Feb 132023
 


John French Sloan Backyards, Greenwich Village 1926

 

Medvedchuk Sees No Prospects For Minsk-3 (TASS)
US Officials Basically Admit They Blew Up Nord Stream – Lavrov (RT)
JP Morgan Reaches Agreement With Zelenskyy On Rebuilding Infrastructure (Fox)
Hungary Slams EU Push To Arm Ukraine (RT)
Samantha Power is in Hungary, Seeding Another Color Revolution (CTH)
Elon Musk Explains Purpose Of Starlink In Ukraine (RT)
Big Oil Rakes In Record Profits (RT)
Europe’s Spend On Energy Crisis Nears 800 Billion Euros (RT)
Ray McGovern Comments on Sy Hersh (Garland Nixon)
Cashless Society? Not in Switzerland (R.)
Homo implacatus (Jotwani)
UK Holds ‘Secret’ Cross-Party Brexit Summit (RT)
The Pain of Listening To Twitter Censorship Testimony (Naomi Wolf)
I’m forming a Super PAC to Draft RFK Jr. To Run For President (Steve Kirsch)

 

 

 

 

Berlusconi
https://twitter.com/i/status/1624894337283723266

 

 

 

 

Ohio


https://twitter.com/i/status/1624938064207290368

 

 

 

 

Campbell

 

 

 

 

Canberra
https://twitter.com/i/status/1624874491141824512

 

 

A Message to Germans—Nord Stream Bombing

 

 

 

 

If Ukraine were a democracy, Medvedchuk would have a loud voice.

Medvedchuk Sees No Prospects For Minsk-3 (TASS)

Viktor Medvedchuk, leader of the Opposition Platform For Life party, which is outlawed in Ukraine, said on Sunday that he sees no perspectives for signing the third Minsk agreements.”As for possible Minsk-3, I see categorically no perspectives. Regrettably, the Minsk agreements have sunk into oblivion,” he told Belarus’ STV television channel.According to Medvedchuk, peace settlement in Ukraine “is possible only when several conditions are met.” But, in his words, “Ukraine has practically ceased to exist as a state.” “It is impossible to say now what can happen and how, whether there will be any peace talks,” he stressed.The Zelensky regime “has armed itself with a policy of neo-Nazism,” he said.

“The Western ideology, which has been imposed on the Ukrainian people, its authorities since 2005, when [Viktor] Yushchenko came to power, has been fed for all these years by Western money, ideology and democracy, which has led, as we see, to tens of thousands of human deaths, the destruction of Ukraine and the fighting Zelensky continues at the head of criminal authorities, until the last Ukrainian.” These actions, in his words, are evidently geared to create an “anti-Russia.” “To create and popularize the policy of anti-Russian hysteria, untamed Russophobia. And it is not easy to destroy it all,” he said, “Today, it is necessary to explode the myth that this neo-Nazism is supported by Ukrainians. It is not supported by those from nine to twelve million Ukrainians who have fled the country. It is not supported by millions staying in Ukraine, who, regrettably, have been driven under the bench, have been intimidates, threatened with repression, criminal prosecution, torture and violence,” Medvedchuk stressed.

According to the politician, the Other Ukraine political movement has been set up to tell the world community that many Ukrainians want normalization of relations with Russia. “So that, the voice of other Ukraine is heard in the world and is not represented by Zelensky who is traveling around the globe, using all possible venues with only one goal: to show that the Ukrainian people is allegedly consolidated and he is representing this people,” he said. He noted that “millions of Ukrainians have been forced to flee the country because of the policy of Zelensky’s criminal regime.” “Today, it is necessary to consolidate those Ukrainians who are against Zelensky’s criminal policy. We want his criminal regime to sink into oblivion. And it implies enormous work we have begun and will do to break the information space which has misted the thoughts and conscience of the Ukrainians filling it with anti-Russian hysteria,” he explained.

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And that will have connsequences.

US Officials Basically Admit They Blew Up Nord Stream – Lavrov (RT)

US officials are basically admitting that they were behind the sabotage of the Nord Stream pipelines, which was perpetrated to prevent rapprochement between Moscow and Berlin, Russian Foreign Minister Sergey Lavrov has said. “The US decided that we [Russia] have been cooperating too well with Germany over the past 20 or 30 years; or rather, the Germans cooperated with us too well,” he said in an interview published on the Foreign Ministry’s website on Sunday. The “powerful alliance” based on Russian energy resources and German technology “began to threaten the monopoly position of many American corporations,” Lavrov explained. So, Washington decided to destroy this alliance between Moscow and Berlin, and did it “literally” by attacking the pipelines, which were built to deliver Russian gas to Europe through Germany, he added.

“American officials are basically admitting that the explosions that occurred at Nord Stream 1 and 2 were their doing. They even speak about it with joy,” the foreign minister stated. Lavrov was likely referring to a confession made by US Under Secretary of State for Political Affairs Victoria Nuland during a Senate hearing in late January. “I am, and I think the administration is, very gratified to know that Nord Stream 2 is now… a hunk of metal at the bottom of the sea,” she said at that time. “The vileness of Western politicians is well known,” Lavrov continued, suggesting that “the plan, which is now being implemented through ‘inciting’ Ukraine against Russia and waging a war by the entire West against Russia by means of Ukraine, is to a large extent aimed at preventing a new rapprochement between Germany and Russia.”

The comments by Russia’s top diplomat come just days after iconic American investigative journalist Seymour Hersh released a bombshell report, blaming Washington for sabotaging the Nord Stream pipelines last year. According to an informed source who talked to Hersh, explosives were planted at the pipelines in the Baltic Sea back in June 2022 by US Navy divers under the guise of a NATO exercise. They were detonated in late September, rendering the key European energy infrastructure inoperable. US National Security Council spokeswoman Adrienne Watson denied the report by the Pulitzer Prize-winning journalist, calling it “utterly false and complete fiction.” No one among high-ranking American officials has even commented on the accusations made by Hersh.

For months, the Russian authorities have been pointing to the fact that the only side to benefit from the destruction of Nord Stream was the US, which has seen supplies of its more expensive liquefied natural gas to Europe increase massively since the explosions.

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He’s selling his country by the pound.

JP Morgan Reaches Agreement With Zelenskyy On Rebuilding Infrastructure (Fox)

J.P. Morgan, the nation’s largest bank, has signed a memorandum of understanding with Ukraine’s president Volodymyr Zelenskyy with the eye on attracting private capital for a new investment fund to rebuild Ukraine’s infrastructure that has been destroyed in its war with Russia, FOX Business has learned. J.P. Morgan bankers spent most of last week meeting with Zelenskyy and his senior staff in Ukraine where they discussed the creation of a fund seeded with $20 billion to $30 billion in private capital, according to people with direct knowledge of the matter. Other ideas discussed with the Ukrainian president were the creation of a bank administered by Wall Street firms that would make investments in oil refineries, roads, bridges and other pieces of economic infrastructure destroyed in Vladimir Putin’s year-long campaign to annex the country and rebuild the old Soviet Union, these people add.

J.P. Morgan bankers were on the ground in Kyiv and other cities, dodging bombs, and witnessing firsthand how the war has crippled the country’s economy. After a series of meetings with various ministers, they met directly with Zelenskyy on Friday night. As a gesture of goodwill on the eve of Sunday’s Super Bowl, the bankers also presented Zelenskyy with a New England Patriots jersey with the number “91,” to signify the year Ukraine gained independence from the old Soviet Union, these people say. FOX Business is the first to report the possible creation of an investment fund and bank to help rebuild the country. People with knowledge of the matter say the plans for a fund or a bank are in the nascent stages and subject to change. J.P. Morgan declined to comment. The big bank is expected to make an announcement about its work in Ukraine on Monday.

[..] Privately, J.P. Morgan bankers met with Zelenskyy for hours last week, providing him with ideas on how to attract private capital. They also recommended that he invite major CEOs, like Apple’s Tim Cook, to the country to discuss economic development and that he meet with GOP lawmakers, such as the new House Speaker Kevin McCarthy, R-Calif. Some Republicans are skeptical about the billions in US aid being sent to the country, these people add. They also said that weeding out corruption and eliminating graft in government will be key to attracting private capital. Zelenskyy was said to be receptive to the advice and understood that at some point the vast amounts of western aid to the country will come to an end and that private capital – which will demand a return for its investment – will be needed to rebuild, these people say.

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“..the tenth sanctions package will only be suitable for causing further damage to us Europeans, similar to the previous nine ones.”

Hungary Slams EU Push To Arm Ukraine (RT)

The European Union’s calls to keep supporting Ukraine with arms shipments will only prolong the conflict with Russia, the Hungarian foreign minister said on Sunday. Speaking to radio Kossuth, Peter Szijjarto commented on recent remarks by the President of the European Parliament, Roberta Metsola, who pushed for fighter jets and long-range weapons to be sent to Kiev. According to the minister, EU lawmakers’ decisions on Ukraine “have generally caused damage to Europe,” and further weapons deliveries will only worsen the hostilities. He went on to blast the EU legislature, claiming that its “credibility is practically zero.” Szijjarto pointed to a recent graft scandal as proof that the EU parliament is “one of the most corrupt organizations in the world.”


He was referring to the recent arrest of the parliament’s former vice president, Eva Kaili, who has been charged with taking bribes from Qatar in exchange for illegally lobbying the interests of the Gulf state. Szijjarto noted that in Western countries, war rhetoric sounds “incomparably louder than the rhetoric of peace,” while nations outside “the transatlantic bubble” tend to prefer peace to a deadly conflict. The minister went on to question the West’s anti-Russia sanctions. He argued that they have failed to force Moscow to end the conflict, while Europe’s economy has “faced incredible difficulties,” and that “the tenth sanctions package will only be suitable for causing further damage to us Europeans, similar to the previous nine ones.” Since the start of large-scale hostilities in Ukraine almost a year ago, Hungary, which is heavily dependent on Russian energy, has been critical of Western sanctions against Moscow. It has also refused to support Kiev with weapons, or allow arms transfers across its border with Ukraine.

https://twitter.com/i/status/1624791254553841665

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And that’s why Samantha Power is in Budapest. They should throw her out.

Samantha Power is in Hungary, Seeding Another Color Revolution (CTH)

Hungary has been in the crosshairs of the Biden/Obama administration ever since Prime Minister Viktor Orban refused to align with the WEF Western Democracies in their quest for regime change in Russia. As the NATO led western alliance assembled to use Ukraine as a proxy war against Russia, Hungarian Prime Minister Orban would not join. In early April 2022, Hungarian Prime Minister Viktor Orban was overwhelmingly reelected, despite the massive efforts against him by the European Union, western and euro-centric multinational globalists. As a result of the victory, Brussels was furious at the Hungarian people. Associated Press – […] “Orban — a fierce critic of immigration, LGBTQ rights and “EU bureaucrats” — has garnered the admiration of right-wing nationalists across Europe and North America.”

Within the statements reported from his 2022 victory speech, Prime Minister Orban warned citizens of the NATO and western allied countries about the manipulation of Ukraine and how he views the Zelenskyy regime: […] “while speaking to supporters on Sunday, Orban singled out Zelenskyy as part of the “overwhelming force” that he said his party had struggled against in the election — “the left at home, the international left, the Brussels bureaucrats, the Soros empire with all its money, the international mainstream media, and in the end, even the Ukrainian president.”This put Hungarian Prime Minister Viktor Orban in the crosshairs of the western alliance, specifically the EU and U.S. bureaucrats who use their power, position and intelligence apparatus to manipulate foreign nations. A year later and now we see USAID Administrator Samantha Power in Hungary openly discussing her seeding of the NGO’s and political activist systems in order to generate yet another color revolution.

Samantha Power, the wife of Cass Sunstein, is well known as the Obama/Biden administration’s advance operative who uses her position in U.S. government to influence activism in targeted nations. Hungary is now her target. Why is eliminating Hungarian Prime Minister Viktor Orban now the goal of the Biden administration. Well, a reminder: • Hungary warned citizens of the west about the New World Order, created through Ukraine. • Hungary continued to purchase Russian oil and natural gas. Zelenskyy and the Western alliance were furious. • Hungary said they would continue energy purchases in Rubles if that is what Russia demanded.

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We will not enable escalation of conflict that may lead to WW3.”

Elon Musk Explains Purpose Of Starlink In Ukraine (RT)

SpaceX CEO Elon Musk has revealed the rationale behind the company’s decision to restrict the use of its Starlink internet system by the Ukrainian military. He doesn’t want the conflict to escalate into World War III, he said. The explanation was part of Musk’s response to astronaut Scott Kelly, who is a vocal supporter of the Ukrainian cause. Kelly urged restoration of full functionality of the system. The restriction announced last week bars the Ukrainian military from using Starlink to pilot drones, which SpaceX President Gwynne Shotwell described as “weaponization” of the product. Musk said Kelly was “smart enough not to swallow media & other propaganda bs” and pointed out that Starlink remained available for military communications in Ukraine, even though as a private company SpaceX had the right to switch the terminals off.

“We’re trying hard to do the right thing, where the ‘right thing’ is an extremely difficult moral question,” Musk stated. “We will not enable escalation of conflict that may lead to WW3.” The Starlink system was hailed by US officials as a gamechanger for the Ukrainian military, providing a reliable communication system that Russia allegedly could not disrupt through hacking. But Musk has provoked the ire of Kiev on several occasions, including by proposing a peace plan in October that would have required Ukraine to make concessions to Russia. He faced criticism and insults from Ukrainian officials in response.

Responding to the Starlink change, Mikhail Podoliak, an aide to Ukrainian President Vladimir Zelensky, declared that Musk and Shotwell had only two options: they could either be on Ukraine’s side and not seek “ways to do harm” or be counted as pro-Russian. The same official previously claimed that the Musk-owned social media platform Twitter was limiting the reach of Ukrainian government accounts and helping “Russian propaganda.” Podoliak offered no evidence to support the claim, but threatened regulatory action.

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And if you tax us on them, we will refuse to invest.

Big Oil Rakes In Record Profits (RT)

Oil giants Shell, BP, Exxon Mobil, Chevron and TotalEnergies posted a combined profit of $196.3 billion last year, according to the companies’ earnings reports. A record-high result for the oil industry, the sum tops the economic output of most countries. French oil giant TotalEnergies was the last to report on its earnings, announcing on Wednesday that its full-year profit in 2022 was $36.2 billion, double its total for 2021. US oil major Chevron and British giants BP and Shell also reported record-high results earlier this month, while Exxon’s $56 billion-profit marked a historic high for the entire Western oil industry. The record-setting earnings came as a result of a spike in fossil fuel prices last year. However, criticism of the industry for hoarding money while consumers are struggling to pay soaring energy bills has intensified.

“Given that we’re entering a global recession and that most of us know people who are struggling, we must all call out profiteering like this,” Alice Harrison from advocacy group Global Witness, told CNBC, calling for “an increased windfall tax to help those struggling to pay their bills.” Human rights group Amnesty International said the oil majors’ profits are “patently unjustifiable” and “an unmitigated disaster.” “The billions of dollars of profits being made by these oil corporations must be adequately taxed so that governments can address effectively the rising cost of living for most vulnerable populations,” said the group’s secretary general Agnes Callamard. US President Joe Biden called Big Oil’s record earnings “outrageous” in his State of the Union address on Tuesday. The head of state noted that the companies invested “too little of that profit” into efforts to stem the surge in energy prices, and proposed raising the tax on corporate stock buybacks four times to boost long-term investment.

Oil companies, however, have been arguing that windfall taxes could hinder investment. “Windfall taxes or price caps simply erode confidence in that investment stability and so I do worry about some of the moves being made. I think there is a different approach that needs to be had which is to really draw investment capital at a time when we need to be able to embed energy security into the broader energy system here in Europe,” Shell CEO Wael Sawan said last week. This opinion was mirrored by Amin Nasser, head of the world’s largest energy company Saudi Aramco, who told CNBC that higher taxes are “not helpful for [the companies] in order to have additional investment.” “They need to invest in the sector, they need to grow the business, in alternatives and in conventional energy, and they need to be helped,” he added.

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These are Big Oil’s record profits.

Europe’s Spend On Energy Crisis Nears 800 Billion Euros (RT)

European countries’ bill to shield households and companies from soaring energy costs has climbed to nearly 800 billion euros, researchers said on Monday, urging countries to be more targeted in their spending to tackle the energy crisis. European Union countries have now earmarked or allocated 681 billion euros in energy crisis speding, while Britain allocated 103 billion euros and Norway 8.1 billon euros since September 2021, according to the analysis by think-tank Bruegel. The 792-billion-euro total compares with 706 billion euros in Bruegel’s last assessment in November, as countries continue through winter to face the fallout from Russia cutting off most of its gas deliveries to Europe in 2022.


Germany topped the spending chart, allocating nearly 270 billion euros – a sum that eclipsed all other countries. Britain, Italy and France were the next highest, although each spent less than 150 billion euros. Most EU states spent a fraction of that. On a per capita basis, Luxembourg, Denmark and Germany were the biggest spenders. The spending earmarked by the countries on the energy crisis is now in the same league as the EU’s 750-billion-euro COVID-19 recovery fund. Agreed in 2020, that saw Brussels take on joint debt and pass it onto the bloc’s 27 member states to cope with the pandemic. The energy spending update comes as countries debate EU proposals to loosen state aid rules further for green technology projects, as Europe seeks to compete with subsidies in the United States and China.

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“Now, this was an act of war, pure and simple. Curiously enough, it was against Germany.”

Ray McGovern Comments on Sy Hersh (Garland Nixon)

I know him to be a meticulous reporter, winner of five Polk Awards, Pulitzer Prize, you name it. Back in the day when honest reporters were so honored. This piece has all the earmarks of Sy’s meticulous approach, and he clearly has a very good source who felt a, well, he felt a constitutional obligation to honor his or her oath to the Constitution of the United States, which is the supreme oath any of us take. And that is to make sure that you tell the truth, especially when the Constitution is being violated. Now, this was an act of war, pure and simple. Curiously enough, it was against Germany. And curiously enough, President Joseph Biden, at a press conference in the presence of the chancellor of Germany, Olaf Scholz, said this is going to happen if Russia invaded Ukraine. And, of course, he was asked, well, how do you do this? I mean, how can you how can you be so confident that Nordstrom will be killed and Biden said, well, just, you know, trust me, it’s going to happen.

And so she, bilingual, the Reuters reporter, turned to Scholz – and this is not widely available now for obvious reasons – and she said, well, I mean, do you agree with that? I mean, hello, how do you feel about this? And this hack, this political hack said: we do everything together. We do everything together. We will be together on this now. So that’s available now. It’s available. Not Sy Hersh’s piece yet, but that interview is available in Germany. You know, I describe Olaf Scholz as kind of the epitome of the abused spouse. Stands there and is abused not only by his master, Joe Biden, but also by this hack that he has as foreign minister. Her name is Baerbock. She is the the most vociferous of all the people saying that we are at war. That’s what she said. We are at war with Russia.

So the question will be: it has been 90 years, count them, nine zero years since the Nazis were making a push for power in Germany. What happened? The Reichstag, the German parliament building was burned down at the end of January, 1933. What happened? The Germans caved. The Nazis didn’t have a majority, but they scared the living daylights out of German citizens. First of all, Social Democrats gave in. Next to fall, the Zentrum party, the Catholic Party. No one spoke up. We know the rest of the story. All right. Now, sometimes history is replete with ironies. Here it is exactly to the month, 90 years later. Will the German people acquiesce in their industry, and then their bodies being frozen out this winter? Or will they rise up and say: “Look, Mr Scholz, you don’t know what the hell you’re doing, and neither does Baerbock. Get out of here!”, and replace that government?

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“It is clear that… getting rid of cash not only touches on issues of transparency, simplicity or security… but also carries a huge danger of totalitarian surveillance..”

Cashless Society? Not in Switzerland (R.)

Swiss citizens will get the chance to try to ensure their economy never becomes cashless, a pressure group said, after collecting enough signatures on Monday to trigger a popular vote on the issue. The Free Switzerland Movement (FBS) says cash is playing a shrinking role in many economies, as electronic payments become the default for transactions in increasingly digitised societies, making it easier for the state to monitor its citizens’ actions. It wants a clause added to Switzerland’s currency law, which governs how the central bank and government manage the money supply, stipulating that a “sufficient quantity” of banknotes or coins must always remain in circulation.

There is no evidence of moves towards a cashless society by Swiss authorities. FBS said it had garnered over 111,000 signatures in support of the measure, above the 100,000 needed to trigger a popular vote. Under Switzerland’s system of direct democracy, the proposal would become law if approved by voters, though government and parliament would decide how that law was implemented.

“It is clear that… getting rid of cash not only touches on issues of transparency, simplicity or security… but also carries a huge danger of totalitarian surveillance,” FBS president Richard Koller said on the group’s website. He also views Switzerland as a European standard-bearer for the defence of cash, as pushing through such guarantees in the European Union would entail the “almost impossible” process of securing approval from all 27 member states. Accelerated by the impact of COVID-19 lockdowns, the trend towards increased cashless payments was evident as far back as 2017, when an Ipsos study found more than a third of Europeans and Americans would happily go without cash and 20 per cent pretty much did so already.

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“Madness born of greed gets classified as ‘a higher form of civilization’..”

Homo implacatus (Jotwani)

A fairer economy would avoid excessive exploitation and extremes of inequality; it would also avoid any systemic negligence in the upbringing of the next generation. Such an economy would be in harmony with the living economics of nature, which has sustained life on earth from ‘day one’. Sadly, that worthy goal remains out of reach as long as people proclaim loudly that ‘greed is good’. We may consider a specific recent example. The subprime mortgage crisis in the US was caused by the fact that greedy but naïve people were cheated and exploited by greedy and cunning people. Naturally, the former were in much larger numbers, since that is a characteristic of economic exploitation.

That entire episode of ‘mega-greed’ – including the ensuing government bailouts – damaged the overall economy of the country and worsened the deep schisms running through the society. After studying such episodes of ‘mega-greed’, it would be difficult to argue that ‘greed is good’. The so-called ‘modern science’ of Economics is totally out of sync with living economics, which is the true economics of Mother Nature. The ‘fake science’ of Economics keeps inconvenient costs out of its books of accounts, and always comes up with wrong diagnoses and wrong prognoses. Nonetheless, because of the ignorance and greed of political leaders, this ‘fake science’ rules the roost.

We must hope for a smooth transition from the economics of death to living economics. However, far too much psychic energy has already been invested in the unnatural theories which justify exploitation of nature, exploitation of fellow human beings, and economic gain through bloody conflict. A painful denouement, or catharsis, is therefore inevitable – as has happened many times in human history. As before, such periods of violent house-cleaning are followed by rationalizations, often based on hoary books. A competition ensues among ‘scholars’ to show who is cleverer, or which hoary books have been proved right. Madness born of greed gets classified as ‘a higher form of civilization’.

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The damage becomes too large to ignore…

UK Holds ‘Secret’ Cross-Party Brexit Summit (RT)

High-ranking officials from opposite ends of the UK political spectrum have held ‘secret’ discussions designed to navigate a path out of various economic and strategic problems posed by Brexit, according to a report by The Observer. Documents from the meeting obtained by the British newspaper say that the talks were held under the primary topic: “How can we make Brexit work better with our neighbours in Europe?” The newspaper quoted a source who stated it to have been a “constructive meeting” which discussed at length economic problems presented by Brexit which come at a time of rising inflation and energy prices. “The main thrust of it was that Britain is losing out, that Brexit is not delivering, our economy is in a weak position,” the source said.

The summit, which reportedly took place on Thursday and Friday, was attended by members of both the ‘Leave’ and ‘Remain’ campaigns, including senior Tory Michael Gove and several members of Keir Starmer’s Labour shadow cabinet. It also included figures from investment banking company Goldman Sachs and Angus Lapsley, the NATO assistant secretary general for defense policy and planning. Gove, who was a central voice in the ‘Leave’ movement in 2016, is also understood to have been “honest” about problems presented as a result of the vote, though he maintained a position that Brexit will prove to be a good choice long-term. The documents detailing the summit also said that “rejoining the EU will not be on the agenda” but noted that the UK and EU share common goals when it comes to the energy and technology sectors, the relationship with Washington, and “containing Russian aggression”.

They also raised questions about the benefits of closer links between the UK and the 27-member European bloc. The Northern Ireland protocol, which aims to prevent a hard border between Northern Ireland and the Republic of Ireland without affecting trading ties between the UK and EU, is currently a central issue in Brussels and was also prominently discussed at the summit, The Observer wrote. The matter remains unresolved several years after Brexit came into effect. The nature of the talks reflects wider concerns from within the UK political ecosystem that Brexit will continue to damage the UK economy, as well as its strategic influence across the globe. The Office for Budget Responsibility has predicted that Brexit will reduce the UK’s GDP per capita by a factor of 4% over 15 years from 2016.

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Character murder.

The Pain of Listening To Twitter Censorship Testimony (Naomi Wolf)

It is incredible to me, as someone who was raised in an American meritocracy, and who has until very recently believed in American meritocracy, that a group of nonentities in Twitter, in collusion with nonentities at CDC (hi there, Carol Crawford), the White House and the US Dept. of the Census — were able thus so simply, and at such immediate, nuclear scale, to destroy the reputation of someone identified since 1990 as a major American voice. So: this can happen to any American voice. These ill-dressed, ill-spoken, banal careerist ciphers, cost me so much. I re-trained for almost a decade, in the middle of my life, to teach. It is all I had ever really wanted to do with my life. Now I will never be able to be the only thing I ever wanted to be — a Professor of English Literature at a university.

I am now sixty. It’s too late for me. Twitter, in collusion with the Biden administration, cost me my hard-won lifelong dream. I’ve been maligned and censored by Twitter since 2021. Even if the company eventually settles my lawsuit against it, and even though Mr Musk has “let” me back on the platform, that would be, this is, no victory. Twitter has not sent an advisory to all of the news outlets around the world that depicted me, at Twitter’s own direction, as crazy, that they were wrong to have done so; there has been no press release stating that they erred, and that I was right, and that they are sorry for wrongly abusing my reputation — and for destroying women and babies. No, forever I will remain “deplatformed from Twitter for misinformation” in the cybersphere, even though it is finally being established that sadly I was deplatformed for telling God’s truth.

It is unlikely that any university at this point would see past the grotesque imprint on my bio that Twitter, via the White House, CDC and perhaps the FBI, has taken care to embed in my bio, and in articles about me, around the world. It is unlikely, too, that I will ever recoup the six figure investments that investors withdrew from my company when Twitter, colluding with the government, was orchestrating the shredding of my reputation. It is unlikely that a 35 years career and legacy online of what had been seen until very recently as a life of significant accomplishment, can ever be re-established. I try never to complain in public. I try never to show self-pity or weakness, at least not to my enemies. But Twitter’s attacks on me are not over, and I am simply sick of the damage these mediocrities have done to me, and continue to try to do.

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President Kennedy?!

I’m forming a Super PAC to Draft RFK Jr. To Run For President (Steve Kirsch)

The federal agencies are so brain damaged it will take major surgery to fix them. Congress clearly isn’t up to the task. We need new leadership in the White House. I can’t think of anyone more qualified to clean up the mess and unite the country than RFK Jr. So I’m putting together a Super PAC to encourage him to run for President on the Democratic side against Biden. If you’d like to help out, please fill out the form here. There will be both volunteer and paid opportunities available. If you have worked for a Super PAC before, it’s especially helpful to me if you register, even if your time is limited.

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Romania
https://twitter.com/i/status/1624682043555852289

 

 

Distraction

 

 

O’Keefe
https://twitter.com/i/status/1624882242202787842

 

 

 

 

Shrooms

 

 

Seal nose
https://twitter.com/i/status/1624720584243351552

 

 

Octopus

 

 

 

 

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Mar 242021
 
 March 24, 2021  Posted by at 9:09 am Finance Tagged with: , , , , , ,  52 Responses »


Paul Gauguin Farm in Brittany 1894

 

We Are Living Through a Time of Fear (Cook)
Covid: £5,000 Fine For People Going On Holiday Abroad (BBC)
Lockdown One Year On – It Was Never Supposed To Work (OffG)
CoroNaspresso: A Cheap, Rapid and Simple Home Test (chemrxiv)
Every Day We Discuss Closure And Then Decide To Keep Going (MENA)
Top Yale Doctor: ‘Ivermectin Works,’ Including For Long COVID (TSN)
Logic In Lockdown: The German Corona Policy Is In Ruins (NZZ)
US Home Sales Fell Nearly 20% In February (F.)
EU Has ‘Destroyed’ Once Friendly Ties With Russia – Lavrov (RT)
Welcome To ‘Shocked & Awed’ 21st Century Geopolitics (Escobar)
H.R.1 – Is It Really “For the People”? (Farrell)
Leaked Docs Show Obama FTC Gave Google Its Monopoly (Bovard)
Big Oil Backs Carbon Tax (Reason)
Minnesota Police Ready For Pipeline Resistance (IC)

 

 

“One must still have chaos in oneself to give birth to a dancing star.”
– Friedrich Nietzsche

 

 

“I was not born to be forced. I will breathe after my own fashion. Let us see who is the strongest”.
– Henry David Thoreau, ‘Civil Disobedience’

 

 

UK politics has gone completely bonkers….

We Are Living Through a Time of Fear (Cook)

Welcome to the age of fear. Nothing is more corrosive of the democratic impulse than fear. Left unaddressed, it festers, eating away at our confidence and empathy. We are now firmly in a time of fear – not only of the virus, but of each other. Fear destroys solidarity. Fear forces us to turn inwards to protect ourselves and our loved ones. Fear refuses to understand or identify with the concerns of others. In fear societies, basic rights become a luxury. They are viewed as a threat, as recklessness, as a distraction that cannot be afforded in this moment of crisis. Once fear takes hold, populations risk agreeing to hand back rights, won over decades or centuries, that were the sole, meagre limit on the power of elites to ransack the common wealth. In calculations based on fear, freedoms must make way for other priorities: being responsible, keeping safe, averting danger.

Worse, rights are surrendered with our consent because we are persuaded that the rights themselves are a threat to social solidarity, to security, to our health. It is therefore far from surprising that the UK’s draconian new Police and Crime Bill – concentrating yet more powers in the police – has arrived at this moment. It means that the police can prevent non-violent protest that is likely to be too noisy or might create “unease” in bystanders. Protesters risk being charged with a crime if they cause “nuisance” or set up protest encampments in public places, as the Occupy movement did a decade ago. And damaging memorials – totems especially prized in a time of fear for their power to ward off danger – could land protesters, like those who toppled a statue to notorious slave trader Edward Colston in Bristol last summer, a 10-year jail sentence.

In other words, this is a bill designed to outlaw the right to conduct any demonstration beyond the most feeble and ineffective kind. It makes permanent current, supposedly extraordinary limitations on protest that were designed, or so it was said, to protect the public from the immediate threat of disease. Protest that demands meaningful change is always noisy and disruptive. Would the suffragettes have won women the vote without causing inconvenience and without offending vested interests that wanted them silent? What constitutes too much noise or public nuisance? In a time of permanent pandemic, it is whatever detracts from the all-consuming effort to extinguish our fear and insecurity. When we are afraid, why should the police not be able to snatch someone off the street for causing “unease”?

The UK bill is far from unusual. Similar legislation – against noisy, inconvenient and disruptive protest – is being passed in states across the United States. Just as free speech is being shut down on the grounds that we must not offend, so protest is being shut down on the grounds that we must not disturb.

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… and I mean completely.

Covid: £5,000 Fine For People Going On Holiday Abroad (BBC)

A £5,000 fine for anyone in England trying to travel abroad without good reason is due to come into force next week as part of new coronavirus laws. The penalty is included in legislation that will be voted on by MPs on Thursday. Foreign holidays are currently not allowed under the “stay at home” rule which ends on Monday. But then the ban on leaving the UK at this time will become a specific law backed up by the threat of the fine. Under the current plan for easing restrictions, the earliest date people in England could go abroad for a holiday would be 17 May. However, another surge in Covid cases in continental Europe, as well as the slow rollout of vaccines across Europe, has cast doubt on the resumption of foreign travel.


Health Secretary Matt Hancock said restrictions on travelling abroad were necessary to guard against the importation of large numbers of cases and new variants which might put the vaccine rollout at risk. Shadow Cabinet Office minister Rachel Reeves told BBC Breakfast that Labour supported measures to keep the UK’s borders secure and avoid the importation of new variants but said the government’s “slowness to react” had contributed to the country’s high death rate. Prime Minister Boris Johnson warned on Monday the UK should be “under no illusion” that it will feel the effects of a rising number of cases on the continent. One of his ministers, Lord Bethell, said England might put “all our European neighbours” on the “red list” of countries. However, Mr Hancock told BBC Radio 4’s Today programme there were no plans to do this.

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A two week lockdown can achieve something. A one year lockdown can only achieve something other than the stated intent.

An entire library on lockdown effectiveness is at The Fat Emperor.

Lockdown One Year On – It Was Never Supposed To Work (OffG)

And so we come to March 23rd, and lockdown’s first birthday. Or, as we call it here, the longest two weeks in history. 1 year. 12 calendar months. 365 increasingly gruelling days. It’s a long time since “2 weeks to flatten the curve”, became an obvious lie. Sometime in July it turned into a sick joke. The curve was flattened, the NHS protected and the clapping was hearty and meaningful. …and none of it made any difference. This was not a sacrifice for the “greater good”. It was not a hard decision with arguments on both sides. It was not a risk-benefit scenario. The “risks” were in fact certainties, and the “benefits” entirely fictional.Because Lockdowns don’t work. It’s really important to remember that.


Even if you subscribe to the belief that “Sars-Cov-2” is a unique discrete entity (which is far from proven), or that it is incredibly dangerous (which is demonstrably untrue), the lockdown has not worked to, in any way, limit this supposed threat. Lockdowns. Don’t. Work. They don’t make any difference, the curves don’t flatten and the R0 number doesn’t drop and the lives aren’t saved (quite the opposite, as we’ve all seen). Just look at the graphs. This one, comparing “Covid deaths” in the UK (lockdown) and Sweden (no lockdown):

Or this one, comparing “Covid deaths” in California (lockdown) and Florida (no lockdown):

From Belarus to Sweden to Florida to Nicaragua to Tanzania, the evidence is clear. “Covid”, whatever that means in real terms, is not impacted by lockdowns. Putting the entire population under house arrest doesn’t benefit public health. In fact, it’s (rather predictably) incredibly counter-productive. The damage done by shuttering businesses, limiting access to healthcare, postponing treatments and diagnoses, postponed surgeries, increasing depression, soaring unemployment and mass poverty has been discussed to death. The scale of the impact cannot be overstated.


Dr David Nabarro, World Health Organization special envoy for Covid-19, said this of lockdowns back in October: “We in the World Health Organization do not advocate lockdowns as the primary means of control of the virus[…]just look at what’s happened to the tourism industry…look what’s happening to small-holding farmers[…]it seems we may have a doubling of world poverty by next year. We may well have at least a doubling of child malnutrition […] This is a terrible, ghastly global catastrophe.”

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Haven’t read the whole document yet, but the picture looks intruiging.

CoroNaspresso: A Cheap, Rapid and Simple Home Test (chemrxiv)

Development of a novel LAMP device which is cheap, reusable, and can be produced in large amounts in a short period of time. The device was designed such not to require chemical exothermic reactions, have limited waste produced and with a minimum cost of the device as a whole. The device was tested for the detection of SARS-CoV2 RNA.

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In Lebanon, it’s one crisis on top of another crisis on top of another.

Every Day We Discuss Closure And Then Decide To Keep Going (MENA)

Once bustling with life, Beirut’s famed Gemmayze Street is now deserted. Lined with damaged homes, collapsed buildings and closed businesses, the residential and commercial hub was one of the city’s most vibrant destinations – but not any more. “It’s like a nightmare. We’ve never seen anything like this before,” said Charbel Bassil, owner of renowned Le Chef restaurant, on the first day of reopening after a nationwide lockdown. One of Beirut’s oldest and most popular restaurants, Le Chef, in in Gemmayze, is one of many businesses struggling to stay afloat under the weight of Lebanon’s compounding crises. The family business reopened its doors on March 22, as per the government’s lockdown strategy, but customers were hardly pouring in.

The modest space, which was often full to the brim for lunchtime, now welcomed only three tables after a full day of work, or about 10 customers. The burst of vigor and energy that characterised the dining experience at Le Chef was replaced by a sense of moping and melancholy. “We’re doing our best to keep going, but everything is a mess,” Mr Bassil told The National. Le Chef , founded in 1967, weathered civil wars and crises, but none harmed trade like Lebanon’s current events. “This is our family business. I’ve been working here since I was a child, but nothing we lived through was as bad as this,” Mr Bassil said. After almost losing the restaurant in the Beirut blast, Le Chef was able to rebuild thanks to donations, $5,000 of which came from the actor Russell Crowe.

But what the port explosion could not destroy, the economic crisis shattered. “We can’t work in this crisis. Suppliers won’t give us goods because of the market rate and we don’t know how to price our dishes,” Mr Bassil told The National. “We’re a restaurant for the people. We want to serve high-quality food for affordable prices.” Lebanon’s currency lost more than 80 per cent of its value since the beginning of the economic crisis, declared one of the worst in the country’s history. In one year, the Lebanese pound, which once traded at 1,500 to the US dollar, slumped to 15,000 on the parallel market. The minimum wage shrank from $450 to an average of $50, leaving people with insufficient salaries to cover rising living costs.

[..] Despite the opportunity to be back in business, Lebanon’s hospitality sector is wary about reopening because operational costs now outweigh profits. Fewer than 1,000 restaurants and cafes are expected to reopen this week, said Aref Saade, treasurer at the Syndicate of Owners of Restaurants, Cafes, Night-Clubs and Pastries. Prior to the crisis, Lebanon had about 8,500 tourist institutions in business. The number decreased to 4,500 when Covid-19 struck, and is anticipated to sink below 1,000 due to the soaring and unstable currency exchange rate. “Businesses are refraining from reopening – it’s just not worth it,” Mr Saade told The National.

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“If I can save you,” he said referring to his father, “I can tell you, I save anybody.”

