bonus Archives - The Automatic Earth

Americans may soon exceed the amount of credit-card debt they racked up during the Great Recession. The average household with credit card debt owes $16,061, up 10% from $14,546 10 years ago and $15,762 last year, according to a new analysis of Federal Reserve Bank of New York and U.S. Census Bureau data by the personal finance company NerdWallet. The amount of household credit card debt is still down from a recent high of $16,912 in 2008 at the height of the recession. The U.S. won’t hit pre-recession credit card debt levels until the end of 2019, NerdWallet’s analysis projects. Total debt (including mortgages, auto loans and student loans) is expected to surpass the amounts owed at the beginning of the Great Recession by the end of 2016, NerdWallet found, mostly due to mortgages and student loans.

Mortgage debt jumped from $159,020 per household in 2010 to $172,806 in 2016, and debt from auto loans grew from $20,032 in 2010 to $28,535 in 2016. Nationwide, total household debt (including mortgages, auto loans and student loans) now equals almost $12.4 trillion, up from about $11.7 trillion in 2010. Why the growth in debt, given that many consumers should be skittish about living beyond their needs after the credit bubble of the Great Recession? The reason concerns a problem that has long dogged Americans. Median household income has grown 28% over the last 13 years, said Sean McQuay, a personal finance expert at NerdWallet, but expenses have outpaced it significantly. Case in point: Medical costs increased by 57% and food and beverage prices by 36% in that period.

Many Americans find it difficult to stick to savings goals. And that’s even worse if you have a family. The amount that a two-parent, two-child family needs just to pay the bills (but not have money left over for savings) ranges from about $50,000 to more than $100,000 depending on where a family lives, according to data from the nonprofit and nonpartisan think tank the Economic Policy Institute. Rent has risen 3.9% in the last year alone, according to the Bureau of Labor Statistics. “The economy is doing better, but we’re really not seeing that trickle down to individual households the way we’d hope,” McQuay said. Rising living costs mean, if anything, consumers should pay extra attention to their budgets in the next year, he said. “We’re allergic to the idea of budgeting,” he said. “It sounds just as awful as dieting.”

No contradiction whatsoever with the article above.

• Americans Want To ‘Live Big(ly)’ In The Trump Era (CNBC)

In the Trump era, excess is in and modesty is out. After years of stealth wealth, humility and downsizing, the president-elect is ushering in a new era of living large, Nobel Prize-winning economist Robert Shiller said Wednesday. “We used to be more into modest living,” the Yale professor told CNBC, speaking about the years after the financial crisis. “Now people are thinking, ‘[that] doesn’t work.’ You know? You have to live big-league and you’re on your way. While there’s no empirical evidence pointing to this shift, Shiller said the excitement is visible at Trump rallies and in the stock market. Despite a slight dip on Wednesday, the Dow Jones industrial average remained near 20,000.

Shiller’s comments add to budding sentiment that America’s new billionaire-in-chief — with his gold-plated penthouse, private jumbo jet and multiple mansions — could shift American attitudes away from inequality and toward the 1980s-style aspiration and worship of wealth. That quest for the good life could also stimulate spending — particularly in housing, Shiller said. “Trump is a real estate man, right? He talks about living big, living large. I can imagine that this will boost housing demand as well, among at least those who are excited by Trump,” he said. Still, Shiller cautioned that investors shouldn’t get too comfortable, as the Trump rally could end up like Calvin Coolidge’s run nearly a century ago. Coolidge was president during the Roaring ’20s, before the decade-long Great Depression started in 1929. “It could be like … Coolidge prosperity. It went for a while and it ended badly,” he said.

“There’s a difference, though, between Calvin Coolidge and Donald Trump, if you haven’t noticed. Trump is way more controversial,” Shiller added.

But bigly.

• Percentage of Young Americans Living With Parents Rises to 75-Year High (WSJ)

Almost 40% of young Americans were living with their parents, siblings or other relatives in 2015, the largest percentage since 1940, according to an analysis of census data by real estate tracker Trulia. Despite a rebounding economy and recent job growth, the share of those between the ages of 18 and 34 doubling up with parents or other family members has been rising since 2005.

Back then, before the start of the last recession, roughly one out of three were living with family. The trend runs counter to that of previous economic cycles, when after a recession-related spike, the number of younger Americans living with relatives declined as the economy improved. [..] The share of young Americans living with parents hit a high of 40.9% in 1940, just a year after the official end of the Great Depression, and fell to a low of 24.1% in 1960. It hovered between about 31% and 33% from 1980 to the mid-2000s, when the rate started climbing steadily.

