four ministers and scores of other former government lackeys, not to mention the freezing of up to 1,700 bank accounts. Crown Prince Mohamed bin Salman’s “Night of the Long Knives” did indeed begin at night, only hours after Hariri’s arrival in Riyadh. So what on earth is the crown prince up to?

Put bluntly, he is clawing down all his rivals and – so the Lebanese fear – trying to destroy the government in Beirut, force the Shia Hezbollah out of the cabinet and restart a civil war in Lebanon. It won’t work, for the Lebanese – while not as rich – are a lot smarter than the Saudis. Every political group in the country, including Hezbollah, are demanding one thing only: Hariri must come back. As for Saudi Arabia, those who said that the Arab revolution will one day reach Riyadh – not with a minority Shia rising, but with a war inside the Sunni Wahhabi royal family – are watching the events of the past week with both shock and awe. But back to Hariri. On Friday 3 November, he was in a cabinet meeting in Beirut. Then he received a call, asking him to see King Salman of Saudi Arabia.

Hariri, who like his assassinated father Rafiq, holds Saudi as well as Lebanese citizenship, set off at once. You do not turn down a king, even if you saw him a few days’ earlier, as Hariri had. And especially when the kingdom owes Hariri’s “Oger” company as much as $9bn, for such is the commonly rumoured state of affairs in what we now call “cash-strapped Saudi Arabia”. But more extraordinary matters were to come. Out of the blue and to the total shock of Lebanese ministers, Hariri, reading from a written text, announced on Saturday on the Arabia television channel – readers can guess which Gulf kingdom owns it – that he was resigning as prime minister of Lebanon. There were threats against his life, he said – though this was news to the security services in Beirut – and Hezbollah should be disarmed and wherever Iran interfered in the Middle East, there was chaos.

[..] Of course, the real story is just what is going on in Saudi Arabia itself, for the crown prince has broken forever the great compromise that exists in the kingdom: between the royal family and the clergy, and between the tribes. This was always the bedrock upon which the country stood or fell. And Mohamed bin Salman has now broken this apart. He is liquidating his enemies – the arrests, needless to say, are supposedly part of an “anti-corruption drive”, a device which Arab dictators have always used when destroying their political opponents.

Our friends.

• Saudi Arabia Is Blocking Aid To The World’s Worst Humanitarian Crisis

Saudi Arabia is stopping food and aid from getting into Yemen, in a move that the United Nations said will be “catastrophic” for a country already facing world’s worst humanitarian crisis. Saudi Arabia shut down all access points to Yemen by air, land, and sea over the weekend, in what they say is an attempt to to curb arms trafficking from Iran to Houthi rebels after an intercepted missile landed on the outskirts Riyadh. “The Coalition Forces Command decided to temporarily close all Yemeni air, sea and land ports,” the coalition said in a statement on the Saudi state news outlet SPA. The Kingdom’s lock down means critical humanitarian aid like medical supplies, food, and water, are not getting into the country. Aid workers decried the decision, warning of “dire” consequences for a country where millions of people rely on humanitarian aid to stay alive.

“Humanitarian supply lines to Yemen must remain open,” urged Robert Mardini, the International Committee of the Red Cross’s regional director for the Near and Middle East. “Food, medicine and other essential supplies are critical for the survival of 27 million Yemenis already weakened by a conflict now in its third year.” Mardini said that shipments of chlorine tablets, used to tackle the spread of cholera, were stopped at the country’s northern border. “That lifeline has to be kept open and it is absolutely essential that the operation of the United Nations Humanitarian Air Service (UNHAS) be allowed to continue unhindered,”Jens Laerke, a spokesperson for the UN Office for the Coordination of Humanitarian Affairs (OCHA) told reporters Tuesday.

It’s a wonder there’s any ice left.

• Antarctica Is Being Rapidly Melted From Below (Ind.)

There is something mysterious and hot lurking beneath the surface of the Antarctic ice. Now Nasa says that it might have found the source of that strange heating – a “mantle plume” – or upwelling of abnormally hot rock, that lies deep beneath the surface. The heat is causing the surface of the ice to melt and crack, resulting in rivers and other disruption to Antarctica. Around 30 years ago, a scientist at the University of Colorado Denver said that there might be a mantle plume under a region of the continent known as Marie Byrd Land. That hypothesis helped explain some strange features seen on the ice, like volcanic activity and a dome. Mantle plumes are narrow streams through which hot rock rises up from the Earth’s mantle, and then spreads out under the crust. Because the material itself is hot and buoyant, it makes the crust bulge upwards.

They explain how some places – like Hawaii and Yellowstone – have huge amounts of geothermal activity despite being far from the edge of a tectonic plate. But it was also an idea that was hard to believe, since the ice above the plume is still there. “I thought it was crazy,” said Helene Seroussi of Nasa’s Jet Propulsion Laboratory, who helped the lead work. “I didn’t see how we could have that amount of heat and still have ice on top of it.” Now scientists have used the latest techniques to support the idea. The team developed a mantle plume numerical model to look at how much geothermal heat would be needed to explain what is seen at Marie Byrd Land, including the dome and the giant subsurface rivers and lakes present on Antarctica’s bedrock.

Further guaranteeing the further demise of the country.

• Next Round Of Greek Pension Cuts To Reach Up To 18% In 2019 (K.)

The recalculation of pensions paid out to people who have already retired will likely lead to major cuts for pensioners of the former Traders’ Fund (TEBE/OAEE) and the civil servants’ fund, as well as those who used to work at banks and state firms. According to data presented to the country’s creditors by the Labor Ministry, three-quarters of the recalculations have been completed, while the process is expected to finish by year-end. The cuts will be implemented from January 1, 2019, but the country’s 2.6 million pensioners should learn by how much their income will suffer by the middle of next year, as Athens has told the creditors it will inform all pensioners by June 2018.

Legally, the cuts cannot exceed 18%, even if the pensioner’s so-called personal difference – i.e. the margin between the pension they secured in the past and the amount a new pensioner would receive – is greater. The law also provides for the abolition of allowances for spouses and children, which a large share of pensioners receive. Kathimerini understands the recalculation results will lead to major cuts mainly for pensioners who had high salaries but few years of service, as well as widows.

is there anyone is the EU left with a conscience?

• EU Parliamentarians Warn Refugees May Die on Greek Islands (GR)

The EU Council and the European Commission must work urgently with Greece to prevent a humanitarian crisis this winter, according to the he Progressive Alliance of Socialists and Democrats (S&D) Group in the European Parliament. The group called for a debate in the parliament’s plenary session next week in Strasbourg. “Thousands of people seeking asylum on the Greek islands still do not have adequate protection for the coming cold months,” said S&D Group President Gianni Pittella.

“Many are still sleeping in light tents designed for summer weather, without sleeping bags, on thin mats or even on the ground. EU governments need to immediately stop sending back refugees to Greece under the Dublin mechanism; which is creating further strain on the Greek asylum system. If we do not act and refugees die from the cold, as they did last year, then their blood will be on our hands.” Pittella was also quick to stress that all EU member states must fulfill their obligations to relocate refugees from Greece. “A legal decision has been taken by the EU, and this must be fully respected. Relocation is the only way of taking these people out of limbo and allowing them to get on with rebuilding their lives.”

‘We’ll get you eventually.”

• Facebook: God Only Knows What It’s Doing To Our Children’s Brains (Axios)

Sean Parker, the founding president of Facebook, gave me a candid insider’s look at how social networks purposely hook and potentially hurt our brains. Be smart: Parker’s I-was-there account provides priceless perspective in the rising debate about the power and effects of the social networks, which now have scale and reach unknown in human history. He’s worried enough that he’s sounding the alarm. Parker, 38, now founder and chair of the Parker Institute for Cancer Immunotherapy, spoke yesterday at an Axios event at the National Constitution Center in Philadelphia, about accelerating cancer innovation. In the green room, Parker mentioned that he has become “something of a conscientious objector” on social media. By the time he left the stage, he jokingly said Mark Zuckerberg will probably block his account after reading this:

“When Facebook was getting going, I had these people who would come up to me and they would say, ‘I’m not on social media.’ And I would say, ‘OK. You know, you will be.’ And then they would say, ‘No, no, no. I value my real-life interactions. I value the moment. I value presence. I value intimacy.’ And I would say, … ‘We’ll get you eventually.'”

“I don’t know if I really understood the consequences of what I was saying, because [of] the unintended consequences of a network when it grows to a billion or 2 billion people and … it literally changes your relationship with society, with each other … It probably interferes with productivity in weird ways. God only knows what it’s doing to our children’s brains.”

“The thought process that went into building these applications, Facebook being the first of them, … was all about: ‘How do we consume as much of your time and conscious attention as possible?'” “And that means that we need to sort of give you a little dopamine hit every once in a while, because someone liked or commented on a photo or a post or whatever. And that’s going to get you to contribute more content, and that’s going to get you … more likes and comments.”

“It’s a social-validation feedback loop … exactly the kind of thing that a hacker like myself would come up with, because you’re exploiting a vulnerability in human psychology.”

“The inventors, creators — it’s me, it’s Mark [Zuckerberg], it’s Kevin Systrom on Instagram, it’s all of these people — understood this consciously. And we did it anyway.”

Debt Rattle November 29 2016

Nov 292016

November 29, 2016 Posted by Raúl Ilargi Meijer at 10:08 am Finance Tagged with: Antarctic, austerity, Canada, cash, Great Barrier, Hooverville, left, recount, Trump Towers 4 Responses »

NPC Skating night, Washington DC 1919

• How The Global Left Destroyed Itself -Or, All Sex Is Not Rape- (DLS)

• Of Hoovervilles and Trump Towers (Thomas)

• The Blinkered Elite Who Still Think Austerity Works (Aditya Chakrabortty)

• Athens Fears IMF, Berlin Will Reach Deal For Further Austerity (Kath.)

• Where Are We In The Business Cycle? (ZH)

• Cash is for Criminals – Taxing Cash Withdrawals from ATMs (Armstrong)

• Canada Watchdog Warns Lenders Face Big Losses If Housing Market Turns (FP)

• Canada House Price Bubble Threatens ‘Financial Stability’ (WS)

• Security Experts Join Jill Stein’s ‘Election Changing’ Recount Campaign (G.)

• France and Britain In Danger of Winter Power Shortages (BBG)

• Pressure Grows As Athens Eyes Faster Asylum Process (Kath.)

• West Antarctic Ice Shelf Breaking Up From The Inside Out (AGU)

• Scientists Record Biggest Ever Coral Die-Off On Great Barrier Reef (R.)

“..the same unreconstructed global capitalism that was still sucking the life from the lower classes that it always had. Only now it was doing so with explicit public backing and with an abandon it had not enjoyed since the roaring twenties.”

• How The Global Left Destroyed Itself -Or, All Sex Is Not Rape- (DLS)

With a Republican Party on its knees, Obama was positioned to restore the kind of New Deal rules that global capitalism enjoyed under Franklin D. Roosevelt. A gobalisation like the one promised in the brochures, that benefited the majority via competition and productivity gains, driven by trade and meritocracy, with counter-balanced private risk and public equity. But instead he opted to patch up financialised capitalism. The banks were bailed out and the bonus culture returned. Yes, there were some new rules but they were weak. There was no seizing of the agenda. No imprisonments of the guilty. The US Department of Justice is still issuing $14bn fines to banks involved yet still today there is no justice. Think about that a minute. How can a crime be worthy of a $14bn fine but no prison time?!?

Alas, for all of his efforts to restore Wall Street, Obama provided no reset for Main Street economics to restore the fortunes of the US lower classes. Sure Obama fought a hostile Capitol but, let’s face it, he had other priorities. And so the US working and middle classes, as well as those worldwide, were sold another pup. Now more than ever, if they said say so they were quickly shut down as “racist”, “xenophobic”, or “sexist”. Thus it came to pass that the global Left somehow did a complete back-flip and positioned itself directly behind the same unreconstructed global capitalism that was still sucking the life from the lower classes that it always had. Only now it was doing so with explicit public backing and with an abandon it had not enjoyed since the roaring twenties.

Which brings us back to today. And we wonder how it is that an abuse-spouting guy like Donald Trump can succeed Barack Obama. Trump is a member of the very same “trickle down” capitalist class that ripped the income from US households. But he is smart enough, smarter than the Left at least, to know that the decades long rage of the middle and working classes is a formidable political force and has tapped it spectacularly to rise to power. And, he has done more. He has also recognised that the Left’s obsession with post-structural identity politics has totally paralysed it. It is so traumatised and pre-occupied by his mis-use of the language of power – the “racist”, “sexist” and “xenophobic” comments – that it is further wedging itself from its natural constituents every day.

Don’t get me wrong, I am very doubtful that Trump will succeed with his proposed policies but he has at least mentioned the elephant in the room, making the American worker visible again.

I like this: in the 1930s you had “Hoover blankets” for newspapers and “Hoover leather” for cardboard, and now there’s “Trump Towers” for shantytowns.

• Of Hoovervilles and Trump Towers (Thomas)

In 1928, Republican Herbert Hoover was elected as president of the US. He took office in March of 1929. The following October, the stock market crashed, heralding in the Great Depression. Millions of Americans lost their jobs and homes and/or starved in the ensuing years. Countless people, having nowhere to live, set up shantytowns that came to be known as “Hoovervilles.” Their new residents relied for the most part on public charities or begging for whatever income they could attain. Was Mister Hoover responsible? Well, no. When elected, he had never held public office before and had not contributed to the cause of the depression. So why was he blamed? Well, whenever there’s disaster, it’s human nature to want to put a face on the cause of the problem. We tend to need to have someone at whom we can point our angry finger.

(Almost immediately after the shooting of John Kennedy, the public were shown a photo of Lee Harvey Oswald holding a rifle; the day after the destroying of the Twin Towers, the television news showed a photo of Osama bin Laden. The viewers didn’t question whether these were indeed the culprits; they simply accepted them, as their need to have someone to blame was greater than their need to have truth.) As a Republican, Mister Hoover became an easy target for Democrats seeking to further their own careers. Although the events that led up to the depression were caused by both Democrats and Republicans, both within politics and without, Mister Hoover was a convenient target for Democrats. In fact, the term “Hooverville” was created by Charles Michelson, publicity chief of the Democratic National Committee. Democrats also came up with other pejoratives, such as “Hoover blankets” for newspapers and “Hoover leather” for cardboard used in a shoe when the sole had worn through.

Throughout the 1930s, hundreds of Hoovervilles sprang up, housing hundreds of thousands of recently homeless people. There was even one in New York’s Central Park. By ascribing the Great Depression and everything that went with it to Mister Hoover, it was a foregone conclusion that in the next presidential election, the Democratic candidate would win by a landslide. For the next 20 years, Democrats held the US presidency and, in that time, the government made a major transformation towards collectivism. In spite of the fact that the Great Depression dragged on for around a decade, few Americans grasped the fact that collectivist policies prolonged the depression, rather than alleviated it.

[..] If history were to repeat, Mister Trump would find that, within months of his ascendancy to the throne, market crashes would occur, followed by monetary collapse, diminishment of entitlements, loss of homes and jobs and a return to Hoovervilles. It wouldn’t be surprising if the present generation of collectivist spin doctors choose to call the new shantytowns “Trump towers.” There can be no doubt that it would be a successful political move and, along with other pejoratives, would be extremely likely to result in a one-term presidency for Mister Trump, followed by a landslide victory in 2020 for the Democratic Party. [..] Mister Trump will be no more to blame than Mister Hoover but, as the present economic cycle will reach the tipping point on his watch, there can be little doubt as to who will receive the blame. Just as in 1929, the tail will blindly be pinned on the elephant, not the donkey, and a long era of increased collectivism will be heralded in.

“The end had come, but it was not yet in sight”.

• The Blinkered Elite Who Still Think Austerity Works (Aditya Chakrabortty)

On 11 September 1929 the Wall Street Journal quoted Mark Twain for its thought of the day: “Don’t part with your illusions; when they are gone you may still exist, but you have ceased to live.” Whatever that day’s subeditors thought they were doing, their choice now sounds as falsely confident as a rambler about to step off a ledge. Markets were already in turmoil, America was sinking into economic depression and running through the daily news was a thin, high note of hysteria. Still, Irving Fisher and the other wise men foresaw only the slightest of setbacks, and the brokers couldn’t take the cash fast enough. As John Kenneth Galbraith writes in his classic, The Great Crash 1929: “The end had come, but it was not yet in sight”.

Just six weeks later shares nosedived, countless families had their life savings destroyed, and an entire ruling class was stripped of its illusions. It took another 25 years, the Great Depression, the New Deal and a world war before stocks regained their 1929 levels. Look around today: the political class of 2016 is stuffed with people firmly clinging on to their illusions. Come Brexit, come Trump, come possible break-up of Europe: no lessons will be learned, barely an inch will be deviated from the ordained course. For some, the best pose is an uncomprehending defiance. Taking a break from tending to his £27m property portfolio, Tony Blair tells the New Statesman, “I can’t come into front-line politics. There’s just too much hostility.” Thus does the patron saint of exasperation inform his ex-voters: it’s not me, it’s you.

Others are smart enough at least to pay lip service to the new times. A couple of months ago George Osborne told the Financial Times how much he’d learned from Brexit: “There’s a pretty profound sense out there that the system’s not working for people, and instead of telling people, ‘Shut up, you’ve never had it so good,’ you’ve got to respond to that … I want to use this time out of office to try and understand it better.” Trouble is, lip service doesn’t pay so well. Days after that interview, the recently ejected chancellor began a speaking tour of America. In just a month, it was revealed last week, he raked in £320,400. Osborne made more from five speeches (nearly all to the finance industry, naturally, and putting in what his parliamentary register records as a total of 13 and a half hours’ work)than the average British worker will earn in over 11 years.

Good cop, bad cop. Rinse and repeat.

• Athens Fears IMF, Berlin Will Reach Deal For Further Austerity (Kath.)

With the government banking on securing a “political decision” at Monday’s Eurogroup – as the conclusion of the bailout review is now seemingly out of reach – the prospect of further austerity as demanded by the International Monetary Fund remains the biggest thorn in its side. Indeed, Athens’s biggest fear is that the IMF and Berlin will strike a deal demanding more measures as highlighted in comments by Finance Minister Euclid Tsakalotos Monday that the government cannot accept “compromise deals made between the IMF and the European countries on the back of Greece.” Tsakalotos criticized the IMF for pressuring Greece to implement more measures while failing to urge European countries to grant the country debt relief, and aimed fire at the eurozone for agreeing to discuss labor measures that stray beyond accepted European principles.

Referring to the labor regulation demands, he said: “Those institutions should not consider a country that is in a [bailout] program to have lesser rights. I think it’s not right, not morally right.” Government aides Monday, meanwhile, said the review would have already been concluded had it not been for the IMF’s demand for more measures in exchange for its participation in the bailout. However, Athens’s case for debt relief received a boost Monday after senior European officials said a solution was overdue. ECB executive board member Benoit Coeure, who was in Athens Monday, said the ECB was “looking forward to a solution” and “all stakeholders in the Greek adjustment program must realize that there are serious concerns about the sustainability of the Greek public debt.”

Really? There’s a business cycle left?