Top Yale Doctor: ‘Ivermectin Works,’ Including For Long COVID (TSN)

A Yale University professor and renowned cancer researcher has pored over the COVID-19 literature and treated several dozen patients. He can remain silent no longer. Dr. Alessandro Santin, a practicing oncologist and scientist who runs a large laboratory at Yale, believes firmly that ivermectin could vastly cut suffering from COVID-19. Santin joins a growing group of doctors committed to using the safe, generic drug both as an early home treatment to prevent hospitalization and alongside inpatient treatments like steroids and oxygen. “The bottom line is that ivermectin works. I’ve seen that in my patients as well as treating my own family in Italy,” Santin said in an interview, referring to his father, 88, who recently suffered a serious bout of COVID. “We must find a way to administer it on a large scale to a lot of people.”

Santin’s statements carry the prestige of a leadership position at Yale School of Medicine and the gravitas of a top uterine cancer researcher, who has authored more than 250 science journal articles and pioneered treatment, used worldwide, for the most aggressive form of uterine cancer. At Yale, he is an OB/GYN professor, team leader in gynecologic oncology at the Smilow Comprehensive Cancer Center, and co-chief of gynecologic oncology. When COVID came along, Santin began reading about how best he might help his cancer patients, 10 to 20 percent of whom were coming in infected with COVID. He began using ivermectin after the National Institutes of Health changed its advisory in January to allow the drug’s use outside of COVID trials. Santin’s endorsement is not only important but broad.

He said he has seen ivermectin work at every stage of COVID — preventing it, eliminating early infection, quelling the destructive cytokine storm in late infection, and helping about a dozen patients so far who suffered months after COVID. One of them is an athlete and mother of two, 39, who had been disabled by post-COVID chest pain, shortness of breath and fatigue; she confirmed in an email to me her joy at being able to walk up a hill again and breathing better within 72 hours of her first dose. “When you have people that can’t breathe for five, six, eight, nine months and they tried multiple drugs and supplements with no success, and you give them ivermectin,” Dr. Santin said of long-haul patients, “and you see that they start immediately feeling better, this is not placebo. This is real.”

[..] Beyond his outpatients, Santin has treated family members and friends infected with COVID in both his home community in Connecticut and in his native Italy via telemedicine. There, he prescribed ivermectin to more than 15 families, in which parents, children or others had became infected; the goal was both to treat early and prevent severe COVID, as studies have shown ivermectin does. “I have not a single one that right now had to go to the hospital to receive oxygen,” he said. “I have no doubt ivermectin saved my 88-year-old father’s life.” His father survived COVID despite high blood pressure, cardiac disease that led previously to seven stents and open heart surgery, and lung problems. “If I can save you,” he said referring to his father, “I can tell you, I save anybody.”

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Google translate.

Logic In Lockdown: The German Corona Policy Is In Ruins (NZZ)

Instead of easing concepts, the Chancellor and Prime Minister present the extension and tightening of the lockdown. The citizens have to pay for what the government has missed for months. Chancellor Angela Merkel and the Prime Minister wrestled with each other for twelve hours on Tuesday. Anyone who expected a big hit after this nightly marathon was disappointed: The result of the conference is shameful. Not only that the tentative easing of the corona measures has been discarded. Germany should also go into a tough lockdown at Easter. “We thought again today,” said the Chancellor in the early hours of the morning. In order to “break through” the third corona wave a little bit, April 1st and 3rd at Easter will be “one-off days of rest”, as “extended rest time”.

Rethought? With these resolutions, Germany’s government surrenders to the principles of reason. If you wanted to avoid hamster purchases and crowds in supermarkets until now, the opposite is now the case: the closing of supermarkets over Easter is forcing citizens to replenish their supplies. You don’t need a crystal ball to predict the resulting overcrowding of the shops on Holy Saturday. Is that still wanton or already deliberate bad planning? Either way, it lacks any logic. Religious freedom could also be a victim of the comfortably formulated “extended rest period at Easter” – for all those for whom five months of rest are not enough – there should be no Easter services with an audience in attendance, according to the will of the conference.

So while in the past few days 700 Hansa Rostock football fans were allowed to go to the stadium with a negative quick test and 1,000 classical music fans who also tested negative were allowed to go back to the Berlin Philharmonic, is it not possible to organize a gathering of Christians at their highest festival? Not if you leave it to this government, that’s for sure. Local politicians such as Tübingen’s Mayor Boris Palmer show that there is another way. With test stations he enables the citizens of his city to live a little and the business people to survive.

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“..the lowest reported inventory since the Realtors association began tracking it in 1982..”

US Home Sales Fell Nearly 20% In February (F.)

Single-family home sales dropped 18.2% from January to February, according to the U.S. Census Bureau, even as annualized sales remain much higher than pre-pandemic rates. 775,000 (at a seasonally adjusted annual rate) new single-family homes were sold in Feb. 2021—that’s a large drop from the 958,000 homes sold rate in Jan. 2021. Adjusted home sale rates are still far higher than they were pre-pandemic: 716,000 new single family homes were sold in Feb. 2020. The median price of new homes sold in February was $349,000 and the average sale price was $416,000. The National Association of Realtors said the decline from January was due to “historically-low inventory”, and said home sales are ahead of total 2020 sales. At the end of December 2020, there were just 1.07 million homes for sale—the lowest reported inventory since the Realtors association began tracking it in 1982.

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“Brussels “has consistently destroyed all mechanisms without exception that existed on the basis of an agreement on partnership and cooperation.”

EU Has ‘Destroyed’ Once Friendly Ties With Russia – Lavrov (RT)

Months of political tension and a wave of new sanctions have severed all links between the EU and Russia, Moscow’s top diplomat has said, adding that his country is ready to resume cooperation if Brussels decides it is interested. Speaking at a press conference alongside his Chinese counterpart on Tuesday, Foreign Minister Sergey Lavrov said that currently, “there are no relations with the EU as an organization. The entire infrastructure of these relations has been destroyed by unilateral decisions made from Brussels.” Some individual European countries, he argued, are still seeking closer ties with Moscow, “guided by their national interests.” However, these are being fast outpaced by growing partnerships with China, Lavrov told journalists.

“If and when Europeans decide to eliminate these anomalies in contacts with their largest neighbor, of course, we will be ready to build up these relations based on equality,” the diplomat confirmed, “while in the East, in my opinion, we have a very intensive agenda, which is becoming more diverse every year.” In February, the foreign minister stated that Moscow’s relations with the bloc had taken a tumble in 2014, after the EU “blamed the Russian Federation for everything that is happening” in Ukraine following the Maidan. Since then, he argued, Brussels “has consistently destroyed all mechanisms without exception that existed on the basis of an agreement on partnership and cooperation.”

As part of a fiery broadcast interview, Lavrov warned that if the bloc’s leadership sought to impose sanctions on Russia that hit sensitive areas of the economy, Moscow could break off diplomatic contact altogether as a last resort. “Of course, we do not want to isolate ourselves from living in the world, but we must be ready for this. If you want peace, prepare for war,” he stressed. Earlier this month, the EU unveiled a new package of sanctions against four Russian officials it claimed were responsible for the detention of opposition figure Alexey Navalny, and “human rights violations” during the policing of subsequent protests held in his support. At the time, the Foreign Ministry in Moscow said the bloc had “missed yet another opportunity to review its … approach to relations with Russia.”

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“The United States is not qualified to talk to China in a condescending manner. The Chinese people will not accept that.”

Welcome To ‘Shocked & Awed’ 21st Century Geopolitics (Escobar)

With a Russia-China-Iran triple bitch slap on the hegemon, we now have a brand new geopolitical chessboard… It took 18 years after Shock and Awe unleashed on Iraq for the Hegemon to be mercilessly shocked and awed by a virtually simultaneous, diplomatic Russia-China one-two. How this is a real game-changing moment cannot be emphasized enough; 21st century geopolitics will never be the same again. Yet it was the Hegemon who first crossed the diplomatic Rubicon. The handlers behind hologram Joe “I’ll do whatever you want me to do, Nance” Biden had whispered in his earpiece to brand Russian President Vladimir Putin as a soulless “killer” in the middle of a softball interview.

Not even at the height of the Cold War the superpowers resorted to ad hominem attacks. The result of such an astonishing blunder was to regiment virtually the whole Russian population behind Putin – because that was perceived as an attack against the Russian state. Then came Putin’s cool, calm, collected – and quite diplomatic – response, which needs to be carefully pondered. These sharp as a dagger words are arguably the most devastatingly powerful five minutes in the history of post-truth international relations. In For Leviathan, it’s so cold in Alaska, we forecasted what could take place in the US-China 2+2 summit at a shabby hotel in Anchorage, with cheap bowls of instant noodles thrown in as extra bonus.

China’s millennial diplomatic protocol establishes that discussions start around common ground – which are then extolled as being more important than disagreements between negotiating parties. That’s at the heart of the concept of “no loss of face”. Only afterwards the parties discuss their differences. Yet it was totally predictable that a bunch of amateurish, tactless and clueless Americans would smash those basic diplomatic rules to show “strength” to their home crowd, distilling the proverbial litany on Taiwan, Hong Kong, South China Sea, “genocide” of Uighurs. Oh dear. There was not a single State Dept. hack with minimal knowledge of East Asia to warn the amateurs you don’t mess with the formidable head of the Foreign Affairs Commission at the CCP’s Central Committee, Yang Jiechi, with impunity.

Visibly startled, but controlling his exasperation, Yang Jiechi struck back. And the rhetorical shots were heard around the whole Global South. They had to include a basic lesson in manners: “If you want to deal with us properly, let’s have some mutual respect and do things the right way”. But what stood out was a stinging, concise diagnostic blending history and politics: “The United States is not qualified to talk to China in a condescending manner. The Chinese people will not accept that. It must be based on mutual respect to deal with China, and history will prove that those who seek to strangle China will suffer in the end.”

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It is a weird piece of legislation.

H.R.1 – Is It Really “For the People”? (Farrell)

A lot has been written about H.R.1 — the so-called “For the People Act of 2021.” Former Vice President Mike Pence has opined on the bill. The Editorial Board of the Wall Street Journal sounded the alarm back in January. The editors of National Review come right out and call it a “partisan assault on American democracy.” H.R.1 purports to, “expand Americans’ access to the ballot box, reduce the influence of big money in politics, strengthen ethics rules for public servants, and implement other anti-corruption measures for the purpose of fortifying our democracy, and for other purposes.” The Bill is 791 pages long. Here are just a few of the more egregious federal power grabs in H.R.1 concocted against the 50 states that run elections under the U.S. Constitution:

• Ban voter ID laws and allow ballot harvesting; • Expand Election Day to “election season” by mandating mail-in ballots be counted 10 days after the election would normally be over; • Automatic voter registration of people who apply for unemployment, Medicaid, Obamacare and college, or who are coming out of prison. There is a lot more, and it gets worse. Substantially worse. There are First Amendment restrictions on political speech and on the support or opposition of a bill and/or a candidate. Remember: This is supposed to be “fortifying our democracy.” If you are interested in a “through the looking glass” annotated analysis of H.R.1 — then head over to the Brennan Center for Justice. They are happy to explain how those pesky constitutional rights can be whittled down to something more “fair” for everyone.

For example, the Brennan Center analysis confidently assures readers about how H.R.1 “affirms Congress’ power to protect the right to vote, regulate federal elections, and defend the democratic process in the United States.” It seeks to airbrush Article I, Section 4 — The Elections Clause — from history and practice. The Clause directs and empowers states to determine the “Times, Places, and Manner” of congressional elections. H.R.1 would federally strangle the Elections Clause. In order to find our way out, it is helpful to know how we got into this terrible predicament. The foundation for the madness of H.R.1 is legal positivism, a thesis, according to the Stanford Encyclopedia of Philosophy, which states “that the existence and content of law depends on social facts and not on its merits.” H.R.1 is nearly 800 pages of meritless, militant, social engineering targeting the foundations of the U.S. Constitution, voting rights and political free speech — all dressed-up as being “for the people.”

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Too late now.

Leaked Docs Show Obama FTC Gave Google Its Monopoly (Bovard)

Eight years ago, the Federal Trade Commission had the chance to face down Google — the giant of Silicon Valley whose power now alters the free flow of information at a global scale, distorts market access for businesses large and small, and changes the nature of independent thought in ways the world has never experienced. Instead, the FTC blinked — and blinked hard, choosing to close the investigation in early 2013. A remarkable leak to Politico of agency documents about the 2012 Google investigation reveals that, despite ample evidence of market distortions and threats to competition presented by the agency’s lawyers, the five commissioners of the FTC deferred instead to speculative claims by their economists.

Records and reporting about the 2012 investigation suggest the FTC did so while bending to political pressure from the Obama White House — which was, in turn, bending to political pressure from Google. William Kovacic, a former FTC chair under President George W. Bush, reviewed the more than 300 pages of documents leaked to Politico and concluded the agency overlooked “what many experts and regulators would consider clear antitrust violations,” calling the specificity of issues outlined “breathtaking.” In short, where we find ourselves today — with Google as the primary filter of the world’s information, engaging in a network of exclusionary contracts and anti-competitive conduct, and subject to an antitrust lawsuit led by the Department of Justice and joined by 48 state attorneys general — could have, and should have, been avoided.

That it wasn’t, however, provides key takeaways about where we are now with Big Tech, and, in particular, the method of enforcement of our antitrust laws, whose application has become too tightly wrapped around the axle of price, and captured by the speculative science of economic forecasting. It also reveals just how politicized antitrust enforcement has become — influenced by the siren song of internet exceptionalism and the powerful tug of Google, one of the world’s richest companies. Perhaps the most stunning takeaway in the 2012 documents is the extent to which the recommendations of the FTC’s lawyers sharply differed from those of the agency’s economists, on whose judgment the FTC commissioners ultimately relied in their decision to drop the investigation into Google.

The FTC’s antitrust attorneys concluded that Google was breaking the law by “banishing potential competitors” with a series of exclusionary contracts on mobile phones — much of which forms the basis for the lawsuit brought nearly a decade later by the Trump Department of Justice. The FTC’s economists, however, demurred, insisting that claims of Google’s market dominance were unfounded and would soon give way to competition. This required a markedly un-curious treatment of key facts.

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Whatever Big Oil backs can never be good.

Big Oil Backs Carbon Tax (Reason)

Executives from leading oil companies, including ExxonMobil, BP, Chevron, ConocoPhillips, and the American Petroleum Institute (API), met virtually with Biden administration officials to discuss policies aimed at addressing the problem of man-made climate change. The Wall Street Journal reported that company leaders said that “they wanted to work with the administration and pledged support for policies that would make it more expensive to emit the gases that contribute to climate change.” In a statement issued after the virtual meeting, API CEO Mike Sommers declared, “We are committed to working with the White House to develop effective government policies that help meet the ambitions of the Paris Agreement and support a cleaner future.” The API is rumored to be considering coming out in support of carbon emissions pricing.

ExxonMobil and ConocoPhillips previously endorsed the bipartisan Climate Leadership Council’s (CLC) revenue neutral carbon tax and dividend proposal in which escalating taxes collected on oil and natural gas at the wellhead and on coal at the minehead would be entirely rebated in equal sums to each American as an annual payment. The CLC cites a 2018 study that finds that 70 percent of American households would receive more in dividend payments then they would pay in increased energy prices. Once the CLC’s carbon tax plan is adopted, all other regulations and subsidies aimed at reducing carbon dioxide emissions, such as automobile fuel efficiency and renewable portfolio standards, are supposed to be permanently repealed.

However, lots of climate activists oppose carbon taxes. Why? InsideClimateNews offered the example of Matto Mildenberger, a political scientist at the University of California, Santa Barbara, who has argued that carbon taxes make climate action unpopular because they front load the costs immediately onto consumers while the eventual benefits of lower temperatures, less fierce storms, and lower sea levels stretch into the future. As InsideClimateNews explained: “In the view of Mildenberger and others who’ve studied climate politics around the world, subsidies, regulation, and other policies that provide more immediate and visible benefits—like jobs creation—are a better way to jump-start climate policy, even if they cost more in the short run. That’s because they stimulate investment to help lower the cost of alternative energy, and at the same time help broaden political support for stronger climate policy. New actors with real investments they want to protect and advance will want more aggressive action, and politicians will respond.”

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Drilling under the Mississippi. Leave it be.

Minnesota Police Ready For Pipeline Resistance (IC)

As you drive toward the Mississippi River’s headwaters from the east, the lakes that open up on either side of the highway are still white-blue with ice. The Mississippi River, however, is flowing. The open water — a trickle compared to the expanse it will become farther south — is a hopeful sign of the end of another long Minnesota winter, but it also has opponents of pipeline construction in the area on edge. Enbridge, the Canadian energy-transport firm, is planning to route its Line 3 pipeline under the Mississippi, near where it crosses Highway 40. In winter, a pollution-control rule bars drilling under the frozen waters. As the ice melts away, so do the restrictions. Those organizing against the project worry that Enbridge could begin tunneling under the Mississippi and other local rivers any day — and the pipeline-resistance movement is getting ready for it.

“They got a lot of money, they got a lot of equipment, but we got a lot of people,” said Anishinaabe water protector Winona LaDuke at an event last week with actor and activist Jane Fonda, which took place in front of the flowing Crow Wing River, not far from where Enbridge seeks to drill under its shores. “Spring is coming. Let’s be outdoorsy.” Enbridge’s Line 3 project began construction four months ago. It was designed to replace a decaying pipeline of the same name; however, a large portion of its 338-mile Minnesota section, which makes up most of the U.S. route, plows through new land and waters. The project would double Line 3’s capacity for carrying tar sands oil, one of the most carbon-intensive fossil fuels in the world, at a moment when a rapid shift away from fossil fuels has become critical to address the climate crisis.

The delicate waterway ecosystems through which the pipeline passes have become the central organizing point of the anti-pipeline, or water protector, movement. Hundreds of rivers, streams, and wetlands face the specter of a tar sands leak after the replacement Line 3 begins operating. And the particularly intensive form of drilling required to tunnel the pipeline under rivers holds its own set of risks during construction.

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God Save the Queen

 

 

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Aug 092020
 


Albert Kahn Paris, Autochrome Lumière color photo 1914

 

COVID19 Pandemic To ‘Bring Socialism To US’, Transform The World – Taleb (RT)
What’s In Trump’s Coronavirus Executive Orders (R.)
Russia COVID19 Vaccine Registration Expected August 12 (RT)
SARS-CoV-2 Fatality Risk In A Nationwide Seroepidemiological Study (Medrxiv)
Chuck Schumer Says Schools Must Reopen Or Economy Suffers (RT)
Trump Aides Exploring Executive Actions To Curb Voting By Mail (Pol.)
No Payment, No Problem: Bizarre New World of Consumer Debt (WS)
Social Media Imposing Modern-Day ‘Hays Code’ On Political Speech (RCP)
Twitter Reportedly Joins Growing List Of Potential TikTok Suitors (ZH)
US To Cut Troop Levels In Afghanistan To ‘Less Than 5,000’ – Esper (R.)
Oil Giants Cut Production By 1 Million bpd Amid Massive Writedowns (R.)
Zelensky Says Ukraine Staying Out Of US Internal Politics, Elections (R.)
George W. Bush Laid the Groundwork for Today’s Immigration Nightmare (MPN)
West’s Favorite Hong Kong ‘Freedom Writer’ Is American In Yellowface (GZ)
Solidarity with the Germans (Varoufakis)

 

 

Weekend, so lower numbers. US new deaths were below 1,000 (976), so I lost that grpah.

 

 

 

 

 

 

 

 

 

 

Hedge funds dollar

 

 

Who would have thought that the first socialist president of the United States would be Donald Trump?

COVID19 Pandemic To ‘Bring Socialism To US’, Transform The World – Taleb (RT)

In a remarkable twist, the raging coronavirus pandemic has forced even countries like the US to adopt “socialist” welfare programs, acclaimed author and risk analyst Nassim Taleb has told RT. While people spend days worrying about global wars, our biggest threats have always been the pandemics, the author of ‘The Black Swan’ and ‘Skin in the Game’ told RT’s Sophie Shevardnadze on her show SophieCo. Visionaries. The advent of the novel coronavirus will tremendously change societies in many ways, making them better ready for future crises, he said. “So the world will be different, wiser. But, hopefully, it will be good for peace, because people will understand tomorrow that the enemy is not some person with weapons. The enemy is that thing you don’t see: a tiny little germ you can have on top of a pencil,” the writer added.

What I think is going to happen is a transformation of economic structures to accommodate potential pandemics. Even if they never happen again, people will be prepared for them. He cited the boom of teleworking, Zoom conference calls, and online shopping as examples of people adapting to the new reality. According to Taleb, globalization would become more “guarded,” rather than disappear entirely. “The physical movement of population… would be reduced, and business travel will not be as active as we saw in the past,” he said. One of the most remarkable changes the pandemic has brought, the writer noted, was how some governments have been “extremely helpful” to citizens trapped in quarantines and lockdowns.

This touched the US as well, where a $2 trillion stimulus package was adopted in May, the largest in the nation’s history. Who would have thought that the first socialist president of the United States would be Donald Trump? He gave people universal basic income for a few months, and they took possession of companies. If that’s not socialism, I don’t know what is. So, the individuals got a protective net that they didn’t have before. “Mark my words, if you want a headline done – ‘Who would have expected the Covid to run both domestic and foreign policy?’, ‘Covid to bring socialism to countries like the United States,’” Taleb said.

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Yeah. No. Everyone may get this wrong or confused, but from what I can see he signed just one executive order (on payroll tax), the other three are memoranda. Details on that:

The hierarchy is: Proclamations, executive orders, presidential memoranda, presidential notices, and presidential determinations. Notices and determinations are usually required by Congress on specific issues. Authority: Under an executive order signed by President John F. Kennedy, an executive order must cite the authority the president has to issue it. That could be the constitution, or a specific statute. Presidential memoranda have no such requirement.

What’s In Trump’s Coronavirus Executive Orders (R.)

After failing to reach a deal with the U.S. Congress for a fresh round of coronavirus pandemic relief, President Donald Trump signed a series of executive orders aimed at pumping up America’s pandemic-hit economy. The orders are likely to face some legal challenges. Trump’s order cuts enhanced federal unemployment benefits – a lifeline for the tens of millions of Americans thrown out of work during the pandemic – from $600 to $400 per week. Democrats had been lobbying to extend the original $600 a week enhanced benefits, which expired on July 31. Trump proposes taking most of the money from the coffers of the Federal Emergency Management Agency – $44 billion, according to the order – with 25% of the money coming from states.

It’s not clear how Trump will convince state governments, whose revenues have been hard hit by the crisis, to pony up their proposed share. Trump called the reduced payments “generous.” Trump’s first order waives the payroll tax that funds Social Security in a bid to inject extra money directly into salaried employees’ pockets. Trump has been pushing the idea for a while but it has found little support in Congress from Democrats or his fellow Republicans. The executive order says the cut comes into effect on Sept. 1, but Trump said it “most likely” would be retroactive to Aug. 1 and translate into “bigger paychecks for working families.”

Trump’s order protecting homeowners and renters from evictions is unlikely to face a challenge from Democrats; indeed, House of Representatives Speaker Nancy Pelosi this week encouraged the move. But it isn’t clear how it will be executed. The order directs authorities to provide “temporary financial assistance” to renters and homeowners “struggling to meet their monthly rental or mortgage obligations.” Even Trump seemed a little hazy on the order’s ultimate effects, saying “we don’t want people being evicted and the act that I am signing will solve that problem – largely, hopefully, completely.” Trump said that interest on student loan payments – frozen since March – would be suspended until the end of the year.

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“Americans were surprised when they heard Sputnik’s beeping, it’s the same with this vaccine. Russia will have got there first..”

Russia COVID19 Vaccine Registration Expected August 12 (RT)

Moscow’s Gamelei Center could register the world’s first coronavirus vaccine on August 12, Russia’s deputy health minister has revealed. Oleg Gridnev says medical workers and the elderly will be given priority for immunization. The senior minister at the department, Mikhail Murashko, announced last week that a nationwide mass vaccination program is planned to begin in October. Murashko added that all expenses will be covered by the government. “The registration of the vaccine developed at the Gamelei Center will take place on August 12,” Gridnev told journalists in Ufa on Friday morning, as cited by RIA Novosti. “Now the last stage, the third, is underway. This is the testing part and is extremely important. We have to understand that the vaccine itself must be safe.”

The Health Ministry, in an official statement, clarified that “the documents required for registration of the vaccine developed by the Gamelei Center, including data from clinical trials, are under examination. The issue of its registration will be decided upon the results of the examination.” Clinical trials of the formula began at Moscow’s Sechenov University on June 18. In a study involving 38 volunteers, it passed safety protocols. It was observed that all those who took part developed immunity to the infection. The speed with which Russia has managed to research and approve a formula has raised some eyebrows in the West, but Vadim Tarasov, a top scientist at Sechenov, said the country had a head start as it has spent the last 20 years developing skills in this field and trying to understand how viruses transmit.

The haste is fairly easy to grasp when you consider the effect Covid-19 has had on the world’s largest country. With more than 870,000 cases, it is among the four countries worst affected by the epidemic, along with the US, Brazil, and India. Russia’s 14,725 fatalities is the 11th highest in the world, although when measured per capita, the death rate ranks 47th, below Germany, but above Austria. The technology behind the Russian vaccine is based on adenovirus, the common cold. Created artificially, the vaccine proteins replicate those of Covid-19, triggering “an immune response similar to that caused by the coronavirus itself,” Tarasov said. In other words, immunization is similar to having survived the virus, but without its life-threatening risks.

Kirill Dmitriev, the head of Russia’s sovereign wealth fund, which has bankrolled the research, last week compared the vaccine discovery process to the Space Race. “Americans were surprised when they heard Sputnik’s beeping, it’s the same with this vaccine. Russia will have got there first,” he told US TV.

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Much deadlier in men. Much deadlier than the seasonal flu.

SARS-CoV-2 Fatality Risk In A Nationwide Seroepidemiological Study (Medrxiv)

The magnitude of the infection fatality risk (IFR) of SARS-CoV-2 remains under debate. Because the IFR is the number of deaths divided by the number of infected, serological studies are needed to identify asymptomatic and mild cases. Also, because ascertainment of deaths attributable to COVID-19 is often incomplete, the calculation of the IFR needs to be complemented with data on excess mortality. We used data from a nation-wide seroepidemiological study and two sources of mortality information -deaths among laboratory-confirmed COVID-19 cases and excess deaths- to estimate the range of IFR, both overall and by age and sex, in Spain.


The overall IFR ranged between 1.1% and 1.4% in men and 0.58% to 0.77% in women. The IFR increased sharply after age 50, ranging between 11.6% and 16.4% in men ≥80 years and between 4.6% and 6.5% in women ≥80 years. Our IFR estimates for SARS-CoV-2 are substantially greater than IFR estimators for seasonal influenza, justifying the implementation of special public health measures.

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Not the first time that the Dems cry murder over something Trump says, only to make it look like they invented it mere weeks later.

Chuck Schumer Says Schools Must Reopen Or Economy Suffers (RT)

Republicans and Democrats failed to reach a compromise on a Covid-19 economic relief bill, but one comment from Sen. Chuck Schumer (D-New York) about schools needing to reopen has some seeing hypocrisy on the left. Rep. Nancy Pelosi (D-California) and Schumer addressed the press after failed negotiations with Republicans on a potential relief bill. While many of their complaints about Republicans refusing to continue robust unemployment and other government programs was to be expected, one comment from Schumer went viral as it didn’t seem to match the outrage shown to President Donald Trump when he mentioned the same thing. “If you don’t open up the schools, you’re going to hurt the economy significantly,” Schumer said, “because lots of people can’t go to work.”

The president has floated the idea of fully reopening most schools in the fall despite the coronavirus pandemic, but he has found pushback with liberal critics each and every time. Schumer’s admission that not reopening schools will hurt the economy, which the president has argued, was seen as a surprising “moment of clarity” by critics on social media who latched onto the comment. The disagreement on reopening schools comes down to federal funding. Schumer and Pelosi have argued the only way to safely let kids back into the in-person education system is through major federal funding. Trump has argued that schools in hotspots for the coronavirus should be taking precautions when reopening, but the failure to add federal funding into a Covid-19 economic package has the left and right at a standstill on the issue.

Already a heated debate, it is only bound to get more heated as the country draws nearer to the dates schools would normally open their doors again. Experts have argued since schooling is a childcare issue, keeping them closed affects not only children and employees of the education system, but also parents who cannot return to work. “Because children and parents are dying from that trauma, too. They’re dying because they can’t do what they’re doing. Mothers can’t go to work because all of a sudden they have to stay home and watch their child, and fathers,” the president told CBS News last month when asked why he considered not reopening schools a “terrible decision.”

Pelosi has argued the president is “messing” with childrens’ health and risking another outbreak of the virus with his support for reopening schools. “Going back to school presents the biggest risk for the spread of the coronavirus,” she told CNN. “If there are CDC guidelines, they should be requirements.”

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Oh, we’re going to have so much fun over the nest three months. And then there may be another three months needed to count the votes. Solid entertainment into Spring 2021. And Pelosi as President.

Trump Aides Exploring Executive Actions To Curb Voting By Mail (Pol.)

Just because Trump’s claims of rampant mail-in voting fraud aren’t supported by evidence doesn’t mean election experts aren’t concerned about problems holding a presidential election during a pandemic. It’s unknown whether the United States Postal Service can handle a surge of mail-in ballots in a timely fashion, and other officials have cautioned about long lines and a shortage of workers at in-person polling stations, which have been limited during the coronavirus outbreak. Some have predicted the crush of remote voting could mean a final winner in the presidential race between Trump and Democrat Joe Biden won’t be known for days or even weeks.

Democrats are pushing for $25 billion for USPS in the next coronavirus recovery bill to help address those concerns, but it remains a source of disagreement with Republicans. There have already been some some notable delays in down-ballot elections during the pandemic, including one New York race this summer. Six weeks after a Democratic primary for a U.S. House seat, all of the ballots have yet to be counted. “This is a rare case where the president is not overstating the case,” argued Tom Fitton, president of Judicial Watch, a conservative group that has sued in North Carolina and Pennsylvania over the accuracy of voting rolls. “Frankly he’s understating the problem that I think we are going to face on Election Day. The system is going to break.”

The Trump campaign is holding events touting its legal actions on voting rules. And privately, the White House is debating possible further action, according to two people familiar with the situation. The White House declined to comment on whether Trump would be signing an executive order on the issue. “All Americans deserve an election system that is secure and President Trump is highlighting that Democrats’ plan for universal mail-in voting would lead to fraud,” said White House spokeswoman Sarah Matthews. “While Democrats continue to call for a radical overhaul of our nation’s voting system, President Trump will continue to work to ensure the security and integrity of our elections.”

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It’s just like a biblical jubilee.

No Payment, No Problem: Bizarre New World of Consumer Debt (WS)

The New York Fed released a doozie of a household credit report. It summarized what individual lenders have been reporting about their own practices: If you can’t make the payments on your mortgage, auto loan, credit card debt, or student loan, just ask for a deferral or forbearance, and you won’t have to make the payments, and the loan won’t count as delinquent if it wasn’t delinquent before. And even if it was delinquent before, you can “cure” a delinquency by getting the loan deferred and modified. No payment, no problem. Student loan borrowers were automatically rolled into forbearance under the CARES Act, and even though many students had stopped making payments, delinquency rates plunged because the Department of Education had decided to report as “current” all those loans that are in forbearance, even if they were delinquent. Yup, according to New York Fed data, the delinquency rate of student loan borrowers, though many had stopped making payments, plunged from 10.75% in Q1, to 6.97% in Q2, the lowest since 2007:

Student loan forbearance is available until September 30, and interest is waived until then, instead of being added to the loan. In a blog post, the New York Fed said that 88% of the student-loan borrowers, including private-loan borrowers and Federal Family Education Loan borrowers, had a “scheduled payment of $0,” meaning that at least 88% of the student loans were in some form of forbearance. Until September 30. And then what? And because delinquencies in student loans, auto loans, credit card debt, and mortgages are being “cured” by putting the loans in deferral programs and modifying the delinquent loans, they become “current” loans even though no catch-up payments have been made.


Still, about 32 million people are claiming unemployment insurance. A much smaller employment shock during the Financial Crisis caused the percentage of delinquent loan balances to soar, and the percentage of “current” loan balances to plunge, to bottom out at 88% in Q4 2009. Not this time. As the percentage of delinquent loan balances fell, the percentage of “current” loan balances jumped to 96.4%, a record high in the New York Fed’s data going back to 2003. Yup, crazy world. Ally Financial reported in its 10-Q filing with the SEC for the second quarter that about 21% of its auto-loan customers were enrolled in its deferral program where they don’t have to make payments for 120 days. “The vast majority of our loan deferrals for customers in the program are scheduled to expire by the end of August 2020,” it said. And then what?

Lenders like these types of programs because they can kick the can of delinquencies down the road, and instead they have “performing loans” for which they can accrue interest which makes their investors happy, even though the customers don’t make any interest or principal payments. Bank regulators normally get nervous about deferral programs. But it appears that bank regulators have been told the shelter at home until further notice. Across all lenders, about 5.9% of the $1.34 trillion in auto loans – so close to $80 billion – are in forbearance, according to the New York Fed. And as a result, borrowers who cannot make the payment, don’t have to make it, and their loans are still deemed “current,” and the percentage of auto loans that are newly delinquent dropped to 6.29%, a record low in the data – while during the last crisis, the delinquent balances were above 10% for nearly two years:

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Yes, they’re censoring TV networks now. Scary. So is this: when Elon Musk tweeted in March that “kids are essentially immune,” Twitter clarified that his tweet did not violate its COVID-19 rules.

Social Media Imposing Modern-Day ‘Hays Code’ On Political Speech (RCP)

Social media companies continued to assert their power over the political sphere this week, with Twitter temporarily suspending the Trump campaign’s ability to post until it removed a clip of a Fox News interview with the president regarding COVID-19. When the Democratic National Committee reposted the video to debunk it, Twitter similarly banned the DNC from tweeting until it too deleted the footage. With Twitter seemingly unbothered by the implications of suspending a presidential campaign’s account just 12 weeks before the election, what might the future hold as control of our public squares is increasingly centralized?

Twitch became the first social media platform to formally suspend a presidential candidate’s account this past June when it deleted two of President Trump’s campaign rally videos for violations of its “hateful conduct” rules. In doing so, it emphasized the divide between physical and virtual campaigning. At an in-person rally a candidate can present the policy proposals he or she believes supporters want. Virtual rallies, however, are policed by an army of moderators enforcing ever-changing acceptable speech policies, forcing politicians to self-censor or risk deletion from the online world that increasingly shapes elections.

In the case of this week’s ban, the story is all the more remarkable because the video in question was actually a cable TV interview with the nation’s leader, meaning that social platforms were in effect banning a major news organization’s reporting. As news is increasingly consumed through social media, the upshot is that the online platform’s acceptable speech rules are being applied to traditional news outlets. Additionally, rather than link the video to an outside fact check, Facebook simply deleted it as “a violation of our policies around harmful COVID misinformation” while Twitter forced the campaign to delete the post as a “violation of the Twitter Rules on COVID-19 misinformation.” Both companies cited as the offending statement Trump’s claim that children have “much stronger immune systems” than adults and thus “they don’t have a problem” when infected.

While oversimplifying, Trump’s claims are not that far removed from those of CDC Director Robert Redfield and infectious disease expert Dr. Anthony Fauci, who have cited the pathogen’s significantly reduced severity in children in their calls to safely reopen schools this fall. While more measured than the “immunity” claimed by Trump, the gist of his statement — that COVID-19’s impact on children appears to be less severe than its effect on older Americans — aligns with the public statements of his medical advisers. Moreover, when Elon Musk tweeted in March that “kids are essentially immune,” Twitter clarified that his tweet did not violate its COVID-19 rules. To this date, Musk’s tweet carries no warnings or fact-checking statements from Twitter refuting it or adding additional context to his claims.

In many ways, social media platforms have become modern-day incarnations of the Hays Code that governed Hollywood from the 1930s to 1960s, establishing “morality” standards and enforcing them with an army of censors. By shaping popular culture through its control of movies, the Hays Code ensured that generations of Americans were presented an idealized world of benevolent public institutions, including police and politicians whose good works were spotlighted and any wrongdoing was punished. Moreover, as an extrajudicial speech regulation, studios could modify the rules and exempt content at will, much as social platforms do today.

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And the censoring power will only get more centralized, unless politics calls a halt to it. But then there’s always the strong links to intelligence services.

Twitter Reportedly Joins Growing List Of Potential TikTok Suitors (ZH)

The ideological battle over the fate of TikTok is provoking fist fights in the Oval Office, and a scramble among the country’s biggest tech firms to see if they might be able to come up with a workable pitch that would allow them to win approval to buy the US operations (along with New Zealand, Australia and Canada, and possibly more) of the popular Chinese-owned social media platform – the only real obstacle to a deal at a time when corporate credit is essentially free. It’s becoming increasingly obvious that the app, which the Trump Administration is threatening to shut down in the US over fears of a “national security threat” (Chinese law forces all Chinese companies to cooperate with state security forces, provoking fears that ByteDance, TikTok’s owner, might be compelled to set up a pipeline of Americans’ private information straight to Beijing), has become perhaps the biggest political football at a time of intense strain in the bilateral relationship.

But amid the chaos and the geopolitical posturing of the leaders of the world’s two largest economies, America’s tech giants apparently see an opportunity, however unlikely, to circumvent opposition to further tech-industry mergers and seal what very well might be the last major merger in the industry for quite some time. And with the world headed into a period of protracted slowdown, companies might as well take advantage of the free money, and lock in that future EPS growth while they can. Since anti-trust scrutiny is such a hot issue in the world of big tech right now, it seems every company that has reportedly engaged in “talks” about the prospects for a deal has a reason for why it might assuage regulators and lawmakers and convince both Congress and the White House to agree to the deal.

Being the smallest of the three major companies rumored to be potential suitors, Twitter obviously has the best case from a purely anti-trust standpoint (although it seems reporters keep coming up with excuses for why Microsoft or Facebook could still make it work). Plus, Twitter’s comparatively tiny $29 billion market cap means it would likely need help from outside investors – a great opportunity for Sequoia and the other big VC firms who backed ByteDance who reportedly were in talks about a deal to bring TikTok into the US under their purview. The deal would have valued TikTok at $50 billion, according to unconfirmed reports.

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How awful! Let’s do something!

US To Cut Troop Levels In Afghanistan To ‘Less Than 5,000’ – Esper (R.)