The result is that there is far less demand for housing than would be expected for the millennial generation, now the largest in U.S. history. The number of adults under age 30 has increased by 5 million over the last decade, but the number of households for that age group grew by just 200,000 over the same period, according to the Harvard Joint Center for Housing Studies. Analysts point to rising rents in many cities and tough mortgage-lending standards as the culprit, making it difficult for younger Americans to strike out on their own.

It’s been a while. Anything to do with QE?

• Republican Presidents Can’t Seem To Avoid Recessions (BBG)

Here’s a frightening factoid for Donald Trump as he prepares to take office next month: Every Republican president since World War II has been in power during at least one recession. Of course, as the saying goes, past performance is not necessarily indicative of future results and the billionaire developer may well avoid a downturn on his watch. But with the economic expansion soon to become the third-longest on record, the risk of a contraction occurring during his time in office can’t be cavalierly dismissed. “Republican presidents seemingly can’t do without” recessions, Joachim Fels, global economic adviser for PIMCO, wrote in a blog post dated Dec. 12. The same can’t be said of Democrats. Outgoing President Barack Obama did preside over an economic downturn in his first six months in office – one he inherited from his predecessor, Republican George W. Bush.

John F. Kennedy took office just before a recession ended. And the U.S. entered and exited slumps when Jimmy Carter and Harry Truman were in charge. But it was recession-free during the tenures of Democrats Lyndon Johnson in the 1960s and Bill Clinton in the 1990s. “The U.S. economy has performed better when the president of the United States is a Democrat rather than a Republican,” Princeton University professors Alan Blinder and Mark Watson wrote in a paper published in the American Economic Review this year. The difference isn’t due to more expansionary fiscal and monetary policies under Democrats, according to Blinder, who served in the Clinton White House, and Watson. Instead it appears to stem from less costly oil shocks, a more favorable international environment, productivity-boosting technological advances and perhaps more optimistic consumers, they wrote. Some of those disparities may be down to better policies, but luck also played a role.

It’ll happen.

• Plan To Tax US Imports Has Better Odds Of Becoming Law Than Many Think (CNBC)

A controversial proposal to tax all goods and services coming into the United States has a better chance of becoming law than many on Wall Street suspect. The so-called “border-adjusted” tax is part of the House tax overhaul plan that also would reduce the corporate rate from 35% to 20%. The idea is to tax goods as they come into the country from overseas, but to avoid taxing U.S. exports at all. For instance, a car imported into the U.S. from Mexico would be taxed, but the American-made steel sent to Mexico would not.

Proponents say the proposed “destination tax” would encourage more U.S. production of goods and create U.S. jobs. But opponents say it will send prices higher, unfairly cut profits for some sectors, particularly the retail industry, and could prompt retaliation. The idea is similar but not quite like a VAT, or value added tax, common in other countries. The stock market has been celebrating promises of lower corporate taxes that could boost business spending, but it has been ignoring proposals that could sting some companies’ bottom lines. Retailers, automakers and refiners are among the industries that could be hit if imports are taxed.

What you get from blowing bubbles. You destroy societies.

• Home Ownership Among 25-Year-Olds In England, Wales Halved In 20 Years (G.)

The proportion of 25-year-olds who own a home has more than halved over the past 20 years, according to a report that points to the generational impact of the housing crisis. Home ownership has dropped from 46% of all 25-year-olds two decades ago to 20% now, the Local Government Association said. The LGA, which represents more than 370 councils in England and Wales, said more homes for affordable or social rent are needed to allow people to save up for a deposit and get on the housing ladder. The LGA’s housing spokesman, Cllr Martin Tett, said: “Our figures show just how wide the generational home ownership gap is in this country. A shortage of houses is a top concern for people as homes are too often unavailable, unaffordable and not appropriate for the different needs in our communities.

“The housing crisis is complex and is forcing difficult choices on families, distorting places, and hampering growth. But there is a huge opportunity, as investment in building the right homes in the right places has massive wider benefits for people and places.” Analysis for the LGA by the estate agent Savills found that the construction of social rented homes – owned and managed by local authorities and housing associations – plunged by 88% between 1995-96 and 2015-16. The association warned that the sharp fall, combined with rents rising at a faster pace than incomes, meant that home ownership was becoming more difficult for an increasing number of people. Home ownership across all age groups has fallen by 4.4% since 2008, while private renters increased by 5.1%, the LGA said.

Beppe Grillo wants full nationalization. The political class just blunders on.