• Where Are We In The Business Cycle? (ZH)

On the bullish side, MS writes a trend of rising yields, steeper curves and better earnings has been in place for months. It forecasts that this trend will continue through 1Q17, as still-easy year-over- year comparisons mean headline inflation and global earnings continue to rise. The bank also points out something the Fed is well aware off: avoid giving the market much, if any, information. Namely, “an initial lack of policy clarity from the Trump administration may actually be helpful allowing investors to believe that the US ultimately will pursue ‘good’ projects (e.g., infrastructure spending) and avoid ‘bad’ ones (trade protectionism), while dangling the possibility of large corporate tax cuts. ”

However, shortly thereafter the initial optimism will fade and by 2Q17, this picture is set to change: global yields and USD to rise in 1Q as markets anticipate that better growth and inflation will cause the Fed to hike twice later in the year. That will mean a material tightening in financial conditions. [..] Around the same time, China growth will slow as credit-fueled stimulus is dialed back. And high expectations that the new US administration will be market-friendly raise the likelihood of disappointment. Even with expectations of fiscal stimulus, Morgan Stanley’s full year 2017 GDP forecast is just 2%. More troubling is that the expansion, already the 4th longest in US history, and set to be the third longest by the time Trump is inaugurated… is very long in the tooth.

Which brings us to the most concerning observation by Morgan Stanley, according to which 2017 is a year in which the bank’s odds of a boom and bust have materially increased, a finding consistent with a late-cycle US environment. So late, in fact, that one look at the chart below shows the US cycle has not only plateaued but is now stalling and is turning over. This, as Morgan Stanley writes, “is a change. Our long-running narrative had been “slow growth, slow reflation, and slow policy normalization”, a backdrop that we’ve seen as favorable to credit. The prospect for more fiscal stimulus in the US and elsewhere affects all three. Our new forecasts call for higher growth, inflation and policy rates than before, an uncertain cocktail for an expansion that is already one of the longest on record.”

Martin rants: “..even the Ten Commandments state clearly that socialism is wrong..”

• Cash is for Criminals – Taxing Cash Withdrawals from ATMs (Armstrong)

We are entering a very dark phase in this battle to retain our liberty. A proposal now being whispered behind the curtain in Europe is to impose a tax on withdrawing your own money from an ATM. The banks support this measure as a whole because they see this as preventing bank runs. Nobody will look at the direction we are headed. I am deeply concerned that these type of proposals will send the West in a real revolution not much different from that of Russia in 1917. The divide between left and right is getting much deeper and the left is hell bent on stripping those who produce of their liberty and assets. This type of confrontation is in line with our War Cycle, which we will update in 2017.

This is the most dangerous period we are heading into for governments will respond only in their own self-interest to survive. The socialists hate those who produce. That is just the bottom line. Nobody should have wealth more than they and this is the same human emotion that has cost tens of millions of lives in civil conflicts through out the centuries. Proof this is a persistent problem is the fact that even the Ten Commandments state clearly that socialism is wrong: “You shall not covet your neighbor’s house … or anything that belongs to your neighbor” (Exodus 20:17). Nevertheless, this is repuidiated by socialists who say it’s not fair that anyone has something more than they do.

This material jealousy has been the source of so much death throughout the centuries because it has been exploited by the ruling class to justify their thievery. We will review all our models and update this after the U.S. inauguration since the socialists are trying to figure out how to steal the election from Trump. There is no way to overturn Michigan, Wisconsin, and Pennsylvania without fraud and they need all three overturned to claim victory. This will not end nicely. The divide will only get bigger. The future is anything but stable and safe.

Only China can save the day now?!

• Canada Watchdog Warns Lenders Face Big Losses If Housing Market Turns (FP)

Recent increases in mortgage interest rates should be a wake-up call that lenders and borrowers should not be making decisions based on a short-term ability to repay, particularly given the risks created by high house prices and a long period of record low rates, Canada’s top banking regulator said Monday. “The recent uptick in mortgage interest rates should serve as a reminder that low rates are not a given, especially over longer periods of time,” Jeremy Rudin, head of the Office of the Superintendent of Financial Institutions (OSFI), told an audience of mortgage professionals in Vancouver. In prepared remarks for the Mortgage Professionals Canada National Conference, Rudin said risks in the market include rising rates and falling house prices.

“A pronounced or prolonged economic downturn could well involve a meaningful housing price correction. This could translate into significant losses for lenders and insurers,” he said. Moody’s Investors Service has estimated that a U.S.-style housing meltdown with home prices falling by as much as 35% could result in combined losses of more than $17 billion for the Canadian banks and mortgage insurers. “Given the risks and vulnerabilities arising from the current environment, sound underwriting is now more important than ever,” Rudin said. This month, Canada’s banks started raising their mortgage prime rates or posted variable rates in what market watchers said was a response to moves by the federal government to cool the housing market. On Nov. 11, mortgage tracker RateSpy.com said the typical five-year discretionary variable rate for Canada’s six largest banks had increased to 2.3% from 2.25%.

Warnings from all sides now.

• Canada House Price Bubble Threatens ‘Financial Stability’ (WS)

In its economic outlook released today, the OECD is generally gung-ho about the Canadian economy, and practically bubbling over with new enthusiasm for the global economy. It now expects global growth to accelerate from 2.9% this year to 3.3% in 2017 and to 3.6% in 2018. Call it the “Trump effect” gone global. But for Canada, despite its hunky-dory economy due to the “moderately expansionary policy stance in the 2016 federal budget,” the OECD has a stark warning: “House prices, housing investment and household debt are very high, posing financial stability risks.” The OECD’s chart shows the house price indices for Vancouver and Toronto, which make up about one-third of the national housing market, versus the index for the rest of Canada. Note the hook at the top of the red line: a feeble sign that house prices in Vancouver might be heading south:

A “disorderly housing market correction,” as envisioned by the OECD, would reduce residential investment, which has become a key in the Canadian economy. Through the reverse “wealth effects,” private consumption would take a hit, and in the end the banks are on the line, and it “could threaten financial stability.”The indebtedness of Canadian households, when measured against disposable income, continues to “edge up from already high levels,” encouraged and enabled by low interest rates. Of the OECD member states, only six have higher debt-to-disposable income ratios: Ireland, Sweden, Australia, Norway, the Netherlands, and Denmark (the last two with a ratio of over 250%). All of them have majestic government-aided and abetted housing bubbles. For American debt slaves, this measure is just over 100%, below where Canada’s was in 2000!

Strange circus.

• Security Experts Join Jill Stein’s ‘Election Changing’ Recount Campaign (G.)

More election security experts have joined Jill Stein’s campaign to review the presidential vote in battleground states won by Donald Trump even as she sues Wisconsin to secure a full recount by hand of all of its 3m ballots. Half a dozen academics and other specialists on Monday submitted new testimony supporting a lawsuit from Stein against Wisconsin authorities, in which she asked a court to prevent county officials from carrying out their recounts by machine. Stein argued that Wisconsin’s plan to allow automatic recounting “risks tainting the recount process” because the electronic scanning equipment involved may incorrectly tally the results and could have been attacked by foreign hackers.

“There is a substantial possibility that recounting the ballots by hand will produce a more correct result and change the outcome of the election,” Stein argued in the lawsuit in Dane County circuit court. A copy was obtained by the Guardian. Stein, the Green party’s presidential election candidate, is working to secure full recounts in the states of Michigan, Pennsylvania and Wisconsin, where Trump surprised pollsters by narrowly beating Clinton on his way to a national victory in the electoral college. A petition from Stein requesting a recount was accepted by Wisconsin last Friday.

Her efforts to obtain a recount in Pennsylvania met serious difficulties on Monday as it became clear she needed three voters in each of the state’s 9,163 voting precincts to request a recount on her behalf, and that deadlines to do so had passed in many precincts. Wisconsin also told Stein on Monday that the recount, which was previously estimated to cost $1m, would actually cost her $3.5m and that the funds must be produced by the end of Tuesday. Stein has raised more than $6m for the three-state recount effort using online crowdfunding.

One of these years….

• France and Britain In Danger of Winter Power Shortages (BBG)

France and the U.K. are the two nations in Europe most at risk of power shortages this winter, particularly if there is a cold snap in early December or January. With availability of Electricite de France’s French nuclear fleet at the lowest level in a decade, the nation will need to rely on imports during several weeks and adding a cold spell to that could make the situation “tense,” according to European grid group Entsoe’s Winter Outlook report. Britain may face a power deficit in early January if temperatures fall below average, it said in the report. The Entsoe analysis indicated that even under severe conditions, demand can be met and reserves maintained across nearly all of Europe, thanks to surpluses in most regions and available interconnector capacity.

The U.K. potentially needs high imports from all neighboring countries in the week from Jan. 9. A combination of low wind and cold temperatures means there might be a deficit. Delays to restarts of several French reactors undergoing safety checks at the request of regulator ASN will mean “significantly” decreased margins in the first three weeks of December. French electricity demand is highly sensitive to cold weather and a drop of 1ºC below normal can add 2,400 megawatts, according to Entsoe. Reseau de Transport d’Electricite, the French grid operator, earlier this month warned of an increasing risk of power shortages in Europe’s second-biggest market. It has several options to reduce demand if needed, including the last-resort possibility of rolling blackouts. The U.K. has a reserve of power stations it can activate and National Grid has described this winter as “tight but manageable.”

The EU has so far sent 35 of 500 promised ‘staffers’ for asylum proceedings. Slow it down and they don’t have to resettle refugees. Convenient.

• Pressure Grows As Athens Eyes Faster Asylum Process (Kath.)

The municipal council on the Aegean island of Chios has voted against a government proposal to create a new reception center for migrants and refugees on the site of a former landfill with the aim of easing congestion at the existing Souda facility. Adding to the strain, heavy rainfall Monday flooded the Souda camp, forcing local authorities to transfer some 800 migrants and refugees into public buildings. On Lesvos, migrants and refugees marched in the island capital of Mytilene in protest at conditions at Moria camp, while demanding that they be allowed to leave the island. Meanwhile, Migration Minister Yiannis Mouzalas visited Germany to discuss ways of accelerating Greece’s asylum procedures within the framework of EU rules on refugee protection. According to official data, an additional 268 individuals arrived on Greece’s islands over the weekend.

Obviously.

• West Antarctic Ice Shelf Breaking Up From The Inside Out (AGU)

A key glacier in Antarctica is breaking apart from the inside out, suggesting that the ocean is weakening ice on the edges of the continent. The Pine Island Glacier, part of the ice shelf that bounds the West Antarctic Ice Sheet, is one of two glaciers that researchers believe are most likely to undergo rapid retreat, bringing more ice from the interior of the ice sheet to the ocean, where its melting would flood coastlines around the world. A nearly 225-square-mile iceberg broke off from the glacier in 2015, but it wasn’t until researchers were testing some new image-processing software that they noticed something strange in satellite images taken before the event. In the images, they saw evidence that a rift formed at the very base of the ice shelf nearly 20 miles inland in 2013.

The rift propagated upward over two years, until it broke through the ice surface and set the iceberg adrift over 12 days in late July and early August 2015. Their findings were published today in Geophysical Research Letters, a journal of the American Geophysical Union. “It’s generally accepted that it’s no longer a question of whether the West Antarctic Ice Sheet will melt, it’s a question of when,” said Ian Howat, associate professor of Earth sciences at Ohio State and lead author of the new study. “This kind of rifting behavior provides another mechanism for rapid retreat of these glaciers, adding to the probability that we may see significant collapse of West Antarctica in our lifetimes.”

No return.

• Scientists Record Biggest Ever Coral Die-Off On Great Barrier Reef (R.)

Warm seas around Australia’s Great Barrier Reef have killed two-thirds of a 700-km (435 miles) stretch of coral in the past nine months, the worst die-off ever recorded on the World Heritage site, scientists who surveyed the reef said on Tuesday. Their finding of the die-off in the reef’s north is a major blow for tourism at reef which, according to a 2013 Deloitte Access Economics report, attracts about A$5.2 billion ($3.9 billion) in spending each year. “The coral is essentially cooked,” professor Andrew Baird, a researcher at James Cook University who was part of the reef surveys, told Reuters by telephone from Townsville in Australia’s tropical north. He said the die-off was “almost certainly” the largest ever recorded anywhere because of the size of the Barrier Reef, which at 348,000 sq km (134,400 sq miles) is the biggest coral reef in the world.

Bleaching occurs when the water is too warm, forcing coral to expel living algae and causing it to calcify and turn white. Mildly bleached coral can recover if the temperature drops and the survey found this occurred in southern parts of the reef, where coral mortality was much lower. While bleaching occurs naturally, scientists are concerned that rising sea temperatures caused by global warming magnifies the damage, leaving sensitive underwater ecosystems unable to recover. UNESCO’s World Heritage Committee stopped short of placing the Great Barrier Reef on an “in danger” list last May but asked the Australian government for an update on its progress in safeguarding the reef.

Debt Rattle October 26 2016

Oct 262016

October 26, 2016 Posted by Raúl Ilargi Meijer at 9:52 am Finance Tagged with: Antarctic, AT&T, bankruptcy, employment, euro, Hillary, oil, Syria, Trump, war, yuan Comments Off

Dorothea Lange Depression refugee family from Tulsa, Oklahoma 1936

• The Euro Has Been A Disaster For Southern European Production (Gefira)

• Washington: Don’t Think It’s Over When Trump Loses (Steve Keen)

• 213 North American Oil Industry Companies Have Now Declared Bankruptcy (FF)

• China Tightens Capital Controls Amid Yuan’s Continuing Slide (Nikkei)

• London House Prices Forecast to Plunge as Brexit Chokes Market (BBG)

• AT&T Is Spying On Americans For Profit (DB)

• The US Is Currently Bombing Seven Countries (PF)

• Trump Says Clinton Policy On Syria Would Lead To World War Three (R.)

• Most Americans Do Not Feel Represented By Democrats Or Republicans (G.)

• The Biggest F*ck Ever Recorded In Human History (Michael Moore)

• Antarctic Glaciers Are Melting at a ‘Staggering’ Rate (Gizm.)

Why it has to stop. Or rather, why it will be stopped.

• The Euro Has Been A Disaster For Southern European Production (Gefira)

Some say that the common currency prevents less productive economies from cheating by weakening their national currencies and forces them to become more efficient and competitive. Industrial production data shows that it is not the case. Italy, France, Greece and Portugal have not only stopped producing more; they are producing now less than in 1990! The decay started immediately after the introduction of the euro in 2002! The OECD industrial production data analysis leads to the following conclusions: 1. since 1990 industrial production (manufacturing and construction included) has been growing in volume at large, even in the most developed countries; 2. the disproportion between industrial output in Germany and two other biggest euroarea economies, Italy and France, occurred already just after the 2001-2002 crisis; 3. Southern Europe’s economies have lost their ability to rebound in industrial production alongside the adoption of the euro.

1. Industrial output can increase In most of the most developed countries in the world industrial production has grown in volume since 1990, although a great deal of manufacturing capacities have been moved from the West to the emerging markets. Moreover, in countries like the USA, Israel, Switzerland, Austria and Germany the output has surpassed the 2008 pre-crisis levels. However, if we take a look at the euroarea or the Group of Seven (G7), then numbers are still lower than in 2008 but definitely higher than in 1990.

2. The euroarea has a problem A closer look at the European industrial production numbers gives a clear signal: something bad has happened after 2000. Before the introduction of euro, production trends ran more or less in the same direction. Meanwhile after the 2001-2002 crisis, French and Italian output did not rebound, while production in Germany expanded enormously and was able to reach the 2008 level quickly after the last crisis. Industry in France and Italy not only has not rebounded but also has started to curb.

3. Southern Europe will not rebound with the euro
Countries with a sovereign currency can easily build up their economies because of one simple mechanism: depreciation. A relatively strong currency (strong in comparison to the economic condition) would not have to be a problem for Italy or Greece if there still were some capacities for more debt. Then internal consumption could prop up industrial production. But Spain, Greece, Italy and Portugal have had neither a weak sovereign currency nor the possibility of incurring more debt.

Industry is very important for the economy, as it creates jobs and innovations. The euroarea in the current form is preventing Southern Europe’s industry from developing because of a different type of economy there. “Roman” economies are not worse than than Germany’s. They just need other tools, so restricting all these various economies in the German fashion will destroy the euro as well as the European unity.

Steve Keen on which employment numbers are actually relevant. Curious to see how many people think Hillary’s got it in the bag. As an example, here’s a Bloomberg poll that just came out:

• Washington: Don’t Think It’s Over When Trump Loses (Steve Keen)

Trump’s fans certainly have their “dark fantasies”, but Washington and Krugman have a “bright fantasy” if they believe that unemployment is genuinely low. My favourite and unimpeachable proof that this is false is an easily-obtained data series: the percentage of Americans aged 25-54 who have a job. While the “Unemployment Rate” is back within half a per cent of its pre-crisis low, the percentage of Americans aged 25-54 who have a job today is 2% lower than it was before the crisis. Perhaps an even more important fact that explains the anger behind Trump (and Sanders too, before he was eliminated by the Democratic Party’s peculiar primary process) is that the employment rate actually peaked in 2000, and even after this recovery, it is still 4% lower than in 2000 (78% today versus 82% in 2000).

What that means in terms of people with jobs is even more telling. The number of people aged 25-54 with a job in the USA peaked at 104.7 million in December 2007. It bottomed at 100.3 million in October 2013, and as of February 2015 (the most recent data) it was 101.2 million. So when Washington is talking about achieving “full employment” again, there are still more than 3 million less people employed today than in 2007. Demographic change has caused this segment of the population to decline since December 2007—from 126 million then to 125 million in February 2015—but that still means 2 million more people are unemployed today than in 2007. So if you look at the unemployment rate, everything is wonderful. That seems to be what Washington insiders—all with well-paying jobs—are doing. But if you look at the employment rate, the economy is still in the doldrums. Which series is telling the truth about the US economy?

The employment to population ratio is telling the truth, because it’s derived by asking employers how many people they have on their payroll. The unemployment rate, on the other hand, lies about the real level of unemployment, because it is derived by asking individuals whether they fulfil a number of criteria, including whether they have looked for a job in the last 4 weeks. The employment ratio accurately tells you the number of people receiving a salary; the unemployment ratio does not accurately tell you who is not receiving one. It’s no comfort to someone not receiving a salary to be told that they are not also unemployed, according to the official definition. Their justified reaction is to tell the “official definition” what to do with itself.

A few billion here and a few billion there in debt.

• 213 North American Oil Industry Companies Have Now Declared Bankruptcy (FF)

Fewer and fewer oil exploration and production companies are declaring bankruptcy. But more oilfield service companies are. So far this month, only one North American E&P firm filed for Chapter 11 protection, according to data released on Tuesday by the Dallas law firm Haynes & Boone. That’s down from two in September, three in August and four in July. But it’s been an especially tough few months for service companies. As crude prices began crashing in 2014, drillers started idling rigs. That led to fewer jobs for the companies that make their money helping producers pump oil and gas. Moreover, when producers did hire service companies, they often forced them to heavily discount their rates.

Eight service companies filed this month. Seven filed last month, and eight again the month before. Almost 50 have filed in the last six months, half of the 108 over two years. In total, 213 North American oil and gas companies have now filed for bankruptcy since the start of 2015, listing more than $85 billion in debt. The most recent exploration firm: the private oil and gas company Mountain Divide, based in Montana, filed on Oct. 14, and listed $83 million in debt. On the oilfield services side, Houston-based Key Energy Services filed on Monday, with more than $1 billion in debt. And Basic Energy Services, headquartered in Fort Worth, said Monday it had reached an agreement with debt holders to file by Tuesday.