The United States plans to cut its troop levels in Afghanistan to “a number less than 5,000” by the end of November, Defense Secretary Mark Esper said in an interview broadcast on Saturday, adding detail to drawdown plans U.S. President Donald Trump announced earlier this week. The United States currently has about 8,600 troops in Afghanistan. Trump said in an interview released Monday by Axios that the United States planned to lower that number to about 4,000.

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Hey! You’re not driving enough! Want to collapse the economy or something?

Oil Giants Cut Production By 1 Million bpd Amid Massive Writedowns (R.)

The world’s five largest oil companies collectively cut the value of their assets by nearly $50 billion in the second quarter, and slashed production rates as the coronavirus pandemic caused a drastic fall in fuel prices and demand. The dramatic reductions in asset valuations and decline in output show the depth of the pain in the second quarter. Fuel demand at one point was down by more than 30% worldwide, and still remains below pre-pandemic levels. Several executives said they took massive writedowns because they expect demand to remain impaired for several more quarters as people travel less and use less fuel due to the ongoing global pandemic that has killed more than 700,000 people.


Of those five companies, only Exxon Mobil did not book sizeable impairments. But an ongoing re-evaluation of its plans could lead to a “significant portion” of its assets being impaired, it reported, and signal the elimination of 20% or 4.4 billion barrels of its oil and gas reserves. By contrast, BP took a $17 billion hit. It said it plans to re-center its spending in coming years around renewables and less on oil and natural gas. Weak demand means oil producers must revisit business plans, said Lee Maginniss, managing director at consultants Alarez & Marsal. He said the goal should be to pump only what generates cash in excess of overhead costs. “It’s low-cost production mode through the end of 2021 for sure, and to 2022 to the extent there are new development plans being contemplated,” Maginniss said.

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Isn’t he also interfering by NOT investigating Burisma, Hunter and the clip where Joe Biden brags about blackmailing Poroshenko into firing a prosecutor?

Zelensky Says Ukraine Staying Out Of US Internal Politics, Elections (R.)

Ukrainian President Volodymyr Zelenskiy said on Saturday that it was a matter of Ukraine’s national security to stay out of U.S. internal politics, particularly its election. “#Ukraine did not and will not allow itself to interfere in the elections and thus harm our trusting and sincere partnership with the #USA,” he wrote on Twitter late on Saturday. Zelenskiy, 42, was a comic actor when he won a landslide election last year. But the first year of his presidency was overshadowed by Ukraine’s unwitting involvement in events that led to the impeachment of Republican U.S. President Donald Trump. Trump had unsuccessfully pressed Ukraine to launch an investigation into his Democratic rival in the 2020 presidential race, former Vice President Joe Biden.


“Never, under any circumstances, it’s acceptable to meddle in another country’s sovereign elections,” Zelenskiy wrote. Zelenskiy appealed to Ukrainian politicians to avoid any actions that could be linked to U.S. elections, nor allow themselves to try to solve any of their personal, political or business problems that way. “Ukraine’s reputation is worth much more than the reputation of any of our politicians,” the president said.

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“It is perhaps the most American of issues, and it should be one that unites us..”

Hard to read that with a straight face, let alone for him to say it.

George W. Bush Laid the Groundwork for Today’s Immigration Nightmare (MPN)

George W. Bush, the 43rd president of the United States, has announced he is releasing a new book called “Out of Many, One” which will celebrate America’s diversity and immigrant populations. “Our immigrant heritage has enriched America’s history. It continues to shape our society. Each generation of Americans — of immigrants — brings a renewal to our national character and adds vitality to our culture. Newcomers have a special way of appreciating the opportunities of America, and when they seize those opportunities, our whole nation benefits,” the former president said. The book, scheduled for release in March 2021 will feature 43 images of immigrants, painted by Bush himself [..]

“While I recognize that immigration can be an emotional issue, I reject the premise that it is a partisan issue. It is perhaps the most American of issues, and it should be one that unites us,” he said in a press release. “My hope is that this book will help focus our collective attention on the positive impacts that immigrants are making on our country.” With immigration becoming an increasingly hot partisan issue, the move celebrating the practice is the latest in a series of actions that Bush has taken to distance himself from the current Republican president. Both Bush and his father claimed they did not vote for Trump in 2016, leading to delight from many Democrats. Speaker of the House Nancy Pelosi, for example, yearned for a by-gone age, admitting to wishing Bush were still president, even though at the time she described him as a “total failure” in every aspect of governing.

[..] Bush bragged about greatly increasing the U.S.’ detention capacity for immigrants, using drones to patrol the area, and building 700 hundred miles of fencing and wall, which served as a stepping stone to Trump’s border plans. The increasingly militarized border mirrored the increasingly hostile rhetoric towards immigrants that dominated the Republican Party today. Bush is no stranger to covering controversial topics in his art. In 2017, he released a similar bestselling book called “Portraits of Courage: A Commander in Chief’s Tribute to America’s Warriors.” In it, he painted dozens of fallen American servicemen, all of whom died fighting in wars he started under false pretenses and has expressed no remorse for doing so. Neither Bush nor the great number of outlets who praised the book appeared at all interested in Middle Eastern victims of his policy.

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A Trojan horse in the 2020’s.

West’s Favorite Hong Kong ‘Freedom Writer’ Is American In Yellowface (GZ)

An American man with ties to Amnesty International and key Hong Kong separatist figures has been posing online as a Hong Kong native named Kong Tsung-gan. Routinely cited as a grassroots activist and writer by major media organizations and published in English-language media, the fictitious character Kong appears to have been concocted to disseminate anti-China propaganda behind the cover of yellowface. Through Kong Tsung-gan’s prolific digital presence and uninterrogated reputation in mainstream Western media, he disseminates a constant stream of content hyping up the Hong Kong “freedom struggle” while clamoring for the US to turn up the heat on China.


Whispers about Kong’s true identity have been circulating on social media among Hong Kong residents, and was even mentioned in a brief account last December by The Standard. The Grayzone spoke to several locals outraged by a deceptive stunt they considered not only unethical, but racist. They said they have kept their views to themselves due to the atmosphere of intimidation looming over the city, where self-styled “freedom fighters” harass and target seemingly anyone who speaks out publicly against them.

The Twitter user Kong Tsung-gan (@KongTsungGan) first appeared in March 2015. Kong Tsung-gan’s earliest tweets featured commentary about Tibet and the Hong Kong Umbrella Movement. At some point, Kong changed his Twitter avatar to a black-and-white headshot of an unknown Asian person. A search of the Wayback Machine internet archive shows that this photo remained up until sometime in late 2019. Later, Kong changed his Twitter avatar to an image depicting Liu Xia, the wife of the late Nobel Prize-winning dissident Liu Xiaobo. Liu Xiaobo was a right-wing ideologue who celebrated the US wars on Vietnam, Afghanistan, and Iraq, and was rewarded with the 2014 Democracy Award by the National Endowment for Democracy – the favorite meddling machine of the US government.


[..] At around the time he created his Twitter account, Kong Tsung-gan published his first Medium post. He has since filled his Medium feed with protest timelines, lists of recommended human rights books and journalism (including a link to the questionable China “expert” Adrian Zenz), and “first-hand accounts” of his protest experiences on the ground. In one account, Kong Tsung-gan claimed he attended a Band 1 government school, implying he was a native Hong Kong resident. Kong’s work has been amplified by Joshua Wong, the Hong Kong protest poster-boy who has enjoyed photo-ops with neoconservative Republican senators like Marco Rubio and Tom Cotton.

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Rich eat poor everywhere.

Solidarity with the Germans (Varoufakis)

A recent study has confirmed that half of Germany’s population owns just 1.5% of the country’s wealth, while the top 0.1% own 20%. And inequality is getting worse. During the last two decades, the real disposable income of the poorest 50% has been falling while that of the top 1% has been rising fast, along with house and share prices. It is against this background of high and rising inequality that the mood of the German public must be understood, in particular popular resistance to the idea of a eurozone fiscal union. German workers, who are increasingly struggling to make ends meet, understandably refuse to endorse the idea of huge amounts of money being constantly channeled to citizens of other countries. The fact that Germany is getting richer overall is irrelevant to them.

From experience, they know that any money sent to Italy or Greece will probably come from them, not the top 0.1% – not to mention that it will probably end up in the pockets of vile Greek oligarchs, or of private German companies that have purchased Greek assets for next to nothing. As a result, the European Union’s recently agreed €750 billion ($880 billion) pandemic recovery fund, dubbed Next Generation EU, threatens to deepen divisions across Europe, rather than being the unifying balm of many commentators’ dreams. Setting aside the scheme’s macroeconomic insignificance, it is important to take a fresh look at it from the perspective of a typical German worker languishing among the bottom 50% of the country’s wealth distribution.

Her government, a typical German worker is told, will be liable for €100 billion of new debt that the EU will use to help foreigners recover from the pandemic’s economic fallout. “Italians will receive €80 billion from Europe’s Recovery Fund,” she hears. “Spaniards will collect €78 billion, and even the Greeks will pocket €23 billion.” And what will she get? Less than nothing. Because her government is already in fiscal consolidation mode, trying to return its budget to a small surplus by 2021, she can expect only stagnant wages and more austerity for her local hospitals, schools, roads, and other infrastructure.1 While she may well feel compassion to the Italians and Spaniards, who lost so many people to COVID-19, she will never accept repeating this exercise in debt mutualization on behalf of southern or East Europeans. The solidarity of German workers, toward whom no one shows any solidarity, has its limits – as it should.

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Aug 242018
 
 August 24, 2018  Posted by at 7:57 am Finance Tagged with: , , , , , , , , , , , ,  12 Responses »


Vincent van Gogh Café, le soir, Arles 1888

 

Thoughts On The ‘Longest Bull Market Ever’ (Black)
New Reality of China’s Failing Economy Is Coming Soon (Rickards)
UK Tells Drug Companies To Stockpile Medicine In Case Of No-Deal Brexit (Ind.)
Big Oil Asks Government To Protect It From Climate Change (AP)
Scott Morrison New Australian PM As Turnbull Denounces ‘Insurgency’ (G.)
Saudi Modernisation Drive Is Reflected In Aramco’s Faltering Sale (G.)
Libya Refuses To Take Migrants Rejected By Italy (AFP)
Italy Threatens To Stop EU Funding Unless Other States Accept Refugees (ZH)
Inflation Adjusted Gold Is At Historical Lows (von Greyerz)
Monsanto Faces A Surge In Lawsuits Following Cancer Ruling (BBC)
‘Monsanto’s History Is One Full of Vast Lies’ (Spiegel)
After 70 Years, Korean Father, Son Share A Drink For First, Last? Time (H.)

 

 

“..a full SIXTY PERCENT of corporate debt issued by companies in the Russell 2000 is rated as JUNK..”

Thoughts On The ‘Longest Bull Market Ever’ (Black)

Well, it happened. Yesterday the US stock market broke the all-time record for the longest bull market ever. This means that the US stock market has been generally rising for nearly a decade straight… or even more specifically, that the market has gone 3,453 days without a 20% correction. That’s a pretty big milestone. And there’s no end in sight. So it’s possible this market continues marching higher for the foreseeable future. But if you step back and really look at the big picture, there are a lot of things that might make a rational person scratch his/her head. For example– the Russell 2000 index (which is comprised of smaller companies whose shares are listed on various US stock exchanges) is currently right at its all-time high.

Yet simultaneously, according to the Wall Street Journal, a full SIXTY PERCENT of corporate debt issued by companies in the Russell 2000 is rated as JUNK. How is that even possible– a junk debt rating coupled with an all-time high? It’s as if investors are saying, “Well, there’s very little chance these companies will be able to pay their debts… but screw it, I’ll pay a record high price to buy the stock anyhow.” It just doesn’t make any sense. Looking at the larger companies in the Land of the Free (which make up the S&P 500 index), the current ‘CAPE ratio’ is now the second highest on record. ‘CAPE’ stands for ‘cyclically-adjusted price/earnings ratio’. Essentially it refers to how much investors are willing to pay for shares of a company, relative to the company’s long-term average earnings.

And right now investors are willing to pay 33x long-term average earnings for the typical company in the S&P 500. The median CAPE ratio based on data that goes back to the 1800s is about 15.6. So at 33, investors are literally paying more than TWICE as much for every dollar of a company’s long-term average earnings than they have throughout all of US market history. And it’s only been higher ONE other time– just before the 2000 stock market crash (when the dot-com bubble burst). 33 is higher than right before the 2008 crisis. It’s even higher than it was before the Great Depression.

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Building zombies for the future.

New Reality of China’s Failing Economy Is Coming Soon (Rickards)

There’s no denying China’s remarkable economic progress over the past thirty years. Hundreds of millions have escaped poverty and found useful employment in manufacturing or services in the major cities. Infrastructure gains have been historic, including some of the best trains in the world, state-of-the-art transportation hubs, cutting edge telecommunications systems, and a rapidly improving military. Yet, that’s only half the story. The other half is pure waste, fraud and theft. About 45% of Chinese GDP is in the category of “investment.” A developed economy GDP such as the U.S. is about 70% consumption and 20% investment. There’s nothing wrong with 45% investment in a fast-growing developing economy assuming the investment is highly productive and intelligently allocated.

That’s not the case in China. At least half of the investment there is pure waste. It takes the form of “ghost cities” that are fully-built with skyscrapers, apartments, hotels, clubs, and transportation networks – and are completely empty. This is not just western propaganda; I’ve seen the ghost cities first hand and walked around the empty offices and hotels. Chinese officials try to defend the ghost cities by claiming they are built for the future. That’s nonsense. Modern construction is impressive, but it’s also high maintenance. Those shiny new buildings require occupants, rents and continual maintenance to remain shiny and functional. The ghost cities will be obsolete long before they are ever occupied.

Other examples of investment waste include over-the-top white elephant public structures such as train stations with marble facades, 128 escalators (mostly empty), 100-foot ceilings, digital advertising and few passengers. The list can be extended to include airports, canals, highways, and ports, some of which are needed and many of which are pure waste. Communist party leaders endorse these wasteful projects because they have positive effects in terms of job creation, steel fabrication, glass installation, and construction. However, those effects are purely temporary until the project is completed. The costs are paid with borrowed money that can never be repaid. China might report 6.8% growth in GDP, but when the waste is stripped out the actual growth is closer to 4.5%. Meanwhile, China’s debts grow faster than the economy and its debt-to-GDP ratio is even worse than the U.S.

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It’s beginning to hit home that time has run out. Wait till the days shorten for real.

UK Tells Drug Companies To Stockpile Medicine In Case Of No-Deal Brexit (Ind.)

Health secretary Matt Hancock has told drug companies to ensure they have six weeks additional supplies of medicines on top of their normal stockpiles to avoid disruption caused by a possible no-deal Brexit. The remarks from Mr Hancock came as Dominic Raab, the Brexit secretary, released the first tranche of technical notes outlining the government’s preparations and warnings to businesses if Britain crashes out of the bloc without a deal. Among the 24 detailed papers it was also revealed that credit card users could be hit with a new “Brexit tax” amounting to £166m, UK citizens living in Europe face the prospect of losing access to pension income and new red tape could delay foreign sperm donations arriving in Britain.

In one of the most stark warnings, Mr Hancock told NHS staff and service providers that the move to increase pharmaceutical companies’ stockpiles was necessary “in case imports from the EU through certain routes” are affected if Theresa May fails to strike a deal with negotiators in Brussels. The request, according to the chief executive of the UK Bioindustry Association, Steve Bates, would be a “massive challenge” for the industry to deliver in less than 200 days. But Mr Hancock also warned that hospitals, GPs and community pharmacies should not hoard or stockpile additional drugs “beyond their business” as usual levels.

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Priceless.

Big Oil Asks Government To Protect It From Climate Change (AP)

As the nation plans new defenses against the more powerful storms and higher tides expected from climate change, one project stands out: an ambitious proposal to build a nearly 60-mile “spine” of concrete seawalls, earthen barriers, floating gates and steel levees on the Texas Gulf Coast. Like other oceanfront projects, this one would protect homes, delicate ecosystems and vital infrastructure, but it also has another priority — to shield some of the crown jewels of the petroleum industry, which is blamed for contributing to global warming and now wants the federal government to build safeguards against the consequences of it.

The plan is focused on a stretch of coastline that runs from the Louisiana border to industrial enclaves south of Houston that are home to one of the world’s largest concentrations of petrochemical facilities, including most of Texas’ 30 refineries, which represent 30 percent of the nation’s refining capacity. Texas is seeking at least $12 billion for the full coastal spine, with nearly all of it coming from public funds. Last month, the government fast-tracked an initial $3.9 billion for three separate, smaller storm barrier projects that would specifically protect oil facilities.

That followed Hurricane Harvey, which roared ashore last Aug. 25 and swamped Houston and parts of the coast, temporarily knocking out a quarter of the area’s oil refining capacity and causing average gasoline prices to jump 28 cents a gallon nationwide. Many Republicans argue that the Texas oil projects belong at the top of Washington’s spending list. “Our overall economy, not only in Texas but in the entire country, is so much at risk from a high storm surge,” said Matt Sebesta, a Republican who as Brazoria County judge oversees a swath of Gulf Coast. But the idea of taxpayers around the country paying to protect refineries worth billions, and in a state where top politicians still dispute climate change’s validity, doesn’t sit well with some.

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Another rightwing anti-immigrant yokel. That’s all they have down under.

Scott Morrison New Australian PM As Turnbull Denounces ‘Insurgency’ (G.)

Australia will have a new prime minister in Scott Morrison – the socially conservative architect of Australia’s hardline anti-asylum seeker policies – after he mounted a late challenge during a drawn-out struggle for power in the governing Liberal party. On Friday, incumbent Malcolm Turnbull failed in his attempt to stare down a challenge from hard right MP Peter Dutton, with insurgents in his party gathering enough signatures to call for a “spill” of the leadership. It led to a three-way challenge that included Morrison, Turnbull’s treasurer, and Julie Bishop, the foreign minister. Turnbull himself stood aside from the contest.

In a party room ballot, Bishop was eliminated in the first round, and Morrison won against former home affairs minister Dutton in a subsequent run-off, 45 votes to 40, suggesting the party is still deeply divided. There appears no end in sight to the civil war consuming the ruling Liberal-led coalition government. The country may be headed to an election, with Turnbull saying he will not stay in parliament. His resignation in between general elections would erase the government’s single-seat majority in the House of Representatives. Australia has now had five prime ministers in just over five years. Since 2010 four prime ministers have lost office not at the ballot box, but torn down by their own parties, earning Canberra the unhappy appellation “the coup capital of the Pacific”.

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Selling 5% of Aramco was supposed to finance ‘diversification’.

Saudi Modernisation Drive Is Reflected In Aramco’s Faltering Sale (G.)

For the Saudis, the implications of the Paris agreement were obvious: the drive to decarbonise the world economy would mean that a considerable part of their oil reserves would have to stay in the ground. This made a warning at the turn of the millennium by the former Saudi energy minister Sheikh Ahmed Zaki Yamani, seem suddenly urgent. “Thirty years from now, there will be a huge amount of oil – and no buyers”, Yamani said. “Oil will be left in the ground. The stone age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil.”

It was not long before Saudi’s rulers responded to this twin challenge. In the short term, they sought to persuade fellow oil producing nations to agree production curbs that would limit supply, drive up crude prices and so ease the pressures on the public finances. At the current oil price of around $70 a barrel, the Saudis can make their budget arithmetic stack up. In the longer term, there was a plan to diversify the economy away from oil. Saudi Vision 2030 was announced by Crown Prince Mohammed bin Salman in April 2016, shortly after the oil price reached its trough. The idea was to make Saudi Arabia a global investment giant, to turn the country into a hub linking the three continents of Europe, Asia and Africa and to be the heart of the Arab and Islamic worlds.

The proposed sale of part of the state-owned oil company – Saudi Aramco – was a key part of this attempt to transform and modernise the economy. Proceeds were earmarked for the country’s sovereign wealth fund so it could continue investing in companies such as the electric car company Tesla and the ride-hailing app Uber.

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Thank you Barack and Hillary.

Libya Refuses To Take Migrants Rejected By Italy (AFP)

Libya has refused to take in a group of 177 migrants stranded on an Italian coastguard boat off a Sicilian port after Rome insisted they would not be allowed to disembark. Italy’s Interior Minister Matteo Salvini threatened earlier this week to return the migrants to the North African country unless other European governments offered to take some of them in. But Mohamed Siala, foreign minister of the UN-backed Libyan unity government, said that “Libya does not accept this unjust and illegal measure because it already has more than 700,000 migrants” on its territory.

In a statement late Wednesday, he called on the international community “to put pressure on the countries of departure to repatriate their nationals”, adding that Libya had only served as a transit point. The Italian boat “Diciotti” arrived on Monday night off the Sicilian port of Catania. Plunged into chaos following the fall and killing of longtime dictator Moamer Kadhafi in a 2011 NATO-backed uprising, Libya has become a prime transit point for sub-Saharan African migrants making dangerous clandestine bids to reach Europe. The country takes in migrants whose boats are intercepted in its waters by the Libyan coastguard, but it has repeatedly rejected those rescued by foreign navies or by humanitarian organisations off its coast.

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Who’s going to blame them?

Italy Threatens To Stop EU Funding Unless Other States Accept Refugees (ZH)

On Thursday, out of the blue, Italy’s Deputy Prime Minister Luigi Di Maio threatened to stop financial contributions to the European Union next year unless other states agreed to take in migrants being held on a coastguard ship in Sicily. The Italian’s ultimatum comes less two months after Europe triumphantly announced a “vaguely worded” deal on how to resolve the continent’s migrant influx. “If tomorrow at the meeting of the European Commission nothing is decided on the redistribution of migrants and the Diciotti ship, I and the entire Five Star Movement are not willing to give 20 billion to the European Union,” Di Maio said in a video posted on his Facebook page.

He echoed statements by Interior Minister and Deputy Premier Matteo Salvini, who has refused to allow 177 migrants to leave the Italian coastguard ship Ubaldo Diciotti, which is docked in the Sicilian port of Catania. While Italian prosecutors opened an investigation into the detention of the migrants and 29 children were allowed to disembark, Salvini still won’t allow the rest of the people to come ashore and has attacked the EU for its “cowardly silence.” Salvini described those aboard as “illegal immigrants,” and said they won’t be allowed to step foot on Italian soil. Instead, he insisted fellow European Union nations take in some of the asylum-seekers. “Italy’s no longer Europe’s refugee camp,” he tweeted. “Upon my authorization, no one is disembarking from the Diciotti.”

Salvini, who is also interior minister, was defiant in the face of a criminal probe into possible kidnapping charges for forcing the migrants to remain on the vessel. The chief prosecutor from the Agrigento court, Luigi Patronaggio, on Wednesday boarded the Diciotti and said afterwards he had opened a probe against “unknown” persons for holding the migrants against their will. “There’s a court that is investigating whether those illegally on board the ship have been kidnapped,” Salvini said in a radio interview. “I’m not unknown. My name is Matteo Salvini… I’m the Interior Minister and I think it is my duty to defend the security of this country’s borders.”

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Just liked the graph, don’t want to tell anyone to buy anything.

Inflation Adjusted Gold Is At Historical Lows (von Greyerz)

Gold at $1,220, adjusted for real inflation, is almost as cheap as it was in 1999 at the $250 low. More importantly, inflation adjusted gold is now very near the 300 year low of 1999. So right now gold is again unloved and undervalued and therefore a bargain. On an inflation adjusted basis, the 1980 high of $850 would today be $16,650. Long before we get hyperinflationary gold prices, that $16,600 level should be easily reached. Owning physical gold for wealth protection purposes is the best preserved secret in the West. In this part of the world, virtually nobody holds gold. At the same time, the wise people in the East continue to buy all the gold that is produced annually. China, India, Iran, Turkey, Russia and many more Eastern nations understand history and economics. That is why they are accumulating major gold reserves at these levels.

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Bayer really didn’t see this coming.

Monsanto Faces A Surge In Lawsuits Following Cancer Ruling (BBC)

American agro-chemicals company Monsanto is facing a surge in lawsuits that may cost its new owners, Bayer, billions in damages. Monsanto manufactures glyphosate-based weedkillers which some believe are carcinogenic. Last month it lost a $289m (£225m) court case that alleged its products Roundup and RangerPro had led to a Californian man’s terminal cancer. Bayer said the number of outstanding cases had risen from 5,200 to 8,000. The German firm’s shares have lost 11% of their value since it lost the case in a California court to groundskeeper Dewayne Johnson, who claimed Monsanto herbicides containing glyphosate, had caused his non-Hodgkins lymphoma.

Bayer shares fell another 1.7% on Thursday. Chief executive Werner Baumann said that when it bought Monsanto, Bayer “could not foresee the scope of the current lawsuits.” The $63bn deal was completed earlier this month. “In the course of the acquisition, we carried out due diligence as is standard practice when taking over a listed company. In doing so, we of course also considered the legal risks,” he said in an interview with Germany’s Handelsblatt newspaper. In a conference call on Thursday, Mr Baumann added: “Our view is that the number is not indicative of the merits of the plaintiffs’ cases”.

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“..Another program is called “Freedom to Operate.” Its purpose is to eliminate everything that might disrupt sales of their products – laws, scientific articles, they go after everything.”

‘Monsanto’s History Is One Full of Vast Lies’ (Spiegel)

On Aug. 10, lawyer Brent Wisner, 34, scored a landmark verdict on behalf of his client, cancer patient Dewayne Johnson. A court in San Francisco ruled that Monsanto was guilty of concealing the potential health risks associated with its weed killer glyphosate, which is sold in the United States under the brand name Round Up. The jury ordered the company to pay $289 million in damages to the plaintiff, who had used Round Up at his job as a janitor for a school district. The court said Monsanto should have labeled the product’s possible dangers for consumers. Monsanto, which was recently acquired by German pharmaceuticals giant Bayer, has denied any link between the product and the disease. Wisner spoke to DER SPIEGEL about the case in an interview.

[..] DER SPIEGEL: How much does Monsanto have to do with the fact that a verdict was reached only now? Wisner: A lot! Monsanto has an internal program called “Let Nothing Go.” The aim of this program is to attack scientists who are critical of Monsanto products. They go after people directly and discredit them. They also pay others to do so. DER SPIEGEL: Are there other such PR strategies? Wisner: Another program is called “Freedom to Operate.” Its purpose is to eliminate everything that might disrupt sales of their products – laws, scientific articles, they go after everything. As part of that effort, they also engage lobbyists – scientists who Monsanto pays for their opportunism. Such programs reflect a corporate culture that shows no interest whatsoever in public health, only in profits.

DER SPIEGEL: Monsanto continues to dispute that it tried to influence scientific research. What was the critical factor for jurors in reaching the verdict? Wisner: I believe it was the scientific findings themselves. The 12 jurors were not lightweights after all. There was a molecular biologist, an environmental engineer, a lawyer. Some colleagues told me: “Be careful Brent, so much intelligence can be an impediment.” But I was certain that the arguments in the critical studies, parts of which were suppressed, were the strongest evidence we had.

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Sad and joyful. Why Korea’s really want peace.

After 70 Years, Korean Father, Son Share A Drink For First, Last? Time (H.)

As soon as 91-year-old Lee Gi-sun got up on the morning of Aug. 22, he pulled out one of the bottles of soju, a potent distilled liquor, that he’d stashed in the bottom of his suitcase. He’d brought this precious liquor to accompany a ceremony for which he’d waited his entire life – a daytime drink with his son! At 10 am on Aug. 22, the final day of the three-day reunion for families divided by the Korean War, family members met in the banquet hall on the second floor of the Mt. Kumgang Hotel to say their goodbyes. A few hours hence, they would return to their respective homes in South and North Korea, with no guarantee of seeing each other again. The father filled a cup with the soju he’d brought.

After taking a sip himself, he silently passed the cup to his son. Gi-sun’s North Korean son, Gang-son (69 years old himself), was also silent as he took the cup and brought it to his lips. This was the first drink shared by the white-haired father and son, and it very well might be their last. It was a heartrending moment when the father’s lifelong dream came true. “We were separated when he was two years old. Two years old,” the father said, letting the last phrase linger in the air. In Jan. 1951, he and his older brother had left their families behind in their home of Yonbaek County, Hwanghae Province, fleeing south with UN troops beaten back by the Chinese onslaught. Gi-sun had assumed he would soon be able to return.

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Feb 092017
 
 February 9, 2017  Posted by at 10:14 am Finance Tagged with: , , , , , , , , , , ,  3 Responses »


Russell Lee Migrant family in trailer home near Edinburg, Texas Feb 1939

China Approaches Maxi-Devaluation (DR)
German Exports Break Record as Trump Targets Trade Balance (BBG)
The Blood Bath Continues In The US Major Oil Industry (SRSrocco)
Record $1 Trillion in US Junk Debt to Mature in Next 5 Years (WSJ)
Trump EU Envoy Says Greece Is Now More Likely To Leave The Euro (G.)
Le Pen Aide Briefed French Central Banker on Plan to Print Money (BBG)
Global Banks In London To Relocate $1.9 Trillion Of Assets After Brexit (BBG)
Former Fed Staffer Says Central Bank Is Under the Thumb of Academics (WSJ)
Out of Pocket, Italians Fall Out of Love With The Euro (R.)
Italy’s “Bitter” Bank Rescue Tsar Bemoans Strategy Vacuum (R.)
Activists Plan Emergency Actions Across The Country To Protest DAPL (IC)
UK Government Backtracks On Pledge To Take Syrian Child Refugees (Ind.)
My Country Was Destroyed (Tima Kurdi)

 

 

Very much in line with what I’ve been saying. China’s dollar reserves are plunging but its dollar-denominated debt soars. A devaluation looks inevitable, and it has to be big because having to do a second one is the worst of all worlds.

China Approaches Maxi-Devaluation (DR)

The Institute of International Finance reports that capital outflows swelled to a record $725 billion last year. China’s desperate to keep that capital at home to support the economy. And it’s been burning holes in its dollar reserves to support the yuan. Selling its dollar holdings to buy yuan puts footings under the yuan. Makes it more attractive. Halts the capital flight. But the fire can only burn so long before it torches the remaining reserves… A $2.99 trillion war chest or a $3 trillion war chest sounds like plenty. But as Jim Rickards explained recently, it’s not nearly as much as it sounds: “Of the $3 trillion that China has left, only $1 trillion of that is a liquid. One trillion is invested in hedge funds, private equity funds, gold mines, et cetera. That money is not liquid. It cannot be used to support the currency, so remove a trillion.”

That leaves $2 trillion: “Another trillion has to be held on what’s called a precautionary reserve to bail out their banking system. The Chinese banks are completely insolvent. That system is going to need to be bailed out sooner rather than later.” Scratch another trillion: “That leaves only $1 trillion of the original $4 trillion in liquid form. The problem is that capital flight is continuing at a rate of $1 trillion per year, so China will be devoid of usable liquid assets by late 2017.” So now what? Jim has warned that Trump could soon label China a currency manipulator. That has vast implications, as you’ll see. But it’s not just Mr. Rickards. We learn today that a group of analysts at Deutsche Bank is piping an identical tune:

“Sometime in the next few weeks, President Trump or his Treasury secretary may declare China a currency manipulator and propose penalties including tariffs on some or all imports from China unless it ceases this and other alleged unfair trade policies.” And that would invite Chinese retaliation. Tariffs of their own on American goods. And then… China might reach for the nuclear option — a “maxi-devaluation.” Jim again: “We know what Donald Trump has said. China’s going to be labeled a currency manipulator. That’s like firing the first shot in a major currency war. We could see tariffs imposed in both directions, shots in retaliation, a financial war… China will retaliate with what I call their nuclear option, which is a maxi-devaluation of the Chinese yuan.”

If China’s going to be branded a currency manipulator and have its exports slapped with a steep tariff, why not go ahead and devalue? One, it would make Chinese exports more competitive. Two, China could stop depleting its dollar reserves. It would no longer have to burn through dollars to boost the yuan. And three, it could actually halt the capital outflows. How? Many Chinese fear the government will impose stricter capital controls as the situation worsens. So they move their capital out of the country in advance. That brings greater fear of capital controls. And more incentives for capital flight. It’s a vicious cycle. But if China devalues all at once, say, 25% or 30%, it sends this message: The worst is over. You may as well keep your capital in China. There will be no further devaluation.

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German trade surplus is bigger than the entire Greek economy. That is how the European Union ‘functions’.

German Exports Break Record as Trump Targets Trade Balance (BBG)

Germany posted a record trade surplus in 2016, which may further fuel accusations by the Trump administration that Europe’s largest economy is exploiting a “grossly undervalued” euro. Exports climbed 1.2% last year to 1.2 trillion euros ($1.3 trillion), the Federal Statistics Office in Wiesbaden reported on Thursday, while imports rose 0.6% to 954.6 billion euros. That left Germany’s trade surplus at 253 billion euros in 2016. The report feeds into a debate kicked off late last month by Peter Navarro, the head of the White House National Trade Council, who told the Financial Times that Germany is gaining an unfair advantage over the U.S. and other nations with a weak currency.

ECB President Mario Draghi, Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble all rejected the claim that came on the back of President Donald Trump’s promises of renegotiating or tearing up free-trade treaties. “The fact that the German economy is exporting much more than it imports is a source of concern and no reason to be proud” because weak imports are the result of a lack of investment, Marcel Fratzscher, head of the DIW economic institute in Berlin, said in an e-mailed statement. “The record surplus will continue to fuel conflict with the U.S. and within the EU.” Exports fell 3.3% in December from the previous month, the report said, while imports were unchanged. The country’s current-account surplus reached 266 billion euros in 2016.

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Zombies on life support.

The Blood Bath Continues In The US Major Oil Industry (SRSrocco)

The carnage continues in the U.S. major oil industry as they sink further and further in the RED. The top three U.S. oil companies, whose profits were once the envy of the energy sector, are now forced to borrow money to pay dividends or capital expenditures. The financial situation at ExxonMobil, Chevron and ConocoPhillips has become so dreadful, their total long-term debt surged 25% in just the past year. [..] While the Federal Government could step in and bail out BIG OIL with printed money, they cannot print barrels of oil. Watch closely as the Thermodynamic Oil Collapse will start to pick up speed over the next five years. According to the most recently released financial reports, the top three U.S. oil companies combined net income was the worst ever. The results can be seen in the chart below:

In 2011, ExxonMobil, Chevron and Conocophillips enjoyed a combined $80.4 billion in net income profits. ExxonMobil recorded the highest net income of the group by posting a $41.1 billion gain, followed by Chevron at $26.9 billion, while ConocoPhillips came in third at $12.4 billion. However, the rapidly falling oil price, since the latter part of 2014, totally gutted the profits at these top oil producers. In just five short years, ExxonMobil’s net income declined to $7.8 billion, Chevron reported its first $460 million loss while ConocoPhillips shaved another $3.6 billion off its bottom line in 2016. Thus, the combined net income of these three oil companies in 2016 totaled $3.7 billion versus $80.4 billion in 2011. Even though these three oil companies posted a combined net income profit of $3.7 billion last year, their financial situation is much worse when we dig a little deeper.

We must remember, net income does not include capital expenditures or dividend payouts. If we look at these oil companies Free Cash Flow, they have been losing money for the past two years. Their combined free cash flow fell from a healthy $46.3 billion in 2011 to a negative $8.7 billion in 2015 and a negative $7.3 billion in 2016. Now, their free cash flow would have been much worse in 2016 if theses companies didn’t reduce their CAPEX spending by nearly a whopping $20 billion.

[..] the free cash flow minus dividend payouts provides us evidence that these oil companies have been seriously in the RED since 2013, not just the past two years displayed in the Free Cash Flow chart. As we can see, the group’s free cash flow minus dividends was a negative $32.8 billion in 2015 and a negative $29 billion last year. Of course, these three companies may have sold some financial investments or assets to reduce these negative values, but a company can’t stay in business for long by selling assets that it would need to use to produce oil in the future. So, what has falling free cash flow and dividends done to ExxonMobil, Chevron and ConocoPhillips long-term debt? You guessed it… it skyrocketed:

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Does this sound like a good thing? : “..the environment remains highly favorable for junk-rated businesses..”

Record $1 Trillion in US Junk Debt to Mature in Next 5 Years (WSJ)

More than $1 trillion of junk-rated corporate debt is slated to mature over the next five years, creating a stiff challenge for heavily-indebted businesses if the market for riskier debt were to deteriorate, according to a new report from Moody’s Investors Service. The $1.063 trillion in maturing debt is the highest ever recorded by the ratings firm over a five-year period and also includes the highest single-year volume in 2021, when $402 billion of junk-rated corporate debt is scheduled to come due. Overall, a little more than $2 trillion of corporate debt is scheduled to mature by 2021 when factoring in $944 billion of investment-grade bonds. But it is the volume of junk-rated debt that could be of greater significance, given that investment-grade companies rarely have trouble extending debt maturities even in more difficult conditions.

As it stands, the environment remains highly favorable for junk-rated businesses, making it easy for most to access funds at their choosing. The average junk-bond yield was 5.72% Tuesday, the lowest level since September 2014. Buoyed by rising interest rates, junk-rated bank loans, which feature floating-rate coupons, have performed especially well of late, enabling U.S. companies to refinance $100 billion of loans in January, the largest monthly total in at least a decade, according to data from S&P Global Still, conditions can change quickly in the leveraged finance markets. A year ago, amid concerns that the U.S. was heading toward another recession, the average junk bond yield was nearly 10%, raising the risk that many borrowers would be unable to refinance bonds with looming maturities, hastening their descent into bankruptcy.

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“..you might have to ask the question if what comes next could possibly be worse than what’s happening now.”

Trump EU Envoy Says Greece Is Now More Likely To Leave The Euro (G.)

Donald Trump’s administration has put itself on a fresh collision course with the European Union after the president’s candidate to be ambassador in Brussels said Greece should leave the euro and predicted the single currency would not survive more than 18 months in its present form. Days after being accused of “outrageous malevolence” towards the EU for publicly declaring that it “needs a little taming”, Ted Malloch courted fresh controversy by saying Greece should have left the eurozone four years ago when it would have been “easier and simpler”. Malloch made his comments as financial markets began to take fright at the possibility of a fresh Greek debt crisis later this year. Shares fell and interest rates on Greek debt rose after it emerged that the EU was at loggerheads with the IMF over whether to give the country more generous debt relief.

“Whether the eurozone survives I think is very much a question that is on the agenda,” he told Greek Skai TV’s late-night chat show Istories. “We have had the exit of the UK, there are elections in other European countries, so I think it is something that will be determined over the course of the next year, year and a half. “Why is Greece again on the brink? It seems like a deja vu. Will it ever end? I think this time I would have to say that the odds are higher that Greece itself will break out of the euro,” Malloch said. The stridently Brexit-supporting businessman, who has yet to be confirmed as the US president’s EU ambassador and is seen by Brussels as a provocative nominee for the post, said he wholeheartedly agreed with Trump’s tweet from 2012 saying Greece should return to the drachma, its former currency.

“I personally think [Trump] was right. I would also say that this probably should have been instigated four years ago, and probably it would have been easier or simpler to do,” Malloch said in the interview with the show’s chief anchor, Alexis Papahelas. Seven years of arduous austerity – the price of the international bailout – had been so bad for the country that it was questionable whether what came next could possibly be worse, Malloch said. In the third bailout in as many years, Greece has lost more than 25% of its GDP due to austerity-fuelled recession, the biggest slump of any advanced western economy in modern times. Without further emergency funding from its €86bn rescue programme, Athens could face a default in July when debt repayments of about €7bn to the European Central Bank mature.

[..] The renewed focus came as the IMF revealed its board was split over how far spending cuts in the country should go, raising fresh doubts over the IMF’s participation in rescue plans for the struggling Greek economy. The IMF believes that the budgetary demands being imposed on Greece by Europe are unreasonable and that the country’s debts will hit 275% of national income by 2060 without fresh assistance. Malloch said: “I have travelled to Greece, met lots of Greek people, I have academic friends in Greece and they say that these austerity plans are really deeply hurting the Greek people, and that the situation is simply unsustainable. So you might have to ask the question if what comes next could possibly be worse than what’s happening now.” The biggest unknown was not a euro exit, but the chaos it would likely engender as Greece moved to a new currency, he said.

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French revolution. Ironic that the central bank governor makes Le Pen’s point while trying to ‘push back’: “The Bank of France belongs to all French and is at the service of a French asset – our currency.” That’s exactly Le Pen’s point, it’s just that she doesn’t see the euro as ‘our currency’. For her, that means the franc.

Le Pen Aide Briefed French Central Banker on Plan to Print Money (BBG)

Presidential candidate Marine Le Pen’s chief economic adviser Bernard Monot met with Bank of France Governor Francois Villeroy de Galhau in September and set out her party’s plans to take control of the central bank and use it to finance government spending. The meeting took place on the sidelines of Villeroy de Galhau’s public hearing in Brussels at the economic and monetary committee of the European Parliament, Monot, who also sits on the panel, said in a Feb. 4 interview. The central bank has become one of Le Pen’s key targets as she fleshes out her plans for taking control of the French economy and leaving the euro. She intends to revoke the Bank of France’s independence and use it to finance French welfare payments and service the government’s debts after abandoning the European monetary union.

While the National Front leader is ahead in polling for the first ballot on April 23, she’s still an outsider to become the next president because of the two-round system which requires broad-based support to win the run-off two weeks later. Villeroy de Galhau, who also sits on the governing council of the ECB, pushed back against her proposals in an interview on BFM television Thursday, though he didn’t mention her specifically. “It’s important that we have institutions and a currency that straddle daily turbulence,” the governor said. “The Bank of France belongs to all French and is at the service of a French asset – our currency.” The spread between French 10-year bonds and similarly dated German debt was the widest in more than four years earlier this week, as political uncertainty deterred investors. Villeroy de Galhau described the move as “temporary tension.”

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The British economy will be healthier when its dependence on banking goes down. Not richer, but healthier. For instance, home prices can finally fall, a much needed development. There’s nothing good about a one-trick pony.

Global Banks In London To Relocate $1.9 Trillion Of Assets After Brexit (BBG)

Global banks in London may have to relocate 1.8 trillion euros ($1.9 trillion) of assets to the continent after Britain withdraws from the European Union, putting as many as 30,000 U.K. jobs at risk, according to Brussels-based research group Bruegel. The assets potentially on the move represent 17% of the U.K. banking system, Bruegel said in a report published Wednesday. Based on discussions with market participants, the researchers estimate that 35% of wholesale banking activity in London can be attributed to dealings with customers inside the EU. Financial firms will have to move that business to countries inside the trading bloc after the U.K. leaves the EU in 2019, likely spelling the end of passporting, where firms seamlessly service the rest of the single market from their London hubs.

Banks, and their clients, are most concerned about a “cliff edge” Brexit, whereby all access is cut off after two years. To safeguard against that loss of access, banks are already in discussions with European regulators about setting up new bases inside the EU and have said they will start the process of moving people within weeks of the government triggering Brexit talks, expected in March. “At a minimum, it is expected that the new EU27-based entities will need to have autonomous boards, full senior management teams, senior account managers and traders, even though much of the back-office might stay in London or elsewhere in the world,” researchers led by Andre Sapir said in the report.

London-based firms will likely have to move about 10,000 employees into these new EU entities, Breugel estimates. An additional 18,000 to 20,000 people in associated professions, such as lawyers, consultants and accountants, may also have to relocate. Bruegel’s estimates are at the conservative end of the spectrum. TheCityUK industry lobby group forecasts as many as 35,000 banking jobs could be relocated, rising to 70,000 when including associated financial services. London Stock Exchange CEO Xavier Rolet has said Brexit would likely see 232,000 jobs leaving the U.K.

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Both Danielle DiMartino Booth and Ann Pettifor have new books coming out. We need girl power, badly.

Former Fed Staffer Says Central Bank Is Under the Thumb of Academics (WSJ)

The Federal Reserve is dominated by academics who don’t know how finance and the economy really work, according to a former Federal Reserve Bank of Dallas staffer in her new book. Danielle DiMartino Booth, an adviser to Richard Fisher when he was Dallas Fed president, says the economists who control most of the central bank’s seats of power filter their decision-making through theoretical models. That led the institution to miss the forces that created the financial crisis, and then adopt the wrong policies to put the economy back on track, she says. Ms. Booth makes her case in a book called “Fed Up: An Insider’s Take on Why the Federal Reserve Is Bad for America,” set to be published Tuesday. Her book comes as other Fed critics are pushing for more diversity at the central bank.

They often focus on the dearth of women and minorities among the top officials, but some have said a broader range of educational and professional backgrounds also would widen the central bank’s perspective. Of the 17 Fed governors and regional bank presidents, 16 are white, 13 are men, and 10 have a Ph.D. in economics. Ms. Booth’s arguments echo those of her former boss, who led the Dallas Fed from 2005 to 2015, and frequently voted against the central bank’s aggressive stimulus efforts during and after the financial crisis. “If you rely entirely on theory, you are not going to conduct the right policy, because policies have consequences” that in many cases people with real-world experience are particularly well-suited to spot, Mr. Fisher said in an interview late last year.

Mr. Fisher hired Ms. Booth, a former Wall Street trader turned financial journalist, to work at the Dallas Fed in 2006 on the strength of columns she had written warning about the state of the housing market and financial markets. She eventually rose to be his appointed eyes and ears on financial markets. In her book, Ms. Booth describes a tribe of slow-moving Fed economists who dismiss those without high-level academic credentials. She counts Fed Chairwoman Janet Yellen and former Fed leader Ben Bernanke among them. The Fed’s “modus operandi” is defined by “hubris and myopia,” Ms. Booth writes in an advance copy of the book. “Central bankers have invited politicians to abdicate leadership authority to an inbred society of PhD academics who are infected to their core with groupthink, or as I prefer to think of it: ‘groupstink.’”

“Global systemic risk has been exponentially amplified by the Fed’s actions,” Ms. Booth writes, referring to the central bank’s policies holding interest rates very low since late 2008. “Who will pay when this credit bubble bursts? The poor and middle class, not the elites.” Fed officials have defended their crisis-era stimulus policies, saying they lowered unemployment and helped the housing market recover. Opponents feared near-zero interest rates would cause excessive inflation and dangerous market bubbles, neither of which has happened. Ms. Booth also is among the Fed critics who see a worrisome revolving door between the central bank and the financial firms it regulates. She points to New York Fed President William Dudley, a former Goldman Sachs chief economist, as an illustration of a “codependent” relationship between the central bank and markets. He and three other regional Fed bank presidents have worked for or had associations with Goldman Sachs. With this in mind, she writes, “Goldman has positioned players on the Fed’s chessboard.”

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“Italy was the second most pro-euro nation after Luxembourg, with 79% expressing a positive opinion.” But now: “only 41% said the euro was “a good thing”..”

Out of Pocket, Italians Fall Out of Love With The Euro (R.)

When the Italian central bank’s deputy governor joined a radio phone-in show last week, many callers asked why Italy didn’t ditch the euro and return to its old lira currency. A few years ago such a scenario, that Salvatore Rossi said would lead to “catastrophe and disaster”, would not have been up for public discussion. Now, with the possibility of an election by June, politicians of all stripes are tapping into growing hostility towards the euro. Many Italians hold the single currency responsible for economic decline since its launch in 1999. “We lived much better before the euro,” says Luca Fioravanti, a 32-year-old real estate surveyor from Rome. “Prices have gone up but our salaries have stayed the same, we need to get out and go back to our own sovereign currency.”

The central bank is concerned about the rise in anti-euro sentiment, and a Bank of Italy source told Reuters Rossi’s appearance is part of a plan to reach out to ordinary Italians. Few Italians want to leave the European Union, as Britain chose to do in its referendum last year. Italy was a founding EU member in 1957 and Italians think it has helped maintain peace and stability in Europe. And the ruling Democratic Party (PD) is pro-euro and wants more European integration though it complains that the fiscal rules governing the euro are too rigid. But the three other largest parties are hostile, in various degrees, to Italy’s membership of the single currency in its current form. The PD is due to govern until early 2018, unless elections are called sooner. The PD’s prospects of victory have waned since its leader Matteo Renzi resigned as premier in December after losing a referendum on constitutional reform, and polls suggest that under the current electoral system no party or coalition is likely to win a majority.

Italians used to be among the euro’s biggest supporters but a Eurobarometer survey published in December by the European Commission showed only 41% said the euro was “a good thing”, while 47% called it “a bad thing.” In the Eurobarometer published in April 2002, a few months after the introduction of euro notes and coins, Italy was the second most pro-euro nation after Luxembourg, with 79% expressing a positive opinion. Italy is the only country in the euro zone where per capita output has actually fallen since it joined the euro, according to Eurostat data. Its economy is still 7% smaller than it was before the 2008 financial crisis, and youth unemployment stands at 40%.

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They literally don’t know what they’re doing: “badly devised and even more badly executed”

Italy’s “Bitter” Bank Rescue Tsar Bemoans Strategy Vacuum (R.)

The head of Italy’s bank-bailout fund said on Tuesday the country lacked a clear strategy for shifting 356 billion euros ($381 billion) in problem loans. In an extraordinary outburst from a man picked by Rome to help tackle the problem, Alessandro Penati, whose boutique asset management firm was chosen to raise private funds for struggling banks, said he felt “bitter and disillusioned”. His comments exposed tensions within the banking sector over Italy’s rescue efforts. “There is no clear vision of the problem and no strategy,” Penati said at a financial conference in Milan, suggesting that he was virtually working alone on rescues that had revealed “horror stories” within some banks. “There is simply a reaction to a problem and this has been the main difficulty for me over these past few months – I had nobody to relate to.”

The Atlante fund, created 10 months ago following pressure from the government, gathered 4.25 billion euros from around 70 mostly private investors, including Italy’s healthier lenders, to buy up bad loans and invest in weaker banks. But the fund’s investors are already making big writedowns on the value of their stakes in Atlante, which promised them annual returns of 6%. The fund faces ever greater demands for capital and no investors willing to stump up more money. In December, Penati’s plan to buy into Italy’s biggest-ever sale of bad debts – 28 billion euros worth of loans written by struggling bank Monte dei Paschi di Siena (BMPS.MI) — fell apart when the bank failed to find any other major investors.

Penati, a former economist who set up Milan-based Quaestio Capital Management, said the sale had collapsed because it had been tied to a capital raising that had been “badly devised and even more badly executed”. Monte dei Paschi (MPS) is now to be rescued by the state. “It would no longer make sense for Atlante to play a role now. The point is that state intervention is considered a way to solve all problems, but it isn’t … MPS’s bad loan problem remains and how they are going to solve it – I don’t know.”

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Drilling has reportedly restarted. How bad can this get?

Activists Plan Emergency Actions Across The Country To Protest DAPL (IC)

On Tuesday the Army Corps of Engineers gave notice to Congress that within 24 hours it would grant an easement allowing Energy Transfer Partners to move forward with construction on the Dakota Access Pipeline, which North Dakota’s Standing Rock Sioux tribe and thousands of allies have attempted to halt out of concern for water contamination, dangers to the climate, and damage to sites of religious significance to the tribe. The federal government dismissed those concerns in its filing. “I have determined that there is no cause for completing any additional environmental analysis,” Douglas Lamont, the acting assistant secretary of the Army, wrote in a memorandum. “The COE has full responsibility to take the reasonable steps necessary to execute the requested easement.”

Two weeks earlier, after only four days in office, Trump signed two memoranda instructing federal officials to ram forward approvals for the Dakota Access and Keystone XL pipelines, both of which had been halted by the Obama administration after people mobilized across the U.S. to stop them. On Dakota Access, the Army Corps did just what the president demanded, waiving the standard 14-day waiting period before such a permit becomes official. The tribe has been left with just one day to rally a legal response. Lawyers for the tribe say they will argue in court that an environmental impact statement, mandated by the Army Corps under Obama, was wrongfully terminated. They will likely request a restraining order while the legal battle ensues. Pipeline company lawyers have said that it would take at minimum 83 days for oil to flow from the date that an easement is granted.

Although the tribal government once supported the string of anti-pipeline camps that began popping up last spring, leaders have since insisted that pipeline opponents go home and stay away from the reservation. “Please respect our people and do not come to Standing Rock and instead exercise your First Amendment rights and take this fight to your respective state capitols, to your members of Congress, and to Washington, D.C.,” tribal chairman Dave Archambault said in a statement. Still, the easement announcement is already activating pipeline opponents to return. A “couple thousand people” are headed back to the camps, including contingents of veterans, said former congressional candidate Chase Iron Eyes, a member of the tribe, in a video posted to Facebook.

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Boy, what a moral void.

UK Government Backtracks On Pledge To Take Syrian Child Refugees (Ind.)

Hours before the final vote on the triggering of Article 50 the government quietly announced it would allow just 350 unaccompanied Syrian children to come to the UK, thousands short of the figure suggested by government sources last year. The statement from Immigration Minister Robert Goodwill said local authorities indicated “have capacity for around 400 unaccompanied asylum-seeking children until the end of this financial year” and said the country should be “proud” of its contribution to finding homes for refugees. Liberal Democrat leader Tim Farron called the decision “a betrayal of British values”. “Last May, MPs from all parties condemned the Government’s inaction on child refugees in Europe, and voted overwhelmingly to offer help to the thousands of unaccompanied kids who were stranded without their families backed by huge public support,” Mr Farron said.

“Instead, the Government has done the bare minimum, helping only a tiny number of youngsters and appearing to end the programme while thousands still suffer. At the end of December last year the Government had failed to bring a single child refugee to the UK under the Dubs scheme from Greece or Italy where many of these children are trapped.” Ministers introduced the programme last year after coming under intense pressure to give sanctuary to lone children stranded on the continent. Calls for the measure were spearheaded by Lord Dubs, whose amendment to the Immigration Act requires the Government to “make arrangements to relocate to the UK and support a specified number of unaccompanied refugee children from other countries in Europe”.

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“This is not about supporting Bashar. This is about ending the war in Syria. We can’t continue like this, supporting regime change.”

My Country Was Destroyed (Tima Kurdi)

I am the aunt of Alan Kurdi, the Syrian boy who tragically drowned September 2, 2015. The devastating image of my 2-year old nephew’s lifeless body, lying face-down on the beach in Turkey, was all over the news across the world. Two weeks ago, I got home from work and my husband showed me a video of Tulsi Gabbard talking about her visit to my home country of Syria. The things she was saying about the United States policy of regime change and how the West and the Gulf countries are funding the rebel groups who wind up with the terrorists are true. I was shocked because it’s something no other U.S. politician has the courage to say. Regime change policy has destroyed my country and forced my people to flee. Tulsi’s message was exactly what I have been trying to say for years, but no one wants to listen.

I live in Canada now, but I was born and raised in Damascus, Syria. Growing up, our country was peaceful, beautiful and safe. Our neighbors were Christian, Muslim, Sunni, Shia; all kinds of religion and color. We all lived together and respected each other. Syria is a secular country. In 2011, the war started in Syria. Most of my family was still in Damascus. I was always in close contact with them and talked to them on the phone on a daily basis. For a year, I heard many tragic stories of people, friends, and neighbors who I grew up with having died in this war. Ultimately, my family had to flee to Turkey. I did what everyone would do for their own family to help, I sent them money and I listened to their struggles to survive as refugees in Turkey.

In 2014, I went to Turkey to visit my family and tried to help them. What I saw and experienced is not what we all saw in the news or we heard in the radio. It was worse than I could ever have imagined. I saw people in the streets without homes, without hope. Children were hungry, begging for a piece of bread. I heard many heartbreaking stories from other refugees who were suffering so much and many who had lost loved ones in the war. After I returned to Canada, I decided I wanted to bring my family here as refugees, but I couldn’t get them approved to come in. Eventually, my brother Abdullah and his wife Rehana, like thousands of Syrians, decided they had to take the risk and trust a smuggler they thought would bring them to freedom, safety, and hope. In September 2, 2015, I heard the tragic news that my sister-in-law Rehana and her two sons drowned crossing from Turkey to Greece.

The image of my two year old nephew Alan Kurdi lying face down on a Turkish beach was all over the media across the world. It was the wake up call to the world. Enough suffering. Enough killing. And most importantly, it was my wake up call. [..] Like me, many Syrians are encouraged that Tulsi met with President Bashar Assad in Syria. Tulsi recognizes that we need to talk to him because a political solution is the only way to restore peace in Syria. If the West keeps funding the rebels, we will see more people flee, more bloodshed, and more suffering. My people have suffered for at least six years. This is not about supporting Bashar. This is about ending the war in Syria. We can’t continue like this, supporting regime change. We have seen it before in Iraq, in Libya, and look what happened to them.

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Nov 302015
 
 November 30, 2015  Posted by at 10:26 am Finance Tagged with: , , , , , , , , , , , ,  4 Responses »


John Vachon Trucks loaded with mattresses at San Angelo, Texas Nov 1939

COP-21 Climate Deal In Paris Spells End Of The Fossil Era (AEP)
Oil’s Big Players Line Up for $30 Billion of Projects in Iran (Bloomberg)
India Opposes Deal To Phase Out Fossil Fuels By 2100 (Reuters)
Beijing Smog Levels So High They Move ‘Beyond Index’ (Bloomberg)
World’s Biggest Pension Fund Loses $64 Billion Amid Equity Rout (Bloomberg)
Iron Ore Falls Below $40 A Metric Ton For The First Time (Bloomberg)
Fed To Take Up ‘Too Big To Fail’ Emergency Lending Curb (Reuters)
Did the Yuan Really Pass the IMF Currency Test? You’ll Know Soon (Bloomberg)
IMF Move Would Pressure China on Management of Yuan (WSJ)
IMF’s Yuan Inclusion Signals Less Risk Taking In China (Reuters)
VW Top Execs Knew Fuel Usage In Some Cars Was Too High A Year Ago (Reuters)
BlackRock Spreads its Tentacles in Brussels (Don Quijones)
The Silk Road Affair: Power, Pop and a Bunch of Billionaires (Bloomberg)
The Strange Case Of Julian Assange (Crikey)
Saudi Arabia’s 2015 Beheadings The Most In 20 Years (Al Jazeera)
EU Split Over Refugee Deal As Germany Leads Breakaway Coalition (Guardian)
European Union Reaches Deal With Turkey on Migration (WSJ)
Tsipras Takes On Turkey’s Davutoglu On Twitter (AP)
As the World Turns Away, Refugees are Still Drowning in the Mediterranean (HRW)

Ambroses say the darndest things. This Ambrose looks through rosy glasses. Probably drinks from them too. “..both countries have come to the realisation that it is possible to decarbonise without hurting economic growth..” Oh, for Christ sake.

COP-21 Climate Deal In Paris Spells End Of The Fossil Era (AEP)

A far-reaching deal on climate change in Paris over coming days promises to unleash a $30 trillion blitz of investment on new technology and renewable energy by 2040, creating vast riches for those in the vanguard and potentially lifting the global economy out of its slow-growth trap. Economists at Barclays estimate that greenhouse gas pledges made by the US, the EU, China, India, and others for the COP-21 climate summit amount to an epic change in the allocation of capital and resources, with financial winners and losers to match. They said the fossil fuel industry of coal, gas, andoil could forfeit $34 trillion in revenues over the next quarter century – a quarter of their income – if the Paris accord is followed by a series of tougher reviews every five years to force down the trajectory of CO2 emissions, as proposed by the United Nations and French officials hosting the talks.

By then crude consumption would fall to 72m barrels a day – half OPEC projections – and demand would be in precipitous decline. Most fossil companies would face run-off unless they could reinvent themselves as 21st Century post-carbon leaders, as Shell, Total, and Statoil are already doing. The agreed UN goal is to cap the rise in global temperatures to 2 degrees centigrade above pre-industrial levels by 2100, deemed the safe limit if we are to pass on a world that is more or less recognisable. Climate negotiators say there will have to be drastic “decarbonisation” to bring this in sight, with negative net emissions by 2070 or soon after. This means that CO2 will have to be plucked from the air and buried, or absorbed by reforestation.

Such a scenario would imply the near extinction of the coal industry unless there is a big push for carbon capture and storage. It also implies a near total switch to electric cars, rendering the internal combustion engine obsolete. The Bank of England and the G20’s Financial Stability Board aim to bring about a “soft landing” that protects investors and gives the fossil industry time to adapt by forcing it to confront the issue head on. Barclays said ,$21.5 trillion of investment in energy efficiency will be needed by 2040 under the current pledges, which cover 155 countries and 94pc of the global economy. It expects a further $8.5 trillion of spending on solar, wind, hydro, energy storage, and nuclear power. Those best-placed to profit in Europe are: Denmark’s wind group Vestas; Schneider and ABB for motors and transmission; Legrand for low voltage equipment; Alstom and Siemens for rail efficiency; Philips, and Osram for LEDs and lighting.

But this is a minimalist scenario. While the Paris commitments suggest a watershed moment, they do not go far enough to meet the targets set by the Intergovernmental Panel on Climate Change (IPPC). The planet has already used up two-thirds of the allowable “carbon budget” of 2,900 gigatonnes (GT), and will have used up three quarters of the remaining 1,000 GT by 2030. Barclays advised clients to prepare for a more radical outcome, entailing almost $45 trillion of spending on different forms of decarbonisation. “The fact that COP-21 in itself is clearly not going to put the world on a 2 degree track does not mean that fossil-fuel companies can simply carry on with business-as-usual. We think they should be stress-testing their business models against a significant tightening of global climate policy over the next two decades,” it said.

[..] Mr Jacobs said a deal in Paris is highly likely. “You can never rule out a break-down. These meetings always go to the wire. But we have gone past the turning point in the US and China, and both countries have come to the realisation that it is possible to decarbonise without hurting economic growth,” he said. It will not be a legally-binding treaty, but it is expected to have the same effect as each country transposes the targets into its own law. In the US it will be enforced through the legal mechanism of the Clean Air Act, anchored on earlier accords, without need for Senate ratification. The sums of money are colossal. Macro-economists say this is just what is needed to soak up the global savings glut and rescue the world from its 1930s liquidity trap. There might even be a boom.

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End of the fossil era, Ambrose? Not everyone agrees.

Oil’s Big Players Line Up for $30 Billion of Projects in Iran (Bloomberg)

Total, Royal Dutch Shell and Lukoil are among international companies that have selected oil and natural gas deposits to develop in Iran as the holder of the world’s fourth-largest crude reserves presents $30 billion worth of projects to investors. Total is one of the companies that have been in the forefront of discussions and Eni is also looking to invest, Oil Minister Bijan Namdar Zanganeh said. Shell, Total and Lukoil all specified fields they would be interested in developing in Iran, Ali Kardor, deputy director of investment and financing at National Iranian Oil Co. said in an interview in Tehran. “Many companies are interested. Europeans are interested, Asian companies are interested,” Zanganeh told reporters at a conference in Tehran on Saturday. “Total is interested, Eni is interested.”

Iran is pitching 70 oil and natural gas projects valued at $30 billion to foreign investors at a two-day conference in Tehran as the Persian Gulf country prepares for the end of sanctions that have stifled its energy production. All banking and economic sanctions will be lifted by the first week of January,” Amir Hossein Zamaninia, deputy oil minister for international and commerce affairs, said at the event. “We are interested to come back to Iran when the sanctions are lifted and if the contracts are interesting,” Stephane Michel, Total’s head of exploration and production in the Middle East said at the conference. “We have worked in this country for a long time, so we know specific fields on which we’ve worked.”

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Eh, Ambrose? “The entire prosperity of the world has been built on cheap energy. And suddenly we are being forced into higher cost energy. That’s grossly unfair..”

India Opposes Deal To Phase Out Fossil Fuels By 2100 (Reuters)

India would reject a deal to combat climate change that includes a pledge for the world to wean itself off fossil fuels this century, a senior official said, underlying the difficulties countries face in agreeing how to slow global warming. Almost 200 nations will meet in the French capital on Nov. 30 to try and seal a deal to prevent the planet from warming more than the 2 degrees Celsius that scientists say is vital if the world is to avoid the most devastating effects of climate change. To keep warming in check, some countries want the Paris agreement to include a commitment to decarbonize – to reduce and ultimately phase out the burning of fossil fuels like coal, oil and gas that is blamed for climate change – this century.

India, the world’s third largest carbon emitter, is dependent on coal for most of its energy needs, and despite a pledge to expand solar and wind power has said its economy is too small and its people too poor to end use of the fossil fuel anytime soon. “It’s problematic for us to make that commitment at this point in time. It’s certainly a stumbling block (to a deal),” Ajay Mathur, a senior member of India’s negotiating team for Paris, told Reuters in an interview this week. “The entire prosperity of the world has been built on cheap energy. And suddenly we are being forced into higher cost energy. That’s grossly unfair,” he said. Mathur said India, whose position at climate talks is seen by some in the West as intransigent, was committed to the 2 degrees ceiling as a long-term goal and was confident a deal would be reached.

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If PM2.5 is the threat, what good is staying indoors? You’d have to live in a bunker.

Beijing Smog Levels So High They Move ‘Beyond Index’ (Bloomberg)

Smog levels spiked in Beijing on Monday, highlighting the environmental challenges facing China as President Xi Jinping arrives in Paris for global climate talks. The concentration of PM2.5, fine particulates that pose the greatest risk to human health, went “beyond index” in the afternoon, according to a U.S. Embassy monitor. The PM2.5 level was 678 micrograms per cubic meter near Tiananmen Square, the Beijing government said. The World Health Organization recommends average 24-hour exposure to PMI of 25 or below. Public outrage over air pollution has been a catalyst for China’s transformation into a driving force for a breakthrough deal in Paris. Leaders including U.S. President Barack Obama and Chinese President Xi Jinping are scheduled to being discussions in the French capital Monday.

Beijing on Sunday raised its air pollution alert to orange, the second-highest level in its four-tier system, for the first time in 13 months. The heavy pollution in Beijing won’t clear up until Dec. 2, according to the environment bureau. The city will ask some factories to suspend or limit production and construction sites to stop transporting materials and waste while the orange alert is active, it said. Under the orange alert, people are advised to cut down on outdoor activity, while the elderly and people with heart and lung ailments should stay inside. Severe pollution was also reported in at least 17 other cities around Beijing, Tianjin, Hebei and Shandong, according to the Ministry of Environmental Protection. Shanghai’s air was also heavily polluted, the second worst level on a six-grade scale, with the PM2.5 reading at 170.4 micrograms per cubic meter as of 12 p.m..

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I warned this would happen the moment Abe pushed pension funds to prop up stock markets: they lose big. Japanese who read this will save even more, further crippling Abenomics.

World’s Biggest Pension Fund Loses $64 Billion Amid Equity Rout (Bloomberg)

The world’s biggest pension fund posted its worst quarterly loss since at least 2008 after a global stock rout in August and September wiped $64 billion off the Japanese asset manager’s investments. The 135.1 trillion yen ($1.1 trillion) Government Pension Investment Fund lost 5.6% last quarter as the value of its holdings declined by 7.9 trillion yen, according to documents released Monday in Tokyo. That’s the biggest percentage drop in comparable data starting from April 2008. The fund lost 8 trillion yen on its domestic and foreign equities and 241 billion yen on overseas debt, while Japanese bonds handed GPIF a 302 billion yen gain.

The loss was GPIF’s first since doubling its allocation to stocks and reducing debt last October, and highlights the risk of sharp short-term losses that come with the fund’s more aggressive investment style. Fund executives have argued that holding more shares and foreign assets is a better approach as Prime Minister Shinzo Abe seeks to spur inflation that would erode the purchasing power of bonds. [..] GPIF had 39% of its assets in Japanese debt at Sept. 30, and 21% in the nation’s equities, according to the statement. That compares with 38% and 23% three months earlier, respectively. The fund had 22% of its investments in foreign stocks at the end of September, and 14% in overseas bonds.

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Overleveraged overcapacity will disappear no matter how powerful the interests.

Iron Ore Falls Below $40 A Metric Ton For The First Time (Bloomberg)

Most-active iron ore futures in Singapore sank below $40 a metric ton for the first time on concern that the economic slowdown in China will cut demand as supplies from the largest miners climb. [..] The raw material has been pummeled since the start of 2014 as surging supplies from low-cost producers including BHP Billiton Ltd. and Rio Tinto in Australia and Brazil’s Vale combine with faltering demand in China to spur a glut. Losses in Singapore and Dalian could presage a drop in the benchmark price for spot ore in Qingdao, which will be updated later in the day. The latest sign of new supply came from Australia, with a vessel waiting offshore on Monday to load the first cargo from Gina Rinehart’s Roy Hill mine.

“Supply continues to rise while port inventories are starting to climb, weighing on iron ore prices,” analysts at Maike Futures Co. said in a note on Monday. “The overseas producers are still profitable and are greatly reducing costs.” The top miners are betting that higher output will enable them to cut unit costs and defend market share while smaller rivals shut. Mills in China, contending with overcapacity and depressed margins, will cut steel production by almost 3% next year, according to the China Iron & Steel Association.

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The Fed can elect to ignore the law, and Congress?

Fed To Take Up ‘Too Big To Fail’ Emergency Lending Curb (Reuters)

The Federal Reserve Board will consider on Monday a proposal to curb its emergency lending powers, a change demanded by Congress after the central bank’s controversial decision to aid AIG, Citigroup and others in 2008. A proposed rule, to be considered by the Fed’s Washington-based board in an open meeting, would require that any future emergency lending be only “broad-based” to address larger financial market problems, and not tailored to specific firms. The 2010 Dodd-Frank financial reform law instructed the Fed to curtail emergency loans to individual banks and prohibited it from lending to companies considered insolvent.

While some at the Fed worry the new rules will hamper the central bank’s response in future crises, some politicians have said the proposed regulations are too imprecise, for example in defining insolvency, to prevent the types of deals done in 2008. As the financial crisis intensified in 2008, the Fed invoked its little-used emergency lending power to stave off the failure of AIG and Bear Stearns, and help other “too big to fail” companies including Citigroup and Bank of America. The Fed also enacted a series of more general emergency programs, in all providing $710 billion in loans and guarantees. Those programs were separate from the much larger Fed asset and bond purchases known as quantitative easing.

The loans have been repaid and the guarantees ended, ultimately earning the Fed a net profit of $30 billion, according to a September Congressional Research Service review. However the effort was criticized as overreach, arguably important in limiting the crisis but also not clearly in line with the intended use of the Fed’s emergency authority. The Fed routinely lends money to banks on a short-term basis to smooth the operations of the financial system. That is part of why it exists. But since the 1930s it has had the power to lend more broadly in a crisis.

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Can’t see Lagarde crushing the expectations she herself built up. Unless there’s a dirty game going on behind the curtain.

Did the Yuan Really Pass the IMF Currency Test? You’ll Know Soon (Bloomberg)

IMF Managing Director Christine Lagarde and some two dozen officials on the fund’s executive board will gather Monday at headquarters in Washington for one of the most-anticipated decisions outside of actually approving loans for nations in crisis. The question inside the 12th-floor, oval boardroom: whether to grant China’s yuan status as a reserve currency by adding it to the fund’s Special Drawing Rights basket. The SDR, created in 1969, gives IMF member countries who hold it the right to obtain any of the currencies in the basket – currently the dollar, euro, yen and pound – to meet balance-of-payments needs. While there’s little suspense in the main thrust of the expected approval – Lagarde already announced that fund staff had recommended the yuan be included and that she supported the finding – the IMF is likely to give more details on how it arrived at the decision.

The IMF’s highest decision-making body is its board of governors, a group of mostly finance ministers and central bankers from its 188 member countries. The board of governors has delegated most of its powers to the executive board, made up of 24 executive directors who represent the membership. The meeting Monday has been classified as “restricted,” meaning no support staff will be allowed to attend. The executive board, which meets more than 200 times a year, usually makes decisions based on consensus, rather than formal votes. Mark Sobel, the U.S. executive director who answers to the Obama administration, wields the most power, with a 17% voting stake. Together, the Group of Seven countries control 43% of the vote, making them a formidable bloc. China, which holds a 3.8% voting share, is represented by former People’s Bank of China official Jin Zhongxia.

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Beijing’s hands will be tied.

IMF Move Would Pressure China on Management of Yuan (WSJ)

The IMF is on the verge of labeling China’s yuan a reserve currency. Now Chinese officials will have to prove they can treat it like one. The IMF on Monday is widely expected to say that next year, it will add the yuan to the elite basket of currencies that comprise its lending reserves, a status enjoyed only by the U.S. dollar, the euro, the British pound and the Japanese yen. The inclusion would represent recognition that the yuan’s status is rising along with China’s place in global finance. Now comes the hard part. The inclusion puts new pressure on Beijing to change everything from how it manages the yuan, also known as renminbi, to how it communicates with investors and the world. China’s pledges to loosen its tight grip on the currency’s value and open its financial system will come under new scrutiny.

“We will have to build up confidence in renminbi assets from investors both at home and abroad and at the same time, prevent the financial risks associated with a more global currency,” said Sheng Songcheng, head of the survey and statistics department at the People’s Bank of China, the country’s central bank. “That calls for carrying out various financial reforms in a coordinated way.” Inclusion would also put pressure on the central bank to offer the same degree of clarity and transparency that the U.S. Federal Reserve, the European Central Bank and other vital institutions strive for. That could be difficult: In the past six months alone, the PBOC shocked markets with a surprise currency devaluation, stood mostly silent during a Chinese stock-market rout and confused investors by issuing a new proclamation that turned out to be months old.

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Is the SDR Xi’s Trojan Horse?

IMF’s Yuan Inclusion Signals Less Risk Taking In China (Reuters)

When the IMF agrees on Monday to add the Chinese yuan to its reserves basket in the biggest shake-up in more than three decades, the IMF can afford itself a congratulatory nod. By acknowledging the yuan as a major global currency alongside the dollar, euro, yen, and pound, as is widely expected, IMF members will endorse the efforts of China’s economic reformers and by doing so hope that will spur fresh change in China. But Chinese policy insiders and international policymakers say reforms may not continue at the breakneck pace of recent months. In addition, Chinese sources suggest adding the yuan to the IMF basket leaves economic conservatives better positioned to resist further significant reform in a reminder of the period following China’s entry to the World Trade Organization (WTO).

A slowing in the pace has implications for those who bet that making the yuan a global reserve currency will give it a boost. The yuan has fallen almost 3% against the dollar this year, on course for its biggest annual fall since its landmark 2005 revaluation. The IMF decision will remove a key incentive – bolstering national pride – that reformers used to push otherwise reluctant conservatives to support reforms. More importantly, however, are worries in Beijing that the rickety economy can’t handle more aggressive reform that allows a freer flow of currency across China’s borders. Beijing is already rapidly losing a taste for more experimentation with capital flows, say the sources – economists involved in policy discussions who declined to be identified because of the sensitivity of the subject.

After the stock market buckled more than 40% in the summer – which many blamed on nefarious foreign capital – regulators have made it harder for money to leave China to counter yuan selling pressure and have intervened heavily in onshore and offshore currency markets. Not just conservatives, but more liberal economists are calling for a pause. “Our ability to control financial risk has yet to be improved,” said a senior economist at the China Centre for International Economic Exchanges (CCIEE), an influential Beijing think-tank. “Any rush to open up the capital account completely could be unfavorable for controlling financial risks … we will definitely be very cautious.”

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Which is why former CEO Winterkorn left in a hurry as soon as the scandal first broke.

VW Top Execs Knew Fuel Usage In Some Cars Was Too High A Year Ago (Reuters)

Volkswagen’s top executives knew a year ago that some of the company’s cars were markedly less fuel efficient than had been officially stated, Sunday paper Bild am Sonntag reported, without specifying its sources. VW in early November revealed that it had understated the level of carbon dioxide emissions and fuel usage in around 800,000 cars sold mainly in Europe. The scandal, which will likely cost VW billions, initially centered on software on up to 11 million diesel vehicles worldwide that VW admitted was designed to artificially suppress nitrogen oxide emissions in a test setting. The Bild am Sonntag report contradicts VW’s assertion, however, that it only uncovered the false CO2 emissions labeling as part of efforts to clear up the diesel emissions scandal, which became public in September.

Months after becoming aware of excessive fuel consumption, former Chief Executive Martin Winterkorn decided this spring to pull one model off the market where the discrepancy was particularly pronounced, the Polo TDI BlueMotion, the paper cited sources close to Winterkorn as saying. The paper did not separately cite its sources for saying that top executives knew about the fuel usage problem a year ago, however. VW at the time cited low sales figures as the reason for the withdrawal. The paper said that VW did not inform Polo TDI BlueMotion owners of the high fuel consumption, which was 18% above the nameplate value.

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Goldman, BlackRock, they are the de facto executive rulers of the world. And it makes them filthy rich.