While at the same time letting Chinese foreign purchases escalate.

• China Tightens Capital Controls Amid Yuan’s Continuing Slide (Nikkei)

China has toughened restrictions on capital flows to prevent a negative feedback loop between a weakening yuan and capital flight. The State Administration of Foreign Exchange has introduced new capital measures in areas such as Shanghai and Guangzhou since the beginning of autumn, asking foreign and regional banks to cap the amount of foreign currency they will sell to customers during 2016. These limits, though ostensibly up to banks’ discretion, are set by negotiation with authorities and so are essentially directed by the government, a financial sector source said. A gag order has been imposed surrounding the measures, the source said. Some banks apparently have set steep exchange rates to pre-emptively curb foreign currency sales, a practice that could pose issues for foreign companies in China trying to repatriate earnings, for example.

China’s trade has flagged in recent months, with exports dropping 10% in September from the year-earlier level in dollar terms. The prospect of an interest rate hike in the U.S., meanwhile, has market players expecting further declines in the yuan’s value. Stashing assets abroad, rather than keeping them in China, is increasingly seen as the safer option. This view has led to further selling of the yuan, giving rise to a downward spiral that capital controls aim to break. Both the foreign exchange regulator and the People’s Bank of China have given banks several directives this year to curb outflows and the currency’s slide. Institutions are asked to report on corporate clients’ plans for buying foreign currency. Large fund transfers that involve foreign currency purchases must be explained by the institutions ahead of time. Individuals traveling overseas are asked to make reservations when exchanging money.

The yuan continues to depreciate despite these efforts. The central bank Tuesday set its daily guidance rate for the Chinese currency at 6.77 yuan to the dollar – just a little shy of the 6.82- to 6.83-to-the-dollar range at which the yuan was fixed for nearly two years following the September 2008 financial crisis. At the time, the goal was to prevent the currency from strengthening to stave off an economic slump. The concern now is that the yuan will become weaker and capital will flow out.

The best thing to could happen in Britain.

• London House Prices Forecast to Plunge as Brexit Chokes Market (BBG)

London property prices are set to fall next year as uncertainty about Britain’s exit from the EU damps the U.K. housing market, according to the Centre for Economics and Business Research. London, and especially the priciest areas of the capital’s housing market, will be most affected, with prices dropping 5.6% in 2017, according to the consultancy’s predictions. Across the U.K., while property value growth will accelerate to 6.9% in 2016, it’s set to slow to 2.6% next year. “Nervousness and uncertainty are starting to show,” said Kay Daniel Neufeld, an economist at Cebr. “We expect to see house-price growth across the U.K. slowing considerably in the fourth quarter of 2016, a trend that is set to continue in 2017.”

While the housing market was already facing headwinds from tax changes before June’s EU referendum, investors are becoming increasingly nervous about the possibility of a so-called hard Brexit. That could see the U.K. giving up membership of Europe’s single market for goods and services to secure greater control of immigration. Accelerating inflation, increasing unemployment and slowing business investment are all set to weigh on house prices, while curbs on migration and a retreat from the single market could slow demand from international buyers, the Cebr said.

Wait till we find out what Google does.

• AT&T Is Spying On Americans For Profit (DB)

In 2013, Hemisphere was revealed by The New York Times and described only within a Powerpoint presentation made by the Drug Enforcement Administration. The Times described it as a “partnership” between AT&T and the U.S. government; the Justice Department said it was an essential, and prudently deployed, counter-narcotics tool. However, AT&T’s own documentation—reported here by The Daily Beast for the first time—shows Hemisphere was used far beyond the war on drugs to include everything from investigations of homicide to Medicaid fraud. Hemisphere isn’t a “partnership” but rather a product AT&T developed, marketed, and sold at a cost of millions of dollars per year to taxpayers.

No warrant is required to make use of the company’s massive trove of data, according to AT&T documents, only a promise from law enforcement to not disclose Hemisphere if an investigation using it becomes public. These new revelations come as the company seeks to acquire Time Warner in the face of vocal opposition saying the deal would be bad for consumers. Donald Trump told supporters over the weekend he would kill the acquisition if he’s elected president; Hillary Clinton has urged regulators to scrutinize the deal. While telecommunications companies are legally obligated to hand over records, AT&T appears to have gone much further to make the enterprise profitable, according to ACLU technology policy analyst Christopher Soghoian.

“Companies have to give this data to law enforcement upon request, if they have it. AT&T doesn’t have to data-mine its database to help police come up with new numbers to investigate,” Soghoian said. AT&T has a unique power to extract information from its metadata because it retains so much of it. The company owns more than three-quarters of U.S. landline switches, and the second largest share of the nation’s wireless infrastructure and cellphone towers, behind Verizon. AT&T retains its cell tower data going back to July 2008, longer than other providers. Verizon holds records for a year and Sprint for 18 months, according to a 2011 retention schedule obtained by The Daily Beast.

Just so you know.

• The US Is Currently Bombing Seven Countries (PF)

For this fact check, we wondered if the U.S. is bombing seven countries. That at least has been so: In September 2014, PunditFact rated True a bombed-countries claim by Ryan Lizza of The New Yorker. Lizza referred to President George W. Bush and his successor, Barack Obama, in a tweet that said: “Countries bombed: Obama 7, Bush 4.” At the time, the U.S. on Obama’s watch had bombed Afghanistan, Iraq, Pakistan, Somalia, Yemen, Libya and Syria. When we asked Stein for her backup information, spokeswoman Meleiza Figueroa pointed out various web posts including a September 2014 CNN news story stating that Obama had ordered air strikes in seven countries through the bulk of his eight years in the office.

[..] The Bureau of Investigative Journalism, a nonprofit news service based at City University London, maintains a running list of U.S. military actions in a number of countries. The bureau annotates each incident with links to press reports. When we looked, the bureau’s accounts by country indicated the latest U.S drone strike in Pakistan occurred in May 2016; the latest strike in Somalia was in September 2016; and the latest U.S. strikes in Yemen and Afghanistan were in October 2016. Separately, we noticed, the Department of Defense said in an Oct. 11, 2016, web post that countries including the U.S. battling the Islamic State of Iraq and the Levant, or ISIL, have conducted 15,634 air strikes to date – 10,129 in Iraq, 5,505 in Syria – with the U.S. conducting 6,868 in Iraq and 5,227 in Syria. In a Sept. 30, 2016, post, the U.S. Air Force said attacks from the air have affected ISIL’s “ability to fight and conduct operations in Iraq, Syria and Afghanistan.”

Too, in August 2016, the New York Times reported the U.S. had “stepped up a new bombing campaign against the Islamic State in Libya, conducting its first armed drone flights from Jordan to strike militant targets” in Libya’s coastal city of Sirte. That news story quoted Obama saying during a news conference that the airstrikes were critical to helping Libya’s fragile United Nations-backed government to drive Islamic State militants out of Sirte, which the group has controlled since June 2015. Obama promised the air campaign would continue as long as necessary to make sure that the extremist group “does not get a stronghold in Libya,” the newspaper said.

Trump -rightly- mirrors something I said a few days ago in Ungovernability “..her harsh criticism of Putin raised questions about “how she is going to go back and negotiate with this man who she has made to be so evil,” if she wins the presidency.”

• Trump Says Clinton Policy On Syria Would Lead To World War Three (R.)

U.S. Republican presidential nominee Donald Trump said on Tuesday that Democrat Hillary Clinton’s plan for Syria would “lead to World War Three,” because of the potential for conflict with military forces from nuclear-armed Russia. In an interview focused largely on foreign policy, Trump said defeating Islamic State is a higher priority than persuading Syrian President Bashar al-Assad to step down, playing down a long-held goal of U.S. policy. Trump questioned how Clinton would negotiate with Russian President Vladimir Putin after demonizing him; blamed President Barack Obama for a downturn in U.S. relations with the Philippines under its new president, Rodrigo Duterte; bemoaned a lack of Republican unity behind his candidacy, and said he would easily win the election if the party leaders would support him.

“If we had party unity, we couldn’t lose this election to Hillary Clinton,” he said. On Syria’s civil war, Trump said Clinton could drag the United States into a world war with a more aggressive posture toward resolving the conflict. Clinton has called for the establishment of a no-fly zone and “safe zones” on the ground to protect non-combatants. Some analysts fear that protecting those zones could bring the United States into direct conflict with Russian fighter jets. “What we should do is focus on ISIS. We should not be focusing on Syria,” said Trump as he dined on fried eggs and sausage at his Trump National Doral golf resort. “You’re going to end up in World War Three over Syria if we listen to Hillary Clinton.”

[..] On Russia, Trump again knocked Clinton’s handling of U.S.-Russian relations while secretary of state and said her harsh criticism of Putin raised questions about “how she is going to go back and negotiate with this man who she has made to be so evil,” if she wins the presidency.

“Less than half the public (43%) say they have a great deal of confidence that their vote will be counted accurately..”

• Most Americans Do Not Feel Represented By Democrats Or Republicans (G.)

As they go to the polls in a historic presidential election, more than six in 10 Americans say neither major political party represents their views any longer, a survey has found. Dissatisfaction with both Democrats and Republicans has risen sharply since 1990, when less than half held that neither reflected their opinions, according to research by the Public Religion Research Institute (PRRI). The seventh annual 2016 American Values Survey was carried out throughout September among a random sample of 2,010 adults in all 50 states. Both party establishments have been rattled by the outsider challenges of Donald Trump, who was successful in winning his party’s nomination, and Bernie Sanders, who was not. In a year that seems ripe for third-party candidates, Libertarian Gary Johnson and Jill Stein of the Green party are seeking to capitalise but have fallen back in the polls in recent weeks.

61% of survey respondents say neither political party reflects their opinions today, while 38% disagree. 77% of independents and a majority (54%) of Republicans took this position, while less than half (46%) of Democrats agree. There was virtually no variation across class or race. Both Democratic presidential nominee Hillary Clinton and Republican standard bearer Trump continue to suffer historically low favourability ratings, with less than half of the public viewing each candidate positively (41% v 33%). Clinton is viewed less favourably than the Democratic party (49%), but Trump’s low rating is more consistent with the Republican party’s own favourability (36%).

The discontent with parties and candidates extends to the electoral process itself, which Trump claims is rigged against him. Less than half the public (43%) say they have a great deal of confidence that their vote will be counted accurately, while 38% have some confidence and 17% have hardly any confidence. [..] The PRRI found that pessimism about the direction of the US is significantly higher today (74%) than it was at this time during the 2012 presidential race, when 57% of the public said the country was on the wrong track.

Slightly confused: I thought he was pro-Hillary?!

• The Biggest F*ck Ever Recorded In Human History (Michael Moore)

I know a lot of people in Michigan that are planning to vote for Trump and they don’t necessarily agree with him. They’re not racist or redneck, they’re actually pretty decent people and so after talking to a number of them I wanted to write this. Donald Trump came to the Detroit Economic Club and stood there in front of Ford Motor executives and said “if you close these factories as you’re planning to do in Detroit and build them in Mexico, I’m going to put a 35% tariff on those cars when you send them back and nobody’s going to buy them.” It was an amazing thing to see. No politician, Republican or Democrat, had ever said anything like that to these executives, and it was music to the ears of people in Michigan and Ohio and Pennsylvania and Wisconsin – the “Brexit” states.

You live here in Ohio, you know what I’m talking about. Whether Trump means it or not, is kind of irrelevant because he’s saying the things to people who are hurting, and that’s why every beaten-down, nameless, forgotten working stiff who used to be part of what was called the middle class loves Trump. He is the human Molotov Cocktail that they’ve been waiting for; the human hand grande that they can legally throw into the system that stole their lives from them. And on November 8, although they lost their jobs, although they’ve been foreclose on by the bank, next came the divorce and now the wife and kids are gone, the car’s been repoed, they haven’t had a real vacation in years, they’re stuck with the shitty Obamacare bronze plan where you can’t even get a fucking percocet, they’ve essentially lost everything they had except one thing – the one thing that doesn’t cost them a cent and is guaranteed to them by the American constitution: the right to vote.

They might be penniless, they might be homeless, they might be fucked over and fucked up it doesn’t matter, because it’s equalized on that day – a millionaire has the same number of votes as the person without a job: one. And there’s more of the former middle class than there are in the millionaire class. So on November 8 the dispossessed will walk into the voting booth, be handed a ballot, close the curtain, and take that lever or felt pen or touchscreen and put a big fucking X in the box by the name of the man who has threatened to upend and overturn the very system that has ruined their lives: Donald J Trump.

They see that the elite who ruined their lives hate Trump. Corporate America hates Trump. Wall Street hates Trump. The career politicians hate Trump. The media hates Trump, after they loved him and created him, and now hate. Thank you media: the enemy of my enemy is who I’m voting for on November 8. Yes, on November 8, you Joe Blow, Steve Blow, Bob Blow, Billy Blow, all the Blows get to go and blow up the whole goddamn system because it’s your right. Trump’s election is going to be the biggest fuck ever recorded in human history and it will feel good.

“.. like ice cubes rising as a soft drink is poured into a glass.”

• Antarctic Glaciers Are Melting at a ‘Staggering’ Rate (Gizm.)

Scientists have long viewed the Amundsen sea embayment as the Achilles heel of West Antarctica, with papers in the 1970s and ‘80s describing it as “uniquely vulnerable,” “unstable,” and the “weak underbelly” of the continent. The fear, then and now, was that warm ocean waters lapping against the foot of the glaciers could cause the ice to pop up off of its rocky floor, like ice cubes rising as a soft drink is poured into a glass. When ice detaches from its so-called “grounding line,” it kickstarts a chain reaction that can trigger a lot of melting. “When water gets between ice and land, it moves quickly, bringing lots of heat in, and melting the ice above it more rapidly,” said Thomas Wagner, the director of NASA’s polar science program. “The Amundsen sea embayment is a place where we know this is happening.”

Indeed, satellite and radar data show that two of West Antarctica’s largest glaciers, Pine Island and Thwaites, have seen their grounding line retreat many miles since 2000, causing fresh water to pour off the ice and into the ocean. This process is so effective that glaciologists recently declared the total collapse of the Amundsen sea embayment—whose glaciers contain enough water to raise global sea levels by four feet—to be “unstoppable.” Here’s the rub: We still have no idea how quickly all of that ice will go, meaning we have no idea whether to prepare for a lot more sea level rise in ten years, in a generation, or at the end of the century. A new study, led by glaciologist Ala Khazendar of NASA’s Jet Propulsion Laboratory, points to ice disappearing sooner rather than later.

For years, NASA has been conducting an airborne campaign called Operation Ice Bridge, flying across sections of our planet’s north and south polar ice sheets and using ground-penetrating radar to measure changes beneath the surface. When Khazendar examined Ice Bridge’s datasets for the Amundsen sea embayment, he realized that NASA flew almost exactly the same path in 2009 that it did in 2002. “This presented an excellent opportunity to look at how ice thickness changed,” he said.

NOTE: we know our Comments section doesn’t function properly. We’re looking into it.

Debt Rattle July 21 2016

Jul 212016

July 21, 2016 Posted by Raúl Ilargi Meijer at 9:03 am Finance Tagged with: 1MDB, Aegean, Antarctic, Brexit, bubble, credit, Crexit, emergency, New Zealand, oil, Turkey, Wikileaks 12 Responses »

DPC City Hall and Market Street and west from 11th, Philadelphia 1912

• S&P Issues ‘Crexit’ Warning as Corporate Debt to Swell to $75 Trillion (CNBC)

• The Entire Market is Driven by a “Once in History” Bubble About to Burst (P.)

• Bank Of England Report Finds Economy Has Not Slowed Since Brexit Vote (G.)

• US Links Malaysia PM, Wolf of Wall Street to Millions Stolen From 1MBD (WSJ)

• Singapore Finds UBS, DBS, StanChart ‘Failings’ in 1MDB Probe (BBG)

• Erdogan Declares State Of Emergency, Warns S&P ‘Don’t Mess With Turkey’ (ZH)

• Wikileaks, About To Expose Turkish ‘Coup’, Under ‘Sustained Attack’ (TAM)

• Reports Of Turkish Commandos In Greek Aegean Put Athens On Alert (Kath.)

• A Turkey of a Coup (Dmitry Orlov)

• More Pain Seen For US Crude As Product Glut Adds To Gloom (R.)

• New Zealand House Bubble Warning Will ‘Shake Government’ (NZH)

• Greek Brain Drain Amounted To 223,000 People In 2008-2013 (Kath.)

• Warmer Water, Not Air, Drives Antarctic Peninsula Glacier Melt (CB)

Too late to take away the punch bowl. It’s set to end up on the floor in a thousand pieces when someone knocks it over.

• S&P Issues ‘Crexit’ Warning as Corporate Debt to Swell to $75 Trillion (CNBC)

Corporate debt is projected to swell over the next several years, thanks to cheap money from global central banks, according to a report Wednesday that warns of a potential crisis from all that new, borrowed cash floating around. By 2020, business debt likely will climb to $75 trillion from its current $51 trillion level, according to S&P Global Ratings. Under normal conditions, that wouldn’t be a major problem so long as credit quality stays high, interest rates and inflation remain low, and there are economic growth persists. However, the alternative is less pleasant should those conditions not persist. Should interest rates rise and economic conditions worsen, corporate America could be facing a major problem as it seeks to manage that debt.

Rolling over bonds would become more difficult should inflation gain and rates raise, while a slowing economy would worsen business conditions and make paying off the debt more difficult. In that case, a “Crexit,” or withdrawal by lenders from the credit markets, could occur and lead to a sudden tightening of conditions that could trigger another financial scare. “A worst-case scenario would be a series of major negative surprises sparking a crisis of confidence around the globe,” S&P said in the report. “These unforeseen events could quickly destabilize the market, pushing investors and lenders to exit riskier positions (‘Crexit’ scenario). If mishandled, this could result in credit growth collapsing as it did during the global financial crisis.” In fact, S&P considers a correction in the credit markets to be “inevitable.” The only question is degree.

[..] “Central banks remain in thrall to the idea that credit-fueled growth is healthy for the global economy,” S&P said. “In fact, our research highlights that monetary policy easing has thus far contributed to increased financial risk, with the growth of corporate borrowing far outpacing that of the global economy.” Between now and 2020, debt “flow” is expected to grow by $62 trillion – $38 trillion in refinancing and $24 trillion in new debt, including bonds, loans and other forms. That projection is up from the $57 trillion in new flow S&P had expected for the same period a year ago. [..] China is expected to account for the bulk of the credit flow growth, with the nation projected to add $28 trillion or 45% of the $62 trillion expected global demand increase. The U.S. is estimated to add $14 trillion or 22%, with Europe adding $9 trillion, or 15%.

“Buying stocks for their yield because bonds are at their lowest yields in 5000 years is like switching to cigarettes from crack for health purposes.”

• The Entire Market is Driven by a “Once in History” Bubble About to Burst (P.)

Since QE 3 ended in October 2014, stocks have traded in a large range between roughly 2,130 and 1800 on the S&P 500.