BlackRock Spreads its Tentacles in Brussels (Don Quijones)

Much like Goldman Sachs, Blackrock is spreading tentacles across Europe at a startling rate. In a sign of its growing influence, the firm met EU officials to discuss financial market matters more times than any other company in the seven months to July, Financial Times reported this week. During that period the firm met Jonathan Hill, European Commissioner for financial services (and former City of London lobbyist), and his team five times — one more time than HSBC and two more times than Deutsche Bank. In fact, the only institutions that met the Commissioner as many times were London Stock Exchange Group, the British Bankers’ Association and Insurance Europe.

BlackRock’s lobbying efforts have worried some investors amidst concerns that the fund house, which offers traditional active mutual funds, passive funds and alternative products such as hedge funds, could have too much influence on European policy. By pure happenstance, the growth in BlackRock’s influence coincided with a 10-fold increase in the company’s self-reported lobbying spending in Brussels: in 2012 the firm spent €150,000; by 2014 that number had catapulted to €1.5m. That kind of money gets you a heck of a lot of access and influence in Brussels, the world’s second most important lobbying hub, especially when you’re already the world’s biggest asset manager.

According to EU Integrity Watch, BlackRock held meetings with Brussels officials over issues as far-reaching as the regulatory agenda in financial services by the EU and the US – a vital issue given the looming TTIP and TiSA trade treaties – capital markets union, Mr. Hill’s plan to boost business funding and investment financing, and money market funds. BlackRock’s most audacious coup to date took place in August, 2014, when the ECB announced its decision to hire BlackRock Solutions to provide advice on the design and implementation of the central bank’s upcoming purchase of asset-backed securities. In other words, just before the ECB embarked on one of the biggest QE programs in world history, it sought the advice of the world’s largest asset manager – i.e. the company most invested in the assets it intended to buy.

To ensure that there were/are no conflicts of interest, BlackRock’s contract stipulates that there must be an effective separation between the project team working for the ECB and its staff involved in any other ABS-related activities, which, as you can imagine, is an immense relief. So too is the fact that “all external audits related to the management of conflicts of interest would be made available to the ECB,” an institution famed worldwide for its blinding institutional transparency and accountability. To put all lingering fears to bed, a spokesperson for BlackRock told FT, “BlackRock advocates for public policies that we believe are in our investors’ long-term best interests.”

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Juicy story. Let’s do a movie.

The Silk Road Affair: Power, Pop and a Bunch of Billionaires (Bloomberg)

Even in post-Soviet Uzbekistan, an ancient crossroads where torture and bribery allegations are endemic, Gulnara Karimova, the president’s Harvard-educated daughter, stood out for her ruthlessness. As the U.S. embassy noted in a secret dispatch from 2005 that was later published by Wikileaks, Karimova was viewed by most Uzbeks “as a greedy, power-hungry individual who uses her father to crush business people or anyone else who stands in her way.” These days the 43-year-old former globetrotting socialite who once publicly praised God for “my face” is confined to her homeland along the legendary Silk Road, watched over by the security services of her aging father, Islam Karimov, who has ruled for a quarter century.

Even in isolation, though, Googoosha, as she’s called herself in music videos, remains in the eye of a storm, the protagonist in a multibillion-dollar tale of alleged greed and graft unfolding across three continents. This story stretches back more than a decade, from the fringes of the czarist empire to the tidy streets of Oslo, via Gibraltar, Geneva and beyond. It touches companies owned by six of Europe’s richest men – five Russians and a native Norwegian – and thrusts the staid Scandinavian business world into a strange new light. It also offers a glimpse into a mercurial U.S. ally, a nation of 30 million that is ranked among the most repressive and corrupt in the world by Freedom House and Transparency International, even while providing occasional logistical support for American troops in neighboring Afghanistan.

[..] In Switzerland, where Karimova once lived in a Geneva mansion, prosecutors have widened their own probe into suspected money-laundering and fraud offenses related to her role in awarding telecommunications contracts in Uzbekistan. In August, they said they’d confiscated more than 800 million Swiss francs ($781 million) of assets linked to her, without elaborating, bringing the total amount seized to about $1.1 billion. Add the $900 million VimpelCom has set aside for potential liabilities and the amount tied up in the investigations is pushing $2 billion. And that’s not even counting the impact on the market values of VimpelCom, MTS and TeliaSonera or the future costs of litigation. VimpelCom’s market value has plunged 59% to $6.3 billion since March 12, 2014, when it disclosed the U.S. and Dutch probes…

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Good overview. No charges have ever been filed. No prosecutor wants to interview Assange.

The Strange Case Of Julian Assange (Crikey)

Julian Assange faces very serious allegations, politicians like to say. That was the description from UK Prime Minister David Cameron’s office three years ago, defending the UK s determination to extradite him to Sweden. And that was the description early this year from then-UK deputy PM Nick Clegg, too – he should go to Sweden to face very serious allegations and charges of rape, said Clegg, not long before leading his party to annihilation in this year’s general election. Clegg, of course, was peddling the oft-repeated lie that there are charges against Assange. But for very serious allegations -sexual molestation, unlawful coercion, sexual assault- the UK and Swedish governments have displayed zero interest in investigating them. In fact, the history of the case against Assange is a history of increasingly bizarre efforts by authorities to avoid questioning him.

When Swedish prosecutors first examined complaints about Assange by two women in 2010, the Chief Prosecutor of Stockholm dismissed all but one of the allegations, including the accusation of sexual assault, saying there is no suspicion of any crime whatsoever. After speaking to prosecutors, Assange remained in Sweden for another week to be interviewed about the one remaining allegation (of molestation). However, after an appeal by former Swedish politician Claes Borgstrom, another prosecutor, Marianne Ny, reopened the whole case. Assange remained in Sweden and offered to be interviewed again, but, in the first of what would turn out to be a long litany of excuses, was told Ny was ill and unable to speak to him. Ny’s office then told Assange’s lawyer he was free to leave Sweden, but once Assange did so, an arrest warrant was issued for him.

Assange then offered to return to Sweden to speak to Ny and gave her a full week of dates in which he would do so. These were all rejected. This was all despite Swedish police having access to the texts of one of the alleged victims of Assange saying she did not want to put any charges on JA but that the police were keen on getting a grip on him , that she was shocked when he was arrested given she only wanted him to take an STD test, and that it was the police who made up the charges . Ny’s unwillingnness to interview Assange would become the pattern for the next five years: Assange repeatedly offered to speak to Swedish authorities by phone, by videolink, or in person at the Australian embassy. The Swedes refused all opportunities to do so and demanded Assange return to Sweden, issuing a European arrest warrant for him.

Eventually the EAW would be upheld by British courts under UK laws, which since then have been amended. Under current British law, a similar case to Assange’s would now be successfully appealed and the EAW rejected. Once he had sought refuge in the Ecaudorean embassy in 2012, Assange continued to offer Swedish authorities the opportunity to speak with him, and they continued to reject them. But while they regularly rejected Assange s offer to be interviewed, other suspects were treated very differently: during the last five years, the Swedes have on 44 occasions asked to travel to the UK to interview, or asked British police to interview, other people in Britain in relation to allegations including violent crime, fraud and even murder. Assange, however, couldn’t be treated the same way – he had to go to Sweden.

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Nice company to keep: “Saudi Arabia, Iran, China, the United States, and Iraq are the top five countries with the most executions.”

Saudi Arabia’s 2015 Beheadings The Most In 20 Years (Al Jazeera)

Saudi Arabia has executed at least 151 people so far this year – the most put to death in a single year since 1995. The stark rise in the number of executions has seen, on average, one person killed every two days, according to the human rights group, Amnesty International. “The Saudi Arabian authorities appear intent on continuing a bloody execution spree,” Amnesty’s report released on Monday said, quoting James Lynch, deputy director at the Middle East and North Africa programme. It is the most people put to death in the kingdom in one year since 1995, when 192 executions were reportedly carried out. Most recent years have had between 79 and 90 people killed by beheadings annually for crimes including “nonlethal offences, such as drug-related ones,” according to the London-based rights group.

The large number of executions shed further light on what Amnesty referred to as unfair judicial proceedings, with a disproportionate imposition of capital punishment on foreign nationals. “Of the 63 people executed this year for drug-related charges, the vast majority, 45 people, were foreign nationals,” the report said. Khalid al-Dakhil, a Saudi political commentator based in Riyadh, challenged “the integrity” of Amnesty’s report, saying it failed to mention Iran’s execution record. “Iran executes far more people a year than Saudi Arabia, but it does not get the negative publicity Saudi Arabia has. This is something that must be addressed,” Dakhil told Al Jazeera. Saudi Arabia, Iran, China, the United States, and Iraq are the top five countries with the most executions. In total, 71 people executed so far in 2015 have been foreigners. The majority were migrant workers from poorer countries who are often sentenced to die without any knowledge of the court’s proceedings because they don’t speak Arabic and do not receive translations.

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These people are busy creating absolute mayhem in Europe.

EU Split Over Refugee Deal As Germany Leads Breakaway Coalition (Guardian)

Months of European efforts to come up with common policies on mass immigration unravelled when Germany led a “coalition of the willing” of nine EU countries taking in most refugees from the Middle East, splitting the EU on the issues of mandatory refugee-sharing and funding. An unprecedented full EU summit with Turkey agreed a fragile pact aimed at stemming the flow of migrants to Europe via Turkey. But the German chancellor, Angela Merkel, frustrated by the resistance in Europe to her policies, also convened a separate mini-summit with seven other leaders on Sunday to push a fast-track deal with the Turks and to press ahead with a new policy of taking in and sharing hundreds of thousands of refugees a year directly from Turkey.

The surprise mini-summit suggested that Merkel has given up trying to persuade her opponents, mostly in eastern Europe, to join a mandatory refugee-sharing scheme across the EU, although she is also expected to use the pro-quotas coalition to pressure the naysayers into joining later. Merkel’s ally on the new policy, Jean-Claude Juncker, president of the European commission, said of the mini-summit: “This is a meeting of those states which are prepared to take in large numbers of refugees from Turkey legally.” But the frictions triggered by the split were instantly apparent. Donald Tusk, the president of the European council who chaired the full summit with Turkey, contradicted the mainly west European emphasis on seeing Ankara as the best hope of slowing the mass migration to Europe.

“Let us not be naïve. Turkey is not the only key to solving the migration crisis. The most important one is our responsibility and duty to protect our external borders. We cannot outsource this obligation to any third country. I will repeat this again: without control on our external borders, Schengen will become history.” He was referring to the 26-country free-travel zone in Europe, which is also in danger of unravelling under the strains of the migratory pressures and jihadi terrorism. Merkel’s mini-summit brought together the leaders of Germany, Austria and Sweden – the countries taking the most refugees – Finland, Belgium, Luxembourg, the Netherlands, and Greece. President François Hollande of France did not attend the mini-summit because of scheduling problems, but it is understood that France is part of the pro-quotas vanguard.

The nine countries include the EU’s wealthiest. The EU-Turkey summit agreed to pay Turkey €3bn (£1.4bn) in return for a deal that would see Ankara patrolling the Aegean borders with Greece – the main point of entry to the EU for hundreds of thousands this year. Ankara is also to resume its long-stalled EU membership negotiations by the end of the year and, according to the schedule agreed, is to have visas waived by next year for Turks travelling to the EU. In response, the EU will be able to start deporting “illegal migrants” to Turkey by next summer under a fast-tracked “readmissions agreement”.

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No there there, just hot air. “..EU leaders made it clear there would be no shortcut in Turkey’s long-stalled bid to join the bloc. [..] And the Turks couldn’t say how effective the agreement would be in reducing the number of the migrants and refugees entering the EU..”

European Union Reaches Deal With Turkey on Migration (WSJ)

The EU on Sunday agreed with Turkey’s government for Ankara to take steps to cut the flow of migrants into Europe in exchange for EU cash and help with its bid to join the 28-nation bloc. EU leaders hailed the agreement as a key step toward substantially reducing the number of asylum seekers entering the bloc, while Turkey’s Prime Minister Ahmet Davutoglu said Sunday’s summit marked a historic new beginning in the often fraught relations between Brussels and Ankara. Yet the continued lack of trust on both sides remained evident, as EU leaders made it clear there would be no shortcut in Turkey’s long-stalled bid to join the bloc.

“The issue hasn’t changed,” French President François Hollande said after leaving the summit to return to Paris for global climate talks. “There is no reason either to accelerate or to slow it down.” And the Turks couldn’t say how effective the agreement would be in reducing the number of the migrants and refugees entering the EU via Turkey. EU officials have said cooperation with Turkey is the best way to reduce migrant flows, arguing that Ankara was very effective in previous years in preventing the outflow of refugees from the country. Alongside fresh efforts to tighten their external borders, EU officials hope the Turkey agreement can help turn the tide in the bloc’s migration crisis, the biggest since the aftermath of World War II.

[..] it appeared that substantial efforts would be required to turn Sunday’s agreement into reality. European Council President Donald Tusk said the EU will closely watch Turkey’s implementation of the deal and will review Ankara’s actions on a monthly basis. EU governments are also still at loggerheads over who would pay the €3 billion Turkey is to receive for its cooperation. Moreover, Turkey must complete dozens of EU requirements to win a recommendation for visa-free access to the bloc by autumn of 2016. Even then, a final decision will need backing of all 28 member states. Meanwhile, Mr. Davutoglu acknowledged he couldn’t promise the number of migrants heading into Europe via Turkey would fall. “Nobody can guarantee a drop,” he said of the refugees heading west from war-torn Syria.

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He’s simply right.

Tsipras Takes On Turkey’s Davutoglu On Twitter (AP)

A highly unusual online exchange took place on Twitter between the prime ministers of Greece and Turkey late Sunday before the former deleted his tweets – but only from the English version of his account. The official English-speaking account of Greek prime minister Alexis Tsipras (@Tsipras_eu) posted four tweets addressed to his Turkish counterpart Ahmet Davutoglu, needling him about Turkey’s downing of a Russian jet and Turkey’s violations of Greek airspace. “To Prime Minister Davutoglu: Fortunately our pilots are not mercurial as yours against the Russians #EuTurkey” Tsipras tweeted. Both prime ministers attended an EU-Turkey summit on refugees in Brussels Sunday. Tsipras did not explain whether his tweets reproduced a conversation between the two or were written especially for Twitter.

“What is happening in the Aegean is outrageous and unbelievable #EUTurkey” Tsipras continued. “We’re spending billions on weapons. You -to violate our airspace, we -to intercept you #EUTurkey” Tsipras said in a third tweet, referring to intrusions of Turkish planes into Greek airspace, which Turkey contests, and Greek and Turkish pilots frequently buzzing each other. Tsipras said the two countries should focus on saving refugees, not on weapons. “We have the most modern aerial weapons systems–and yet, on the ground, we can’t catch traffickers who drown innocent people #EUTurkey,” the Greek premier said in a fourth tweet. Davutoglu chose to respond to only the first tweet and not engage in a detailed dialogue.

“Comments on pilots by @atsipras seem hardly in tune with the spirit of the day. Alexis: let us focus on our positive agenda,” @Ahmet_Davutoglu responded. Then, the @Tsipras_EU account deleted the four tweets, which have remained posted, however, in Tsipras’ Greek language account, @atsipras. The deletion sparked further furious tweeting, with comments such as “who is handling your account?” being the most common. Then, the English account posted further tweets, but less controversial this time. “Important Summit today for the EU, Turkey and our broader region #EUTurkey” A last Tsipras tweet obliquely referred to the deleted ones: “We are in the same neighborhood and we have to talk honestly so we can reach solutions #EUTurkey.”

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But the disgrace goes on. And it’s ours, you, me, everyone. Want to protest something?

As the World Turns Away, Refugees are Still Drowning in the Mediterranean (HRW)

Her name was Sena. She was four years old. She was wearing blue trousers and a red shirt. She drowned in a shipwreck on November 18 in the Aegean Sea off Bodrum, Turkey. His name was Aylan. He was three years old. He drowned on September 2nd, along with his mother and his five-year-old brother. Like Sena, he was Syrian, dressed in blue and red, and travelling with his family on a desperate journey to reach safety and a future in Europe. The picture of his tiny lifeless body washed up on shore appeared to shake Europe’s—indeed, the world’s—conscience. Yet at least 100 more children, including Sena, have drowned in the Aegean in the weeks since. This year has seen an unprecedented number of asylum seekers and migrants—over 712,000 as of this week—crossing from Turkey to the Greek islands, most of them in overcrowded flimsy rubber dinghies.

One-quarter of those risking their lives are children. We have witnessed an unbearable death toll this year, with at least 585 people missing or lost in the Aegean, most of them since Aylan’s death. War, persecution, geopolitics, dangerous smuggler tactics, the weather – all of these factors contribute to the surge in arrivals as well as the number of lives lost. The UN refugee agency, UNHCR, estimates that 60% of those coming to Greece by sea are Syrians, while 24% are from Afghanistan. The response of the European Union has to be multifaceted. It should include measures to reduce the need for dangerous journeys and tackle the root causes of refugee and migration flows in a way that respects human rights.

But the immediate imperative has to be to save lives. Turkish and Greek coast guard boats are out there every day patrolling the waters. And various EU countries have sent boats, personnel and other equipment to participate in Operation Poseidon in the Aegean, a mission of the EU’s external border agency Frontex. Combined, these actions have saved tens of thousands of lives. I’ve seen a burly Portuguese coast guard officer gently take a baby from her mother’s arms after a rescue. I’ve observed the professionalism of Norwegian police officers on patrol for Frontex. A colleague of mine was impressed by the way Greek coast guard officers handled two difficult rescues. But more needs to be done.

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May 272015
 
 May 27, 2015  Posted by at 9:46 am Finance Tagged with: , , , , , , , , , , ,  1 Response »


Walker Evans Shoeshine stand, Southeastern US 1936

China Blows Its Debt Bubble Bigger (Pesek)
Bernanke: No Risk Of Hard Landing In China (Reuters)
Greece May Delay IMF Payments Till The End Of June (Guardian)
Greece’s Creditors Must ‘Get Their Act Together’, Says Varoufakis (AFP)
Steve Keen: Varoufakis Battles ‘Divorce Lawyer’ Style Austerity Talks (CNBC)
Juncker Questions Varoufakis, Tsipras (Kathimerini)
Greek Default, European Bankruptcy (Jacques Sapir)
A Parallel Currency For Greece: Part I (VoxEU)
Half Of Greeks Cover Their Needs From Their Deposits (Kathimerini)
EU Funds At Risk Due To Project Payment Freeze By Athens (Kathimerini)
Target Of Greek Scorn Shapes Nation’s Fate As IMF’s Storm Chaser (Bloomberg)
Landlords Enjoy £14 Billion Tax Breaks In UK Buy-To-Let Expansion (Guardian)
Corruptionomics in Italy (Alessio Terzi)
Robert Mundell, Evil Genius Of The Euro (Greg Palast, 2012)
In EU, Reform Means Different Things To Member Countries (Guardian)
Big Oil Bosses’ Bonuses Linked To $1 Trillion Spending on Drilling (Guardian)
Why Finance Is Too Much Of A Good Thing (Martin Wolf)
Canada’s Economy Out Of The Woods? Think Again (CNBC)
FIFA Officials Arrested on Corruption Charges; Face Extradition to US (NY Times)
Can Organic Farming Counteract Carbon Emissions? (WSJ)

“Even among China’s many questionable credit vehicles, local-government financing vehicles are a standout.”

China Blows Its Debt Bubble Bigger (Pesek)

There are plenty of reasons one could argue China isn’t on the verge of a debt crisis: The country has $3.7 trillion in currency reserves, a closed financial system and ambitious leaders who claim to be on the case. And doesn’t the biggest rally in Chinese stocks since 2008 count for anything? But like Japan and other highly-indebted countries that have struggled to deleverage, China isn’t showing the requisite tolerance for pain. A case in point was the government’s May 15 decision to order banks to prop up the same local-government financing vehicles, or LGFVs, that it claimed to be reining in. Then the People’s Bank of China decided this week to guide the three-month Shanghai Interbank Offered Rate to its lowest level since 2008.

By manipulating “shibor” in this way, the People’s Bank of China is helping regional leaders accelerate their unsustainable borrowing. Neither of these steps will help China avoid a Japan-like crisis. Rather, they are likely to ensure a belated financial reckoning in the years ahead with the potential to shake the global economy. The encouragement of local government borrowing is especially alarming. Even among China’s many questionable credit vehicles, LGFVs are a standout. They allow provincial governments to use state-owned resources and assets, like land, to borrow from banks. LGFVs have become a potent symbol of the country’s post-2008 overindulgence in debt, with local government obligations now exceeding the entire German economy.

The Chinese government has also been urging banks to increase lending to borrowers with liquidity troubles, relaxing rules for companies to conduct off-balance-sheet borrowing and prodding the PBOC to do whatever it takes to cap local-government bond yields. Meanwhile, by allowing local government to shift their LGFV debt to fresh bonds, the Chinese government has eliminated any remaining semblance of transparency in those markets. Entrepreneurial government officials who want to raise some cash to fund dubious projects now have a license to do so without leaving a paper trail.

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Meet the expert.

Bernanke: No Risk Of Hard Landing In China (Reuters)

Former Federal Reserve Chairman Ben Bernanke said that China’s economic slowdown should not worry markets as there was no risk of a hard landing, and emphasized that a move to raise U.S. rates should be viewed as a positive sign for the world’s largest economy. Bernanke, who participated in an open interview at a private-sector forum in Seoul on Wednesday, said the expected U.S. rate hike would be “anticlimactic” when it happens and that there would only be minor negative impact on South Korea. “There may be some volatility. Countries like Korea are very well placed because it has very good policy, good institutions. It’s not weak or underdeveloped and doesn’t know how to handle capital flows.”

A Fed rate hike, expected by markets before the end of this year, would be something to cheer about, said Bernanke, who now works at the Brookings Institution, bond giant Pimco and hedge fund Citadel. “I don’t know when (the rate hike will come), but when that begins, that’s good news, not bad news because it means the U.S. economy is strong enough.” Bernanke also said the economic slowdown in China is necessary as it needs to change its growth model to be more sustainable in the long term. “China was growing 10% a year. And it was doing that through heavy capital investment, steel plants and so on. Very export oriented,” he said. “As the country gets more rich and sophisticated that kind of growth is no longer successful.”

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First move in a while? Promptly denied in Athens.

Greece May Delay IMF Payments Till The End Of June (Guardian)

Greece could secure vital weeks to negotiate a rescue deal with its creditors if Athens is able to delay repayments worth €1.6bn to the IMF, as critical deadlines approach. The proposal to combine four IMF repayments due in June and delay payment until the end of the month would win more time for vital debt talks that resumed on Tuesday. Greece must repay €300m on 5 June, the first of four instalments due next month. The IMF, its biggest creditor after the European Union, often waits a month before receiving funds from debtor countries. A senior eurozone official close to the talks with Athens told Reuters: “There is the possibility of putting together several payments that Greece would need to make to the IMF in the course of June and then just make one payment.”

The news agency said a second official close to the talks also acknowledged that a payment delay was a possibility. The first official said: “That’s basically a technical treasury exercise and they could tell the IMF that this is how they want to do it and the IMF would probably have to be OK with that.” Shut out of international markets, Athens has conceded that it will miss the 5 June payment without new loans from the EU, which is demanding reforms that will make the country’s debt sustainable. Last week, the interior minister, Nikos Voutsis, a longstanding ally of the prime minister, Alexis Tsipras, said the country needed to strike a deal with its European partners within the next couple of weeks or it would default on its IMF repayments. In remarks that heightened the possibility of a default, he said: “This money will not be given and is not there to be given.”

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“It’s about time the institutions, in particular the IMF, get their act together..”

Greece’s Creditors Must ‘Get Their Act Together’, Says Varoufakis (AFP)

Greece’s creditors must “get their act together” and help produce a new loan deal for the cash-strapped country, Finance Minister Yanis Varoufakis said Tuesday. “It’s about time the institutions, in particular the IMF, get their act together, and come to an agreement with us,” the outspoken Varoufakis told CNN. Greece’s radical left government in recent days has sent conflicting messages on its finances as the state is gradually running out of money. The cash crunch has been caused by the government’s inability to agree with its international creditors on reforms that would unlock some €7.2 billion in promised bailout cash.

Over the weekend, a cabinet minister said Greece had “no money” to make a series of repayments to the IMF from June 5. “The instalments for the IMF in June are (overall) €1.6 billion. This money will not be given. There isn’t any to be given. This is a known fact,” Interior Minister Nikos Voutsis said on Sunday. A day later, a government spokesman insisted the country would keep up with its payments for as long as it could. “To the extent that we are able to pay, we will keep on repaying these obligations,” government spokesman Gabriel Sakellaridis told reporters. Varoufakis on Tuesday denied that Greece is about to run out of money. “Our state, as a result of huge sacrifices by the Greek people, has managed to live within its means,” he said.

“We will make the payment because I have no doubt that we will have an agreement,” he added. Talks in Brussels over the Greek reform list are to resume on Tuesday. According to Athens, the two sides are still apart on tax issues, social insurance, labour rights and the size of Greece’s budget surplus. The government hopes to secure an agreement by early June at the latest.

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“Mainly his frustration, the fact that the one thing that he can’t discuss with the finance ministers of Europe is economics..”

Steve Keen: Varoufakis Battles ‘Divorce Lawyer’ Style Austerity Talks (CNBC)

Greece’s controversial finance minister, Yanis Varoufakis, has blamed the euro zone’s insistence on greater austerity measures as the real reason why talks with lenders are stalling, and not any lack of willingness on Greece’s part to implement reforms. In a blog post published Monday, Varoufakis said the Greek government’s negotiations with its creditors have been entirely misrepresented as “unwilling” by the world’s media when Athens is actually very keen to put economic reforms in place. “The problem is simple: Greece’s creditors insist on even greater austerity for this year and beyond – an approach that would impede recovery, obstruct growth, worsen the debt-deflationary cycle, and, in the end, erode Greeks’ willingness and ability to see through the reform agenda that the country so desperately needs,” Varoufakis said in a Project Syndicate blog post, published on Monday.

“Our government cannot – and will not – accept a cure that has proven itself over five long years to be worse than the disease,” he added. At the same time, former colleague, fellow economist and close friend of Varoufakis, Steve Keen said the finance minister was frustrated with the progress of Greece’s talks with the euro zone, adding Varoufakis had compared the talks to dealing with “divorce lawyers”. Keen, chief economist of the Institute of Dynamic Economic Analysis (IDEA) who is credited with forecasting the economic crisis from as early as 2005, said the finance ministers of Europe refused to discuss certain euro policies, according to Varoufakis.

Keen, who also heads up the school of economics, history and politics at Kingston University in London, first met Varoufakis when they both worked as lecturers at Sydney University in the late 1980s. When asked what they mainly discuss at the moment, Keen said, “Mainly his frustration, the fact that the one thing that he can’t discuss with the finance ministers of Europe is economics,” he told CNBC. “He goes inside, he is expected to be discussing what the economic impact of the policies of the euro are and how to get a better set of policies, living within the confines of the euro and the entire European Union system, and he said they simply won’t discuss it. He said it is like walking into a bunch of divorce lawyers, it is not anything like what you think finance ministers should be talking about,” Keen said, adding that he thought current austerity reforms being suggested by the euro zone were a “fantasy”.

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Way beyond his mandate. Still wondering how that became so accepted in Europe.

Juncker Questions Varoufakis, Tsipras (Kathimerini)

As Greece’s negotiations with its creditors enter the most critical phase, the country’s finance minister created fresh confusion on Tuesday with statements regarding possible tax reforms which were almost immediately revoked. Meanwhile, fuelling speculation about how much longer Varoufakis can stay in the crucial post of finance minister, European Commission President Jean-Claude Juncker declared that he was “not helping the process.” “Mr Varoufakis is the finance minister of a country that has to confront huge problems and he doesn’t give the feeling that he knows that,” Juncker told the MNI news agency. Asked by the MNI reporter whether he trusted Prime Minister Alexis Tsipras, Juncker took 14 seconds to answer “yes” but said Tsipras was becoming “increasingly responsible.”

In the interview Juncker also presented his opinions on what concessions should be made from each side in the tough negotiations while saying it was imperative to achieve a deal that includes the International Monetary Fund, which is awaiting a €300 million repayment from Greece next week. Referring to proposed changes to the Greek value-added tax system that are under discussion, Juncker said these reforms must yield €1.8 billion, or 1% of gross domestic product, in order to narrow a fiscal gap. He said pension reform was also crucial, pointing to the large proportion of early retirements in Greece in particular, while suggesting that labor reforms – another sticking point – could be postponed until the fall.

The Brussels Group negotiations resume on Wednesday with a Euro Working Group teleconference expected to take place on Thursday. In Athens, government sources said they expected a deal by the weekend so an emergency Eurogroup can be held next Tuesday. But confusion about the details such a deal would entail was deepened by Varoufakis. The minister told a press conference the government was considering introducing a “small” levy on ATM withdrawals. Two hours after the statement, his ministry said that the idea of taxing bank transactions had been proposed during negotiations but was withdrawn following “objections by the Finance Ministry.”

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“..one can see a preference emerging for an austerity which sweeps everything away wherever it passes.”

Greek Default, European Bankruptcy (Jacques Sapir)

The negotiations with Greece have been lead against any good sense or, more exactly, against any democratic good sense (which we are forced to agree is not quite the same thing). There have been attempts to discredit, to threaten, even to corrupt the Greek negotiators. These negotiations are actually being held in the greatest of obscurity. We do not have at disposal the minutes of the declarations of the participants, and one leaves it over to the press the produce “leaks“ the content of which is uncontrollable, precisely because of the lack of minutes. Yannis Varoufakis has expressed this quite well on his blog, admitting that he taped the negotiations so that one day we will know what to make out of the behavior of all parties involved.

“And maybe that we should question the European institutions, where decisions of fundamental importance are being taken, in the name of the European citizens, but minutes of which are neither taken down nor published. Secrecy and a credulous press are not good harbingers for European democracy.” Considering that Varoufakis is in reality a defender of the European project, one must understand, and measure the amplitude and the reach of his criticism. In effect, it is European democracy, not so much as a principle (already badly harmed since the 2005 refusal to take into account the referendums in France and in the Netherlands) but as a system of operational rules, with the purpose of ensuring the responsibility of actors for their acts, which is absent today. We know quite well that without responsibility there is democracy no longer.

What Varoufakis is saying, is that the European Union is no longer, in its day to day functioning, a democratic system. But the failure also concerns the aims of the European Union. In the case of Greece, one pretends officially wanting to keep the country in the Eurozone. But, in fact, and for various reasons, one can see a preference emerging for an austerity which sweeps everything away wherever it passes. Greece’s position has received the support of many economists and even the IMF has considered that on a number of points, the Greek government was right. But, nothing doing. It is all happening as if the German government, it must be said with the help of the French government which is behaving – alas – in this instance as the most eager of vassal, as the lowest of lackeys, were seeking to impose at any price upon ALL the countries of the Eurozone the death-bringing austerity which is its policy.

And one can understand that concessions to Greece would immediately entail demands emanating from Spain. In this latter country, Podemos, the party coming out of the movement of the indignés has carried away on this Sunday, May 24, a few beautiful victories which are rendering the position of the Spanish Prime Minister, Rajoy, ever more fragile. But this is true also of Portugal and Italy. Concessions to Greece would signal the beginning of a wholesale putting into question of austerity, something the German government doesn’t want to happen under any pretext. For ideological reasons, but also for some very material ones.

What is profiling itself on the horizon is not a Greek default, or more exactly, not only a Greek default. We are witnessing the bankruptcy of the Europeist ideology, and of the European Union as well. Through the Greek default, we will be witnessing a defaulting of the politics of the European Union, taken hostage by Germany. So that this default will be a European default, as it will signal the end of a certain idea of the European Union and will open a deep and durable crisis within Europe. European institutions will be affected in their legitimacy. This default will be the basis of the coming revolution.

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A useful overview that includes Cochrane, Parenteau and Varoufakis’ ideas.

A Parallel Currency For Greece: Part I (VoxEU)

Absent a deal with creditors, very soon, short of cash, the Greek government might default on its debt. To prevent this from happening, and to avoid taking new extra doses of useless and painful austerity, Athens could be bound to resort to the introduction of some kind of new domestic currency – in parallel to the euro – for the government to be able to make payments to public employees and pensioners while freeing up the euros needed to pay out its creditors. The ECB has not denied this possibility. Recently, ECB sources have unofficially discussed the issue with the media in some detail (albeit anonymously), and executive board member Yves Mersch has referred to a parallel currency for Greece as one of “the exceptional tools that any government can consider if it has no other options,” noting that all these tools bear high costs.

Is this really so? Is it really the case that a parallel currency would be worse than the current medicine Greece is taking (and is set to be taking for an indefinite future)? A parallel currency per se would neither prevent the risk of Greece’s disorderly default nor automatically help it out of depression. But not all parallel currencies are born equal, and there are various ways to design a parallel currency, each bearing significantly different implications. Below we compare the proposals currently on the table and discuss how a parallel (quasi) currency could be designed to promote Greece’s economic recovery. The issue is relevant for all countries suffering a weak economic activity, with no autonomous monetary policy, and limited fiscal space.

John Cochrane (2015) considers the possibility that the Greek government issues small cuts, zero-coupon bonds as promises to repay the bearer an equivalent amount of euros at some future date (IOUs). These IOUs could take the form of paper securities or electronic book entries in bank accounts, and the government could roll them over every year, just as for any type of debt obligation. The IOUs could be used to pay public salaries, pensions, and social transfers as well as to recapitalise or lend to banks. The IOUs would trade at a discount, but if the government accepted them at face value for tax payments, the discount might not be large. Mostly, the discount would reflect the risk that Greece either reneges on its commitment to accept its own debt for tax payments or suspends the roll over, thereby defaulting on the new debt. As Cochrane notices, introducing the IOUs would amount to creating a separate or dual currency that would allow Greece not to leave the Eurozone.

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The other half doesn’t have any…

Half Of Greeks Cover Their Needs From Their Deposits (Kathimerini)

Greek salaried workers cannot buy what they want but, rather, have to limit themselves to what they can afford on their reduced disposable income, a survey by the Labor Institute of the General Confederation of Greek Labor (GSEE) and the Association of Working Consumers of Greece (EEKE) showed on Tuesday. Crucially, 47% of consumers surveyed said they have relied on their savings to cover their needs in the past few months, while 16% were forced to borrow to spend, as the reduction of incomes continued in 2015 for more than half of Greece’s wage-earners (53%), the survey conducted in mid-February revealed – though this is markedly better than the 70% rate recorded last September.

In terms of expectations for the current quarter, consumers (who responded just three or four weeks after the change in government) said that things could not get much worse: Three in four (75%) said incomes would remain stable (from 57% in September), 16% expected a decline (from 40% five months earlier) and 9% even expected to see their incomes rise.

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To be filed under ‘irony’?!

EU Funds At Risk Due To Project Payment Freeze By Athens (Kathimerini)

Greece runs the immediate risk of missing out on €1 billion worth of EU subsidies this year from the previous support framework, which expires on December 31, as a payment freeze by the state has blocked the proper implementation of projects that will have to finish by the end of the year. Although the subsidy absorption rate had improved considerably in recent years, reaching a level of 85%, failure to stick to that rate this year – the last of the extended 2007-2013 program – would hamper Greece’s capacity to utilize the EU funds. At greater risk are not only the highway and environmental projects but also investment plans that are being implemented by the private sector. Economic uncertainty has suspended any resolve for investing, resulting in an extensive inability to absorb the funds Brussels has set aside for Greece.

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Hit man.

Target Of Greek Scorn Shapes Nation’s Fate As IMF’s Storm Chaser (Bloomberg)

When the IMF’s point man on Greece, Poul Thomsen, rebuffed the nation’s proposal in December to unlock more bailout funding, he wound up making his job even tougher. The Greek government’s failure then to secure an agreement with its creditors helped pave the way for its defeat in January by the anti-austerity Syriza party. Instead of negotiating with Greece’s establishment, Thomsen finds himself facing a novice group whose leaders have likened the lenders’ conditions to “fiscal waterboarding.” Now the 60-year-old Danish economist is holding his ground against Syriza economic plans that fail to meet IMF criteria for putting Greece’s debt on a sustainable path.

And this time, the nation’s membership in the euro and the IMF’s credibility hang in the balance as Greece runs low on cash and European leaders look to the fund’s blessing before disbursing more bailout money. The situation has Thomsen, whose thesis adviser was an architect of the euro, in the role of helping decide the currency’s fate. Thomsen has been closely involved with the Greek bailout since its inception in 2010, and often represents the fund at meetings of euro-area finance ministers, where officials from the European Commission and ECB also typically attend. Those two institutions and the IMF form the so-called troika of Greek creditors.

“That deal in December was a hugely missed opportunity,” said Martin Edwards, an international-relations professor at Seton Hall University in South Orange, New Jersey, who has researched IMF lending programs. “They moved from having a moderately cooperative government to one that wasn’t going to be in their corner. This is a problem of their own devising.”

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“A fraction of this amount would go a long way towards fixing our housing shortage, and giving millions of priced-out families and young people the chance of a stable home.”

Landlords Enjoy £14 Billion Tax Breaks In UK Buy-To-Let Expansion (Guardian)

Landlords enjoyed a record £14bn in tax breaks in 2013, according to figures revealing the expansion of the UK’s buy-to-let market in the aftermath of the financial crisis. Some £6.3bn was declared against the cost of mortgage interest alone in the 2012-13 financial year, according to information obtained by the Guardian from HMRC through a freedom of information request. The figures also reveal that the number of landlords has increased by more than one-third over the past six years. In the 2012-13 financial year, 2.1 million taxpayers declared income from property, up from 1.5 million in 2007-08.

The anti-homelessness charity Shelter has called for the government to conduct an urgent review of the tax treatment of landlords, who can also deduct the cost of insurance, maintenance and repairs, utility bills, legal fees and other expenses from their income. Owner-occupiers are not entitled to the same privileges. In response to the figures, Campbell Robb, Shelter’s chief executive, said: “In the context of looming welfare cuts and a dramatic shortage of homes, all those struggling to keep up with sky-high housing costs will be shocked to hear that a massive £14bn has been given in tax breaks for landlords in just a year.

“A fraction of this amount would go a long way towards fixing our housing shortage, and giving millions of priced-out families and young people the chance of a stable home. “In the Queen’s speech the new government must start to set out a comprehensive plan that will finally build the homes this country desperately needs, and an urgent review of these huge tax breaks must be part of this.”

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Masters of corruption.

Corruptionomics in Italy (Alessio Terzi)

In line with its National Reform Programme for the period 2015-16, Matteo Renzi’s government obtained parliament’s approval on a new anti-corruption law on May 21. We document the sheer size of corruption in Italy and argue that tackling it is not only a matter of fairness, but also crucial to boost the country’s potential output after three years of recession and almost two decades of stagnation. Experience from past success cases suggests that only forceful and comprehensive actions will succeed in bringing corruption under control.

The problem of corruption in Italy is real and large. Transparency International’s Corruption Perception Index, the most widely used indicator of corruption, shows how Italy occupies the last place in Europe and 69th in the world, on par with Romania, Bulgaria, and Greece. This picture is confirmed by other organisations. The World Bank’s indicator for Control of Corruption ranks Italy 95th out of 215 countries, again neck and neck with Greece, Romania, and Bulgaria. The WEF ranks Italy 102nd out of 144 countries on indicators related to ethics and corruption.

The economic consequences of corruption can be dissected in two classes: static and dynamic. Statically, corruption leads to the creation of deadweight losses, as it drives prices above their marginal cost of production. This implies a loss for both the public (e.g. in the form of investment projects being more expensive) and the private sector (e.g. in a bureaucratic procedure costing more to execute). The Italian Court of Auditors estimates these direct costs of corruption to be in the order of magnitude of €60bn per year, equivalent to roughly 4% of the country’s GDP.

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A timely reminder: “..when crises arise, economically disarmed nations have little to do but wipe away government regulations wholesale, privatize state industries en masse, slash taxes and send the European welfare state down the drain.”

Robert Mundell, Evil Genius Of The Euro (Greg Palast, 2012)

The idea that the euro has “failed” is dangerously naive. The euro is doing exactly what its progenitor – and the wealthy 1%-ers who adopted it – predicted and planned for it to do. That progenitor is former University of Chicago economist Robert Mundell. The architect of “supply-side economics” is now a professor at Columbia University, but I knew him through his connection to my Chicago professor, Milton Friedman, back before Mundell’s research on currencies and exchange rates had produced the blueprint for European monetary union and a common European currency. Mundell, then, was more concerned with his bathroom arrangements. Professor Mundell, who has both a Nobel Prize and an ancient villa in Tuscany, told me, incensed:

“They won’t even let me have a toilet. They’ve got rules that tell me I can’t have a toilet in this room! Can you imagine?” As it happens, I can’t. But I don’t have an Italian villa, so I can’t imagine the frustrations of bylaws governing commode placement. But Mundell, a can-do Canadian-American, intended to do something about it: come up with a weapon that would blow away government rules and labor regulations. (He really hated the union plumbers who charged a bundle to move his throne.) “It’s very hard to fire workers in Europe,” he complained. His answer: the euro. The euro would really do its work when crises hit, Mundell explained. Removing a government’s control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession.

“It puts monetary policy out of the reach of politicians,” he said. “[And] without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business.” He cited labor laws, environmental regulations and, of course, taxes. All would be flushed away by the euro. Democracy would not be allowed to interfere with the marketplace – or the plumbing. [..] The supply-side economics pioneered by Mundell became the theoretical template for Reaganomics – or as George Bush the Elder called it, “voodoo economics”: the magical belief in free-market nostrums that also inspired the policies of Mrs Thatcher. Mundell explained to me that, in fact, the euro is of a piece with Reaganomics: “Monetary discipline forces fiscal discipline on the politicians as well.” And when crises arise, economically disarmed nations have little to do but wipe away government regulations wholesale, privatize state industries en masse, slash taxes and send the European welfare state down the drain.

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Which is why the EU has no future.

In EU, Reform Means Different Things To Member Countries (Guardian)

The most over-used word in Brussels is “reform”. There is not a leader in the EU who does not urge reform of the union. The trouble is they all mean different things when they declaim the r-word. A German leader urges reform and means belt-tightening, structural change, balanced budgets in the push for global competitiveness. If you’re a French or Italian leader, reform means less austerity, more public spending, policies geared to growth not contraction, to jobs and not more unemployment. And David Cameron, who couches his referendum campaign in the need to reform the EU, of course, means a new deal for Britain.

Reform means concessions to UK exceptionalism in the EU, with 27 countries recognising and adjusting to Britain’s uniqueness in Europe. In the arguments about the looming renegotiation of Britain’s position in the EU, the emphasis until now has been on form rather than substance, the shape that a deal might take rather than what it might bring. This has focused on the calls for reopening the EU treaties, changing the terms of British EU membership, conferring a new legal order on that status. It is still not clear what might happen because Cameron has been deliberately vague about what he wants, exploring what the others – by the other 27 leaders, Cameron usually means Angela Merkel – might be prepared to give.

Cameron’s argument is that treaty change is necessary because of the impact of the euro crisis, that the eurozone needs a radical shift towards greater political and fiscal integration to shore up the single currency. Of course, Cameron speaks with a forked tongue because his argument is aimed at exploiting that renegotiation to rewrite the terms of British membership. Treaty change in any major way will not happen. It is too difficult. It will take too long. And eurozone leaders are also intensely irritated by the lecturing from Cameron and George Osborne, the chancellor, about how to put their house in order.

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Ain’t we smart?

Big Oil Bosses’ Bonuses Linked To $1 Trillion Spending on Drilling (Guardian)

Bosses at the world’s big five oil companies have been showered with bonus payouts linked to a $1tn crescendo of spending on fossil fuel exploration and extraction over nine years, according to Guardian analysis of company reports. The unprecedented push to bring untapped reserves into production, and to exploit new and undiscovered fields, involves some of the most complex feats of engineering ever attempted. It also reflects how confident Exxon Mobil, Shell, Chevron, Total and BP are that demand will remain high for decades to come.

The big oil groups are pressing ahead with investments despite the International Energy Agency (IEA) estimating that two-thirds of proven fossil fuel reserves will need to remain in the ground to prevent the earth from warming 2C above pre-industrial levels – a proposed temperature limit beyond which scientists warn of spiralling and irreversible climate change. Multi-billion-dollar capital projects amount to huge, long-term bets by the big five that exorbitant costs associated with unlocking hydrocarbon reserves in some of the most inaccessible locations on the planet can eventually be recouped and converted into profits. Bonuses for chief executives at all five firms are tied to the achievement of delivery milestones in the construction and deployment of such projects.

Shell’s Ben van Beurden, for example, last year received a pay deal worth $32.2m, including bonuses linked to delivering “a high proportion of flagship projects on time and on budget”. These are thought to include four platforms floating 1,000 metres or more above deepwater wells in the Gulf of Mexico, Gulf of Guinea and South China Sea. Similarly, BP’s Bob Dudley was awarded a pay deal worth $15.3m, with bonuses linked to seven “major projects”, thought to include Sunrise, a tar sands joint venture in Canada, as well as projects in Angola, Azerbaijan, the Gulf of Mexico and the North Sea.

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“The first is direct damage: an unsustainable credit-fuelled boom, say. Another is indirect damage that results from a breakdown in trust in a financial arrangements..”

Why Finance Is Too Much Of A Good Thing (Martin Wolf)

An organised society offers two ways of becoming rich. The normal way has been to exercise monopoly power. Historically, monopoly control over land, usually seized by force, has been the main route to wealth. A competitive market economy offers a socially more desirable alternative: invention and production of goods and services. Alas, it is also possible to extract rents in markets. The financial sector with its complexity and implicit subsidies is in an excellent position to do so. But such practices do not only shift money from a large number of poorer people to a smaller number of richer ones. It may also gravely damage the economy.

This is the argument of Luigi Zingales of Chicago Booth School, a strong believer in free markets, in his presidential address to the American Finance Association. The harm takes two forms. The first is direct damage: an unsustainable credit-fuelled boom, say. Another is indirect damage that results from a breakdown in trust in a financial arrangements, due to crises, pervasive “duping”, or both. Prof Zingales emphasises the indirect costs. He argues that a vicious circle may emerge between public outrage, rent extraction and back to yet more outrage. When outrage is high, it is difficult to maintain prompt and unbiased settlement of contracts. Without public support, financiers must seek political protection. But only those who enjoy large rents can afford the lobbying.

Thus, in the face of public resentment, only rent-extracting finance – above all, the mightiest banks – survive. Inevitably, this further fuels the outrage. None of this is to deny that finance is essential to any civilised and prosperous society. On the contrary, it is the very importance of finance that makes the abuses so dangerous. Indeed, there is substantial evidence that a rise in credit relative to gross domestic product initially raises economic growth. But this relationship appears to reverse once credit exceeds about 100% of GDP. Other researchers have shown that rapid credit growth is a significant predictor of a crisis.

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Beware housedold debt, hiding behind the housing bubble.

Canada’s Economy Out Of The Woods? Think Again (CNBC)

The state of Canada’s finances is back in focus this week with economists questioning whether the country has managed to combat a worrying rise in private debt. An independent policy think tank, called the Fraser Institute, made headlines last Wednesday when it described concerns as “overblown,” adding that there was little evidence that Canadian households were irresponsibly borrowing too much. However, that argument is now being challenged by David Madani, an economist focused on the north American nation at Capital Economics. He called the research “misleading” as it only showed the payments on debt interest, not the principal repayments which reduce the original loan amount.

“Principal repayments often represent a large portion of debt obligations, especially when it comes to housing mortgage debt,” he said in a note released on Monday. “Should market interest rates rise over the next several years, as we anticipate, household debt obligations will become much more onerous.” Canada’s economy has seen house prices and debt levels continue to climb despite the global financial crash of 2008. Former governor of the Bank of Canada, Mark Carney, warned of elevated household debt levels on several occasions during his tenure.

New statistics in March showed that Canadian households held roughly C$1.63 ($1.32) of credit market debt for every dollar of disposable income in the fourth quarter of 2014 – a record high, according to Statistics Canada who published the data. The country has also had to deal with a dramatic fall in the price of oil with its economy very much reliant on the commodity. The central bank delivered a rate cut in January and market participants are gearing up for another policy meeting this week. The current governor of the Bank of Canada, Stephen Poloz, said last week that this policy was “working” and that the cut would benefit households with a mortgage.

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Question: how did the NY times know where and when the arrests were going to take place?

FIFA Officials Arrested on Corruption Charges; Face Extradition to US (NY Times)

Swiss authorities conducted an extraordinary early-morning operation here Wednesday to arrest several top soccer officials and extradite them to the United States on federal corruption charges. As leaders of FIFA, soccer’s global governing body, gathered for their annual meeting, more than a dozen plain-clothed Swiss law enforcement officials arrived unannounced at the Baur au Lac hotel, an elegant five-star property with views of the Alps and Lake Zurich. They went to the front desk to get keys and proceeded upstairs to the rooms. The arrests were carried out peacefully, with at least two men being ushered out of the hotel without handcuffs. One FIFA official, Eduardo Li of Costa Rica, was led by the authorities from his room to a side-door exit of the hotel. He was allowed to bring his luggage, which was adorned with FIFA logos.

The charges allege widespread corruption in FIFA over the past two decades, involving bids for World Cups as well as marketing and broadcast deals, according to three law enforcement officials with direct knowledge of the case. The charges include wire fraud, racketeering and money laundering, and officials said they targeted members of FIFA’s powerful executive committee, which wields enormous power and does its business largely in secret. The arrests were a startling blow to FIFA, a multibillion-dollar organization that governs the world’s most popular sport but has been plagued by accusations of bribery for decades.

The inquiry is also a major threat to Sepp Blatter, FIFA’s longtime president who is generally recognized as the most powerful person in sports, though he was not charged. An election, seemingly pre-ordained to give him a fifth term as president, is scheduled for Friday. Prosecutors planned to unseal an indictment against more than 10 officials, not all of whom are in Zurich, law enforcement officials said. Among them are Jeffrey Webb of the Cayman Islands, a vice president of the executive committee; Eugenio Figueredo of Uruguay, who is also an executive committee vice president and until recently was the president of South America’s soccer association; and Jack Warner of Trinidad and Tobago, a former member of the executive committee who has been accused of numerous ethical violations.

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It can produce enough food for everyone, while at the same time cutting CO2 and toxicity in our food. It can not generate gigantic profits fro Big Ag and the chemical industry, though.

Can Organic Farming Counteract Carbon Emissions? (WSJ)

Organic practices could counteract the world’s yearly carbon dioxide output while producing the same amount of food as conventional farming, a new study suggests. The white paper by the Rodale Institute, a nonprofit that advocates for the use of organic practices, says that using “regenerative organic agriculture,” such as low or no-tillage, cover crops and crop rotation, will keep photosynthesized carbon dioxide in the soil instead of returning it to the atmosphere. Citing 75 studies from peer-reviewed journals, including its own 33-year Farm Systems Trial, Rodale Institute concluded that if all cropland were converted to the regenerative model it would sequester 40% of annual CO2 emissions; changing global pastures to that model would add another 71%, effectively overcompensating for the world’s yearly carbon dioxide emissions.

Michel Cavigelli, a research soil scientist at the USDA’s Agricultural Research Service, which has a slightly different 19-year side-by side study, says his research also shows that organic soil has higher carbon content than conventional but warns that the devil is in the details. For example, the USDA study tills the organic plot and that might cause the manure’s carbon to stay deeper in the soil. But the question organic farming always comes back to is whether farming without synthetic pesticides and genetically modified organisms is really a viable way to feed the planet. Rodale Institute believes it can do that and better. In the longest-running study of its kind, Rodale’s Farming Systems Trial compares organic farming with conventional farming, by farming neighboring plots just as organic farmers and traditional farmers would.

That means its organic farming plot utilizes techniques like crop rotation and cover crops while the conventional plot uses common synthetic pesticides and genetically modified organisms. Both organic and conventional fields were divided into tilled and no-till areas to reflect that farmers use both practices. The findings show that organic farming yields are lower than conventional in the first few years, while conventional crops do better in the first years than they do later on. Over time the production equals out and with organic outperforming conventional farming production in years of drought (organic corn yields 31% more than conventional corn during drought).

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Mar 242015
 
 March 24, 2015  Posted by at 7:27 am Finance Tagged with: , , , , , , ,  4 Responses »


DPC Surf Avenue, Coney Island, NY 1903

The World’s Next Credit Crunch Could Make 2008 Look Like A Hiccup (Telegraph)
No Risk Too Big as Bond Traders Plot Escape From Negative Yields (Bloomberg)
Fed’s Fischer Says Rate Rise Probably Warranted by End-2015 (Bloomberg)
Shadow Banking System Shows Signs of Stabilizing After Collapse (Bloomberg)
The Unbearable Exuberance of China’s Markets (Pesek)
Oil Majors Pile On Record Debt To Plug Cash Shortfalls (FT)
Pension Funds Shun Bonds Just as Southeast Asia Needs Them Most (Bloomberg)
Hedge Funds Are Boosting Tech Valuations to Dangerous Heights (Bloomberg)
IMF, World Bank Throw Weight Behind China-Led Bank (CNBC)
Tsipras Raises Nazi War Reparations Claim At Berlin Press Conference (Guardian)
Why Greek Default Looms (BBC)
Draghi Rejects Accusation That ECB Is Blackmailing Greece (Bloomberg)
Merkel Points Tsipras Toward Deal With Greece’s Creditors (Bloomberg)
Barroso: Greece Should Blame Itself (CNBC)
Andalusia Election Increases Pressure on Spain’s Rajoy (Bloomberg)
‘The Fourth Reich’: What Some Europeans See When They Look at Germany (Spiegel)
Beijing to Close All Major Coal Power Plants to Curb Pollution (Bloomberg)

Or 1937.

The World’s Next Credit Crunch Could Make 2008 Look Like A Hiccup (Telegraph)

In 1937 the US was, economically speaking, an island, entire of itself; today, thanks to globalisation, the power of the dollar and a long period of ultra-loose monetary policy, it is a part of the main. Christine Lagarde, the head of the IMF, recently raised concerns in India about the ripple effect of Fed tightening on countries that have borrowed heavily in dollars and whose still-recovering economies remain vulnerable to a rate rise. And in 1937 the equity markets were the financial be-all and end-all; today they are dwarfed by the debt markets, which are, in turn, dwarfed by the derivatives markets. The total value of all global equities was around $70 trillion in June last year, according to the World Federation of Exchanges; meanwhile, the notional value of all outstanding derivatives contracts was more than $690 trillion.

It is worth noting that the vast majority (around four-fifths) of all existing derivatives contracts are based on interest rates. The derivatives market is the not the vast roulette table of popular perception. These financial instruments are essentially insurance policies – they are designed to protect the holder from adverse price movements. If you are worried about (to pick some unlikely examples) a strong euro, or expensive oil, or rising interest rates, you can buy a contract that pays out if your fears are realised. Managed well, the gain from the derivative should offset the loss from the underlying price movement. Nevertheless, the arguments employed by the derivatives industry sometimes sound similar to those employed by the pro-gun lobby: derivatives aren’t dangerous, it’s the people using them that you need to worry about. That’s not hugely reassuring.

What could go wrong? Let’s say that US interest rates do rise sooner and faster than the market expects. That means bond prices, which always move in the opposite direction to yields, will plummet. US Treasury bonds are like a mountain guide to which most other global securities are roped – if they fall, they take everything else with them. Who will get hurt? Everyone. But it’ll likely be the world’s banks, where even little mistakes can create big problems, that suffer the most pain. The European Banking Authority estimates that the average large European lender still has 27 times more assets than it does equity. This means that if the stuff on their balance sheets (including bonds and other securities priced off Treasury yields) turns out to be worth just 3.7pc less than was assumed, it will be time to order in the pizzas for late night discussions about bail-outs.

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Casino.

No Risk Too Big as Bond Traders Plot Escape From Negative Yields (Bloomberg)

In the negative-yield vortex that is the European bond market, investors are discovering just what lengths they’re willing to go to generate returns. Norway’s $870 billion sovereign wealth fund said this month that it added Nigeria and lifted its share of lower-rated company debt to the highest since at least 2006. Allianz SE, Europe’s biggest insurer, is shifting from German bunds to bulk up on mortgages. JPMorganis buying speculative-grade corporate debt to boost returns. With the ECB’s fight against deflation pushing yields on almost a third of the euro area’s $6.26 trillion of government bonds below zero, even the most risk-averse investors are taking chances on assets and regions that few would have considered just months ago.

That’s exposing more clients to the inevitable trade-off that comes with the lure of higher returns: the likelihood of deeper losses. “We are wandering into uncharted territory that’s subject to uncertainty and mistakes,” said Erik Weisman at MFS Investment Management. He’s buying debt with longer maturities and increasing his allocation of top-quality government holdings to Australia and New Zealand, which have some of the highest yields in the developed world. The shift is a consequence of how topsy-turvy the bond market has become as falling consumer prices and stubbornly high unemployment prompted the ECB to step up its quantitative easing with government debt purchases.

About €1.44 trillion sovereign debt, valued at about $1.9 trillion as of their issue dates, from Germany to Finland and even Slovakia, carry negative yields. That means the bonds guarantee losses for buyers who hold them to maturity. In effect, investors are betting the securities will appreciate in price before then, allowing them to sell at a profit before they come due. [..] The bond market worldwide is more vulnerable to losses than at any time on record, based a metric known as duration, index data compiled by Bank of America show. The risk has ballooned as issuers worldwide took advantage of the decline in borrowing costs to sell more and more longer-term bonds. This probably means we end up seeing all these reverse in a very unpleasant fashion,” Weisman said.

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The multi-voiced good cop bad cop narrative continues.

Fed’s Fischer Says Rate Rise Probably Warranted by End-2015 (Bloomberg)

Federal Reserve Vice Chairman Stanley Fischer said raising interest rates from near zero “likely will be warranted before the end of the year” and subsequent increases probably won’t be uniform or predictable. “A smooth path upward in the federal funds rate will almost certainly not be realized” as the economy encounters shocks such as the surprise plunge in oil prices, Fischer, said on Monday in remarks to the Economic Club of New York. Officials last week opened the door to a rate increase as soon as June, while also indicating in their forecasts they will go slow once they get started. Fischer’s comments are the first from Fed leadership since Chair Janet Yellen’s press conference after the Federal Open Market Committee meeting on Wednesday.

The Fed wants to be “reasonably confident” inflation is rising toward its 2% goal before moving. A stronger dollar could interfere by holding down import prices. Fisher, however, was unfazed by the strength of the dollar, which has advanced almost 5% this year on the Bloomberg Dollar Spot index. He argued that its rise reflected the performance of the U.S. economy and central bank bond buying in Europe and Japan, which will also benefit U.S. growth. “What is not acceptable is manipulating exchange rates – purely exchange rates – trying to use that as the sole means of generating growth,” Fischer told the audience. “That has not happened as far as we can tell in our partner countries.”

The dollar dropped against all its 16 major peers except the pound on Fischer’s comments on rate-increase timing, which he left vague and stressed would be data-dependent. “Whether it’s going to be June or September, or some later date, or some date in between, will depend on the data,” said Fischer, although he said labor market readings would be an important guide. The March payrolls report is due on April 3. “We’ve got two very positive numbers for the first quarter of 2015 and we’re waiting for another one,” said Fischer, 71, the former Bank of Israel governor who joined the Fed in May. U.S. employers added 534,000 new jobs in the first two months of 2015 and the jobless rate fell to 5.5% in February.

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Make it sound like a good thing, why don’t you?

Shadow Banking System Shows Signs of Stabilizing After Collapse (Bloomberg)

The financing markets that help ease most U.S. debt trading are showing signs of stabilizing after shrinking by almost 50% since the financial crisis. The amount, known as shadow banking, was $4.124 trillion in February and averaged $4.139 trillion over the past three months, according to data compiled by the Center for Financial Stability, a nonpartisan research group. The measure, which includes money-market funds, repurchase agreements and commercial paper, all adjusted for inflation, peaked at $7.61 trillion in March 2008. “The flicker of good news is that we are starting to see a bottom form and hopefully we will start to see a recovery,” Lawrence Goodman at the Center for Financial Stability.

“The damage is done and we still have a long ways to go for there to be re-engagement of market finance in the economy. The economy has been growing substantially below potential, in part because market finance has failed to provide the fuel to the economy.”
Federal Reserve officials last week cut their economic growth estimate for the fourth quarter from a year earlier to 2.3% to 2.7%, down from as much as 3% in December. Inflation will range from 0.6% to 0.8% at the end of this year, policy makers forecast, down from a range of 1% to 1.6% projected in December.

Global regulators have focused on reducing the footprint of shadow banking, which was viewed as a catalyst for the collapse of Lehman Brothers Holdings Inc. in 2008 that shook markets worldwide. In the process, market finance contracted to a degree that starved financial markets of liquidity and was detrimental to growth, according to the CFS. Repo agreements are a source of short-term finance for banks, allowing them to use securities as collateral for short-term loans from investors such as other banks or money-market mutual funds. The amount of securities financed through a part of the market known as tri-party repo averaged $1.62 trillion as of Feb. 10, compared with $1.58 trillion in January and down from $1.96 trillion in December 2012, according to data compiled by the Fed.

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The term ‘bubble’ doesn’t begin to describe it.

The Unbearable Exuberance of China’s Markets (Pesek)

Chinese investors are acting as giddy as Americans were on Dec. 5, 1996, the day Alan Greenspan made his infamous “irrational exuberance” dig at markets. Don’t take my word for it. Here’s what the country’s securities regulator said Friday, the day the Shanghai Composite Index rallied to its highest close since May 2008: “Investors should be cautious about market risks,” the China Securities Regulatory Commission said on its microblog. “We shouldn’t be thinking if we don’t buy now, we will miss it.” Not much ambiguity there, and yet Shanghai stocks rallied Monday, heading to their longest streak of gains since 2007. What gives? Beijing is making the same mistake Washington did 18-plus years ago by not clamping down on a stock-market boom that’s based more on leverage than reality.

Then-Federal Reserve Chairman’s Greenspan’s swipe at Wall Street froth was a halfhearted one – so cryptic, in fact, that many seasoned Fed reporters missed it. It came in the middle of a mind-numbingly boring speech about Japan’s 1980s bubble. For a couple of days, markets quaked at the prospect that the Fed might cut short the ongoing rally, which had assigned astronomical valuations to the dodgiest startups. But then Greenspan blew the endgame. Lawmakers were apoplectic over the Fed targeting stocks. Rather than stand his ground, Greenspan shut up and moved on. If the Fed had clamped down more assertively in the late 1990s – say, with stringent margin requirements – a Nasdaq crash might’ve been averted. Chastened investors might’ve been less inclined to overleverage in the decade that followed.

In Beijing, central bank governor Zhou Xiaochuan can’t afford to make the same mistake. Economic fundamentals aren’t driving this rally – political expedience is. Chinese growth is slowing – an early indicator of factory activity hit an 11-month low in March – Beijing is clamping down on credit and a property market that once seemed unstoppable is reeling. That leaves one place for Chinese to satisfy their urge to get rich quick: equities. And recent policy tweaks are helping them. In September, China reduced fees by more than half for individuals and institutions to open share accounts. At the same time, the futures exchange cut margin requirements for equity-index contracts. Last month, it trimmed the amount of cash banks must hold back from lending by 50 basis points to 19.5%.

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Everyone piles on debt. There’s nothing else left.

Oil Majors Pile On Record Debt To Plug Cash Shortfalls (FT)

The world’s biggest energy groups have sold record amounts of debt this year, taking advantage of historically low interest rates to plug cash shortfalls with borrowing, after a 50% plunge in oil prices. The total debt raised in the first two months of 2015 by large US and European oil and gas companies has jumped by more than 60% from the final three months of 2014. It outstrips the previous quarterly record set six years ago after the last price collapse, Morgan Stanley research shows. Sales by half a dozen of these companies, which include multibillion dollar bond offerings from ExxonMobil, Chevron, Total and BP, reached $31bn in January and February, accounting for almost half the $63bn raised by oil and gas groups globally.

The dominance of the majors also reflects the increasing difficulties faced by the smaller oil explorers, whose borrowing costs are rising. Gulf Keystone recently put itself up for sale and EnQuest had to renegotiate its banking covenants. Martijn Rats, analyst at the US bank, says some of the so-called oil “majors” could be preparing the ground for acquisitions, borrowing now to be able to act quickly should smaller, weakened groups become vulnerable to take over. Mr Rats said that mergers and acquisitions could pick up as early as the second half of this year: “As a result, it would seem reasonable for integrated oil companies to lock in extremely competitive rates of financing,” he said. Another reason for the high levels of issuance is that debt remains a relatively cheap way to cover spending on big projects and fund dividends as cash flow dwindles due to lower prices.

Apart from Italy’s Eni, which has said it will cut its dividend this year, most of the big groups have vowed to protect payouts to investors. They are also pressing suppliers to cut costs, delaying projects and selling assets. “If you see a protracted period of lower oil prices ahead, you will probably think that it takes a while for cost deflation to come through and restore cash flow, so the first thing you can do is use the balance sheet to borrow money to plug that gap,” said Mr Rats. The majors have made up a much larger share of overall oil and gas debt issuance, accounting for 48% of such fundraising this year, up from 30% in the last three months of 2014. By contrast, the share of state-owned oil companies has fallen to just 22% from 35% in the first quarter of last year.

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No more road building.

Pension Funds Shun Bonds Just as Southeast Asia Needs Them Most (Bloomberg)

The biggest state pension funds in Thailand and the Philippines are shifting money from bonds to stocks, which could push up the cost of government stimulus programs. The Social Security Office and Government Service Insurance System said they’re increasing holdings of shares, while the head of Indonesia’s BPJS Ketenagakerjaan said he sees the nation’s stock index rising 14% by year-end. Rupiah, baht and peso notes have lost money since the end of January, after handing investors respective returns of 13%, 9.9% and 6.6% last year, Bloomberg indexes show. “There has been frustration among domestic institutional investors about the falling returns on bonds,” Win Phromphaet, who manages 1.2 trillion baht ($37 billion) as Social Security Office’s head of investment in Bangkok, said.

“Large investors including SSO must quickly expand our investments in other riskier assets.” Appetite for sovereign debt is cooling just as Southeast Asian governments speed up construction plans in response to slowing growth in China and stuttering recoveries in Europe and Japan. Indonesian President Joko Widodo has added 100 trillion rupiah ($7.7 billion) of spending on projects including ports and power plants in his 2015 budget, Thailand’s military rulers are accelerating outlays on rail and roads and Philippine President Benigno Aquino is relying on new infrastructure to increase growth to 8% in his last two years in office.

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“Some of the valuations are mind-boggling..”

Hedge Funds Are Boosting Tech Valuations to Dangerous Heights (Bloomberg)

A flood of money from unconventional sources has sent valuations of late-stage technology startups, including Uber Technologies Inc. and Snapchat Inc., to levels that haven’t been seen since before the dot-com crash. Hedge funds and mutual funds that once shunned venture-style deals are flocking to the market’s hottest corner, paying 15 to 18 times projected sales for the year ahead in recent private-funding rounds, according to three people with knowledge of the matter. That compares with 10 to 12 times five years ago for the priciest companies, one said. While some of the startups may become profitable, others are consuming cash and could fail.

The torrid action is spurring talk that 15 years after the collapse of the Internet bubble, the market may be setting itself up for another bruising fall. “Some of the valuations are mind-boggling,” said Sven Weber, investment manager of the Menlo Park, California-based SharesPost 100 Fund, which backs late-stage tech startups. Companies now valued at 16 times future revenue could easily lose a third of their value in a market pullback that Weber and others say may occur in the next three years. The other people asked not to be named because they didn’t want to be seen criticizing competitors’ deals. Such worries have done little to cool the market. Investors’ appetites have been stoked by jackpots won in initial public offerings.

Among the biggest: an almost fourfold $3.2 billion paper profit earned by Silver Lake in Chinese e-commerce giant Alibaba’s record-breaking, $21.8 billion September IPO. It was a quick kill for Silver Lake, coming three years after the private-equity firm’s investment in the company. Private values also are soaring. Online scrapbooking startup Pinterest Inc. raised $367 million this month, valuing the company at $11 billion. Snapchat, the mobile application for sending disappearing photos, is valued at $15 billion, based on a planned investment by Alibaba, according to people with knowledge of the deal. Uber’s valuation climbed more than 10-fold since the middle of 2013, reaching $40 billion in December.

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“The frustration with the U.S. is palpable.”

IMF, World Bank Throw Weight Behind China-Led Bank (CNBC)

Global institutions, including the IMF and the World Bank, have endorsed a China-led international bank, despite opposition from the U.S. “We are comfortable with the idea of a bank that puts together finance for infrastructure, because our view is that there is a huge need for infrastructure in emerging markets countries,” David Lipton, the first deputy managing director of the IMF, told CNBC early on Monday. The $50-billion Asian Infrastructure Investment Bank (AIIB) is being established to meet the need for greater infrastructure investment in lower- and middle-income Asian countries. It comes amid complaints by China and other major emerging economies that they lack influence in institutions such as the IMF, the Asian Development Bank and the World Bank.

Support for the AIIB has gathered speed in Europe this month, with the U.K. the first country to sign up, followed by Germany, France and Italy and then Luxembourg and Switzerland. However, Washington has expressed misgivings, officially because of concerns about standards of governance and environmental and societal safeguards. Unofficially, the country’s is thought to be worried about sacrificing its clout in Asia to China, as well as piqued by criticism of slow reforms in the IMF and World Bank. “While this is seen as a diplomatic setback for the Obama administration, the underlying (blame) may lie with Congress,” said strategists led by Marc Chandler at Brown Brothers Harriman in a research note on Monday.

“It has blocked IMF funding which is the precondition for reforming the voting (quotas), which would give China and other developing countries a greater voice. In contrast, the Obama Administration seems to recognize that if China (and others) do not get a larger voice in the existing institutions, it will create parallel institutions.” He added: “The frustration with the U.S. is palpable.” “China is now the leader of the world,” Sri Mulyani Indrawati, managing director of the World Bank, told CNBC on Sunday in Beijing. “They (Chinese leaders) try to show that they have sound principles in not only presenting a development solution, but also in establishing this new institution and that is why many of the countries now are becoming members of this institution.”

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Timing is everything.

Tsipras Raises Nazi War Reparations Claim At Berlin Press Conference (Guardian)

Greece’s leftwing prime minister Alexis Tsipras stood beside German leader Angela Merkel and demanded war reparations over Nazi atrocities in Greece on Monday night, even as the two leaders sought to bury the hatchet following weeks of worsening friction and mud-slinging. “It’s not a material matter, it’s a moral issue,” said Tsipras, unusually insisting on raising the “shadows of the past” at the heart of German power in the gleaming new chancellery in Berlin. It was believed to be the first time a foreign leader had gone to the capital of the reunified Germany to make such a demand. Merkel was uncompromising, while appearing uncomfortable and irritated. “In the view of the German government, the issue of reparations is politically and legally closed,” she said.

While the two leaders clashed over the second world war, there was no sign of any meeting of minds on the substance of their dispute over Greece’s bailout and what Tsipras has to deliver to secure fresh funding and avoid state insolvency within weeks. Two months after winning the election by promising to abolish “Merkelism” – the harsh austerity ordained by the eurozone and other creditors in return for €240bn in bailout loans over the past five years – Tsipras held to the view that Greece’s crisis was not of his making. He delivered a lengthy diagnosis of what had gone wrong in the last five years, but had next to nothing to say about his own policies except vague references to fighting corruption.

And when he raised the corruption issue, he singled out a German company, Siemens, because of its alleged activities in Greece. A stony-faced Merkel reiterated what she had said in Brussels on Friday after a late-night session with Tsipras – that a 20 February agreement with the eurozone extending Greece’s bailout until the end of June remained the yardstick. That agreement obliges Tsipras to deliver a persuasive menu of detailed fiscal and structural reforms which need to be vetted by the eurozone before any further bailout funding can be released. Asked if she had reached any agreements with Tsipras, Merkel avoided the question and stressed she was only one of 19 eurozone national leaders.

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“.. the punishment of Greek people for the feckless borrowing of their government and the feckless lending of German banks has surely gone well beyond what is necessary to instruct Greece in the merits of fiscal rectitude..”

Why Greek Default Looms (BBC)

I have used the metaphor before of Greece and Germany being a feuding married couple, not really wanting a divorce but so unable ever to understand the other’s point of view that terminal rupture remains a significant probability. So for the Greek prime minister, Alexis Tsipras, it must have been personally humiliating to send his “please-send-cash-soon” letter to Angela Merkel, the German chancellor (the letter has been obtained by the FT). He complains that there is no sign, in the conduct of eurozone officials working on the new financial rescue plan, of wanting to make the promised new start in the fraught relationship. Mr Tsipras accuses them of trying to hold the country to a reform and reconstruction programme that his Syriza government has rejected, and which he thought had been dropped, too, by eurozone leaders.

Which broadly points to the biggest flaw in the entente reached in February between Greece and eurozone – namely that the agreement they approved disguised a continuing and profound emotional and ideological gulf. Both sides in essence want the other to admit they were wrong in the past and have turned over a new leaf: neither shows the inclination to do that. The clearest manifestation of mutual misunderstanding being a long way off was last week’s blog by the finance minister, Yanis Varoufakis. He makes a point that is both true and incendiary (in the present circumstances): namely that the eurozone’s and IMF’s original €240bn bailout was, in practice, a bailout of the feckless banks and investors who had lent to Greece, rather than of Greece itself. [..]

There is a high probability, most economists would say, of history vindicating Mr Varoufakis’s critique: the punishment of Greek people for the feckless borrowing of their government and the feckless lending of German banks has surely gone well beyond what is necessary to instruct Greece in the merits of fiscal rectitude. But whether it is altogether wise and diplomatic to tell the Germans they were selfish and wrong, at this juncture, is moot. There is no sign of the two sides forgiving each other and moving on.

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I did not have financial realationships with that country.

Draghi Rejects Accusation That ECB Is Blackmailing Greece (Bloomberg)

Mario Draghi pushed back against an accusation that the European Central Bank is blackmailing Greece and compounding the pressure on the country. “Let me disagree with you about everything you said,” Draghi told Portuguese lawmaker Marisa Matias during his regular hearing at the European Parliament in Brussels. He was responding to a question about the withdrawal of a waiver that allowed the ECB to accept the country’s junk-rated debt as collateral. “It’s bit rich when you look at our exposure to Greece” which totals €104 billion, Draghi says. “What sort of blackmail is this? We haven’t created any rule for Greece, rules were in place and they’ve been applied. The exchange came amid signs that Greece could run out of money by early next month.

Prime Minister Alexis Tsipras is meeting today with German Chancellor Angela Merkel to discuss reform commitments that could unlock stalled aid money. Draghi said the ECB will reintroduce the waiver at some point, ‘‘but several conditions have to be satisfied.’’ Shut out from ECB funding, Greek banks currently rely on emergency liquidity from their national central bank. The ECB reviews the allowance on a weekly basis to make sure it doesn’t run against a ban on state financing. Draghi said Greek lenders are solvent ‘‘at present,’’ even though ‘‘the liquidity situation has been deteriorating.’’ In his opening statement to the parliament in Brussels, Draghi pushed aside concerns that the ECB’s quantitative-easing plan will be hampered by a shortage of bonds available to buy.

‘‘We see no signs that there will not be enough bonds for us to purchase,’’ he said. ‘‘Feedback from market participants so far suggests that implementation has been very smooth and that market liquidity remains ample.’’ The central bank started buying government debt this month to revive inflation. While the region’s recovery is being helped by cheap oil and a weak euro, Draghi is faced with a resumption of the crisis in Greece, with the country on the verge of a default that would shake the foundations of the single currency. The ECB plans to buy €60 billion a month of public-sector debt under its latest stimulus program, which is slated to last until September 2016, or until inflation is back on track toward the central bank’s goal of just under 2%. In the first two weeks of the program, €26.3 billion of public sector purchases were settled.

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Concerted effort to make Merkel look good.

Merkel Points Tsipras Toward Deal With Greece’s Creditors (Bloomberg)

German Chancellor Angela Merkel encouraged Prime Minister Alexis Tsipras to follow the path set out by Greece’s creditors, saying his country belongs in Europe and she wants its economy to succeed. Merkel gave Tsipras a red-carpet reception at the Chancellery in Berlin on Monday without giving any signal that the emergency aid the Greek government is urgently seeking would be unlocked. Instead, she talked at their joint briefing of how she wanted to build trust with her Greek counterpart. “We want Greece to be economically strong, we want Greece to have growth,” Merkel said. “And I think we share the view that this requires structural reforms, solid finances and a functioning administration.”