During this time, whenever stocks began to breakdown in a serious way, a clear intervention was staged in which someone manipulated the markets higher. Regardless of whether you are a bull or a bear, none of those rallies felt normal or sane in any way. No one panic buys every single day at the exact same time for days on end. Which brings us to today. Stocks have broken out of the trading range to the upside hitting new all-time highs.

They are doing this despite the US entering a recession, China continuing to devalue the Yuan, Italy facing a banking crisis, etc. The explanation the bulls are giving for the breakout is that stocks supposedly hitting all time highs because with $13 trillion in bonds posting negative yields, stocks’ 2.4% or so in dividends are extremely attractive from a yield perspective. Yes, we’ve reached the point at which investors are buying stocks for yield and bonds for capital gains. This is extremely problematic in that it implies that all equity purchases are being driven by a “once in history” bond bubble.• German bond yields are negative out to nearly 10 years. • Japanese bond yields are negative out to 10 years. • Swiss bond yields are negative out to 50 years.

These are completely unsustainable developments. Buying stocks for their yield because bonds are at their lowest yields in 5000 years is like switching to cigarettes from crack for health purposes. At some point something will break in the bond markets. Central Banks are attempting to corner the asset class that is the benchmark for the risk-free rate globally. Put another way, investors are willing to PAY for the right to lend to these Governments for up to and even over a decade. At some point something is going to break here. When it does, stocks will implode below the 2008 lows. It’s only a matter of time.

It’s not fair! They promised us the sky would fall…

• Bank Of England Report Finds Economy Has Not Slowed Since Brexit Vote (G.)

Theresa May’s new administration has received a significant boost from a Bank of England report showing that the economy has been resilient in the first few weeks since the Brexit vote and displays no general signs of slowing down. The monthly survey by the Bank’s regional agents – considered to be the “eyes and ears” of policymakers in Threadneedle Street – found that a majority of firms questioned were not planning to mothball investment or change hiring plans. Even so, City analysts said the Bank was still likely to announce fresh stimulus measures for the economy next month in anticipation that the better-than-expected economic news since the referendum would not last.

Howard Archer, chief UK economist at IHS Global Insight, said: “While there may be some relief that the economy may have dodged an immediate sharp slowdown from the Brexit vote, the danger is still very much there given the major uncertainty that is apparent – and there seems a compelling case for the Bank of England to deliver a substantial package of measures at its August meeting to try and bolster business and consumer confidence” The agents’ report was released at the same time as the Office for National Statistics reported that the labour market remained solid in the period from March to May, the first three months of the referendum campaign, with the jobless rate falling to its lowest level in more than a decade.

Question: why did this talke so long?

• US Links Malaysia PM, Wolf of Wall Street to Millions Stolen From 1MBD (WSJ)

U.S. prosecutors have linked the prime minister of Malaysia, a key American ally in Asia, to hundreds of millions of dollars allegedly siphoned from one of the country’s economic development funds, according to a civil lawsuit seeking the seizure of more than $1 billion of assets from other people connected to him. The Justice Department filed lawsuits Wednesday to seize assets that it said were the result of $3.5 billion that was misappropriated from 1Malaysia Development Bhd., or 1MDB, a fund set up by Prime Minister Najib Razak in 2009 to boost the Malaysian economy. The move sets up a rare confrontation between U.S. prosecutors and an important partner in the fight against terrorism.

The moderate Muslim nation is also a counterpoint to China’s rising ambitions in Asia. Among the Justice Department’s assertions: That some $1 billion originating with 1MDB was plowed into hotels; luxury real estate in Manhattan, Beverly Hills and London; fine art; a private jet and the 2013 film “The Wolf of Wall Street.” Among those behind the spending, the lawsuit alleges, was Riza Aziz, stepson of Mr. Najib. No criminal charges were filed. The Malaysian people were defrauded on an enormous scale, said Deputy FBI Director Andrew McCabe at a news conference announcing the complaints. The asset seizure would be the largest ever by the Justice Department’s anticorruption unit.

Excuse me, but how did Goldman Sachs end up not being mentioned?

• Singapore Finds UBS, DBS, StanChart ‘Failings’ in 1MDB Probe (BBG)

Singapore vowed to take action against four banks for failures in anti-money laundering controls and said it seized S$240 million ($177 million) in assets linked to alleged fraud at the Malaysian state investment company known as 1MDB. Preliminary findings uncovered “instances of control failings” in UBS’s Singapore branch, Standard Chartered’s local unit and DBS, as well as “substantial breaches” of anti-money laundering regulations at Falcon Private Bank in the city-state, the Monetary Authority of Singapore said in a statement Thursday. The regulator’s probe, which started in March 2015, is part of global investigations into 1Malaysia Development Bhd. that stretch across Abu Dhabi, Switzerland, the Caribbean, Hong Kong and the U.S.

More than $3.5 billion was misappropriated from the Malaysian firm, and about $1 billion laundered through the U.S. banking system, the U.S. Justice Department said Wednesday as it launched what could potentially be its biggest ever seizure for such ill-gotten gains. “Supervisory examinations of financial institutions with 1MDB-related fund flows have revealed a complex international web of transactions involving multiple entities and individuals operating in several jurisdictions,” the Singapore central bank said. “Certain financial institutions in Singapore were among those used as conduits for these transactions” and MAS will be taking actions against them, it said.

It’s really years too late to blame ratings agencies for one’s troubles.

• Erdogan Declares State Of Emergency, Warns S&P ‘Don’t Mess With Turkey’ (ZH)

Having warned earlier of the possibility, Turkish President Tayyip Erdogan on Wednesday announced a three-month state of emergency, saying this would enable the authorities to take swift and effective action against those responsible for last weekend’s failed military coup. He explicitly focused on the effort across his nation to “effectively tackle the Gulen movement,” as Erdogan stated that there might be more plans to continue coup attempts. The state of emergency, which comes into force after it is published in Turkey’s official gazette, will allow the president and cabinet to bypass parliament in passing new laws and to limit or suspend rights and freedoms as they deem necessary. The decision has immediately raised fears of more arbitrary arrests, killings and disappearances.

“The aim of the declaration of the state of emergency is to be able to take fast and effective steps against this threat against democracy, the rule of law and rights and freedoms of our citizens,” the president said. Erdogan, who has launched mass purges of state institutions since the July 15 coup attempt by a faction within the military, said the move was in line with Turkey’s constitution and did not violate the rule of law or basic freedoms of Turkish citizens. The president added that “citizens should have no concerns for democracy,” and warned ratings egency S&P “not to mess with Turkey” and comforted his citizens that a “state of emergency does not mean military rule” and that the decision was not against the constitution.

Erdogan said regional governors would receive increased powers under the state of emergency, adding that the armed forces would work in line with government orders. But most amusingly, Erdogan promptly warned S&P, which earlier today downgraded Turkey to BB, “not to mess with Turkey” and that the decision to downgrade the country was political. Finally, he lashed out at Europe, “which he said does not have the right to criticize this decision,” anticipating expressions of “concern” from the European Union, which has become increasingly critical of Turkey’s rights record and has urged restraint as Ankara purges its state institutions since the abortive coup.

Ther are people who think they can shut down WikiLeaks? What do they think the US has been trying to do for years?

• Wikileaks, About To Expose Turkish ‘Coup’, Under ‘Sustained Attack’ (TAM)

Wikileaks claimed Monday it was under attack after it announced it would release hundreds of thousands of documents related to Turkey and the failed military coup attempted Friday, CNET reported. The organization, which has released information on everything from war crimes to Hillary Clinton’s email scandal, announced Sunday it would be releasing 100,000 documents related to Turkey’s “political power structure,” some of which detail the “leadup” to the coup.

ANNOUNCE: Get ready for a fight as we release 100k+ docs on #Turkey’s political power structure. #TurkeyCoup #Soon
— WikiLeaks (@wikileaks) July 18, 2016

Wikileaks anticipated the release would be censored in Turkey, cautioning in a three-part tweet posted Monday: “Turks will likely be censored to prevent them reading our pending release of 100k+ docs on politics leading up to the coup. We ask that Turks are ready with censorship bypassing systems such as TorBrowser and uTorrent and that everyone else is ready to help them bypass censorship and push our links through the censorship to come.” The Turkish government, headed by President Recep Tayyip Erdogan, has increasingly ramped up censorship efforts against journalists, lending credibility to Wikileaks suspicions their release may not fully reach Turkish citizens—especially considering the latest leak concerns his ruling party, AKP.

As CNET noted: “Facebook, Twitter and YouTube were reportedly blocked in Turkey during the attempted coup Friday, but many residents appear to have gotten around the blocks, posting messages and videos, likely using VPNs or other anonymizing services.”
Throughout Monday, Wikileaks continued to promote the release. (“Turks ask whether WikiLeaks is pro or anti-AKP. Neither. Our only position is that truth is the way forward. 100k+ docs serves all sides. – WikiLeaks (@wikileaks) July 18, 2016”). They then tweeted that instead of 100,000 documents, they would actually be releasing far more. “Our pending release of 100k docs on Turkish political power? Just kidding. The first batch is 300k emails, 500k docs,” they announced.

But just hours later, they alerted followers their website was being attacked. “Our infrastructure is under sustained attack,” they tweeted, alongside the hashtag, #TurkeyPurge. “We are unsure of the true origin of the attack. The timing suggests a Turkish state power faction or its allies. We will prevail & publish,” Wikileaks tweeted shortly after.

Greece will be nervous.

• Reports Of Turkish Commandos In Greek Aegean Put Athens On Alert (Kath.)

Reports that a group of Turkish military commandos tried to cross from Turkey to the island of Symi, in the southeastern Aegean, put the Greek armed forces on alert on Wednesday amid fears that ties between Greece and Turkey could be tested in the wake of a failed coup in the neighboring country. The Greek Coast Guard was on alert from around 11 a.m. when a group of inflatable dinghies and other vessels were seen departing from Datca, on the Turkish coast, in the direction of Symi. Confused intelligence referred to the presence of around 20 Turkish commandos on those vessels. Athens had been anticipating a possible attempt by participants in the failed coup to come to Greece and so took the reports seriously.

Later in the day, citing Turkish military officials, Reuters reported that Turkish F-16 fighter jets were scrambled to check reports that missing Turkish coast guard vessels had appeared in Greek waters in the Aegean. Some Turkish military hardware was stolen and used in the failed coup but Turkish government officials have insisted that no military equipment remains unaccounted for. Later on Wednesday, the Turkish interior ministry denied claims that rebel soldiers might have “hijacked” a vessel to flee to Greece, Reuters reported. Sources of the Hellenic Air Force confirmed that two Turkish F-16s had conducted patrols but they said they remained in Turkish air space. The Greek Coast Guard monitored the movements of the Turkish vessels, which remained in Turkish waters. Also, a contingent of the Greek Police was dispatched to Symi to conduct checks there.

The developments came after a statement by Foreign Minister Nikos Kotzias on the anniversary of the Turkish occupation of Cyprus prompted a terse reaction by Ankara. “Greece does not and will never accept the consequences of the Turkish invasion,” Kotzias said. “It has made it clear to all sides that the elimination of the anachronistic system of guarantees and the withdrawal of all Turkish occupation forces – which, as the recent events in Turkey confirmed, undermine rather than ensure constitutional order and democratic normalcy – are an integral part of the solution of the Cyprus problem.” The Turkish Foreign Ministry responded that linking the Cyprus situation to recent events in Turkey was “ill-intentioned” and “unfortunate,” and called on Athens to avoid trying to benefit from the events and to display good neighborly behavior.

Orlov contends that Erdogan is simply not that smart.

• A Turkey of a Coup (Dmitry Orlov)

A lot of words have already been said in the past few days about the Turkish coup that couldn’t fly, but strangely enough some rather obvious things went unmentioned, so I’ll try to fill in a few gaps. Specifically, a lot of the things that have been said range from feeble-minded to utterly preposterous. If this is propaganda, then it sounds like very bad, weak propaganda. Still, there is no shortage of people endlessly repeating these talking points, whether because they get paid to or because they don’t know better. They are the ones I want to address.

Idiotic Theory #1: Erdogan staged his own coup in order to consolidate his power. Prior to the putsch, Erdogan went on vacation, which is traditionally the best time to overthrow a leader. For example, Gorbachev’s tenure as “president” of USSR was ended by a putsch in August 1991 while he was on vacation. People who are busy staging a putsch to consolidate their power don’t go on vacations; they are too busy plotting and orchestrating. Erdogan attempted to fly back to Turkey, only to find that he couldn t land at Istanbul Ataturk, then found himself chased by hostile F-16s. He then flew toward Europe and requested political asylum in Germany, which was refused (bye-bye, Germany!). At some point it dawned on him that most of the army and virtually all of the people in Turkey were on his side, and so he called upon them to take to the streets in defense of the legitimate government.

He did this using an improvised public communications technique that was almost a mockery of itself: his face on a cell phone held in front of a television camera. What followed wasn’t some peaceful, timid demonstration in support of the status quo but gonzo political action, complete with civilians laying down in front of tanks and getting crushed, followed by other civilians jumping on top of tanks and slitting the drivers’ throats. The putsch crumbled. The optics of all of this are hard to misread. He went on vacation; he tried to flee; he begged his people for help over a cell phone. He ended up looking like a very weak and confused leader in a region where leaders either look strong or they don’t stay leaders for long. Do you still think that he planned all this? I don’t.

Demand.

• More Pain Seen For US Crude As Product Glut Adds To Gloom (R.)

A glut of refined products has worsened the already-grim outlook for U.S. crude oil for the rest of the year and the first half of 2017, traders warned this week, as the spread between near-term and future delivery prices reached its widest in five months. A stubborn, massive supply overhang punished crude over the winter as U.S. oil futures hit 12-year lows in February. As supply outages and production cuts increased, crude rallied and spreads tightened significantly in May. But the unusually large amount of gasoline and oil in storage, combined with expectations of a ramp-up in crude production, has made traders more bearish on the price outlook for late 2016 and early 2017.

West Texas Intermediate (WTI) futures for delivery in September traded at a discount of as much as $2.23 to those for delivery in December on Wednesday, the biggest this year. Turnover in that spread soared, touching a record high of more than 19,000 contracts, or about 19 million barrels of oil. December spreads, which are the most actively traded, have also blown out in the past month. The discount of the WTI December 2016 contract to December 2017 widened to $4.11 last week. On Wednesday it traded as wide as $3.92 with over 15,000 lots traded. In May that spread had narrowed to just 50 cents, the tightest since November 2014.

The craziest thing of all is foreign buyers often get credit from foreign banks, so New Zealand can only do so much; other than ban foreign buyers outright.

• New Zealand House Bubble Warning Will ‘Shake Government’ (NZH)

A top banker’s dire warning about New Zealand’s overheated house prices shows the market is in crisis and an immigration rethink is needed, Labour says. In a strongly worded opinion piece, ANZ chief executive David Hisco has warned Auckland property prices are over-cooked and the end would likely be messy. He has joined several leading establishment figures in calling for stronger action on housing, and warns yesterday’s Reserve Bank lending restrictions did not go far enough. Hisco’s comments come after Finance Minister Bill English and Housing Minister Nick Smith signalled they expected property values to slow or drop.

Both told first home buyers to ride the bubble out before buying. Labour finance spokesman Grant Robertson said Hisco’s message reflected the fact the housing market was in crisis. “This is the kind of warning from inside the system that should, if nothing else, shake the Government.” Labour policy is to ban foreign buyers, extend the “bright line” test to five years so investment properties on-sold within five years have to pay a tax on the capital gains achieved, fast-track the building of affordable homes and begin consultation on ending negative gearing.

[..] NZ First leader Winston Peters said Hisco’s warning of a “messy end” was totally predictable and avoidable but had been ignored by the Government and others for too long. “There will be a correction. It is going to be enormously painful for hundreds of thousands of New Zealanders and that’s the sad part about it. Many people will lose their equity. But any conception such a build up in the house price bubble could go on shows what enormous denial the political system is in.” Peters said English and Smith were trying to stave off the inevitable. He did not believe the Reserve Banks’ moves this week to increase loan to value radios for investors from 30 to 40 per cent deposits would have much impact. “It’s crude, it’s blunt and not helpful.”

Note: this is well before the ‘Greece crisis’, and well before Syriza was elected.

• Greek Brain Drain Amounted To 223,000 People In 2008-2013 (Kath.)

A special study by the Bank of Greece on Wednesday showed that 223,000 young people left the country from 2008 to 2013 in search of a better future abroad, constituting the so-called “brain drain.” The results of recent research point to the vast majority of people aged between 25 and 39 years who left the country in the first five years of the Greek recession being single and with a university degree. The young Greeks left not only due to unemployment and adverse economic conditions but also because of state’s failure to provide and generate opportunities for professional evolution.

The Bank of Greece study revealed that the momentum and magnitude of the phenomenon makes it essential to record its characteristics and to investigate the factors that are in play before analyzing the negative consequences for the local economy. The main characteristic identified is that it mainly concerns the section of the workforce that is healthy, educated and specialized, and has high mobility and employability rate. The central bank also attributed the growth of the brain drain to the failure of the local education system to produce high-quality human capital and to the inability of the domestic economy to hold on to and attract talented workers.

It’s not the air.

• Warmer Water, Not Air, Drives Antarctic Peninsula Glacier Melt (CB)

The Antarctic Peninsula is a long, relatively narrow limb extending 800 miles out from West Antarctica, and is home to hundreds of glaciers. These rivers of ice ooze their way down through the Peninsula’s rocky mountain range and into the ocean, powered by gravity and their own weight. But of the 674 glaciers on the Peninsula’s western side, almost 90% are retreating. This happens when their ice melts faster than new snowfall can replenish it. The prevailing theory has been that warming air are melting the glaciers. But a new study, just published in Science, finds that the main cause is actually rising ocean temperatures. As the Peninsula’s glaciers are among the main contributors to sea level rise, knowing how and why they’re changing will help make predictions more accurate, the lead author tells Carbon Brief.

The Antarctic Peninsula is one of the fastest warming regions on Earth. Temperatures have risen by more than 3C over the past 50 years. The warming atmosphere has caused some remarkable changes to the eastern side of the Peninsula. The Larsen ice shelf, a floating sheet of ice formed from glaciers spilling out onto the cold ocean, has lost two of its four sections in recent decades. Larsen-A collapsed in 1995, followed by its neighbour, Larsen-B, in 2002. Rising air temperatures are also contributing to the thinning of Larsen-C, which is now at risk of collapse. Over on the western side of the Peninsula, around 600 small glaciers of various shapes and sizes have also been melting.

Scientists had thought that warming air temperatures were the likely cause of these retreating glaciers, says lead author Dr Alison Cook, a research fellow at the Durham University. She explains to Carbon Brief: “Few of these glaciers had been studied in detail and it was thought that their retreat was in response to the atmospheric warming, which has been the predominant driver on the eastern side.” However, recent research suggests the glaciers are retreating even more quickly than can be explained by just the warming atmosphere. Cook’s study finds that the main cause of glacier melt actually lies deep in the ocean – several hundred metres beneath the surface.

Average ocean temperatures (at a depth of 150m) and change in glacier size (in % per year) for 1945-2009 on the Antarctic Peninsula. The size and colour of the dots indicates glacier change – the larger, red dots showing the largest decrease, and the blue dots show stable glaciers that aren’t retreating. Ocean circulation and types of water mass are labelled as follows: Circumpolar Deep Water (CDW), Shelf Water (SW), Bransfield Strait Water (BSW), and Antarctic Circumpolar Current (ACC). Source: Cook et al. (2016)

Debt Rattle October 13 2015

Oct 132015

October 13, 2015 Posted by Raúl Ilargi Meijer at 8:45 am Finance Tagged with: Antarctic, China, default, diesel, downgrade, EM, emissions, leverage, Merkel, refugees, Silk Road, TTIP 3 Responses »

Russell Lee Columbia Gardens outdoor amusement resort, Butte, Montana 1942

• US Debt Markets Shaken Amid More Corporate Downgrades And Defaults (WSJ)

• Why US Banks Soon Will Be Singing The Blues (CNBC)

• China Imports Slump 20% Amid Falling Commodity Prices, Weak Demand (Guardian)

• China Trade Data Unsettle Asian Bourses (FT)

• China’s Stock Rally-to-Rout Is About to Repeat (Bloomberg)

• KKR Warns About Renewed Commodity, Emerging-Market Rout on China (Bloomberg)

• Pimco’s Bear Case Only Gets Stronger as Emerging Currencies Jump (Bloomberg)

• Switzerland to Impose 5% Leverage Ratio on Biggest Banks (Bloomberg)

• Europeans Move To Undercut Global Bank Capital Rules (FT)

• The Failure to Learn From Boom-Bust Cycles (WSJ)

• Higher Interest Rates Would Throw Bank Profits a Lifeline (Bloomberg)

• China’s Great Game: A New Silk Road To A New Empire (FT)

• Angus Deaton Showed We’re Helping the Wrong People (Bloomberg)

• US Annual Oil Output to Drop for First Time Since 2008 (WSJ)

• Oil Sands Boom Dries Up in Alberta, Taking Thousands of Jobs With it (NY Times)

• German Brand Dealt ‘Hammer Blow’ By VW Scandal And Weakening Economy (Telegraph)

• Emissions Test Changes Could Make Diesels ‘Unaffordable’ (BBC)

• Home Flipping Frenzy in Sydney Sparks Warnings on Housing Risks (Bloomberg)

• TTIP Deal Would Remove People’s Rights To Access Basic Human Needs (Ind.)

• Merkel Seeks Turkey’s Aid on Borders to Stem Refugee Flow to EU

• Athens Rules Out Joint Sea Patrols With Turkey (Kath.)

• Marine Food Chains At Risk Of Collapse (Guardian)

• Antarctic Ice Melts So Fast Whole Continent May Be At Risk By 2100 (Guardian)

“Credit-rating firms are downgrading more U.S. companies than at any other time since the financial crisis..”

• US Debt Markets Shaken Amid More Corporate Downgrades And Defaults (WSJ)

Falling profits and increased borrowing at U.S. companies are rattling debt markets, a sign the six-year-long economic recovery could be under threat. Credit-rating firms are downgrading more U.S. companies than at any other time since the financial crisis, and measures of debt relative to cash flow are rising. Analysts expect profits at large companies to decline for a second straight quarter for the first time since 2009. The market for riskier debt has become snarled, raising fears that companies could have trouble repaying their obligations following several years of record debt issuance, low corporate defaults and persistently low interest rates. Reflecting those concerns, investors are now demanding more yield to own corporate bonds relative to benchmark U.S. Treasury securities.

The softening U.S. corporate fundamentals have been largely overlooked as investors focused on sharp declines in the shares, bonds and currencies of many emerging-markets nations. Many analysts say the health of China remains the largest source of uncertainty in the global economy. But rising downgrades and an increase in U.S. corporate defaults indicate “some cracks on the surface” of the domestic-growth outlook, said Jody Lurie, corporate credit analyst at financial-services firm Janney Montgomery Scott LLC. Many investors closely monitor debt-market trends as an indicator of U.S. economic health. In August and September, Moody’s Investors Service issued 108 credit-rating downgrades for U.S. nonfinancial companies, compared with just 40 upgrades.

That’s the most downgrades in a two-month period since May and June 2009, the tail end of the last U.S. recession. Standard & Poor’s Ratings Services downgraded U.S. companies 297 times in the first nine months of the year, the most downgrades since 2009, compared with just 172 upgrades. Meanwhile, the trailing 12-month default rate on lower-rated U.S. corporate bonds was 2.5% in September, up from 1.4% in July of last year, according to S&P. About a third of the downgrades targeted oil and gas companies or firms in other commodity-linked industries, following a plunge in oil prices in the second half of 2014, said Diane Vazza, head of global fixed-income research at S&P.

“S&P 500 financials are expected to show a 3.8% annualized growth in profits [..] As recently as July analysts had been forecasting 9.9% growth..”

• Why US Banks Soon Will Be Singing The Blues (CNBC)

With Wall Street banks about to report on how much money they’ve been making, estimates are moving in the wrong direction. Coming off a quarter in which the industry collectively reported $43 billion in profits, analysts had been hoping a rising rate environment and increasing demand would keep things moving for the $15.1 trillion sector. However, fading hopes for a rate hike in 2015 and other factors are making analysts nervous about just how the quarterly profit reports will shape up. JPMorgan Chase gets things started for the Big Four on Tuesday, with Bank of America and Wells Fargo on tap Wednesday and Citigroup due Thursday. Goldman Sachs reports Thursday as well and PNC will report Wednesday.

As a sector, S&P 500 financials are expected to show a 3.8% annualized growth in profits, according to S&P Capital IQ. While that’s better than the 5.1% decline projected for the entire index, it’s a big comedown from initial projections. Revenue is expected to grow 4.4%. As recently as July analysts had been forecasting 9.9% growth, and a year ago that expectation was a gaudy 27%. So even if results come in better than expected, they likely will remain well below the initially lofty hopes for financials, which were supposed to be 2015’s best-performing sector. Individual companies have seen substantial revisions in recent days.

Analysts have cut MetLife estimates from 88 cents a share to 77 cents, Goldman Sachs from $3.46 to $3.20 and Morgan Stanley from 68 cents to 63 cents, according to FactSet. Earnings expectations have been reduced for 53 of the 88 companies in the S&P 500’s financial sector. The weakness comes as loan growth has held fairly steady thanks to a robust climate in commercial real estate. The sector jumped 9.7% in the third quarter, its best of the year after rising 6.7% in 2014, according to Federal Reserve data. Investment banking also has been fairly solid throughout the year. While global revenue is down 10% year over year, it’s been flat at $28 billion in the U.S., thanks to a record $9.7 billion haul in mergers and acquisition revenue, according to Dealogic.

Imports down 17.7% in yuan, over 20% in USD. Different numbers reflect the difference between calculations in yuan and in dollars.

• China Imports Slump 20% Amid Falling Commodity Prices, Weak Demand (Guardian)

China’s imports fell heavily in September, official figures said, keeping pressure on policymakers to do more to stave off a sharper economic slowdown. Although exports fell less than expected by 3.7% from the same period last year, the value of imports tumbled more than 20% to register the 11th straight month of falls. Imports plunged 20.4% in September from a year earlier to $145.2bn, customs officials said, due to weak commodity prices and soft domestic demand. These factors will complicate Beijing’s efforts to stave off deflation, one of the headwinds threatening the world’s second biggest economy. Highlighting persistent weakness in demand at home and abroad, China’s combined exports and imports fell 8.1% in the first nine months of the year from the same period in 2014, well below the full-year official target of 6% growth.

“In general, there are no green shoots in this set of data,” said Zhou Hao, senior economist at Commerzbank in Singapore. “The growth of [trade] volume still remains low.” However, monthly figures were much more rosy. Exports to every major market except Taiwan rose from August, as did imports. Julian Evans-Pritchard of Capital Economics said monthly trends showed a steady rise to most major export markets in the US and Europe over the summer. “Basically, exports have been doing better since the second quarter, but that recovery trend has been masked on a year-on-year basis because the second half of 2014 was so strong.” Evans-Pritchard also said that import data had become unreliable given massive swings in prices due to the commodity downturn and a divergence between prices and trading volumes.

“For the major commodities like oil, copper, etc. we’re actually seeing a pretty healthy trend in import volumes.” Import volumes are a leading indicator for exports in China, given a large share of materials and parts re-exported as finished goods. “September’s import figure does not bode well for industrial production and fixed asset investment,” wrote ANZ economists in a research note reacting to the figures. “Overall growth momentum last month remained weak and third quarter GDP growth to be released [on 19 October] will likely have edged down to 6.4%, compared with 7% in the first half.” China posted trade surplus of $60.34bn for the month, the general administration of Customs said on Tuesday, higher than forecasts for $46.8 billion.

China has a record surplus. Sounds good. Exports down ‘only’ 1.1% (still curious if you want to grow GDP by 7%). Imports down 17.7%. That will be largely raw materials. So what will they be able to produce for export next year?

• China Trade Data Unsettle Asian Bourses (FT)

Chinese trade data rattled Asian markets as a bigger-than-expected fall in imports offset the cheer afforded by a record mainland trade surplus and slower pace of decline in exports. The Shanghai Composite was down 0.4% and the tech-focused Shenzhen Composite was up 0.3% after data showed China posted its biggest-ever trade surplus, in renminbi terms, of Rmb376.2 in September, up from Rmb368bn in August and comfortably ahead of economists’ expectations of Rmb292.4bn. That was underpinned by exports declining by 1.1% last month from a year earlier, an improvement from August’s 6.1% pace of decline. Economists expected exports to drop by 7.4%.

Imports fell 17.7% in September from a year ago, a bigger-than-forecast drop and larger than August’s 14.3% decline – less than encouraging in the context of China’s goal to shift its growth model from export-driven to consumption-based. Ahead of the trade data release, economists at ANZ said: “China’s exports have likely contracted in September, but its strong trade surplus should ease the pressure of capital outflows.” They reckon economic activity on the mainland remained sluggish in September, leading to their forecast of 6.4% economic growth in the third quarter. China’s official gross domestic product data are due on October 19, and analysts are increasingly bearish, tipping real growth at 6.7%, according to a Bloomberg survey of 25 economists, lower than the official full-year target of “around 7%”. Among other equities benchmarks, Hong Kong’s Hang Seng was down 0.3% and Australia’s S&P/ASX 200 was down 0.9%. Japan’s Nikkei, reopening after a long weekend, was down 0.9%.

“As oil starts to move and materials follow, investors will by default feel more positive about China,” he said. “This is a bear market rally.”

• China’s Stock Rally-to-Rout Is About to Repeat (Bloomberg)

In August, Thomas Schroeder correctly predicted a rebound in Chinese stocks wouldn’t last. Now, he says, the benchmark equity gauge will plumb new lows as a bear-market rally fails. The Shanghai Composite Index will climb to 4,100 in the next three months before slumping as much as 41% to 2,400 in early 2016, Schroeder, founder and managing director of Chart Partners, said. The benchmark index added 3.3% to close at 3,287.66 on Monday. Schroeder, a former Asian technical analysis chief at UBS, cited triangle and wedge patterns in making his call. The Shanghai Composite tumbled 29% in the third quarter, the biggest slump among benchmark global gauges, as a stock boom turned to bust amid concern about the slowdown in China’s economy and a crackdown on using borrowed money to buy equities.

The bottoming of oil prices and a rebound in emerging market currencies will help bolster a rally in the nation’s equities in the next two months, which will reverse as the Federal Reserve starts raising interest rates, Schroeder said. “As oil starts to move and materials follow, investors will by default feel more positive about China,” he said. “This is a bear market rally.” Schroeder predicted in August that the Chinese equity rout will worsen, with the Shanghai Composite likely sliding below 3,100 within two months. The measure fell to as low as 2,927.29 on Aug. 26. Technical analysts use past patterns to try to predict future movements. [..] “We haven’t seen a major low for the emerging markets,” said Schroeder, whose Chart Partners Group is a provider of trading strategies linked to technical analysis. “There’s likely to be more pain next year as the U.S. starts lifting rates.”

Squeeze.

• KKR Warns About Renewed Commodity, Emerging-Market Rout on China (Bloomberg)

There are few reasons to get excited about the recent rebound in commodities and emerging-market assets, according to KKR which correctly forecast the stock selloff in developing countries five months ago. China will continue to rein in credit growth, reducing the investments in factories and machinery that have been among the key drivers for the commodity boom in recent years, Henry McVey, global head of macro and asset allocation at KKR, one of the world’s largest private equity firms, wrote in a note posted on its website. “Many hard commodity prices are likely to suffer another leg down,” McVey and Frances Lim, who visited Asia recently, said in the note. “We would view any recovery as a bounce, not a sustained re-acceleration in the Chinese economy, as the structural headwinds remain significant.”

The MSCI Emerging Markets Index rose Monday to a two-month high, while commodities are trading around 6% above a 16-year low set in August, on speculation that China will take steps to shore up its faltering economy. The emerging-market stock gauge has still lost about 10% this year, heading for its third annual decline, as lower raw-material prices and the Chinese economic slowdown undermines exports in countries from Brazil to Malaysia. While some “targeted stimulus” in housing and infrastructure in recent months may help stabilize China’s economy, it won’t alter a slowing trajectory because the government needs to reduce debt and production overcapacity, McVey said. KKR,which manages $102 billion in assets, expects growth in China to slow to 6% in 2018, from 6.8% this year, which would be the least since 1990.

McVey, who previously worked as chief investment strategist at Morgan Stanley and a managing director at Fortress Investment, told investors in May to stay away from most of the publicly traded emerging-market companies. He said a buildup in debt and weakening currencies in emerging countries will lead to underperformance in stocks, a call foreshadowing an over 20% decline in the MSCI benchmark gauge over the next four months. McVey said growth in China’s fixed-asset investments, the biggest driver in the country’s rise over the past decade, will decline to as little as 5% a year, from 11% in August, and down from a peak of 34% in 2009.

Dead cats bouncing all over the place.

• Pimco’s Bear Case Only Gets Stronger as Emerging Currencies Jump (Bloomberg)

Pacific Investment Management Co. is sticking with its pessimistic outlook on emerging-market currencies, saying the biggest rally in 17 years has only bolstered the case for making bearish wagers. “These currencies look more interesting to be underweight from here than they were a week ago,” Luke Spajic, an emerging markets money manager at Pimco, whose developing-nation currency fund has outperformed 97% of peers during the past five years, said in a phone interview on Monday. Pimco, which oversees $1.52 trillion, said in an Oct. 1 report that it had short positions in currencies such as Malaysia’s ringgit, the Thai baht and the South Korean won. Emerging-market currencies surged last week, recording the biggest rally since 1998 as traders pushed back expectations for when the U.S. Federal Reserve will start raising interest rates.

While Spajic said he doesn’t know how long the rebound will last, he sees a “wave of deflationary pressure” across Asia that will eventually weigh on currencies as exports and economic growth projections decline. Pimco’s concerns echo those of the IMF, which cut its 2015 outlook for the global economic expansion to 3.1% on Oct. 6 from a July forecast of 3.3%. The fund cited a slowdown in emerging markets, saying the following day that high debt levels at banks and other companies have left developing economies susceptible to financial stress and capital outflows.

Switzerland does as US does.

• Switzerland to Impose 5% Leverage Ratio on Biggest Banks (Bloomberg)

Switzerland’s finance ministry will require the country’s biggest banks to have capital equal to about 5% of total assets after UBS Group AG and Credit Suisse Group AG sought to win easier terms, according to people briefed on the deliberations. The decision would mimic the U.S. leverage ratio for its biggest banks, which exceeds the 3% minimum set in a global agreement by the Basel Committee on Banking Supervision, according to the people, who asked not to be identified because the talks aren’t public. The Swiss government will also align its calculation of the ratio with the method employed in the U.S., resulting in fewer types of debt counting toward capital, one of the people said. The measure of financial strength has gained importance since the 2008 financial crisis as a means of making big banks less prone to collapse.

A government-appointed expert panel recommended in December that Switzerland follow the lead of the U.S., which in recent years has introduced some of the world’s toughest capital requirements. Zurich-based UBS and Credit Suisse reported Basel III leverage ratios of 3.6% and 3.7% at the end of the second quarter, indicating they would be more than 1%age point short of the new target. “Higher requirements mean that the banks will have fewer funds to return to shareholders,” said Andreas Brun at Zuercher Kantonalbank. “For UBS, whose investment case is based on rising dividend expectations, this is a big issue. For Credit Suisse, whose capital situation is worse, this means a higher dilution because of a bigger requirement of a capital increase.”

Meanwhile in the EU, banks are still holier than thou.

• Europeans Move To Undercut Global Bank Capital Rules (FT)

Several European countries are taking action to water down new global capital rules for their top financial institutions, causing concern among investors and EU officials. France is set to become the latest country to introduce legislation that would save its leading banks from having to issue tens of billions of euros of new bonds to meet the rules agreed by global regulators a fortnight ago, people familiar with the situation said. Brussels officials are so worried with the divergence in policies that they have started talks with EU countries on a more co-ordinated stance, two EU officials said. Market insiders said that investors were frustrated and that all banks could end up paying more when they issue debt.

The rules on “total loss absorbing capital” (TLAC) agreed on September 25 by the Financial Stability Board are one of the final pieces of a wave of post-crisis regulation designed to ensure there is never a repeat of the bank bailouts of recent times. The rules apply only to the world’s largest banks but have wider reach, according to Laurent Frings, analyst at Aberdeen Asset Management. “The view from investors to a large degree is that local regulators will force domestically important banks to work to the sale rules,” said Mr Frings. In the UK and Switzerland, banks such as UBS, Credit Suisse and Barclays are building up their “loss absorbing capital” by issuing new debt from bank holding companies that can be “bailed in” in a crisis. The banks will have to issue tens of billions of the new bonds to meet their TLAC requirements.

In Germany and Italy, however, legislators are passing laws to make traditional senior debt easier to bail in. This frees their banks of the obligation to issue new debt for TLAC. Several people close to the situation said that France would also propose a solution to help its banks. “Being a European authority we would always argue that it’s a good idea to put in place a European solution, and not try to come up with 19 or 28 solutions on that,” said Elke Koenig, president of the Single Resolution Board, the new EU-wide resolution authority for failing banks. “We’ve clearly given our support to the basic idea [of the German bank law] at the same time saying it would be preferential longer term to have a European solution.”

Or the failure to see that this is not a boom-bust cycle?

• The Failure to Learn From Boom-Bust Cycles (WSJ)

The plunge in commodity prices is thumping oil exporters around the globe. The scale of the beating rests largely on whether governments heeded the lessons from prior boom-bust cycles. Norway and Saudi Arabia built up sizable rainy-day funds and managed their windfalls from high prices conservatively. Now they’ve got considerable buffers against a downturn. Nigeria and Venezuela splurged and made few economic overhauls as prices surged. They’re now suffering as growth skids. The commodity bust is weighing heavily on resource-rich countries that represent 20% of the world’s economic output. The oil-price decline is supporting some of the largest consumers, such as the U.S. and Europe, that are key to keeping the global economy out of recession.