Meeting the chancellor for the second time in five days in an effort to build bridges between their governments after weeks of sniping, Tsipras echoed her tone, while resisting the embrace of the policy prescriptions that she has shaped for the past five years. “The Greek bailout program was an unprecedented adjustment effort but in our view it wasn’t a success story,” he said. “We’re trying to find common ground to reach an agreement soon on the reforms that the Greek economy needs and for the disbursement of the funds that it also needs.” The two countries have often been at loggerheads since Tsipras’s January election victory as the Greek leader tries to shape an alternative to the austerity program set out in the country’s bailout agreement. Merkel insists Greece must stick to the broad terms of that deal, though holding out the prospect of some flexibility.

With Greece’s financial predicament becoming ever more parlous, Tsipras was greeted by a group of supporters demonstrating outside the Chancellery who could be heard chanting during the ceremonial reception. His government needs to persuade its creditors to sign off on a package of economic measures to free up long-withheld aid payments that will keep the country afloat. Finance ministry officials may submit their latest plans as soon as this week, a Greek official said earlier. Hinting at the prickly relationship between their respective finance ministers, Tsipras said that he wants to avoid widening splits in the euro area and urged Germans and Greeks to avoid stereotyping each other, saying Germany isn’t to blame for all of Greece’s problems. “We have to understand each other better,” he said.

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Who’s he again?

Barroso: Greece Should Blame Itself (CNBC)

Greece’s problems can be laid at its own door and the country needs to provide a clear commitment to reform to reach an agreement with its creditors, Jose Manuel Barroso, the former president of the European Commission, told investors in Hong Kong. “The Greek people went through extremely difficult moments, hardship. But these difficulties of Greece were not provoked by Europe,” Barroso said in an address at the Credit Suisse Asian Investment Conference in Hong Kong. “It was provoked by the irresponsible behavior of the Greek government.” “The situation of Greece is the result of unsustainable debt that was created by the Greek government, mismanagement of their public finances, huge problems with tax evasion and tax fraud [and] problems of the administration,” he said, noting that the country had also misled the European Union by filing false figures on its economy. [..]

Barroso was generally unsympathetic to the Greek stance. “There is nothing that condemns Greece to be in a difficult situation. There are reforms they can make and they are as able as any other country to do,” he said. “There is an ideological difficulty that exists in the Greek government to understand that the way for Greece to recover the confidence of the markets is in fact for to go on with structural reforms that Greece has committed to.”

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Podemos did not do well.

Andalusia Election Increases Pressure on Spain’s Rajoy (Bloomberg)

Spanish Prime Minister Mariano Rajoy’s People’s Party scored its worst election result in 25 years in Spain’s most populous region, adding to pressure on the party leadership before general elections. Rajoy’s PP got 26.8% in Andalusia, compared with 40.7% in the last regional vote in 2012, according to the regional government data. That’s the lowest level of support since 1990, when the PP got 22.2%. Andalusia’s ballot marks the start of a Spanish electoral marathon to choose another 14 regional presidents, more than 8,000 mayors, and a new national government in the next 10 months. Rajoy struggled to mobilize his voters even as the fourth largest economy in the euro region is growing at the fastest pace since 2007. No date has been set for the national election which must be held by January 2016.

“Alternative leadership to Rajoy should be an urgent first point of discussion for the party based on public opinion criteria,” said Lluis Orriols, a political scientist at Carlos III University in Madrid. “Still, sometimes internal party power dynamics and public opinion follow different patterns.” Rajoy is scheduled to chair a meeting of his party’s executive committee in Madrid on Monday. The Spanish leader attended five political events in Andalusia during the two-week electoral campaign in the southern region, compared with two visited by his Socialist counterpart, Pedro Sanchez. Andalusia’s President Susana Diaz won the regional vote, paving the way for the Spanish Socialist Party, PSOE, to run the country’s most-populous area for the 10th term in a row.

Andalusia, located in southern Spain, is the nation’s largest and most populous region. It struggles with unemployment of about 35%, compared with 26% in Greece, the European Union state with the highest jobless rate. Farming and tourism comprise two of the largest sources of revenue and the region’s 16,843 euro ($18,330) gross domestic product per capita is the second lowest in the country after Extremadura. Sunday’s election also tested the advance of Podemos, allied to Greece’s Syriza party that won power in January in Athens after promising to raise public spending in defiance of its bailout agreement. The anti-austerity Podemos won 15 seats.

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“German capital dominates Europe and it profits from the misery in Greece,” Glezos says. “But we don’t need your money.”

‘The Fourth Reich’: What Some Europeans See When They Look at Germany (Spiegel)

May 30, 1941 was the day when Manolis Glezos made a fool of Adolf Hitler. He and a friend snuck up to a flag pole on the Acropolis in Athens on which a gigantic swastika flag was flying. The Germans had raised the banner four weeks earlier when they occupied the country, but Glezos took down the hated flag and ripped it up. The deed turned both him and his friend into heroes. Back then, Glezos was a resistance fighter. Today, the soon-to-be 93-year-old is a member of the European Parliament for the Greek governing party Syriza. Sitting in his Brussels office on the third floor of the Willy Brandt Building, he is telling the story of his fight against the Nazis of old and about his current fight against the Germans of today.

Glezos’ white hair is wild and unkempt, making him look like an aging Che Guevara; his wrinkled face carries the traces of a European century. Initially, he fought against the Italian fascists, later he took up arms against the German Wehrmacht, as the country’s Nazi-era military was known. He then did battle against the Greek military dictatorship. He was sent to prison frequently, spending a total of almost 12 years behind bars, time he spent writing poetry. When he was let out, he would rejoin the fight. “That era is still very alive in me,” he says. Glezos knows what it can mean when Germans strive for predominance in Europe and says that’s what is happening again now. This time, though, it isn’t soldiers who have a chokehold on Greece, he says, but business leaders and politicians.

“German capital dominates Europe and it profits from the misery in Greece,” Glezos says. “But we don’t need your money.” In his eyes, the German present is directly connected to its horrible past, though he emphasizes that he doesn’t mean the German people but the country’s ruling classes. Germany for him is once again an aggressor today: “Its relationship with Greece is comparable to that between a tyrant and his slaves.” Glezos says that he is reminded of a text written by Joseph Goebbels in which the Nazi propaganda minister reflects about a future Europe under German leadership. It’s called “The Year 2000.” “Goebbels was only wrong by 10 years,” Glezos says, adding that in 2010, in the financial crisis, German dominance began.

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Let’s see them try.

Beijing to Close All Major Coal Power Plants to Curb Pollution (Bloomberg)

Beijing, where pollution averaged more than twice China’s national standard last year, will close the last of its four major coal-fired power plants next year. China’s capital city will close China Huaneng’s 845 megawatt power plant next year, after last week closing plants owned by Guohua Electric and Beijing Energy Investment, according to a statement Monday on the website of the city’s economic planning agency. A fourth major power plant, owned by China Datang, was shut last year. The plants will be replaced by four gas-fired stations with capacity to supply 2.6 times more electricity than the coal plants. Once complete, the city’s power and its central heating will be entirely generated by clean energy, according to the Municipal Commission of Development and Reform.

Air pollution has attracted more public attention in the past few years as heavy smog envelops swathes of the nation including Beijing and Shanghai. About 90% of the 161 cities whose air quality was monitored in 2014 failed to meet official standards, according to a report by China’s National Bureau of Statistics earlier this month. The level of PM2.5, the small particles that pose the greatest risk to human health, averaged 85.9 micrograms per cubic meter last year in the capital, compared with the national standard of 35. Beijing plans to cut annual coal consumption by 13 million metric tons by 2017 from the 2012 level in a bid to slash the concentration of pollutants. The city also aims to take other measures such as closing polluted companies and cutting cement production capacity to clear the air this year, according to the Municipal Environmental Protection Bureau.

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Oct 272014
 
 October 27, 2014  Posted by at 11:38 am Finance Tagged with: , , , , , , , ,  1 Response »


Unknown California State Automobile Association signage 1925

Stock Markets Threatened By Collapse In Chinese Consumer Demand (Questor)
Scariest Day For Market Looms, And It’s Not Halloween (CNBC)
What Next After China’s Foreign Reserves Fall? (MarketWatch)
15 Big Oil Sell Signals That Warn Of A 50% Stock Crash (Paul B. Farrell)
Oil Speculators Bet Wrong as Rebound Proves Fleeting (Bloomberg)
Goldman Cuts Oil Forecasts as US Market Clout Increases (Bloomberg)
A Scary Story for Emerging Markets (Worth Wray)
Fed-Driven ‘Locomotive USA’ (Ivanovitch)
U.S. Gains From ‘Good’ Deflation as Europe Faces the Bad and Ugly (Bloomberg)
Spain’s Export-Led Recovery Comes At Price Of EU-Wide Deflationary Vortex (AEP)
Europe’s Bank Test Celebrations Mask Mounting Challenges (Reuters)
Europe Must Act Now To Avoid ‘Lost Decade (FT)
Italy Under Pressure As Nine Banks Fail Stress Tests (FT)
Italy’s Stress Test Fail: Attack Of The ‘Drones’ (CNBC)
Italy Market Watchdog Bans Short Selling On Monte Paschi Bank Shares (Reuters)
Europe’s Banks Are Still a Threat (Bloomberg)
Draghi Sets Stimulus Pace as ECB Reveals Covered-Bond Purchases (Bloomberg)
German Business Confidence Drops For 6th Straight Month (AP)
Hundreds Give Up US Passports After New Tax Rules Start (Bloomberg)
Arctic Ice Melt Seen Doubling Risk of Harsh Winters in Europe, Asia (Bloomberg)
Nurse’s Lawyers Promise Legal Challenge to Ebola Quarantine (NBC)

I can repeat this every single day: China is in much worse shape than we know from official numbers.

Stock Markets Threatened By Collapse In Chinese Consumer Demand (Questor)

The capitulation of the Chinese consumer threatens to drag stock markets around the world into a death spiral as one of the pillars of global growth is undermined. Figures from the world’s largest consumer goods groups last week laid bare the shocking weakness of consumer demand in China, which threatens to pull down global stock markets that have been priced to perfection by more than five years of extraordinary monetary policy and asset price inflation. For China to avoid a hard landing it was essential for consumer spending to pick up from where centrally planned infrastructure spending left off, but there are signs this simply isn’t happening. Unilever, the world’s third largest consumer goods company, said they were surprised by the “unusually rapid” slowdown in Chinese consumer demand. The company said that sales growth had slumped to about 2pc during the nine months ended September, down from about 8pc growth last year. The slowdown in Chinese sales growth to about 2pc is also an average – there are pockets where trading is far worse.

The company added that sales to the big hypermarkets in the country are less than 2pc or even negative in some cases. Nestle, the worlds largest food company, recently reported falling sales for the first nine months of the year and also warned of “challenging” Chinese trading conditions. The fear of China going backwards is now becoming a reality, as the Chinese consumer is not picking up from where capital investment left off. Immediately after the 2008 banking crisis China launched the largest stimulus package and infrastructure investment program the world has ever seen. China has used 6.6 gigatons of cement in the last three years compared to 4.5 gigatons the USA has used in 100 years. The stimulus package increased fixed capital investment to 50pc of GDP, while domestic consumption withered to only 35pc. The lopsided economy led Hu Jintao, the President of China until 2012, to call the period of growth “unstable, unbalanced, uncoordinated and unsustainable.” The hope was it would eventually kick start consumer spending.

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What Next After China’s Foreign Reserves Fall? (MarketWatch)

Should we be worried that China’s prodigious foreign-exchange accumulation has gone into reverse? Last week, China’s forex regulator reassured markets that there was no need to worry about a $100 billion fall in reserves in the third quarter — the largest such drop since 1996. China’s foreign reserve pile fell to $3.89 trillion from $3.99 trillion at the end of June. Guan Tao, head of China’s State Administration of Foreign Exchange’s balance-of-payments department, cited the end of the Federal Reserve’s quantitative easing policy as a main factor contributing to the decline, adding there were no risks or problems. But some analysts are less sanguine, especially when this rare dwindling of China’s cash pile coincides with the economy growing at its slowest pace in five years, according to third-quarter data.

Société Générale strategist Albert Edwards writes that a reserve decline of this magnitude reflects deteriorating Chinese competitiveness from its excessively strong real foreign-exchange rate. Daiwa Research, meanwhile, highlights the significance of these outflows in undermining the ability of the People’s Bank of China (PBOC) to expand its balance sheet. In recent decades, China’s reserve accumulation has been the fuel for its massive money-supply growth. Thanks to twin capital and trade surpluses, the PBOC was able to behave like a massive money-printing machine. Now, as reserve accumulation goes into reverse, so too does the money supply. M2 – which includes currency, checking deposits and some time deposits — grew at just at 12.9% year-on-year for September, versus 14.7% year-on-year for June. SocGen’s Edwards warns that China faces a looming credit crunch and is already on a deflationary precipice. China’s consumer inflation rate slowed to 1.6% in September, down from 2% previously.

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Fed meeting to announce end of QE on Wednesday.

Scariest Day For Market Looms, And It’s Not Halloween (CNBC)

The Federal Reserve in the coming week is expected to end its quantitative easing program – the much-anticipated action that’s been at the very heart of the market’s fears. After a two-day meeting, the Fed Wednesday is expected to announce the completion of its bond purchases, based on improvements in the economy. Markets will now look forward to the time – expected at some point next year—when the Fed believes the economy is strong enough for it to raise short-term interest rates from zero. The economic calendar also heats up in the week ahead, with durable goods Tuesday; third-quarter GDP Thursday, and income and spending and employment costs data Friday. All of the data becomes even more important as the markets attempt to interpret the Fed’s process of normalizing rates.

The Fed “tries to reinvigorate corporate risk taking, and finally we get to the point where corporate risk taking picks up again, and they’re supposed to remove the accommodation. That was just a bridge,” said Tobias Levkovich, chief equity strategist at Citigroup. While recent market volatility has been blamed on everything from Ebola to a global growth scare, one common thread going through all markets is the underlying concern that the Fed’s removal of its easing program will be the financial equivalent of taking off the training wheels. Markets already have stumbled, and analysts expect more volatility ahead as they continue to move closer to a world with more normal interest rate levels.

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“Graham says the next bear will hit around election time 2016. The third $10 trillion stock crash early in this new 21st century.”

15 Big Oil Sell Signals That Warn Of A 50% Stock Crash (Paul B. Farrell)

Big Oil investors beware: “The day of the huge international oil company is drawing to a close,” warned the Economist last year. Since then, Big Oil sell signals have gotten louder, more frequent, confirming fears of a crash in Big Oil, in the entire energy industry, rippling through Wall Street stocks, the global economy. When? Before the new president is elected, in 2016. Scenario like 2008, when McCain lost. Yes, the overhyped shale boom was supposed to make America energy independent, investors happy. Wrong. Risks are rocketing, volatility increasing. Why? Big Oil is vulnerable, they’re running scared, making bigger, costlier, deadlier and dumber bets that threaten the global economy. Worse, Big Oil is in denial about their high-risk, self-destructive gambles.

Main Street’s also in denial. Yes, we’re in a rare historical event now. Two bulls back-to-back, with no bear market in between. Makes investors feel it’ll go forever, like 1999. True, stocks have been roaring since March 2009 when the bottom hit at 6,547 on the Dow after a 54% drop from the October 2007 high of 14,164. Since, a steady climb to a recent DJIA record at 17,279, with gains over 250%. But now our Double Bull has stopped roaring. But market giants are warning, bye-bye bull. Jeremy Grantham, founder of the $117 billion GMO money-management firm, predicts another megatrillion dollar crash, repeating the bears of 2000 and again in 2008. Wall Street lost roughly $10 trillion each time. Graham says the next bear will hit around election time 2016. The third $10 trillion stock crash early in this new 21st century.

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“People came in and tried to pick the bottom, and they picked wrong.”

Oil Speculators Bet Wrong as Rebound Proves Fleeting (Bloomberg)

Hedge funds rushed back into oil too quickly, boosting bullish bets amid a rebound last week, only to then watch surging U.S. crude supplies push prices right back down to a two-year low. The net-long positions in West Texas Intermediate futures rose 5.7% in the seven days ended Oct. 21, U.S. Commodity Futures Trading Commission data show. Short bets shrank 20%, the most in three months, while longs dropped 2.8%. After rising as analysts speculated prices had reached a floor, WTI sank again after stockpiles climbed nationally and at Cushing, Oklahoma, the delivery point for New York Mercantile Exchange futures. It fell to $80.52 on Oct. 22, the lowest settlement since June 2012, and ended the week down 24% from the year’s high.

The U.S. benchmark, which slipped into a bear market Oct. 9, may dip to $75 by the end of year, Bank of America Corp. said Oct. 23. The “swiftness of the selloff” attracted bargain hunters, John Kilduff, a partner at Again Capital, a New York-based hedge fund that focuses on energy, said by phone Oct. 24. “People came in and tried to pick the bottom, and they picked wrong.” U.S. oil inventories increased 7.11 million barrels in the seven days ended Oct. 17 to 377.7 million, the Energy Information Administration said Oct. 22. Supply has grown by about 21 million in three weeks.

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A good call for once?

Goldman Cuts Oil Forecasts as US Market Clout Increases (Bloomberg)

Goldman Sachs cut its forecasts for Brent and WTI crude prices next year on rising global supplies, predicting OPEC will lose influence over the oil market amid the U.S. shale boom. The bank is becoming more confident in the scale and sustainability of U.S. shale oil production and said U.S. benchmark prices need to decline to $75 a barrel for a slowdown in output growth. Brent will average $85 a barrel in the first quarter, down from a previous forecast of $100, and West Texas Intermediate will sell for $75 a barrel in the period, from an earlier estimate of $90, analysts including Jeffrey Currie wrote in a report. The biggest members of the Organization of Petroleum Exporting Countries are discounting supplies to defend market share rather than cutting production to boost prices that have collapsed into a bear market.

The highest U.S. output in almost 30 years is helping increase stockpiles as exporters including Saudi Arabia reduce prices to stimulate demand. “We believe that OPEC will no longer act as the first-mover swing producer and that U.S. shale oil output will be called upon to fill this role,” Goldman said in the report. “Our forecast also reflects the realization of a loss of pricing power by core-OPEC.” Any near-term OPEC production cut will be modest until there is sufficient evidence of a slowdown in U.S. shale oil production growth, according to the report. Global producers may need to cut almost 800,000 barrels a day of output next year to limit a build in inventories and ultimately balance the global oil market in 2016, Goldman said.

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“the global debt drama would end with an epic US dollar rally, a dramatic reversal in capital flows, and an absolute bloodbath for emerging markets … ”

A Scary Story for Emerging Markets (Worth Wray)

In the autumn of 2009, Kyle Bass told me a scary story that I did not understand until the first “taper tantrum” in May 2013. He said that – in additon to a likely string of sovereign defaults in Europe and an outright currency collapse in Japan – the global debt drama would end with an epic US dollar rally, a dramatic reversal in capital flows, and an absolute bloodbath for emerging markets. Extending that outlook, my friends Mark Hart and Raoul Pal warned that China – seen then by many as the world’s rising power and the most resilient economy in the wake of the global crisis – would face an outright economic collapse, an epic currency crisis, or both. All that seemed almost counterintuitive five years ago when the United States appeared to be the biggest basket case among the major economies and emerging markets seemed far more resilient than their “submerging” advanced-economy peers.

But Kyle Bass, Mark Hart, and Raoul Pal are not your typical “macro tourists” who pile into common-knowledge trades and react with the herd. They are exceptionally talented macroeconomic thinkers with an eye for developing trends and the second- and third-order consequences of major policy shifts. On top of their wildly successful bets against the US subprime debacle and the European sovereign debt crisis, it’s now clear that they saw an even bigger macro trend that the whole world (and most of the macro community) missed until very recently: policy divergence. Their shared macro vision looks not only likely, not only probable, but IMMINENT today as the widening gap in economic activity among the United States, Europe, and Japan is beginning to force a dangerous divergence in monetary policy.

In a CNBC interview earlier this week from his Barefoot Economic Summit (“Fed Tapers to Zero Next Week”), Kyle Bass explained that this divergence is set to accelerate in the next couple of weeks, as the Fed will likely taper its QE3 purchases to zero. Two days later, Kyle notes, the odds are high that the Bank of Japan will make a Halloween Day announcement that it is expanding its own asset purchases. Such moves only increase the pressure on Mario Draghi and the ECB to pursue “overt QE” of their own.
Such a tectonic shift, if it continues, is capable of fueling a 1990s-style US dollar rally with very scary results for emerging markets and dangerous implications for our highly levered, highly integrated global financial system.

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“No other country buys more than it sells to the rest of the world”. The curse of the reserve currency.

Fed-Driven ‘Locomotive USA’ (Ivanovitch)

No other country buys more than it sells to the rest of the world: America’s net contribution to the growth of the world economy in the first eight months of this year amounted to $480.8 billion, or about 3% of its GDP. And here is a striking contrast: Germany, the world’s fourth-largest economy, is currently getting a net contribution from the rest of the world to the tune of $280 billion – nearly 7% of its GDP. Not even China is sucking so much demand out of the world economy. In the year to the second quarter, China’s trade surplus is estimated at about 2% of its GDP. Those taking potshots at the U.S. government’s foreign policy have a point here that could strongly resonate with the American public, because exports directly or indirectly support more than 11 million American jobs, or close to one-tenth of the country’s latest employment numbers.

It might, therefore, be a good idea to help the Fed’s efforts to steady the economy by getting Germany, China and other large surplus countries to generate more growth from their domestic demand. We may then be able to sell them something instead of being their dumping ground: In the first eight months of this year, our trade deficits with Germany and China were up 14% and 4%, respectively, from the year earlier. But don’t hold your breath for such actions by Washington, or by multilateral agencies whose job it is to ensure balanced trade relationships in the world economy. Nothing of the sort will happen. As in the past, large trade surplus countries won’t budge. They know that during the forthcoming elections – starting with the mid-term Congressional elections next month and culminating with the U.S. presidential contest in 2016 – the Fed will do everything possible to keep economy and employment in a reasonably good shape.

That, of course, means that the locomotive USA will be an increasingly steady pillar of global output, and an expanding market for export-led economies. Germany’s sinking economy, for example, will continue to force local companies to seek salvation on external markets. An apparently rising political hostility with Russia seems to be turning German businesses toward an open, properly regulated and welcoming American market. Problems with China will also cause Germany to lower its formidable export boom on the U.S. That is a conclusion one may draw from the analysis of Sebastian Heilemann, a prominent German sinologist and a director of the Mercator Institute for China Studies (MERICS) in Berlin. Ominously, he is talking about the “dark clouds” in Chinese-German relations, saying that German companies are suffering from Chinese (get the euphemism) “reverse engineering,” and from increasing administrative difficulties of doing business in the Middle Kingdom.

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There’s no such thing as good deflation.

U.S. Gains From ‘Good’ Deflation as Europe Faces the Bad and Ugly (Bloomberg)

When it comes to deflation there’s the good – and there’s the bad and ugly. Europe faces the risk of the latter as it teeters on the edge of a recession that could trigger a debilitating dive in prices and wages. The U.S., meanwhile, may end up with the more benign version as surging oil and gas supplies push energy costs down and the economy ahead. “Bad deflation weakens growth,” Nancy Lazar, co-founder and a partner at Cornerstone Macro LP in New York, wrote in a report to clients this month. “Good deflation lifts growth.” Lazar also co-founded International Strategy & Investment Group LLC more than 20 years ago. That’s welcome news for U.S. investors. Billionaire Paul Tudor Jones, one of the most successful hedge-fund managers, said on Oct. 20 that U.S. stocks will outperform other equity markets for the rest of the year, according to two people who heard him speak at the closed-door Robin Hood Investors conference in New York.

Hedge fund manager David Tepper, who runs the $20 billion Appaloosa Management LP, told the same conference the following day that investors should bet against the euro, two people familiar with his remarks said. The Standard & Poor’s 500 Index has risen 6.3% so far this year, while the Stoxx Europe 600 Index has fallen 0.3%. The euro is down 7.8% against the dollar since the start of 2014. Treasuries have returned 5.3% this year, compared with 7.6% for German bunds and 15% for Greek debt, according to Bloomberg World Bond Indexes. The U.S. has the “best hand” among nations, while Europe is “the sick one,” Jamie Dimon, chief executive officer of JPMorgan Chase & Co. in New York, said at an Oct. 21 event held by the Urban Land Institute in New York.

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Pushing wages down with unemployment at 27.5% is the easy part. In a currency union, you’re going to export those low wages too, though. And that will implode the EU.

Spain’s Export-Led Recovery Comes At Price Of EU-Wide Deflationary Vortex (AEP)

[..] A deal reached with Renault after much soul-searching in 2012 cuts entry pay for new workers by 27.5pc, to roughly €17,000 a year (£13,400). Older workers keep their jobs at frozen pay, but with fewer holidays and tougher conditions. Joaquin Arias from the trade union federation CCOO said the terms amounted to blackmail. “The alternative was slow death. We would never have accepted such a plan if the crisis hadn’t been so bad.” Wage costs are now 40pc below levels in comparable French plants in France, the chief reason why Renault and Peugeot have cut their output of vehicles in their home country by half over the last decade. French unions may rage against “social dumping”, but they now face the asphyxiation of their industry unless they too knuckle under. “The French factories are going through exactly what we faced five years ago. It is very hard for everybody, but they too are having to follow the Spanish model,” said Mr Estevez. [..]

Fernando de Acuña, head of Spain’s top property consultancy RR de Acuña, warns that the country is going through an illusionary mini-bubble, with people betting on a fresh cycle in the housing market when the crippling effects of the last boom-bust cycle have yet to be cleared. “We think prices will fall by another 20pc over the next three years. There is still an overhang of 1.7m unsold homes in an annual market of around 230,000. The developers have 467,000 units on their books, and half of these are indirectly controlled by the banks. It is extend and pretend. There are another 150,000 in foreclosure proceedings that are backed up because the courts are saturated,” he said. “People don’t want to hear any of this. We were called criminals and terrorists when we warned in 2007 the country was going to Hell, but we were right, because we base our analysis on the facts and not on wishful thinking,” he said.

It has always been debatable whether Spain can hope to pull itself out of a low-growth trap by relying on exports alone, given that it still has a relatively closed economy with a trade gearing of just 34pc of GDP, far lower than Ireland at 108pc. The current account is already slipping back into deficit in any case as imports surge, suggesting that Spain is still nowhere near a competitive equilibrium within the eurozone. It is already “overheating” in a sense even with 5.6m people unemployed. The International Monetary Fund says Spain’s exchange rate is up to 15pc overvalued. Ominously, the export boom has been fading despite the success of the car industry. Total shipments rose just 1pc in the year to August compared with the same period in 2013, with falls of 11pc to Latin America, and of 13pc to the Middle East. Exports actually contracted by 5pc in August from a year earlier.

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“One-fifth of European banks are at risk of insolvency … ”

Europe’s Bank Test Celebrations Mask Mounting Challenges (Reuters)

Investors were spared immediate pain on Sunday after the European Central Bank’s landmark banking health check did not force massive capital hikes amongst the euro zone’s top lenders. But the sector’s long-term attractiveness has been damaged by revelations of extra non-performing loans and hidden losses that will dent future profits. The ECB said on Sunday the region’s 130 most important lenders were just €25 billion ($31.69 billion) short of capital at the end of last year, based on an assessment of how accurately they had valued their assets and whether they could withstand another three years of crisis. The amount of new money needed falls to less than €7 billion after factoring in developments in 2014, well shy of the €50 billion of extra cash investors surveyed by Goldman Sachs in August were expecting.

That means existing investors will only be asked for a fraction of the demand they expected in order to maintain their shareholdings. But, those who read the details of the ECB’s proclamation on the health of the euro zone banking sector would have seen more ominous signs too, as the ECB pointed to the amount of work that remains to be done to restore the region’s lenders. The review said an extra €136 billion of loans should be classed as non-performing – increasing the tally of non-performing loans by 18% – and that an extra €47.5 billion of losses should be taken to reflect assets’ true value. “Banks face a significant challenge as the sector remains chronically unprofitable and must address their €879 billion exposure to non-performing loans as this will tie-up significant amounts of capital,” accountancy firm KPMG noted.

Others took a bleaker view. “One-fifth of European banks are at risk of insolvency,” said Jan Dehn, head of research at Ashmore, referencing the fact that one-fifth of banks fell shy of the ECB’s pass mark at the end of last year. He added that the ECB’s efforts to boost the euro zone’s sluggish growth through pumping money into the economy would not work if banks were too poorly capitalised to lend. After the ECB adjusted banks’ capital ratios to reflect supervisors’ assessments of banks’ asset values, 31 had core capital below the 10% mark viewed by investors as a safety threshold, while a further 28 had ratios just 1 percentage point above.

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That headline could just as well be 5 years old. Nothing changed. Just new shades of porcine lipstick.

Europe Must Act Now To Avoid ‘Lost Decade (FT)

The bottom line is that none of the tools currently on the table will get the job done. There are not enough assets to purchase or finance and the timetable to get anything done is too long. Policy makers do not have the luxury of a year or two to figure this out. The ECB balance sheet shrinks virtually daily and as it shrinks, the monetary base of Europe is contracting and putting downward pressure on prices. Europe is clearly in danger of falling into the liquidity trap, if it is not already there. The likelihood of a “lost decade” like that experienced in Japan is rapidly increasing. The ECB must act and act quickly. How is this affecting the markets? The recent rally in US fixed income is materially different than when rates last approached 2%. Previously, the Federal Reserve was actively managing the yield curve to reduce long-term borrowing costs in order to stimulate the economy. The current rally is caused by a massive deflationary wave unleashed upon the US by beggar-thy-neighbour policies in Europe and Asia.

The precipitous decline in energy and commodity prices and competitive pressures on prices for traded goods will probably push inflation, as measured by the Fed’s favoured personal consumption expenditures index, back down toward 1%. This raises the likelihood that any increase in the policy rate by the Fed will be pushed into 2016 or later. With inflationary expectations falling and the relative attractiveness of US Treasury yields over German Bunds and Japanese government bonds, US long-term rates are likely to continue to be well supported with limited room to rise and a dynamic that could push them lower from here. In the real economy, the decline in energy prices should offset the effect of reduced exports, which is supportive of US growth in the near term. This will help equities recover from the recent storm of volatility as we move deeper into the fourth quarter, which is a time of seasonal strength for the stock market. However, this may prove to be the rally to sell. Results from currency translations for large, multinational companies will weigh heavily on S&P 500 earnings in the first half of 2015.

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Leave the euro, and restructure all bank debt. It’s the only thing that makes any sense at all. But it’s not even considered.

Italy Under Pressure As Nine Banks Fail Stress Tests (FT)

Italy’s central bank was thrown on the defensive on Sunday as its banking sector emerged as the standout loser in health checks aimed at restoring confidence in the euro area’s financial sector. Officials at the Bank of Italy criticised parameters in regulatory stress tests as unrealistically harsh on Italian banks and disputed the exact number of failures, after nine Italian lenders fell short in a comprehensive review unveiled by the European Central Bank. Across the euro area, some 25 banks emerged with capital shortfalls following an unprecedented regulatory effort aimed at dispelling the cloud of uncertainty surrounding the European banking sector’s health.

The announcement represents the culmination of more than a year of intensive work costing hundreds of millions of euros and involving thousands of officials and accountants – all aimed at restoring investor faith in European banks ahead of the launch of a unified banking supervisor in Frankfurt. The biggest failure was Banca Monte dei Paschi di Siena, which has already hired bankers at Citigroup and UBS to advise on its options after it received takeover approaches. German banks emerged largely unscathed, with only one technical failure, while Spain clawed its way through with no shortfalls.

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Italy’s “public debt-to-GDP ratio was 134% in the second quarter of 2014, compared to 94% for the euro zone as a whole”.

Italy’s Stress Test Fail: Attack Of The ‘Drones’ (CNBC)

Italy’s report card was by far the worst from this weekend’s European bank stress tests, with nine of its 15 banks tested failing to reach the levels of capital required. The country’s relationship with European authorities could get increasingly fractious, with the European Commission yet to approve its 2015 budget. And tensions are set to continue as its banks look to raise more capital than any other country to reach ECB requirements at a time when the Italian economy is back in recession. There was a “surgical targeting of Italian banks with asset quality review (AQR) drones (by the ECB),” according to Carlo Alberto Carnevale-Maffe, professor of strategy at Italy’s Bocconi University. “The ECB targeted the banks with the lowest level of transparency and governance, and the highest links with the political system,” he told CNBC.

Unicredit and Intesa Sanpaolo, the country’s two biggest lenders, both passed the tests, but some of their smaller counterparts are struggling as the economy stagnates, and the level of sovereign debt on their balance sheets starts to look more worrying. While household debt levels in Italy are relatively low, its public debt-to-GDP ratio was 134% in the second quarter of 2014, compared to 94% for the euro zone as a whole. Federico Ghizzoni, chief executive of UniCredit, told CNBC he was “very satisfied” with his bank’s result and added: “For the system in general, the results including what has been done in 2014 is OK.” Ghizzoni predicted there will be an increase in mergers and acquisitions in the Italian banking sector as a result of the tests.

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World’s oldest bank turns into merger target.

Italy Market Watchdog Bans Short Selling On Monte Paschi Bank Shares (Reuters)

Italy’s Consob has banned short selling on Monte dei Paschi’s shares on Monday and Tuesday, the Italian market regulator said in a statement. Shares in Italy’s third biggest bank lost more than 17% on Monday after results from a pan-European health check of lenders showed on Sunday that Monte dei Paschi faced a capital shortfall of €2.1 billion – the biggest gap among the 130 lenders under scrutiny.

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“In one way, the ECB had good reason to be strict.” Question is then, why didn’t it?

Europe’s Banks Are Still a Threat (Bloomberg)

The European Central Bank has just published the results of new “stress tests” on European Union banks, hoping to convince financial markets that the banking system is now strong enough to weather another crisis. This latest exercise is a big improvement over previous efforts, which were widely derided as too soft – but it’s still not good enough. The test had two parts. The first was a detailed examination of loans, to see whether they were worth what the banks said. This found that most of 130 banks under review had overvalued their assets – by a total of €47.5 billion ($60 billion) at the end of last year. The second part asked, with assets correctly valued, whether the banks had enough capital to safely endure another recession and financial-market shock. It found that 25 did not, and 13 of those need to raise €9.5 billion in capital, over and above what they’ve added so far this year.

This closer scrutiny has helped. Deutsche Bank AG raised €8.5 billion in equity this year to boost its chances of passing. Weak institutions, such as Portugal’s Banco Espirito Santo and Austria’s Volksbanken network, are restructuring or shutting down. By strengthening the system and increasing confidence in it, the ECB’s tests might reverse a two-year slump in private-sector lending. That’s the hope, anyway. Trouble is, even the new tests were pretty soft. Economists at Switzerland’s Center for Risk Management at Lausanne, for example, have put the capital shortfall for just 37 banks at almost €500 billion – as opposed to the roughly €10 billion reported by the ECB for its sample of 130. This more stringent test used a method that mimics how the market value of equity actually behaves under stress.

In one way, the ECB had good reason to be strict. It had to contend with doubts aroused by the previous unpersuasive tests. Also, it takes over as the euro area’s supranational bank supervisor on Nov. 4, so any lingering issues will be its responsibility. But it knew that if it were too tough, the blow to confidence could have plunged the EU back into crisis. The euro area already has a stalled recovery and stands on the brink of deflation; an alarming report on the banks might have done more harm than good. So the design of the exercise was compromised. It used a measure of capital that relies on banks to weight assets by risk — an opportunity to fudge the numbers. It ignored the credit freezes, forced asset sales and contagion that can cause huge losses in bad times. The worst-case scenario projected a fall in euro-area output of just 1.4%in 2015 (in 2009, it dropped 4.5%). And no governments default.

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It’s already crystal clear that there’s not enough to purchase: “In reality, it is what follows that will be important, or maybe more importantly, what doesn’t follow.”

Draghi Sets Stimulus Pace as ECB Reveals Covered-Bond Purchases (Bloomberg)

Investors will be handed a clue today in to just how aggressive Mario Draghi is willing to be. At 3:30 p.m. in Frankfurt, the European Central Bank will reveal how much it spent on covered bonds last week after returning to that market for a third time as part of a renewed bid to stave off deflation. The central bank bought at least €800 million ($1 billion) of assets from Portugal to Germany in the three days since the program began on Oct. 20, traders said last week. Formal details will help them divine how quickly the ECB president can reach his target of expanding the institution’s balance sheet by as much as €1 trillion. “In terms of the ECB’s aspiration to expand its balance sheet, the market wants it all now,” said Richard Barwell, senior European economist at Royal Bank of Scotland Group Plc in London.

“There’s scope for immediate disappointment to the scale of the purchases we see today.” With the economy stuttering and inflation forecast to have stayed below 1% for a 13th month in October, Draghi is under pressure to do more. While central banks from the U.S. to Japan used large-scale asset purchases to bolster their balance sheets and kick-start lending, the ECB has so far refrained from such a step. German opposition to sovereign-bond purchases means officials have chosen covered bonds and asset-backed securities as the latest tools to help expand the balance sheet. While policy makers say their plans will spark new issuance, economists at firms including Morgan Stanley and Commerzbank say the central bank will probably need to buy other assets to reach the target.

Of the region’s €2.6 trillion covered-bond market, the ECB will only buy assets eligible under its collateral framework for refinancing loans, denominated in euros and issued by credit institutions in the euro area. Purchases will be announced weekly, starting today, and the pool of bonds eligible is about €600 billion, ECB Vice President Vitor Constancio said this month. ABS buying is scheduled to begin later this quarter and there are about €400 billion of such assets eligible to buy, according to Constancio. “Covered bond and ABS purchases appear to be the line of least resistance for the ECB,” said Jon Mawby, a London-based fund manager at GLG Partners LP, which manages $32 billion. “In reality, it is what follows that will be important, or maybe more importantly, what doesn’t follow.”

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Lowest in 22 months.