But it is providing less of an overall global boost than predicted just a year ago, while forcing more vulnerable economies to scramble in an uncertain environment. “The oil price drop came as a surprise,” said Angolan finance minister Armando Manuel. “It captured my country in a state in which we were not sufficiently diversified.” The commodity collapse and its effect on emerging economies drew wide attention in Lima, where the world’s finance ministers and central bankers gathered for the IMF’s annual meeting, which ended Sunday, against a backdrop of dimming global growth. The problem isn’t isolated to oil, fueling a much broader slump in major emerging markets from Brazil to South Africa.

Metal prices are in a long-term funk, hitting exporters of iron, copper and similar industrial commodities. Oil exporters are showing what may be in store for other major commodity exporters. Nigeria, which got nearly 65% of its government revenue from crude exports before the price plunge, has seen its projected 2015 growth slashed to less than 4% from more than 6% a year ago, according to the IMF. Kazakhstan’s growth rate has tumbled to 1.5% this year from 6% before the petroleum collapse. In Venezuela, where the state gets half its revenue from oil sales, the economy is shriveling by 10%.

That’s the number 1 reason the Fed would love to hike rates.

• Higher Interest Rates Would Throw Bank Profits a Lifeline (Bloomberg)

Having bailed them out and then helped to repair their balance sheets with record-low interest rates and bond-buying, policy makers may assist the financial industry once more when the U.S. Federal Reserve begins tightening monetary policy. That’s according to two recently published reports by the Bank for International Settlements and McKinsey & Co., both of which have highlighted the downsides of ultra-easy borrowing costs in the past. Based on seven years of data from 109 large international banks in 14 countries, the BIS confirmed a relationship between short-term rates and the slope of the curve for bond yields with bank profitability.

The conclusion drawn by Claudio Borio, the head of the monetary and economic department at the BIS, and colleagues is that the positive impact of being able to earn income by lending money out for higher rates over time is bigger than the hit of defaults and income that doesn’t carry interest. Even better news for the banks is that the effect is strongest when rates are lower and the yield curve isn’t that steep, as is now the case. That provides another reason for the BIS’s economists to again decry the unintended side-effects of accommodative monetary policy. They reckon that between 2011 and 2014, the average bank of those studied lost one year of profits as a result of low rates. “All this suggests that over time, unusually low interest rates and an unusually flat term structure erode bank profitability,” said Borio et al in the report, which was published on Oct. 1.

Return on equity at 500 global lenders was unchanged in 2014 at 9.5%, about the average of the last 35 years, according to the Sept. 30 study by McKinsey. Profit margins also continued a steady decline, dropping by 185 basis points in 2014, in part because of lower rates. It reckons tighter policy would boost return on equity by about 2 %age points. “Many in the industry are waiting for an interest rate rise or some other structural lift to profits,” McKinsey said. There is a sting in the tail. It warned that even if rates do rise, profit margins may still not return to their pre-crisis highs. “Much of the benefit will get competed away, and risk-costs will likely increase, especially in economies where the recovery is still fragile,” McKinsey said.

China doesn’t, and won’t, have sufficient growth to execute these plans.

• China’s Great Game: A New Silk Road To A New Empire (FT)

The granaries in all the towns are brimming with reserves, and the coffers are full with treasures and gold, worth trillions, wrote Sima Qian, a Chinese historian living in the 1st century BC. “There is so much money that the ropes used to string coins together rot and break, an innumerable amount. The granaries in the capital overflow and the grain goes bad and cannot be eaten”. He was describing the legendary surpluses of the Han dynasty, an age characterised by the first Chinese expansion to the west and south, and the establishment of trade routes later known as the Silk Road, which stretched from the old capital Xi an as far as ancient Rome.

Fast forward a millennia or two, and the same talk of expansion comes as China’s surpluses grow again. There are no ropes to hold its $4tn in foreign currency reserves -the world’s largest- and in addition to overflowing granaries China has massive surpluses of real estate, cement and steel. After two decades of rapid growth, Beijing is again looking beyond its borders for investment opportunities and trade, and to do that it is reaching back to its former imperial greatness for the familiar Silk Road metaphor. Creating a modern version of the ancient trade route has emerged as China’s signature foreign policy initiative under President Xi Jinping.

“It is one of the few terms that people remember from history classes that does not involve hard power …and it s precisely those positive associations that the Chinese want to emphasise”, says Valerie Hansen, professor of Chinese history at Yale University. If the sum total of China s commitments are taken at face value, the new Silk Road is set to become the largest programme of economic diplomacy since the US-led Marshall Plan for postwar reconstruction in Europe, covering dozens of countries with a total population of over 3bn people. The scale demonstrates huge ambition. But against the backdrop of a faltering economy and the rising strength of its military, the project has taken on huge significance as a way of defining China’s place in the world and its relations -sometimes tense- with its neighbours.

Winner of the Fauxbel. Yawn.

• Angus Deaton Showed We’re Helping the Wrong People (Bloomberg)

Presidential candidates from both parties are focusing, as usual, on the middle class. But what’s that? And why, exactly, does it deserve such attention? Princeton’s Angus Deaton, who on Monday was announced as the latest winner of the Nobel Memorial Prize for economics, has offered some intriguing answers. The most important is this: If you care about how people actually experience their lives, you should be concerned about people who earn less than $75,000 per year. Above that amount, Deaton’s evidence suggests that more money may not particularly matter. To understand why, we need to distinguish between two very different measures of human well-being. Researchers have traditionally proceeded by asking people to evaluate their overall life-satisfaction (say, on a scale of 1 to 10).

More recently, researchers have tried to capture people’s actual experiences in a more refined way, for example by asking them about their levels of stress, sadness, happiness and enjoyment during the day (again on a scale of 1 to 10). A key question: Does money buy happiness? Deaton, along with his coauthor Daniel Kahneman (a Nobel Prize winner in 2002), found that in the United States, the answer depends on which question you use. If people are asked about their overall life-satisfaction, money definitely matters. As people’s annual earnings go up, their self-reported life-satisfaction increases as well. But the same is not true for actual experiences. More income is definitely associated with less sadness and more happiness up to $75,000, but above that level people’s experienced happiness is the same regardless of income.

In terms of stress, another important indicator of people’s well-being, it’s a lot worse to earn $20,000 than $60,000 – but above $60,000, stress levels are not reduced by more money. What’s going on here? Deaton and Kahneman don’t exactly know, but they speculate that above a certain threshold, increases in income do not much affect people’s ability to engage in activities that matter most – which include spending time with friends, enjoying good health and taking time off from work. They also suggest that beyond that threshold, more money might have some negative effects, such as a reduced ability to enjoy small pleasures. But below the $75,000 threshold, many of life’s misfortunes have a much bigger negative impact. For the poor, getting divorced, having asthma, and being alone have far more severe effects. Even the benefits of the weekend turn out to be lower.

Let’s see how much banks have buried away in shale loans.

• US Annual Oil Output to Drop for First Time Since 2008 (WSJ)

U.S. oil output will decline in 2016 for the first time in eight years as producers slash spending, OPEC said Monday, while the producer group continues pumping at high levels. In its closely watched monthly oil market report, OPEC slashed its U.S. oil production forecast by 280,000 barrels a day next year, to 13.538 million barrels a day, a number that includes natural gas liquids. That would be about 60,000 barrels a day less than in 2015, the first decline since 2008. The finding is consistent with what the U.S. Energy Information Administration said last week, predicting that U.S. crude production would average about 8.9 million barrels a day in 2016, down from 9.2 million barrels a day in 2015.

OPEC said lower oil prices were forcing U.S. oil producers to cut spending and causing their wells to deplete faster than expected. OPEC producers continued to pump at high rates, the report said, with Saudi Arabia at 10.226 million barrels a day—slightly down from last month—and Iraq producing a near-record 4.143 million barrels a day. Overall the producer group was pumping 31.571 million barrels a day, the highest reported level since April 2012. The increasing levels of OPEC production—and the forecast declines in the U.S.–are part of a new order for the world’s petroleum industry since crude prices collapsed from over $100 a barrel last year to less than $50 this year.

“We see kind of a lot of volatility over the next four or five years..”

• Oil Sands Boom Dries Up in Alberta, Taking Thousands of Jobs With it (NY Times)

FORT McMURRAY, Alberta — At a camp for oil workers here, a collection of 16 three-story buildings that once housed 2,000 workers sits empty. A parking lot at a neighboring camp is now dotted with abandoned cars. With oil prices falling precipitously, capital-intensive projects rooted in the heavy crude mined from Alberta’s oil sands are losing money, contributing to the loss of about 35,000 energy industry jobs across the province. Yet Alberta Highway 63, the major artery connecting Northern Alberta’s oil sands with the rest of the country, still buzzes with traffic. Tractor-trailers hauling loads that resemble rolling petrochemical plants parade past fleets of buses used to shuttle workers.

Most vehicles carry “buggy whips” — bright orange pennants attached to tall spring-loaded wands — to help prevent them from being run over by the 1.6-million-pound dump trucks used in the oil sands mines. Despite a severe economic downturn in a region whose growth once seemed limitless, many energy companies have too much invested in the oil sands to slow down or turn off the taps. In addition to the continued operation of existing plants, construction persists on projects that began before the price fell, largely because billions of dollars have already been spent on them. Oil sands projects are based on 40-year investment time frames, so their owners are being forced to wait out slumps.

“It really is tough right now,” said Greg Stringham, the vice president for markets and oil sands at the Canadian Association of Petroleum Producers, a trade group that generally speaks for the industry in Alberta. “We see kind of a lot of volatility over the next four or five years.” After an extraordinary boom that attracted many of the world’s largest energy companies and about $200 billion worth of investments to oil sands development over the last 15 years, the industry is in a state of financial stasis, and navigating the decline has proved challenging. Pipeline plans that would create new export markets, including Keystone XL, have been hampered by environmental concerns and political opposition.

The hazy outlook is creating turmoil in a province and a country that has become dependent on the energy business. Canada is now dealing with the economic fallout, having slipped into a mild recession earlier this year. And Alberta, which relies most heavily on oil royalties, now expects to post a deficit of 6 billion Canadian dollars, or about $4.5 billion. The political landscape has also shifted. Last spring, a left-of-center government ended four decades of Conservative rule in Alberta. Federally, polls suggest that the Conservative party — which championed Keystone XL and repeatedly resisted calls for stricter greenhouse gas emission controls in the oil sands — is struggling to get re-elected in October.

Merkel will find it harder to impose her will.

• German Brand Dealt ‘Hammer Blow’ By VW Scandal And Weakening Economy (Telegraph)

The VW emissions scandal has dealt a “hammer blow” not just to Volkswagen’s reputation but potentially to the entire German national brand, according to a consultancy that calculates brand worth. The revelations that as many as 11 million diesel vehicles have been fitted with software designed to deceive emissions testers has damaged the German repuation of efficiency and reliability, said the report from Brand Finance. As a result, the value of the ‘Made in Germany’ brand has fallen 4pc – or $191bn – to $4.2 trn this year. The report added the scandal threatens to undo decades of accumulated goodwill and cast doubt over the efficiency and reliability of German industry.

However, the authors said Germany has attracted worldwide admiration for its sympathetic stance to migrants escaping Syria and other war-torn countries, which is boosting the country’s positive image. Not only has the county benefited from goodwill perceptions, but the migrants will also boost the economy, said the report. The country’s birth rate has been flagging and the influx of generally young people and families will boost Germany’s labour force, encouraging investment in Europe’s largest economy. Germany’s birth rate has collapsed to the lowest level in the world. A study by the World Economy Institute in Hamburg earlier this year said the country’s workforce will start plunging at a faster rate than Japan’s by the early 2020s due to the declining birth rate, seriously threatening the long-term viability of Europe’s leading economy.

Data last week showed German exports suffered their worst month since the global recession, as global demand slowed. Exports in Europe’s largest economy collapsed by 5.2pc in August – their largest drop since January 2009, according to figures from the country’s Federal Statistics Office. Overall the US remains the world’s most valuable national brand, having benefited from a large, wealthy market wanting to “buy American”. The country is worth $19.7 trn, when combining its strength as a brand with GDP data. Fast-growing superpower China, which has previously threatened to knock the US off the top spot, has instead been rocked by the recent stock market turbulence and slowing economic growth. Its brand worth slipped 1pc to $6.3 trn, when compared to the previous year. The UK comes in at fourth place, worth $3bn, a rise of 6pc from last year.

Diesel is dead for luxury cars. French carmakers will be hit very hard, if only because Paris MUST scrap its huge diesel subsidies.

• Emissions Test Changes Could Make Diesels ‘Unaffordable’ (BBC)

Making European emissions tests more stringent could make some diesel vehicles “effectively unaffordable”, a trade body has warned. The European Commission is trying to get vehicle makers to agree to bigger cuts in emissions from diesel engines. The pressure comes in the wake of the Volkswagen emissions scandal. The European Automobile Manufacturers’ Association (ACEA) said car companies needed enough time to implement changes to emissions testing. Diesel vehicles have been encouraged in many European markets because they can produce less carbon dioxide – a major greenhouse gas – than those with petrol engines.

The trade body said diesel was an important part of meeting future CO2 targets and it was important for the Commission to let manufacturers plan and implement necessary changes. The VW scandal, in which saw the German car maker admit rigging emissions tests, has put significant pressure on diesel vehicle manufacturers. Diesel engines emit higher levels of nitrogen oxide and dioxide (NOx) that are harmful to human health. European government officials have set out plans to introduce real-world measurements of NOx emissions rather than rely on laboratory tests. The new testing regime is due to start early next year, with the results coming into effect in 2017.

However, talks between officials in Brussels last week to discuss the plans are reported to have stalled. The ACEA said it would continue “to stress the need for a timeline and testing conditions that take into account the technical and economic realities of today’s markets”. The trade body added: “Without realistic timeframes and conditions, some diesel models could effectively become unaffordable, forcing manufacturers to withdraw them from sale.” Such a move would hit both consumers and jobs in the automotive sector, it said.

They’ve denied the bubble for so long now, why not do it a while longer?

• Home Flipping Frenzy in Sydney Sparks Warnings on Housing Risks (Bloomberg)

Sydney home prices soared 44% in the three years ended September, enticing speculators who’ve been partly inspired by home renovation shows on how to spruce up and sell homes for quick profits. The frenzy surrounding Sydney’s property boom, reminiscent of the exuberance in U.S. real estate before the 2008 financial crisis, has prompted regulators and Goldman Sachs to warn the market is overheated, while Bank of America Merrill Lynch on Monday said it expects prices to fall. Since September 2013, more than 1,500 houses and 800 apartments have been resold in less than a year in Sydney, for about 20% more on average, according to online property listing firm Domain Group. That compares with about about 530 houses and almost 400 apartments in the previous two years.

People need to be careful because “house prices aren’t going to continue to rise much more quickly than income; debt levels can’t keep rising faster than income,” Reserve Bank of Australia Deputy Governor Philip Lowe said at a conference in Sydney Tuesday. “Ideally, we’ll now go through a period of quite modest house price growth. I think that would de-risk household balance sheets a little and would probably be good for the economy.” Rushing to buy and sell homes is underscoring a build-up of mortgage risks as households take on record debt, lured by home-loan costs at the lowest in five decades. The housing debt to income ratio touched a record high of 132.8% in the three months ended June 30 up from 119.4% three years earlier, according to government data.

That is the ultimate danger.

• TTIP Deal Would Remove People’s Rights To Access Basic Human Needs (Ind.)

People’s access to basic rights such as water and energy could be at the mercy of multinational corporations, according to a new report into two controversial EU free trade deals. The report claims that the agreements could allow all public services to be locked into commercial deals that would place profit above the rights of individuals to access basic services – regardless of any possible consequences for welfare. According to the report, Public Services Under Attack, such deals would be “effectively irreversible.” They would allow multinational corporations to sue governments that try to regulate the cost of public services if it could be proved companies’ profits would be harmed.

The two trade agreements, the CETA (Comprehensive Economic and Trade Agreement) with Canada and the TTIP (Transatlantic Trade and Investment Partnership) with the US, are currently being negotiated. In their current state, it is claimed, all public services including health, education and energy could be at risk of privatisation. Under current WTO agreements, access to water is regarded as a basic human right. The new trade agreements would effectively undermine this, according to John Hilary, the executive director of War on Want, one of the campaign groups behind the report . He claims that in a worst-case scenario, if individuals were unable to pay their water bill, they would be denied access to it.

“Suddenly, instead of water being considered a human right, it would be treated as a commodity and people could be cut off if they can’t afford it,” Mr Hilary told The Independent. Previously, the UK Government has insisted that public services such as education and the NHS would be protected from such action. In November last year, the UK Government published a document on the deal, Separating Myth from Fact, in which it states: “TTIP will not change the way that the NHS, or other public services, is run. “The European Commission is following our approach that it must always be for the UK to decide for itself whether or not to open up our public services to competition.”

But Mr Hilary believes the public should be sceptical of such assurances. He said: “There is no truth in the government’s claim that public services are safe in TTIP. “Corporate lobbyists have made sure that key services such as health, education, post, rail and water are to be opened up to the private sector, and treaties such as TTIP will lock in that privatisation for ever. “As a result of the lobbying by these special interest groups in the services sector, it’s quite clear that public services are in the frame and any claim to the contrary is bogus.”

Children are stil drowning, Angela. That should be your priority, not borders or camps.

• Merkel Seeks Turkey’s Aid on Borders to Stem Refugee Flow to EU

German Chancellor Angela Merkel said Turkey needs to help stem the flow of Syrian refugees to Europe, setting the tone for her talks with Turkish leaders this week. “It’s necessary to look not just at the European dimension, but also to talk with Turkey about sensible border controls,” Merkel said Monday in a speech to party members in Stade near Hamburg. “We have to start getting more involved internationally. That’s why I will go to Turkey on Sunday.” With a record 800,000 or more refugees and migrants expected to arrive in Germany this year, Merkel is under pressure to offer solutions to an increasingly skeptical public as her approval ratings decline and she says Germany can’t stop the stream on its own. “We don’t know how many there will be,” she said.

In her speech to members of her Christian Democratic Union, Merkel said for the first time that her government is considering screening at Germany’s borders. This way, “we could possibly decide immediately” which people are economic migrants who wouldn’t qualify to stay in Germany as asylum seekers, Merkel said. While saying that all 28 European Union countries need to help stem the continent’s biggest refugee crisis since World War II, Merkel singled out Turkey as part of the solution. After EU leaders discuss the crisis at a summit in Brussels on Thursday, Merkel plans to travel to Ankara on Oct. 18 for talks with Turkish President Recep Tayyip Erdogan and Prime Minister Ahmet Davutoglu, her first official trip to Turkey since February 2013.

In Turkey, control over the border with EU member Greece “was given up at some point” because Turkey felt overwhelmed and its economy “isn’t doing so well anymore,” leaving Greece and the EU’s border patrol mission to deal with the refugee flow, Merkel said. “Naturally, we need to talk to Turkey about that.”

And the ideas won’t fly anyway. Next. Bring in the German navy?!

• Athens Rules Out Joint Sea Patrols With Turkey (Kath.)

Diplomatic sources in Athens Monday ruled out the prospect of Greek and Turkish naval forces conducting joint patrols in the eastern Aegean in a bid to curb a dramatic influx of migrants and refugees. Speaking to Kathimerini, the same sources from the Greek Foreign Ministry stated that no official European documents raise the issue of joint sea patrols – which was first reported in the German press ahead of the draft action plan signed last week between the European Union and Turkey on the support of refugees and migration management.