German Business Confidence Drops For 6th Straight Month (AP)

Business confidence in Germany, Europe’s largest economy, has dropped for a sixth consecutive month as concerns over the turmoil in Ukraine and elsewhere continue to take their toll. The Ifo institute said Monday that its confidence index dropped to 103.2 points in October from 104.7 in September, as business leaders’ assessments of their current situation and their expectations for the next six months both fell. The government and independent economists have cut their growth forecasts for Germany after a string of disappointing industrial data for August. Economists warn if international crises escalate or Africa’s Ebola outbreak spreads the impact could become greater. Ifo’s survey is based on responses from about 7,000 companies in various sectors.

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All your bucks are belong to us.

Hundreds Give Up US Passports After New Tax Rules Start (Bloomberg)

The number of Americans renouncing U.S. citizenship increased 39% in the three months through September after rules that make it harder to hide assets from tax authorities came into force. People giving up their nationality at U.S. embassies increased to 776 in the third quarter, from 560 in the year-earlier period, according to Federal Register data published yesterday. Tougher asset-disclosure rules that started July 1 under the Foreign Account Tax Compliance Act, or Fatca, prompted more of the estimated 6 million Americans living overseas to give up their passports. The appeal of U.S. citizenship for expatriates faded further as more than 100 Swiss banks began to turn over data on American clients to avoid prosecution for helping tax evaders.

The U.S., the only Organization for Economic Cooperation and Development nation that taxes citizens wherever they reside, stepped up the search for tax dodgers after UBS paid a $780 million penalty in 2009 and handed over data on about 4,700 accounts. Shunned by Swiss and German banks and with Fatca starting, more than 9,000 Americans living overseas gave up their passports over the past five years. Fatca requires U.S. financial institutions to impose a 30% withholding tax on payments made to foreign banks that don’t agree to identify and provide information on U.S. account holders. It allows the U.S. to scoop up data from more than 77,000 institutions and 80 governments about its citizens’ overseas financial activities..

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Winter time.

Arctic Ice Melt Seen Doubling Risk of Harsh Winters in Europe, Asia (Bloomberg)

The decline in Arctic sea ice has doubled the chance of severe winters in Europe and Asia in the past decade, according to researchers in Japan. Sea-ice melt in the Arctic, Barents and Kara seas since 2004 has made more than twice as likely atmospheric circulations that suck cold Arctic air to Europe and Asia, a group of Japanese researchers led by the University of Tokyo’s Masato Mori said in a study published yesterday in Nature Geoscience. “This counterintuitive effect of the global warming that led to the sea ice decline in the first place makes some people think that global warming has stopped. It has not,” Colin Summerhayes, emeritus associate of the Scott Polar Research Institute, said in a statement provided by the journal Nature Geoscience, where the study is published.

The findings back up the view of United Nations climate scientists that a warmer average temperature for the world will make storms more severe in some places and change the character of seasons in many others. It also helps debunk the suggestion that slower pace of global warming in the past decade may suggest the issue is less of a problem. “Although average surface warming has been slower since 2000, the Arctic has gone on warming rapidly throughout this time,” he said.

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The mess the US makes of its ebola response reaches staggering proportions. How is it possible that it has been so hugely unprepared?

Breaking: 5-year old boy monitired for ebola in NY.

Nurse’s Lawyers Promise Legal Challenge to Ebola Quarantine (NBC)

Lawyers for a nurse quarantined in a New Jersey hospital say they’ll sue to have her released in a constitutional challenge to state restrictions for health care workers returning to New Jersey after treating Ebola patients in West Africa. Civil liberties attorney Norman Siegel said Kaci Hickox, who was quarantined after arriving Friday at the Newark airport, shows no symptoms of being infected and should be released immediately. He and attorney Steven Hyman said the state attorney general’s office had cooperated in getting them access to Hickox. Late Sunday, a spokesman for New Jersey Gov. Chris Christie issued a statement saying that people who had come into contact with someone with Ebola overseas would be subject to a mandatory quarantine at home. It did not explain why Hickox was being held at the hospital, though it did say, “Non-residents would be transported to their homes if feasible and, if not, quarantined in New Jersey.”

Hyman told NBC News he wasn’t sure what the statement meant for Hickox’s release. “I think we’re getting closer to it,” he said. He and Siegel, speaking earlier outside Newark University Hospital, where she is quarantined, said they spent 75 minutes with her on Sunday. They said she was being kept in a tented area on the hospital’s first floor with a bed, folding table and little else — they said she was able to get a laptop computer with wi-fi access only Sunday. But they said she is not being treated. “She is fine. She is not sick,” Hyman said. Photos they released showed her in hospital garb peering through a plastic window of the tented-off area.

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Oct 222014
 
 October 22, 2014  Posted by at 10:47 am Finance Tagged with: , , , , , , , , , , ,  2 Responses »


Russell Lee Migrant family in trailer home near Edinburg, Texas Feb 1939

At Least 11 Banks To Fail European Stress Tests (Reuters)
All the Markets Need Is $200 Billion a Quarter From the Central Bankers (BW)
What Would It Take To Trigger The ‘Fed Put’? (MarketWatch)
Currency Wars Evolve With Goal of Avoiding, Exporting Deflation (Bloomberg)
Are Belgium, Finland And France The ‘New Periphery’ In Europe? (CNBC)
EU To Warn France And Italy On Budget Plans (FT)
US Shale Producers Cramming Wells in Risky Push to Extend Boom (Bloomberg)
Oil at $80 a Barrel Muffles Forecasts for US Shale Boom (Bloomberg)
How Wall Street Is Killing Big Oil (Oilprice.com)
Investors Pile Into Oil Funds at Fastest Pace in 2 Years (Bloomberg)
Markets Need To Accept Low Growth As ‘New Normal’ In China (Saxo)
China to Let World in on Gauge Showing State of Economy (Bloomberg)
UK Deficit Up 10% From Last Year, National Debt Rises £100 Billion (Guardian)
The Moral Economy Of Debt (Robert Skidelsky)
Fears Over Gas Supply As Russia-Ukraine Talks Fail (Reuters)
New York Fed Caught Sight of London Whale and Let Him Go (Bloomberg)
World’s Top-Ranked Pension Funds Probed for Hedge Fund Use (Bloomberg)
How To Start A War And Lose An Empire (Dmitry Orlov)
“Omenland” (James Howard Kunstler)
WHO: Ebola Serum In Weeks And Vaccine Tests In Africa By January (Guardian)

This could make a whole lot of people really nervous.

At Least 11 Banks To Fail European Stress Tests (Reuters)

At least 11 banks from six European countries are set to fail a region-wide financial health check this weekend, Spanish news agency Efe reported, citing several unidentified financial sources. The results of the stress tests on 130 banks by the European Central Bank are due to be unveiled on Sunday. Four banks in Greece, three Italian lenders and two Austrian ones are among those that preliminary data showed had failed the tests, Efe said. It gave no details of how much capital the banks would have to raise and said this could yet change as numbers could be revised at the last minute.

The euro fell on the report. Efe also identified a Cypriot bank and possibly one from Belgium and one from Portugal. The exercise is designed to see how banks would cope under various economic scenarios, including adverse ones, and is likely to reveal capital shortfalls at some entities. The ECB is carrying out the checks of how the biggest euro zone banks have valued their assets, and whether they have enough capital to weather another economic crash, before taking over as their supervisor on Nov. 4.

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Anyone still realize how insane that is, or are our brains completely numb and dumbed down by now?

All the Markets Need Is $200 Billion a Quarter From the Central Bankers (BW)

The central-bank put lives on. Policy makers deny its existence, yet investors still reckon that whenever stocks and other risk assets take a tumble, the authorities will be there with calming words or economic stimulus to ensure the losses are limited. A put option gives investors the right to sell their asset at a set price so the theory goes that central banks will ultimately provide a floor for falling asset markets to ensure they don’t take economies down with them. Last week as markets swooned again, it was St. Louis Federal Reserve President James Bullard and Bank of England Chief Economist Andrew Haldane who did the trick.

Bullard said the Fed should consider delaying the end of its bond-purchase program to halt a decline in inflation expectations, while Haldane said he’s less likely to vote for a U.K. rate increase than three months ago. “These comments left markets with the impression that the ‘central-bank put’ is still in place,” Morgan Stanley currency strategists led by Hans Redeker told clients in a report yesterday. Matt King, global head of credit strategy at Citigroup, and colleagues have put a price on how much liquidity central banks need to provide each quarter to stop markets from sliding. By estimating that zero stimulus would be consistent with a 10% quarterly drop in equities, they calculate it takes around $200 billion from central banks each quarter to keep markets from selling off.

With the Fed and counterparts peeling back their net liquidity injections from almost $1 trillion in 2012 toward that magic marker, King’s team said “a negative reaction in markets was long overdue.” “We think the markets’ weakness owes more to an almost belated reaction to a temporary lull in central bank stimulus than it does to any reduction in the effect of that stimulus in propping up asset prices,” they said in an Oct. 17 report to clients. Bank of America Merrill Lynch strategists said in a report today that another 10% decline in U.S. stocks might spark speculation of a fourth round of quantitative easing from the Fed. That would mimic how the Fed acted following equity declines of 11% in 2010 and 16% in 2011.

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It would seem that all it takes is for other central bankers failing to put in those $200 billion four times a year. But that still pre-supposes that the Fed’s first priority is to support the markets. Whereas I suggest it’s to support the big banks. And that’s not one and the same thing.

What Would It Take To Trigger The ‘Fed Put’? (MarketWatch)

Janet Yellen runs the Federal Reserve now, but that doesn’t mean that notions about what used to be known as the “Bernanke put,” named after her predecessor, Ben Bernanke, have expired. So far, there’s been little talk of a “Yellen put,” but the U.S. Federal Reserve still remains ready to bail out the markets if things get hairy, Bank of America Merrill Lynch analysts say. Actual financial puts give the holder the right but not the obligation to sell the underlying security at a set price, known as the strike price. Puts named after central bankers are figurative. They’re shorthand for the idea the Fed will rush in to rescue tanking markets, a notion denied by Alan Greenspan and Bernanke, but reinforced by the Fed’s aggressive actions following big market declines, most recently, during the 2008 crisis. The BofA Merrill analysts, in a Tuesday note, say recent market volatility shows that investors are now losing faith in what traders had dubbed the “Draghi put,” named after European Central Bank President Mario Draghi.

Investors are growing less certain the ECB will step in with a program of full-fledged quantitative easing of its own stave off deflationary pressures in the eurozone. “If this ECB option turns out to be worthless, the key question becomes how much protection does the Fed provide? In other words, approximately how big can an equity correction become before the Fed steps in again?” they write. They note that in 2010 and 2011, the Fed stepped in following equity corrections of 11% and 16%, respectively. Based on their assessment of last week’s market action, the analysts say it appears it would take a further 10% decline from the recent lows to trigger anticipation of what might be dubbed QE 4, or the fourth iteration of the U.S. central bank’s monetary stimulus measures.

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Everywhere but America.

Currency Wars Evolve With Goal of Avoiding, Exporting Deflation (Bloomberg)

Currency wars are back, though this time the goal is to steal inflation, not growth. Brazil Finance Minister Guido Mantega popularized the term “currency war” in 2010 to describe policies employed at the time by major central banks to boost the competitiveness of their economies through weaker currencies. Now, many see lower exchange rates as a way to avoid crippling deflation. Weak price growth is stifling economies from the euro region to Israel and Japan. Eight of the 10 currencies with the biggest forecasted declines through 2015 are from nations that are either in deflation or pursuing policies that weaken their exchange rates, data compiled by Bloomberg show.

“This beggar-thy-neighbor policy is not about rebalancing, not about growth,” David Bloom, the global head of currency strategy at HSBC which does business in 74 countries and territories, said in an Oct. 17 interview. “This is about deflation, exporting your deflationary problems to someone else.” Bloom puts it in these terms because, when one jurisdiction weakens its exchange rate, another’s gets stronger, making imported goods cheaper. Deflation is a both a consequence of, and contributor to, the global economic slowdown that’s pushing the euro region closer to recession and reducing demand for exports from countries such as China and New Zealand.

[..] Disinflationary pressures in the euro area are starting to spread to its neighbors and biggest trading partners. The currencies of Switzerland, Hungary, Denmark, the Czech Republic and Sweden are forecast to fall from 4% to more than 6% by the end of next year, estimates compiled by Bloomberg show, partly due to policy makers’ actions to stoke prices. “Deflation is spilling over to central and eastern Europe,” Simon Quijano-Evans, head of emerging-markets at Commerzbank, said yesterday by phone. “Weaker exchange rates will help” them tackle the issue, he said. Hungary and Switzerland entered deflation in the past two months, while Swedish central-bank Deputy Governor Per Jansson last week blamed his country’s falling prices partly on rate cuts the ECB used to boost its own inflation. A policy response may be necessary, he warned.

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Interesting development. Forgot to ‘reform’ the core.

Are Belgium, Finland And France The ‘New Periphery’ In Europe? (CNBC)

The improvement in competitiveness in southern euro zone nations has left some core countries such as Belgium and France lagging behind, posing the risk that they could become the “new periphery,” a new report warns. “A handful of core euro zone economies have registered pretty sharp increases in their unit labor costs (ULCs) over the past four years,” according to a report by Capital Economics published Monday. This was happening at the same time as those in many peripheral countries had been falling outright, it said. “While this process may help the peripheral economies regain relative competitiveness more rapidly, some core economies, including Belgium, now look at risk of falling behind, threatening to push the euro-zone’s periphery north,” Roger Bootle and Jonathan Loynes, managing director and chief European economist at Capital Economics respectively, said in their report. The report analysed changes in competitiveness in the euro zone by looking at unit labor costs (the average cost of labor to produce one unit of output) across the region.

On this metric it found that the southern peripheral economies comprised of Spain, Italy, Ireland and Portugal “have succeeded in cutting costs relative to the euro zone as a whole over the past few years.” However, in a handful of core economies, notably Belgium, Finland and France, ULCs have continued to rise, both in absolute terms and relative to the euro zone average. “In Belgium in particular, ULCs have risen sharply and are now the highest in the euro-zone. Belgium’s high costs already appear to be harming both investment and export growth, traditionally strong drivers of growth in the economy. And its current account has fallen into a sustained deficit for the first time in 30 years.” “All this suggests that Belgium’s recovery is unlikely to gather further pace [and] in contrast to governments in the south, we doubt that Belgian politicians will be prepared (or forced) to tackle these issues any time soon.” they added.

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Rome and Paris will stare them down.

EU To Warn France And Italy On Budget Plans (FT)

The European Commission will on Wednesday tell five euro zone countries, including France and Italy, that their budget plans risk breaching EU rules, say three officials briefed on the decision. The move comes a week after all euro zone countries submitted their budgets to Brussels for review as part of the EU’s new fiscal rules. Officially a request for more information, the commission’s move is the first step in a politically charged process of rejecting a euro zone nation’s budget and sending it back to national capitals for revision. A decision on rejection must be made by the end of the month. In addition to France and Italy, EU officials said similar requests will be sent to Austria, Slovenia and Malta. Simon O’Connor, a spokesman for Jyrki Katainen, the EU’s economic commissioner who is in charge of the evaluations, would not confirm the move. But he said it would not mean that Brussels had definitively decided to reject a country’s budget plan.

“Technical consultations with member states on the draft budget plans do not prejudge the outcome of our assessment,” O’Connor said. A formal request for revisions to the French and Italian budgets could prove politically explosive. Both governments are fending off rising anti-EU sentiment. Under the EU’s new budget rules, adopted at the height of the euro zone crisis, the commission is required to send a budget back to its government within two weeks of submission if it finds “particularly serious non-compliance” with EU budget rules. If the commission is contemplating such a move, the rules require it to notify the government in question within one week. Wednesday is the deadline for the one-week notification. EU officials said France and Italy may contravene different parts of the budget rules. France is required to get its deficit back under the EU ceiling of 3% of economic output by next year but its plan ignored that commitment, projecting a deficit of 4.3% of gross domestic product.

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Right. We all know that by sticking two straws in a glass of soda, you get out twice as much as with one. And sure, a shale play is not exactly like a glass of water, but still close enough. I think this is not about getting out more, but about getting the same amount out faster. Doesn’t sound like a terrible solid business model, but it’s not at all surprising either, given how the shale industry operates.

US Shale Producers Cramming Wells in Risky Push to Extend Boom (Bloomberg)

U.S. shale producers are cramming more wells into the juiciest spots of their oilfields in a move that may help keep the drilling boom going as prices plunge. The technique known as downspacing aims to pull more oil at less cost from each field, allowing companies to boost profit, attract more investment and arrange needed loans to continue drilling. Energy companies see closely-packed wells as their best chance to add billions more barrels of oil to U.S. production that’s already the highest in a quarter century. “We would be dealing with more than a decade of inventory,” said Manuj Nikhanj, co-head of energy research for ITG Investment Research in Calgary. “If you can go twice as tight, the multiplication effect is massive.”

To make downspacing work, the industry must first solve a problem that for decades has required producers to carefully distance their wells. Crowded wells may steal crude from each other without raising total production enough to make the extra drilling worthwhile. Too much of that cannibalization could propel the U.S. production revolution into a faster downturn. In the past, most wells were drilled vertically into conventional reservoirs, which act more like pools of oil or gas. Companies learned quickly that packing wells too closely together just drains the reservoirs faster without appreciably increasing production, like two straws in the same milkshake. Shale rock is different, acting more like an oil-soaked sponge.

Drilling sideways through the layers of shale taps more of the resource, while fracking is needed to crack the rock to allow oil and gas to flow more freely into the well. So far, early results from downspacing experiments by a handful of companies have been mixed. It’s “the billion-dollar question,” said Wood Mackenzie’s Jonathan Garrett, “Is downspacing allowing access to new resources, or is it drawing down the existing resources faster?” An analysis of a group of wells on the same lease in La Salle County, in the heart of Texas’s booming Eagle Ford formation, showed that closer spacing reduced the rate of return for drilling to 23% from a high of 62% for wells spaced further apart, according to a paper published in April by Society of Petroleum Engineers.

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A sordid tale indeed.

Oil at $80 a Barrel Muffles Forecasts for US Shale Boom (Bloomberg)

The bear market in oil has analysts reassessing the U.S. shale boom after five years of historic growth. The U.S. benchmark price dropped to $79.78 a barrel on Oct. 16, the lowest since June 2012. At that level, one-third of U.S. shale oil production would be uneconomic, analysts for New York-based Sanford Bernstein said in a report yesterday. Drillers would add fewer barrels to domestic output than the previous year for the first time since 2010, according to Macquarie, ITG Investment and PKVerleger. Horizontal drilling through shale accounts for as much as 55% of U.S. production and just about all the growth, according to Bloomberg Intelligence. The nternational Energy Agency predicted in November that the U.S. would pass Russia and Saudi Arabia to become the biggest producer in the world by 2015. Though some forecasts show oil rebounding or stabilizing, any slower increase in U.S. output would shake perceptions for the global market, said Vikas Dwivedi, an oil and gas economist in Houston for Sydney-based Macquarie.

“It would reshape the way everybody would think about oil,” Dwivedi said. Daily domestic production added a record 944,000 barrels last year and reached a 29-year high of 8.95 million barrels this month, according to the Energy Information Administration, the U.S. Department of Energy’s statistical arm. Output, much less growth, is difficult to maintain because shale wells deplete faster than conventional production. Oil production from shale drilling, which bores horizontally through hard rock, declines more than 80% in four years, more than three times faster than conventional, vertical wells, according to the IEA. New wells have to generate about 1.8 million barrels a day each year to keep production steady, Dwivedi said. At $80 a barrel, output would grow by 5%, down from a previous forecast of 12%, according to New York-based ITG. At $75 a barrel, growth would fall 56% to about 500,000 barrels a day, Dwivedi said. Closer to $70 a barrel, the growth rate would drop to zero, he said.

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why

This has been going on for a number of years. Exxon will go the way of IBM. Or maybe Rosneft can do a hostile take-over. That would be so funny.

How Wall Street Is Killing Big Oil (Oilprice.com)

Lee Raymond, the famously pugnacious oilman who led ExxonMobil between 1999 and 2005, liked to tell Wall Street analysts that covering the company would be boring. “You’ll just have to live with outstanding, consistent financial and operating performance,” he once boasted. For generations, Exxon and its Big Oil brethren, including Chevron, ConocoPhilipps, BP, Royal Dutch Shell and Total, dominated the global energy landscape, raking in enormous profits and delivering fat dividends to shareholders. Big Oil has long been an investor darling. Those days are over. Once reliable market beaters, Big Oil shares are lagging: Over the last five years, when the S&P 500 rose more than 80%, shares of Exxon and Shell rose just over 30%. The underperformance reflects oil majors’ inability to maintain steady cash flows and increase production in a world where much of the easy oil has already been found and project costs are rapidly escalating.

Last year, Exxon, Chevron and Shell failed to increase oil and gas production despite having spent US$500 billion over the previous five years, $120 billion in 2013 alone. Under pressure from investors, the world’s largest oil companies are now forced to cut capital expenditure and sell assets to boost cash flows. Big Oil is, in short, heading towards liquidation. And this process has set in motion a tectonic shift in the global energy balance of power away from western international oil companies, or IOCs, and towards state-owned national oil companies, NOCs, in emerging markets. Not only do the NOCs – companies like Saudi Aramco; Russia’s Gazprom and Rosneft; China’s CNOOC, CNPC and Sinopec; India’s ONGC; Venezuela’s PDVSA; and Brazil’s Petrobras – control approximately 90% of the world’s known petroleum reserves, they are also immune to the market pressures constraining Big Oil.

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Betting that the Saudi’s will blink. Hey, it’s a casino out there.

Investors Pile Into Oil Funds at Fastest Pace in 2 Years (Bloomberg)

Investors are putting money into funds that track oil prices at the fastest rate in two years, betting that crude will rebound from a bear market. The four biggest oil exchange-traded products listed in the U.S. have received a combined $334 million so far this month, the most since October 2012, according to data compiled by Bloomberg. Shares outstanding of the funds, including the United States Oil Fund (DBO) and ProShares Ultra Bloomberg Crude Oil, rose to 55 million yesterday, a nine-month high. “There are investors who love to catch a falling knife,” said Dave Nadig, chief investment officer of San Francisco-based ETF.com. “It’s pretty easy to look at what’s been going on in oil and say ‘well, it has to bottom out somewhere.’ There are plenty of investors out there who still believe that the long-term trend of oil has to be $100.” Money has flowed into the funds as West Texas Intermediate and Brent crudes, the benchmarks for U.S. and global oil trading, each plunged more than 20% from their June highs, meeting a common definition of a bear market.

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Wonder what the real number is at this point in time for China, the actual growth. Even 4% feels high.

Markets Need To Accept Low Growth As ‘New Normal’ In China (Saxo)

Pauline Loong, Managing Director of Asia-analytica, gives us her assessment of the latest Chinese GDP figures: “The worst quarterly GDP performance in almost six years has raised hopes of a bolder policy response from Beijing. But more aggressive measures in the coming months might still not provide the hoped-for catalyst on stock prices or deliver the boost needed for a return to market-moving growth rates.” Pauline says we need to “be realistic” about China’s GDP and get used to lower numbers. For example 6.9% could be the “new normal” next year. China’s official GDP target for 2014 remains 7.5%, a number which looks increasingly out of reach. In response, Beijing has been “micro managing” stimulus, in Pauline’s view, going from sector to sector and even telling banks what size of business to lend to. Pauline Loong warns that China’s gear change from export driven economy to consumer driven market will take longer than most may imagine, it’s worth bearing in mind that Chinese GDP per capita is only just above Iraq in global rankings.

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200 million migrant workers are missing from the official stats. That’s considerably more than the entire active US workforce. Remember, from the article above, that “Chinese GDP per capita is only just above Iraq in global rankings.”

China to Let World in on Gauge Showing State of Economy (Bloomberg)

Chinese Premier Li Keqiang has an insider’s knowledge on the strength of the world’s second-largest economy that helps him determine when stimulus is needed. He’s about to share part of the secret. Li has said several times this year that slower growth is tolerable as long as enough jobs are created, often referring to a survey-based unemployment indicator that’s different from the registered urban jobless rate released every quarter. The published gauge excludes migrant workers who aren’t registered with local authorities, estimated at more than 200 million. The more comprehensive jobless rate will be released “very soon,” Sheng Laiyun, spokesman for the National Bureau of Statistics, said in Beijing yesterday. “The quality of the indicator, for now, looks very good. So, we are using it internally for policy decision-making references.”

China’s leaders have eschewed across-the-board stimulus and interest-rate cuts even as growth cooled to the weakest pace in more than five years last quarter, sticking to limited steps such as easing home-purchase controls. Having access to better barometers like the new unemployment measure would help economists estimate how deep a slowdown in gross domestic product the government will tolerate. “The lack of good unemployment data is the main reason why China still focuses so much on GDP,” said Zhu Haibin, chief China economist at JPMorgan Chase & Co. in Hong Kong. “In fact, the government is more concerned about employment and inflation, and that’s why they refrained from big stimulus.” Releasing the methodology, breakdown and samples for the new jobless rate in addition to the headline number, as the U.S. does, would also greatly help researchers, Zhu said.

He called China’s current registered unemployment rate “untrustworthy and unusable.” Sporadic revelations made by the government about the broader unemployment gauge, which surveys 31 cities, show about a 1 percentage-point divergence from the official rate this year. The surveyed rate fell for four straight months to 5.05% in June, the National Development and Reform Commission said on its website in July. In contrast, the official registered rate was 4.08% in the second quarter, unchanged from the previous three months. The new surveyed rate adopts a methodology following the guidance of the International Labour Organization, according to Cai Fang, vice director of the government-backed Chinese Academy of Social Sciences. “All eyes will be on it,” said Ding Shuang, senior China economist at Citigroup Inc. in Hong Kong. “It’s going to be really important, like that of the U.S.”

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The UK government is a joke.

UK Deficit Up 10% From Last Year, National Debt Rises £100 Billion (Guardian)

The chancellor’s plan to cut the deficit this year looks increasingly unrealistic after another jump in government borrowing in September pushed the deficit 10% higher in the first half of the year, lessening the chances of a pre-election giveaway at December’s autumn statement. Borrowing last month was £11.8bn, £1.6bn higher than in September 2013 and more than £1bn higher than City economists had forecast, official figures showed, as the tax take failed to keep pace with government spending despite the recovery in the economy. Tax receipts have disappointed over recent months partly due to unexpectedly weak pay growth and the increase in the personal allowance to £10,000. In the first six months of the tax year, between April and September, borrowing was £58bn, up £5.4bn on the first half of last year, according to the Office for National Statistics. Economists said it was looking increasingly likely George Osborne would miss his target of reducing the deficit by more than £12bn in 2014-15.

Alan Clarke, economist at Scotiabank, said that if the current trend continued, borrowing would come in about £10bn above the target. Howard Archer, chief UK economist at IHS Global Insight, said: “The chancellor is looking ever more unlikely to meet his fiscal targets for 2014/15. This means that Mr Osborne faces an awkward fiscal backdrop as he announces his autumn statement in December as the May 2015 general election draws ever nearer. This gives him little scope to announce any major sweeteners.” The Office for Budget Responsibility, the Treasury’s official forecaster, cautioned that although there was uncertainty over government borrowing in the second half of the fiscal year, tax receipts for the full year were likely to come in below forecast. “Factors such as weaker-than-expected wage growth, lower-than-expected residential property transactions and lower oil and gas revenues mean it is looking less likely that the full year receipts growth forecast will be met,” it said.

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How is this not a criminal practice: “The US student loan provider, Sallie Mae, sells repackaged debt for as little as 15 cents on the dollar.”

The Moral Economy Of Debt (Robert Skidelsky)

Every economic collapse brings a demand for debt forgiveness. The incomes needed to repay loans have evaporated, and assets posted as collateral have lost value. Creditors demand their pound of flesh; debtors clamour for relief. Consider Strike Debt, an offshoot of the Occupy movement, which calls itself “a nationwide movement of debt resisters fighting for economic justice and democratic freedom”. Its website argues that “with stagnant wages, systemic unemployment, and public service cuts” people are being forced into debt in order to obtain the most basic necessities of life, leading them to “surrender [their] futures to the banks”. One of Strike Debt’s initiatives, rolling jubilee, crowdsources funds to buy and extinguish debt, a process it calls collective refusal. The group’s progress has been impressive, raising more than $700,000 and extinguishing debt worth almost $18.6m. It is the existence of a secondary debt market that enables rolling jubilee to buy debt so cheaply.

Financial institutions that have come to doubt their borrowers’ ability to repay, sell the debt to third parties at knockdown prices, often for as little as five cents on the dollar. Buyers then attempt to profit by recouping some or all of the debt from the borrowers. The US student loan provider, Sallie Mae, sells repackaged debt for as little as 15 cents on the dollar. To draw attention to the often-nefarious practices of debt collectors, rolling jubilee recently cancelled student debt for 2,761 people enrolled at Everest College, a for-profit school whose parent company, Corinthian Colleges, is being sued by the US government for predatory lending. Everest’s loan portfolio was valued at almost $3.9m. Rolling jubilee bought it for $106,709.48, or about three cents on the dollar. But that is a drop in the ocean. In the US alone, students owe more than $1tn, or about 6% of GDP. And the student population is just one of many social groups that lives on debt.

Indeed, throughout the world, the economic downturn of 2008-09 increased the burden of private and public debt – to the point that the public-private distinction became blurred.In a recent speech in Chicago, Irish president Michael D Higgins explained how private debt became sovereign debt. He said: “As a consequence of the need to borrow so as to finance current expenditure and, above all, as a result of the blanket guarantee extended to the main Irish banks’ assets and liabilities, Ireland’s general government debt increased from 25% of GDP in 2007 to 124% in 2013.” The Irish government’s aim, of course, was to save the banking system. But the unintended consequence of the bailout was to shatter confidence in the government’s solvency.

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One day a deal is announced, the next it’s denied.

Fears Over Gas Supply As Russia-Ukraine Talks Fail (Reuters)

Russia and Ukraine failed to reach an accord on gas supplies for the coming winter in EU-brokered talks on Tuesday but agreed to meet again in Brussels in a week in the hope of ironing out problems over Kiev’s ability to pay. After a day of talks widely expected to be the final word, European Energy Commissioner Guenther Oettinger told a news conference the three parties agreed the price Ukraine would pay Russia’s Gazprom – $385 per thousand cubic metres – as long as it paid in advance for the deliveries. But Russian Energy Minister Alexander Novak said Moscow was still seeking assurances on how Kiev, which earlier in the day asked the EU for a further €2 billion ($2.55 billion) in credit, would find the money to pay Moscow for its energy.

Dependent on Western aid, Ukraine is in a weak position in relation to its former Soviet master in Moscow, though Russia’s reasons were unclear for wanting further assurances on finances, beyond an agreement to supply gas only for cash up front. Citing unpaid bills worth more than $5 billion, Russia cut off gas flows to Kiev in mid-June. The move added to East-West tensions sparked by Russia’s annexation of Ukraine’s Crimea and conflict in Russian-speaking eastern Ukraine. The two countries are fighting in an international court over the debt, but Oettinger noted that Ukraine had agreed to pay off $3.1 billion in two tranches this year to help unblock its access to gas over the winter. European Union states, many also dependent on Russian gas and locked in a trade war with Moscow over Ukraine, fear their own supplies could be disrupted if the issue is not resolved.

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Boy oh boy, what a surprise.

New York Fed Caught Sight of London Whale and Let Him Go (Bloomberg)

It seems pretty clear to me that JPMorgan’s London Whale episode, in which the bank’s Chief Investment Office lost $6.2 billion on poorly managed credit derivatives trades, was a huge win for U.S. banking regulators. Like, here is a rough model of banking regulation:

  1. Banks tend to be better at banking than banking regulators are, so they are unlikely to want to defer to the regulators’ judgment in most circumstances.
  2. You need the banks to buy into the regulation, and defer to the regulators, for the regulation to produce real broad-based risk reduction rather than mere check-the-box compliance efforts.
  3. One way to get the banks to buy into regulation is for them to fail catastrophically and realize that they’re not as good at their jobs as they thought they were.
  4. But catastrophic failure is precisely what, as a regulator, you want to prevent.
  5. Because it’s bad.
  6. But also because, if you allow a catastrophic failure, then you’re not a very good regulator either, so the failure provides no additional reason for a bank to listen to you.

So 2008 ushered in a new regulatory environment but at, you know, a certain cost, both to the world and to the regulators’ credibility.

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At east the Danes have not yet fully been taken over.

World’s Top-Ranked Pension Funds Probed for Hedge Fund Use (Bloomberg)

Denmark, home to the world’s top-ranked pension system, will toughen oversight of the $500 billion industry after regulators observed a surge in risk-taking linked in part to more widespread use of hedge funds. The Financial Supervisory Authority in Copenhagen will require pension funds to submit quarterly reports on their alternative investments to track their use of hedge funds, exposure to private equity and infrastructure projects. The decision follows funds’ failures to account adequately for risks in their investment strategies, according to an FSA report. The regulatory clampdown comes as Denmark deals with risks it says are inherent to a system due to be introduced across the European Union in 2016.

The new rules will allow pension funds to invest according to a so-called prudent person model, rather than setting outright limits. In Denmark, the approach has proven problematic for the only EU country to have adopted the model, said Jan Parner, the FSA’s deputy director general for pensions. “The funds are setting up for their release from the quantitative requirements, but the problem is, it’s not clear what a prudent investment is,” Parner said in an interview. “The challenge for European supervisors is to explain to the industry what prudent investments are before the opposite ends up on the balance sheets.” Denmark, which has almost two years of experience with the approach after its early adoption in 2012, says a lack of clear guidelines invites misinterpretation as firms try to inflate returns.

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Great Orlov piece on Unkraine, US, Russia, NATO.

How To Start A War And Lose An Empire (Dmitry Orlov)

A year and a half I wrote an essay on how the US chooses to view Russia, titled The Image of the Enemy. I was living in Russia at the time, and, after observing the American anti-Russian rhetoric and the Russian reaction to it, I made some observations that seemed important at the time. It turns out that I managed to spot an important trend, but given the quick pace of developments since then, these observations are now woefully out of date, and so here is an update. [..] … what a difference a year and a half has made! Ukraine, which was at that time collapsing at about the same steady pace as it had been ever since its independence two decades ago, is now truly a defunct state, with its economy in free-fall, one region gone and two more in open rebellion, much of the country terrorized by oligarch-funded death squads, and some American-anointed puppets nominally in charge but quaking in their boots about what’s coming next.

Syria and Iraq, which were then at a low simmer, have since erupted into full-blown war, with large parts of both now under the control of the Islamic Caliphate, which was formed with help from the US, was armed with US-made weapons via the Iraqis. Post-Qaddafi Libya seems to be working on establishing an Islamic Caliphate of its own. Against this backdrop of profound foreign US foreign policy failure, the US recently saw it fit to accuse Russia of having troops “on NATO’s doorstep,” as if this had nothing to do with the fact that NATO has expanded east, all the way to Russia’s borders. Unsurprisingly, US–Russia relations have now reached a point where the Russians saw it fit to issue a stern warning: further Western attempts at blackmailing them may result in a nuclear confrontation. The American behavior throughout this succession of defeats has been remarkably consistent, with the constant element being their flat refusal to deal with reality in any way, shape or form.

Just as before, in Syria the Americans are ever looking for moderate, pro-Western Islamists, who want to do what the Americans want (topple the government of Bashar al Assad) but will stop short of going on to destroy all the infidel invaders they can get their hands on. The fact that such moderate, pro-Western Islamists do not seem to exist does not affect American strategy in the region in any way. Similarly, in Ukraine, the fact that the heavy American investment in “freedom and democracy,” or “open society,” or what have you, has produced a government dominated by fascists and a civil war is, according to the Americans, just some Russian propaganda. Parading under the banner of Hitler’s Ukrainian SS division and anointing Nazi collaborators as national heroes is just not convincing enough for them. What do these Nazis have to do to prove that they are Nazis, build some ovens and roast some Jews? Just massacring people by setting fire to a building, as they did in Odessa, or shooting unarmed civilians in the back and tossing them into mass graves, as they did in Donetsk, doesn’t seem to work.

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And my main man Jim was in Sweden.

“Omenland” (James Howard Kunstler)

[..] too soon, I landed back in Newark Airport, Lord have mercy. I grabbed a taxi to the Newark train station to get to the Hudson River line out of New York City back upstate. Along the way on Route 21, I passed a graffiti on an overpass. It said “Omenland.” The anonymous genius who sprayed that there sure caught the US zeitgeist. Newark compares to Stockholm as an Ebola victim in the gutter compares to a supermodel at poolside. The scene in the Newark train station was like the barroom from Star Wars, a creature-feature extravaganza, intergalactic Mutt Central, wookies in hoodies with burning coals for eyes, ladies with pierced cheeks, crack-heads, winos, missing body part people, lopsided head people, and the scrofulous physical condition of the station is proof positive that Chris Christie is unqualified to be president. This is a gateway to New York, America’s greatest city, you understand, and it looks like the veritable checkpoint to the rectum of the universe. You know what occurred to me: maybe it is?

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Guess it’s better than nothing.

WHO: Ebola Serum In Weeks And Vaccine Tests In Africa By January (Guardian)

The World Health Organisation has announced it hopes to begin testing two experimental Ebola vaccines in west Africa by January and may have a blood serum treatment available for use in Liberia within two weeks. The UN’s health agency said it aimed to begin testing the two vaccines in the new year on more than 20,000 frontline health care workers and others in west Africa – a bigger rollout than previously envisioned. Dr Marie Paule Kieny, an assistant director general at the WHO, acknowledged there were many “ifs” remaining and “still a possibility that it [a vaccine] will fail”. But she sketched out a much broader experiment than was imagined only six months ago, saying the WHO hoped to dispense tens of thousands of doses in the first months of the new year. “These are quite large trials,” she said.

Kieny said in remarks reported by the BBC that a serum was also being developed for use in Liberia based on antibodies extracted from the blood of Ebola survivors. “There are partnerships which are starting to be put in place to have capacity in the three countries to safely extract plasma and make preparation that can be used for the treatment of infective patients. “The partnership which is moving the quickest will be in Liberia where we hope that in the coming weeks there will be facilities set up to collect the blood, treat the blood and be able to process it for use.” A WHO spokeswoman, Fadela Chaib, said the agency expected 20,000 vaccinations in January and similar numbers in the months afterwards using the trial products. An effective vaccine would still not in itself be enough to stop the outbreak but could protect the medical workers who are central to the effort. More than 200 of them have died of Ebola.

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