According to the plan, Turkey will “strengthen the interception capacity of the Turkish Coast Guard, notably by upgrading its surveillance equipment, increasing its patrolling activity and search and rescue capacity, and stepping up its cooperation with the Hellenic Coast Guard.” In an interview with Germany’s Bild newspaper published Monday, Chancellor Angela Merkel heralded closer cooperation between Greece, Turkey and EU border agency Frontex. “In the Aegean Sea, between Greece and Turkey, both NATO members, traffickers do whatever they want,” she told the paper. Diplomatic circles in Athens suggest that Ankara is tempted to use the refugee crisis as a tool for prompting additional EU aid, concessions on the issue of EU visas, or the creation of a buffer zone behind the Syrian border.

Acidification.

• Marine Food Chains At Risk Of Collapse (Guardian)

The food chains of the world’s oceans are at risk of collapse due to the release of greenhouse gases, overfishing and localised pollution, a stark new analysis shows. A study of 632 published experiments of the world’s oceans, from tropical to arctic waters, spanning coral reefs and the open seas, found that climate change is whittling away the diversity and abundance of marine species. The paper, published in the Proceedings of the National Academy of Sciences, found there was “limited scope” for animals to deal with warming waters and acidification, with very few species escaping the negative impact of increasing carbon dioxide dissolution in the oceans. The world’s oceans absorb about a third of all the carbon dioxide emitted by the burning of fossil fuels.

The ocean has warmed by about 1C since pre-industrial times, and the water increased to be 30% more acidic. The acidification of the ocean, where the pH of water drops as it absorbs carbon dioxide, will make it hard for creatures such as coral, oysters and mussels to form the shells and structures that sustain them. Meanwhile, warming waters are changing the behaviour and habitat range of fish. The overarching analysis of these changes, led by the University of Adelaide, found that the amount of plankton will increase with warming water but this abundance of food will not translate to improved results higher up the food chain.

“There is more food for small herbivores, such as fish, sea snails and shrimps, but because the warming has driven up metabolism rates the growth rate of these animals is decreasing,” said associate professor Ivan Nagelkerken of Adelaide University. “As there is less prey available, that means fewer opportunities for carnivores. There’s a cascading effect up the food chain. “Overall, we found there’s a decrease in species diversity and abundance irrespective of what ecosystem we are looking at. These are broad scale impacts, made worse when you combine the effect of warming with acidification. “We are seeing an increase in hypoxia, which decreases the oxygen content in water, and also added stressors such as overfishing and direct pollution. These added pressures are taking away the opportunity for species to adapt to climate change.”

Run away.

• Antarctic Ice Melts So Fast Whole Continent May Be At Risk By 2100 (Guardian)

Antarctic ice is melting so fast that the stability of the whole continent could be at risk by 2100, scientists have warned. Widespread collapse of Antarctic ice shelves – floating extensions of land ice projecting into the sea – could pave the way for dramatic rises in sea level. The new research predicts a doubling of surface melting of the ice shelves by 2050. By the end of the century, the melting rate could surpass the point associated with ice shelf collapse, it is claimed. If that happened a natural barrier to the flow of ice from glaciers and land-covering ice sheets into the oceans would be removed. Lead scientist, Dr Luke Trusel, Woods Hole Oceanographic Institution in Massachusetts, US, said: “Our results illustrate just how rapidly melting in Antarctica can intensify in a warming climate.”

“This has already occurred in places like the Antarctic Peninsula where we’ve observed warming and abrupt ice shelf collapses in the last few decades. “Our model projections show that similar levels of melt may occur across coastal Antarctica near the end of this century, raising concerns about future ice shelf stability.” The study, published in the journal Nature Geoscience, was based on satellite observations of ice surface melting and climate simulations up to the year 2100. It showed that if greenhouse gas emissions continued at their present rate, the Antarctic ice shelves would be in danger of collapse by the century’s end..

Debt Rattle May 18 2015

May 182015

May 18, 2015 Posted by Raúl Ilargi Meijer at 9:50 am Finance Tagged with: Antarctic, China, El Nino, endgame, eurozone, Greece, NSA, Putin, Q Ratio, TPP, UK 2 Responses »

Harris&Ewing Car exterior. Washington & Old Dominion R.R. 1930

• Q Ratio: Today’s Stock Market Has at Least One Similarity to 1929 (Bloomberg)

• Greece’s Debt Battle Exposes Deeper Eurozone Flaws (WSJ)

• Would Staying In The Euro Be A Catastrophe For Greece? (Guardian)

• Greek Endgame Nears for Tsipras as Bank Collateral Hits Buffers (Bloomberg)

• Greek Lessons for UK’s David Cameron (WSJ)

• David Blanchflower: Bank of England In Cloud-Cuckoo Land On Wages (Independent)

• UK Police Warn Big Budget Cuts Will Lead To ‘Paramilitary’ Force (Guardian)

• If Numbers Don’t Lie Then… (Mark St. Cyr)

• China Home Prices Drop Over 6% In April (Reuters)

• China Struggles To Make Its Debt Problems Go Away (MarketWatch)

• Merkel Under Pressure To Reveal Extent Of German Help For US Spying (Reuters)

• A Diplomatic Victory, and Affirmation, for Putin (NY Times)

• The Democratic Party Would Triangulate Its Own Mother (Matt Taibbi)

• TPP: Fast-Track Measure Will Pass ‘This Week’, McConnell Says (Guardian)

• The American Press Tried To Discredit Seymour Hersh 40 Years Ago, Too (Ames)

• Huge El Niño Becoming More Likely In 2015 (Slate)

• Antarctic Larsen B Ice Shelf In Last Throes Of Collapse (Livescience)

“It is very strongly indicated .. that we’re looking at a stock market which is something like 80% over-priced.”

• Q Ratio: Today’s Stock Market Has at Least One Similarity to 1929 (Bloomberg)

If you sold every share of every company in the U.S. and used the money to buy up all the factories, machines and inventory, you’d have some cash left over. That, in a nutshell, is the math behind a bear case on equities that says prices have outrun reality. The concept is embodied in a measure known as the Q ratio developed by James Tobin, a Nobel Prize-winning economist at Yale University who died in 2002. According to Tobin’s Q, equities in the U.S. are valued about 10% above the cost of replacing their underlying assets – higher than any time other than the Internet bubble and the 1929 peak. Valuation tools are being dusted off around Wall Street as investors assess the staying power of the bull market that is now the second longest in 60 years.

To Andrew Smithers, the 77-year-old former head of SG Warburg’s investment arm, the Q ratio is an indicator whose time has come because it illuminates distortions caused by quantitative easing. “QE is a very dangerous policy, in my view, because it has pushed asset prices up and high asset prices, we know from history, are very dangerous,” Smithers, of Smithers & Co. in London, said in a phone interview. “It is very strongly indicated by reliable measures that we’re looking at a stock market which is something like 80% over-priced.” Acceptance of Tobin’s theory is at best uneven, with investors such as Laszlo Birinyi saying the ratio is useless as a signal because it would have kept you out of a bull market that has added $17 trillion to share values. Others see its meaning debased in an economy whose reliance on manufacturing is nothing like it used to be.

To Smithers, the ratio’s doubling since 2009 to 1.10 is a symptom of companies diverting money from their businesses to the stock market, choosing buybacks over capital spending. Six years of zero-percent interest rates have similarly driven investors into riskier things like equities, elevating the paper value of assets over their tangible worth, he said. Standard & Poor’s 500 Index members last year spent about 95% of their profits on buybacks and dividends, with stock repurchases exceeding $2 trillion since 2009, data compiled by S&P Dow Jones Indices show. In the first four months of this year, almost $400 billion of buybacks were announced, with February, March and April ranking as three of the four busiest months ever, according to data compiled by Birinyi Associates Inc.

“Our discussions on the Greek side progressed a lot more easily than the discussions on the European side..”

• Greece’s Debt Battle Exposes Deeper Eurozone Flaws (WSJ)

Since there is no international bankruptcy court, sovereign restructurings always face political challenges as the debtor and creditor countries’ taxpayers, and the shareholders of private lending institutions all duke it out to determine how to distribute the losses. But in this case, it’s further complicated by the close financial integration between eurozone member countries. It brings a heightened level of contagion risk to the table – the idea that investors in other eurozone countries’ bonds will sell them to cover losses incurred in Greece and unleash a vicious cycle of market pressure. To forestall that risk, eurozone authorities were always reluctant to let private-sector creditors suffer big “haircuts” on their investments – which inevitably translated into a bigger burden for taxpayers.

Yet there were no pan-European political institutions to pool fiscal resources and automatically apportion how to share those burdens. Without a U.S.-style centralized federal government, the 17 member states would fight over every dollar. The result was something close to paralysis. “The technological and capital market integration was so advanced, and the world was so fragile after the 2008 crisis, that in order to really create freedom of decision-making in Greece you needed a huge amount of institutional buffers that weren’t there — buffers against contagion,” says Georgetown law professor Anna Gelpern, a long-time scholar of sovereign debt markets.

It’s tempting to suggest that bankers and hedge funds exploited this dysfunction at taxpayers’ expense. But one fund manager who participated in the private sector involvement, or PSI, talks of 2012, complained that even when the creditor committee was poised to sign a deal, the 16 EU finance ministers couldn’t agree on the terms among themselves. “Our discussions on the Greek side progressed a lot more easily than the discussions on the European side,” he said. This tortured process looms over the eurozone’s future, even if Greece finally gets a successful debt restructuring. The same flawed structure means that contagion could rear its head again in Portugal – or worse, in Spain or Italy – currently low bond yields could spike again and the panic that of 2012 could return.

While we are a long ways from those levels, this month’s rapid selloff in the region’s bond markets hints at how quickly things could unwind. For now, the ECB’s massive bond-buying program functions as the de facto institutional buffer that the eurozone politicians failed to build. But its powers aren’t limitless – the ECB can only act within a narrow mandate of achieving price stability and suffers internal political divisions of its own. Such alternative “buffer institutions are cushions to buy space to find a political solution,” said Ms. Gelpern. “If you run through those buffers without getting a political solution, then the system is going to crack. We are closer than ever to that.”

It would if the German attitude towards power doesn’t change.

• Would Staying In The Euro Be A Catastrophe For Greece? (Guardian)

Yanis Varoufakis rues the day when Greece joined the euro. The Greek finance minister says his country would be better off if it was still using the drachma. Deep down, he says, all 18 countries using the single currency wish that the idea had been strangled at birth but understand that once you are in you don’t get out without a catastrophe. All of that is true, and explains why Greece is involved in a game of chicken with all the other players in this drama: the International Monetary Fund, the European commission, the European Central Bank and the German government. Varoufakis wants more financial help but not if it means sending the Greek economy into a “death spiral”. Greece’s creditors will not stump up any more cash until Athens sticks to bailout conditions that Varoufakis says would do just that.

Things will come to a head this summer because it is clear Greece cannot make all the debt repayments that are coming up. It has to find €10bn (£7.3bn) in redemptions to the IMF, the ECB and other bondholders before the end of August and the money is not there. Greece’s creditors know that and are prepared to let the government in Athens stew. They know that Greece really has only two choices: surrender or leave the euro, and since it has said it wants to stay inside the single currency, they expect the white flag to be fluttering any time soon. Greece’s willingness to go ahead with the privatisation of its largest port, Piraeus, will be seen as evidence by the hardliners in Brussels and Berlin that they have been right to take a tough approach in negotiations with the Syriza-led government.

But before he admits he has lost the game of chicken, Alexis Tsipras, the Greek prime minister, should think hard about Varoufakis’s analysis. Was it a mistake for Greece to join the euro? Clearly, the answer is yes. Would Greece be better off with the drachma? Given that the economy has shrunk by 25% in the past five years and is still shrinking, again the answer is yes. Can you leave the euro and return to the drachma without a catastrophe? Undoubtedly there would be massive costs from doing so, including credit controls to prevent currency flight, and a profound shock to business and consumer confidence. There are also the practical difficulties involved in substituting one currency for another.

In a way, though, this is not the question the Greek government should be asking itself. Greece has been suffering an economic catastrophe since 2010. It is suffering from an economic catastrophe now and will continue to suffer from an economic catastrophe if it stays in the euro without generous debt forgiveness and policies that facilitate, rather than impede, growth. So the real question is not whether leaving the euro would be a catastrophe, because it would. The real question is whether it would be more of a catastrophe than staying in.

Turning into a long endgame.

• Greek Endgame Nears for Tsipras as Bank Collateral Hits Buffers (Bloomberg)

Greek banks are running short on the collateral they need to stay alive, a crisis that could help force Prime Minister Alexis Tsipras’s hand after weeks of brinkmanship with creditors. As deposits flee the financial system, lenders use collateral parked at the Greek central bank to tap more and more emergency liquidity every week. In a worst-case scenario, that lifeline will be maxed out within three weeks, pushing banks toward insolvency, some economists say. “The point where collateral is exhausted is likely to be near,” JPMorgan Chase Bank analysts Malcolm Barr and David Mackie wrote in a note to clients May 15. “Pressures on central government cash flow, pressures on the banking system, and the political timetable are all converging on late May-early June.”

European policy makers are losing patience with Tsipras who said as recently as May 14 that he won’t compromise on any of his key demands. While talks are centering on whether to give Greece more money, the European Central Bank could raise the stakes if it increases the discount on the collateral Greek banks pledge in exchange for cash under its Emergency Liquidity Assistance program. Such a move might inadvertently prompt a further outflow of bank deposits and pressure Tsipras to choose between doing a deal and putting his country on the road to capital controls. “We are in an endgame,” ECB Executive Board member Yves Mersch said Saturday. “This situation is not tenable.”

The arithmetic goes as follows: Greek lenders have so far needed about €80 billion under the ELA program. Banks have enough collateral to stretch that lifeline to about €95 billion under the terms currently allowed by the ECB, a person familiar with the matter said. With the central bank raising the ELA by about €2 billion every week, that could take banks to the end of June. A crunch will come if the ECB increases the haircut on Greek collateral to levels not seen since last year. That could be prompted by anything from a complete breakdown in talks to a missed debt payment, the official said. A continuation of the current impasse could even be all that’s needed, the official said. An increased haircut would reduce the ELA limit to about €88 billion, the person said. While that gives banks about four weeks before hitting the buffers, the leeway is so limited that Greece might need to impose capital controls, limiting transactions such as ATM withdrawals, to conserve the cushion.

Nice comparison.

• Greek Lessons for UK’s David Cameron (WSJ)

David Cameron and Alexis Tsipras are miles apart politically, but they share more in common than either may care to admit. Both the U.K. and Greek prime ministers took office after elections in which their parties secured just 37% of the vote. Both claim a strong mandate to reform their country’s relationship with the European Union—and boast that their real aim is to reform the EU itself. Both face pressure from party hard-liners who would rather risk a permanent rupture than accept any compromise. And both leaders believe the rest of Europe will do anything to avoid such a rupture and so will ultimately have to accept their demands. Mr. Tsipras will find out soon enough if his assessment was right: Greece’s debt negotiations are approaching their drop-dead moment when failure to agree on a new funding deal will push the government into a messy default.

But Mr. Cameron’s EU odyssey has only just begun: He must now follow through on his election pledge to hold a referendum on Britain’s continued membership of the EU by the end of 2017. The stakes could hardly be higher. Many analysts think a Greek euro exit would be destabilizing but ultimately containable. But a British exit from the EU would diminish the union in the eyes of the world, weakening its capacity to secure trade deals, deepen the European single market and to confront threats from Russia and the Mediterranean. Just as Mr. Tsipras says he wants to keep Greece in the euro, Mr. Cameron has no desire to lead the U.K. out of the EU. And as in Greece, there is little public appetite for an exit. A recent poll showed British voters back EU membership by 45%—against 33% who want out—rising to 56% to 20% if Mr. Cameron can renegotiate the terms of membership.

Like Mr. Tsipras, Mr. Cameron’s problem lies with his party, not the public. Up to a quarter of his 331 parliamentarians look certain to campaign to leave the EU since their demands for opt-outs for large swaths of EU law, a U.K. veto on future EU rules and an end to the right of EU citizens to seek work in the U.K. can never be met. Mr. Cameron’s objective is to avoid an even bigger split that would damage his authority and could become permanent. For a prime minister who has bet his country’s strategic future on his ability to renegotiate the terms of EU membership, the lack of detailed planning is striking. U.K. officials say that as things stand, Downing Street has no clear process, no team, no detailed policy proposals, no clear view on what is needed to declare the renegotiation a success and no decision on the timing of the referendum.

“There is no such thing as an expansionary fiscal contraction.”

• David Blanchflower: Bank of England In Cloud-Cuckoo Land On Wages (Independent)

In his reply to a letter from the Monetary Policy Committee this week outlining why CPI inflation was 2% below the target he had set for them, the Chancellor made clear there was more austerity heading everyone’s way. “Ultimately, the credibility of our economic policy rests on the strength of our public finances. This new Government now has a clear mandate to take the steps needed to return them to surplus and ensure continued economic security.” Here we go again, and this time he thinks he has a “mandate’ to slash and burn. It really is amazing that he hasn’t learnt from his past errors. In 2010 George Osborne imposed austerity and the economy stalled for two years; he relaxed austerity and went to plan B, and growth picked up.

So Slasher Osborne is back to his old tricks. Sadly for Slasher this time he has a slowing economy to deal with, rather than the rapidly growing one he inherited in 2010. Now the bond markets really do seem to be in free-fall, just as they weren’t in 2010. As the Governor of the Bank of England, Mark Carney, made clear in his press conference this week, “there is persistent fiscal drag … just as there has been over the last several years”. That’s one of the headwinds that weighs on the economy. The headwinds are once again going to become hurricane force. Hurricane Slasher is heading your way. Austerity is likely to smash growth once again. It seems almost inevitable that monetary policy will have to compensate for such tightening, so I fully expect the next interest rate move to be downwards, with another significant round of quantitative easing, if this austerity is implemented.

There is no such thing as an expansionary fiscal contraction. Just to remind readers, GDP growth was 1% in Q2 2010 and 0.3% in Q1 2015, the latest data that we have. To put this in context, the first chart plots quarterly GDP growth rates for the 19 EU countries that to this point have produced estimates. The UK’s growth rate of 0.3% is below both the EU and the eurozone averages of 0.4%, and is growing at half France’s growth rate of 0.6%. The UK ranks joint 11th with Belgium, Germany and Italy. There are several other countries who are yet to report for 2015 but whose growth rates for Q4 2014 were higher than 0.3%: the Czech Republic, Denmark, Luxembourg, Malta, Poland and Sweden, plus two non-EU members, Norway and Switzerland. The UK is now one of the slowest-growing European economies.

A very valuable insight: “You police by consent by having a relationship with local communities.”

• UK Police Warn Big Budget Cuts Will Lead To ‘Paramilitary’ Force (Guardian)

Police will be forced to adopt a “paramilitary” style of enforcement if the government inflicts big budget cuts on them, the head of the police officers’ organisation has warned. Steve White, chair of the Police Federation, said his 123,000 members, from police constables to inspectors, fear a move towards a more violent style of policing as they try to keep law and order with even fewer officers than now. White told the Guardian that more cuts would be devastating: “You get a style of policing where the first options are teargas, rubber bullets and water cannon, which are the last options in the UK.” White said cuts would see the bedrock principle of British law enforcement, policing by consent, ripped apart. The week ahead sees the federation stage its annual conference, which starts on Tuesday 19 May.

The key day will be Wednesday when the home secretary, Theresa May, will address rank-and-file officers. Last year May stunned delegates with a speech telling them to reform or be taken over by government, and telling them policing was failing too often. Police leaders have a fine line to walk in opposing cuts. Rank-and-file members are furious at the effects of austerity on their terms and conditions, as well as falling officer numbers nationally. But May and her advisers believe some members of the police force use over-the-top rhetoric in predictions that cuts would lead to chaos on the streets, and instead believe they should squeeze maximum value out of the public money given. White said police had already endured five years of austerity and were braced for more “swingeing cuts” after the election of a Conservative government with a majority.

White said that since 2010, when the Conservative-led coalition started slashing its funding to police by 20%, the service had been cut by 17,000 officers and 17,000 civilian staff, but had managed to limit the effect on the public. He said the service was now “on its knees”, with some internal projections within policing of a further 20% to 25% of cuts by the end of the next parliament in 2020. This would lead to more than 15,000 officers disappearing off the streets, only being seen when responding to crime or serious events such as disorder on the streets. White said: “You are left with a police service who you only speak to in the direst of circumstances, a police service almost paramilitary in style.”

“You police by consent by having a relationship with local communities. “If you don’t have a relationship, because the officers have been cut, you will lose the consent which means the face and style of policing changes. “The whole service, from top to bottom, is deeply concerned about the ability to provide the service that the public have come to expect over the next five years.”

First, falling gas prices were supposed to boost the economy. Now rising prices are to do the same thing.

• If Numbers Don’t Lie Then… (Mark St. Cyr)

One argument now being proposed to help bolster the projections that Q2 will be closer to 3% as opposed to the abysmal print of Q1 is (even as the Atlanta Fed. is now predicting the same if not worse) that this jump will be fueled by (wait for it…) “Cap-ex spending relating to the bump up in crude prices over the recent weeks…” (insert rimshot here) This wasn’t coming from some ancillary small fund manager. This line of thought and analysis was coming from one of our “too big to fail” taxpayer-funded bail-out houses of financial acumen. As this “insight” was simultaneously broadcast throughout television and radio, heralded as “This is why we have people like you on – for exactly this type of insightful analysis and perspective.” I couldn’t help myself but to agree.

For this is what “financial” brilliance across the financial media now represents: Financial spin. My analysis? With analysis like this? Taxpayers better get ready – again! This objective “seasoned” analysis is being professed by one of the same that expected the prior GDP print to show “great improvement” based on “the gas savings made possible from lower crude prices.” The result? If the build in inventory hadn’t been “adjusted” in formulations Pythagoras would marvel at – the print would have been negative. So now you’re being led to believe with the recent rise in crude prices: drillers, refiners, etc., etc., are going to load up on cap-ex only months after many have scuttled rigs, buildings, employees, and more? Again, soon enough to effect Q2?

If cap-ex can be effected that soon, and to that degree as to pull GDP prints from near negative to 3% in a single quarter all by itself – as every other macro data point is collapsing? Why would lower gas prices have ever been wanted let alone touted as “good for the economy?”I’ll just remind you that this “insightful analysis” was coming from one of the many who loved to tout endlessly how the U.S. economy is based on “consumer spending” and “more money in consumers wallets based on lower prices at the pump was inevitable.”

All I’ll ask is: when does “inevitable” materialize? Before? Or, after the next revisions? Again, now since it’s been shown that the “inevitable consumer” spent nothing of their gas savings to help prop up the prior GDP. (sorry I forgot, yes they did in higher health insurance costs) Where the case was made to bludgeon any doubters of their analysis: i.e., “lower crude prices resulting in lower gas prices = more consumer spending.” We are now supposed to embrace the inverted narrative where: “GDP for Q2 will show growth of around 3% based on higher crude prices resulting in increased cap-ex?”

Still, nothing the media can’t put a positive spin on.

• China Home Prices Drop Over 6% In April (Reuters)

Average new home prices in China’s 70 major cities dropped 6.1% last month from a year ago, the same rate of decline as in March, according to Reuters calculations based on official data published today. But nationwide prices steadied from March, further narrowing from a 0.1% fall in the previous month. Beijing saw prices rise, albeit modestly, for the second month in a row, while those in Shanghai rose for the first time in 12 months. But prices in many smaller cities, which account for around 60% of national sales, continued to fall. Analysts said that property investment, which comprises around 20% of China’s GDP, may grow less than 5% this year, compared with 10.5% in 2014, knocking 1 %age point off economic growth.

Data last week showed home sales measured by floor area rebounded 7.7% in April from a year ago, the first growth since November 2013. But property investment growth continued to slow in the first four months of 2015 to the lowest since May 2009 as new construction slumped, impacting demand for everything from steel and cement to appliances and furniture. However, government measures seem to be slowing enticing some buyers back into the market. Mortgages rose 2.1% in the months from Janaury to April from the same time a year earlier. China relaxed tax rules and downpayment requirements on second homes in late March. Earlier this month, the central bank cut interest rates for the third time since November to lower companies’ borrowing costs and stimulate loan demand.

“..the interest-cost burden of servicing debt has risen to 15% of GDP.”

• China Struggles To Make Its Debt Problems Go Away (MarketWatch)

China’s latest plan to tackle its local-government-debt problem appears to be pretending there isn’t one. This might actually stave off a wave of unpleasant corporate busts and bankruptcies, but investors need to be alert for other signs of distress in China’s repressed financial system. In recent weeks, plans floated to address local government debt — estimated to be some 22 trillion yuan ($3.54 trillion) — have included swapping loans for bonds and even potential quantitative easing by the central bank. But as these initiatives appeared to lose steam, it emerged Friday that Beijing had reverted to a more traditional plan: Tell banks to keep lending to insolvent state projects and roll over such loans.

The directive was jointly issued by the Ministry of Finance, the banking regulator and the central bank, saying that financial institutions should keep extending credit to local-government projects, even if borrowers are unable to make payments on existing loans. The positive take is that this latest maneuver postpones a painful debt reckoning and will help protect the property market and broader economy from another leg down after more weak economic data for April. Caution is understandable, as local-government debt presents numerous contagion risks. SocGen describes it as the “critical domino” in the chain of China’s credit risk. This is not just because of the size of the problem, but also due to the labyrinth of funding which straddles special-purpose-funding vehicles and the shadow-banking market.

Further, local governments are inextricably linked to the property market, as they rely on land sales for their revenue. So if the implicit guarantee on state debt were to be removed at the local-government level, the potential for a messy unraveling looks high. It’s also easy to see how this represents a larger systematic risk, as Fitch estimates banks’ total exposure to property could exceed 60% of credit if non-loan financing is also taken into account. Yet any relief that funding taps will not be switched off will also be balanced by concerns over the dangers of building up an even larger debt burden. Fitch warns that the more authorities permit loans by weak entities to be rolled over, the greater the build-up and cost of servicing that debt, and the greater the strain on banks and the overall economy. They calculate that the interest-cost burden of servicing debt has risen to 15% of GDP.

Apparently, the BND now claims it was instrumental in catching Osama Bin Laden. Get in line!

• Merkel Under Pressure To Reveal Extent Of German Help For US Spying (Reuters)

The German chancellor, Angela Merkel, is coming under increasing pressure to divulge a list of targets, including the IP addresses of individual computers, that German intelligence tracked on behalf of the US National Security Agency (NSA). Critics have accused Merkel’s staff of giving the BND foreign intelligence agency the green light to help the NSA spy on European firms and officials. The scandal has strained relations between Merkel’s conservative Christian Democratic Union and its junior coalition partner, the Social Democrats, whose leader, Sigmar Gabriel, has publicly challenged her over the affair.

Gabriel told the German newspaper Bild am Sonntag that parliament needed to see the list, which contains names, search terms and IP addresses. The government has said it must consult the US before revealing the list, whose contents are thought crucial to establishing whether the BND was at fault in helping the NSA. Gabriel, who is also Germany’s vice-chancellor, said: “Imagine if there were suspicions that the NSA had helped the BND to spy on American firms. Congress wouldn’t hesitate for a second before looking into the documents.”

Big victory indeed. That’s why we read so little about it.

• A Diplomatic Victory, and Affirmation, for Putin (NY Times)

For Russia, victory came three days after Victory Day, in the form of Secretary of State John Kerry’s visit this week to the Black Sea resort city of Sochi. It was widely interpreted here as a signal of surrender by the Americans — an olive branch from President Obama, and an acknowledgment that Russia and its leader are simply too important to ignore. Since the seizure of Crimea more than a year ago, Mr. Obama has worked aggressively to isolate Russia and its renegade president, Vladimir V. Putin, portraying him as a lawless bully atop an economically failing, increasingly irrelevant petrostate. Mr. Obama led the charge by the West to punish Mr. Putin for his intervention in Ukraine, booting Russia from the Group of 8 economic powers, imposing harsh sanctions on some of Mr. Putin’s closest confidants and delivering financial and military assistance to the new Ukrainian government.

In recent months, however, Russia has not only weathered those attacks and levied painful countersanctions on America’s European allies, but has also proved stubbornly important on the world stage. That has been true especially in regard to Syria, where its proposal to confiscate chemical weapons has kept President Bashar al-Assad, a Kremlin ally, in power, and in the negotiations that secured a tentative deal on Iran’s nuclear program. Mr. Putin, who over 15 years as Russia’s paramount leader has consistently confounded his adversaries, be they foreign or domestic, once again seems to be emerging on top — if not as an outright winner in his most recent confrontation with the West, then certainly as a national hero, unbowed, firmly in control, and having surrendered nothing, especially not Crimea, his most coveted prize.

“..you’ve been had.”

• The Democratic Party Would Triangulate Its Own Mother (Matt Taibbi)

Barack Obama made headlines this week by taking on Sen. Elizabeth Warren in a dispute over our latest labor-crushing free trade deal, the Trans-Pacific Partnership. The president’s anger over Warren’s decision to lead the Senate in blocking his authority to fast-track the TPP was heavily covered by the Beltway media, which loves a good intramural food fight. It was quite a show, which was the first clue that something wasn’t quite right in this picture. The Beltway press made a huge spectacle out of how the “long-simmering” Obama-Warren “feud” had turned “personal.”

And there were lots of suggestions that the president, in his anger toward Warren, simply let his emotions get the best of him – that he let slip impolitic and perhaps sexist words in his attacks on Warren, whom he described as “absolutely wrong” and “a politician like everyone else.” Reuters, taking the cheese all the way with this “it just got personal” storyline that people on both sides of the Warren-Obama spat have been pimping to us reporters all week, quoted observers who put it like this: The president miscalculated in making this about Elizabeth Warren, that backfired badly. It only served to raise awareness of the issue and drive people away from his position,” said Chris Kofinis, a Democratic strategist who has worked with labor unions opposed to the pact. “It never makes sense to make these kinds of issues personal,” he said.

Politicians do get angry. They even sometimes get angry in public. They are, after all, human, in some cases anyway. But politicians mostly only take their masks off when cornered: stuck in a televised argument with an expert irritant, called to speak in a legislative chamber just as that nagging case of intermittent explosive disorder kicks in, surprised by a ropeline question on the campaign trail, etc. But if you think that Barack Obama, one of the coolest cucumbers ever to occupy the White House, sat down for a scheduled interview in front of a professional softballer like ex-Times and current Yahoo pundit Matt Bai – a setup that’s the presidential media equivalent of a spa treatment – and just suddenly “lost it” in a discussion about the TPP, you’ve been had.

GOP praise for Obama. Can’t be a good sign.

• TPP: Fast-Track Measure Will Pass ‘This Week’, McConnell Says (Guardian)

Republican majority leader Mitch McConnell said on Sunday the Senate will pass “fast-track” authority to negotiate major trade deals this week, despite opposition to the measure from many of President Barack Obama’s fellow Democrats. “Yes, we’ll pass it. We’ll pass it later this week,” McConnell said in an interview with ABC. The trade issue has made unlikely allies of the Republican majority leader and the Democratic president. McConnell said on Sunday that Obama has “done an excellent job” on the trade issue. The Senate voted last week to consider the fast-track measure, two days after Democrats had blocked debate on the bill, which would clear the way for a 12-nation Pacific trade agreement.

The strong support on the second vote suggested senators were unlikely to reject the trade measure. Heated debate is still expected in the Senate over amendments and later in the House of Representatives, where many Democrats staunchly oppose the Trans-Pacific Partnership on fears trade liberalisation will cost US jobs. The Republican representative Paul Ryan said on CNN that he was confident the measure would pass the House. “We will have the votes,” said Ryan, who is chairman of the House ways and means committee. “We’re doing very well. We’re gaining a lot of steam and momentum.”

How many investigative journalists are left?

• The American Press Tried To Discredit Seymour Hersh 40 Years Ago, Too (Ames)

Seymour Hersh found himself in the middle of an F-5 shitstorm this week after breaking his biggest blockbuster story of the Obama Era, debunking the official heroic White House story about how Navy SEALs took out Osama Bin Laden in a daring, secret nighttime raid in the heart of Pakistan. According to Hersh’s account, OBL was given up by one of his Pakistani ISI prison wardens—our Pakistaini allies had been holding him captive since 2006, with backing from our Saudi allies, to use for leverage. Hersh’s account calls into question a lot of things, starting with the justification for the massive, expensive, and brutal US GWOT military-intelligence web, which apparently had zilch to do with taking out the most wanted terrorist in the world. All it took, says Hersh, was one sleazy Pakistani ISI turncoat walking into a CIA storefront in Islamabad, handing them the address to Bin Laden’s location, and picking up his $25 million bounty check. About as hi-tech as an episode of Gunsmoke.

The celebrated Navy SEAL helicopter raid and killing of OBL was, according to Hersh, a stage production co-directed by the US military and Pakistan’s intelligence agency, who escorted the SEALs to Bin Laden’s room, pointed a flashlight at the captive, and watched the SEALs unload hot lead on the old cripple, turning him into spaghetti bolognese. (Raising other disturbing questions—such as, why would the White House want to silence forever the one guy with all the names, the most valuable intelligence asset in the world… unless of course that was the whole point of slaughtering him in his Abbottabad cell? Which leads one to wonder why the US wanted to make sure Bin Laden kept his secrets to himself, should one bother wondering.)

Hersh has pissed off some very powerful people and institutions with this story, and that means the inevitable media pushback to discredit his reporting is already underway, with the attacks on Hersh led by Vox Media’s Max Fisher, CNN’s Peter Bergen, and even some on the left like Nation Institute reporter Matthieu Aikins. Yesterday Slate joined the pile-on, running a wildly entertaining, hostile interview with Hersh. Such attacks by fellow journalists on a Sy Hersh bombshell are nothing new—in fact, he used to relish them, and probably still does. He got the same hostile reaction from his media colleagues when he broke his biggest story of his career: The 1974 exposé of the CIA’s massive, illegal domestic spying program, MH-CHAOS, which targeted tens, maybe hundreds of thousands of Americans, mostly antiwar and leftwing dissidents.

Hersh is better known today for his My Lai massacre and Abu Ghraib exposés, but it was his MH-CHAOS scoop, which the New York Times called “the son of Watergate,” that was his most consequential and controversial—from this one sensational exposé the entire intelligence apparatus was nearly taken down. Hersh’s exposés directly led to the famous Church Committee hearings into intelligence abuses, the Rockefeller Commission, and the less famous but more radical Pike Committee hearings in the House, which I wrote about in Pando last year. These hearings not only blew open all sorts of CIA abuses, assassination programs, drug programs and coups, but also massive intelligence failures and boondoggles.

“At the top end, this El Niño could be the strongest in recorded history.”

• Huge El Niño Becoming More Likely In 2015 (Slate)

For the first time since 1998—the year of the strongest El Niño on record, which played havoc with the world’s weather patterns and was blamed for 23,000 deaths worldwide—ocean temperatures in all five El Niño zones have risen above 1 degree Celsius warmer than normal at the same time. That’s the criteria for a moderately strong event, and the latest forecast models are unanimous that it’s going to keep strengthening for the rest of the year. A sub-surface wave of warm water is driving this trend, which has reached off-the-charts levels during the first four months of 2015. That data was enough for Australia’s Bureau of Meteorology to officially upgrade the Pacific Ocean to El Niño conditions this week. David Jones, head of climate monitoring for the BOM, told reporters that the 2015 El Niño is shaping up to be “quite a substantial event … not a weak one or a near miss.”

The U.S. weather service, which uses slightly different criteria, declared official El Niño conditions back in March. The U.S. updated its outlook on Thursday, boosting odds of a continuation of El Niño until this summer to around 90%—what they called a “pretty confident forecast.” Autumn outlooks made this time of year normally have an error of plus-or-minus 0.6 degrees Celsius, meaning the current forecast of a 2.2 degree warming of the tropical Pacific by December essentially locks in a strong event. At the low end, we can expect the biggest El Niño since the last one in 2009-2010, a moderately strong event. At the top end, this El Niño could be the strongest in recorded history.

“The Larsen B ice shelf existed for 12,000 years before it fell apart in 2002..”

• Antarctic Larsen B Ice Shelf In Last Throes Of Collapse (Livescience)

A vast Antarctica ice shelf that partly collapsed in 2002 has only a few years left before it fully disappears, according to a new study. Radar data reveals that the Larsen B ice shelf could shatter into hundreds of icebergs by 2020, researchers reported Thursday (March 14) in the journal Earth and Planetary Science Letters. “It’s really startling to see how something that existed on our planet for so long has disappeared so quickly,” lead study author Ala Khazendar, a scientist at NASA’s Jet Propulsion Laboratory in Pasadena, California, told Live Science. An ice shelf is like a floating ice plateau, fed by land-based glaciers. The Larsen B ice shelf existed for 12,000 years before it fell apart in 2002, separate studies showed.

The ice shelf is on the Antarctica Peninsula, the strip of land that juts northward toward South America. Larsen B is about half the size of Rhode Island, some 625 square miles (1,600 square kilometers). Because the ice shelf is already in the ocean, its breakup won’t further boost sea level rise. But Khazendar and his co-authors also discovered that the glaciers feeding into Larsen B’s remaining ice shelf have dramatically thinned since 2002. “What matters is how much more ice the glaciers will dump into the ocean once this ice shelf is removed,” Khazendar said. “Some of these glaciers are most likely already contributing to sea level rise because they are in the process of accelerating and thinning.”

The Leppard and Flask glaciers thinned by 65 to 72 feet (20 to 22 meters) between 2002 and 2011, the new study reported. The fastest-moving part of Flask Glacier sped up by 36%, to a speed of 2,300 feet (700 m) a year. The glaciers that were behind the vanished section of the Larsen B ice shelf sped up by as much as 8 times their former rate after the ice crumbled over a six-week period in 2002, earlier studies showed. The northwestern part of the Larsen B ice shelf is also becoming more fragmented, the researchers said. But the southeastern part is cracking up. A huge rift has appeared just 7.5 miles (12 km) from the grounding line, where the ice loses contact with the ground and starts floating on the ocean, the study reported. This crack marks where the ice shelf may start to break apart, the researchers said.