• Monte Paschi Headed for Nationalization After Sale Failure (BBG)

Banca Monte dei Paschi di Siena SpA will probably fail to lure sufficient demand for a €5 billion capital increase, leading to what would be the country’s biggest bank nationalization in decades, said people with knowledge of the matter. No anchor investor has shown interest in the stocks sale, the Siena-based company said in a statement late Wednesday. Two debt-for-equity swap offers will raise about €2 billion, with investors converting bonds for about €2.5 billion, the lender said. The interest is probably insufficient to pull the deal off, said the people, who asked not to be identified before a final assessment. Qatar’s sovereign-wealth fund, which had considered an investment, hasn’t committed to buying shares, people with knowledge of the matter have said.

Other institutions that were considering buying shares have indicated that they would put funds in the troubled bank only if it’s able to raise €1 billion from cornerstone investors, according to the people. Monte Paschi Chief Executive Officer Marco Morelli had crisscrossed the globe looking for investors to back the bank’s reorganization plan, which included a share sale, a debt-for-equity swap and the sale of €28 billion worth of soured loans. A nationalization of Monte Paschi, the biggest in Italy since the 1930s, could be followed by rescues for lenders including Veneto Banca and Banca Popolare di Vicenza as part of a €20 billion government package. State intervention and a hit to bondholders is the most likely scenario for Monte Paschi, Manuela Meroni, an analyst at Intesa Sanpaolo SpA wrote in a note to clients Thursday. “The solution to the Monte Paschi issue could reduce the systemic risk for the sector,” Meroni wrote.

Monte Paschi shares failed to open in Milan on Thursday after being indicated lower. The shares have dropped 87% this year, trimming the bank’s value to €478 million. If government funds are used in the bank’s recapitalization, bondholders will probably have to take losses under European burden-sharing rules. The cabinet is considering a so-called precautionary recapitalization that may reduce the potential losses. A cabinet meeting may be held as early as Thursday evening to rescue Monte Paschi, newspaper La Stampa reported, without saying where it got the information.

Especially in the rear-view mirror.

• China’s Currency Outflows Are Much Larger Than They Appear (MW)

Investors have been drastically underestimating the pace at which money is leaving China. Since June, the People’s Bank of China has liquidated $1.1 trillion in foreign-currency reserves, according to a calculation by a team of analysts at Goldman Sachs. That’s nearly double the $540 billion reported by the PBOC, when adjusted for shifts in the yuan’s valuation, between August 2015 and November 2016. Goldman arrived at its figure by incorporating data provided by the State Authority on Foreign Exchange, the arm of the PBOC responsible for currency flows. That data details flows that are considered approved Chinese corporate demand, as well as money flowing through the offshore yuan market. If one factors in these outflows, the total amount of capital that has left China in that time period balloons from the reported $540 billion to $1.1 trillion, Goldman said. Goldman illustrates these flows in a chart, below:

“Since June, this data has continued to suggest significantly larger [foreign exchange] sales by the PBOC than is implied by FX reserve data [the gap is about $25 billion a month on average in the last several months],” said the team, led by MK Tang, executive director of global investment research Asia, in a research note released to the media on Monday. The PBOC has been selling its foreign currency reserves, which have declined for 14 straight months through November, to help support its rapidly weakened currency, the yuan. After selling off earlier in the year, the dollar has strengthened rapidly against most major currencies including the yuan. In fact, dollar gains accelerated following President-elect Donald Trump’s Nov. 8 electoral victory. Presently, the yuan, USDCNY, +0.0706% also known as the renminbi, is trading near its weakest level against the dollar since late 2008.

Greenwald is very clear. But help me out: does the interviewer try to imply that there is circumstantial evidence regardless of there not being any? That because a lot of so-and-so’s have said there is, that somehow means there must be?

• Glenn Greenwald Weighs In On Election Hacks (MSNBC)

Co-founding editor of The Intercept, Glenn Greenwald, talks to Ari Melber about the investigation into Russian hacks involving the 2016 election.

Never let a good crisis go to waste. Zero credibility.

• EU To Boost Border Checks On Cash, Gold To Tackle ‘Terrorism Financing’ (R.)

The European Commission proposed tightening controls on cash and precious metals transfers from outside the EU on Wednesday, in a bid to shut down one route for funding of militant attacks on the continent. The move follows Monday’s attack on a Christmas market in Berlin, where 12 people were killed as a truck plowed into a crowd. It is part of an EU “action plan against terrorist financing” unveiled after the bombings and shootings in Paris in November 2015. Under the new proposals, customs officials in EU states will be able to step up checks on cash and prepaid payment cards transferred via the post or through freight shipments.

Authorities will also be given the power to seize cash or precious metals carried by suspect individuals entering the EU. People carrying more than 10,000 euros ($10,391.00) in cash are already required to declare this at customs upon entering the EU. The new rules would allow authorities to seize money even below that threshold “where there are suspicions of criminal activity,” the EU executive commission said in a note. “With today’s proposals, we strengthen our legal means to disrupt and cut off the financial sources of terrorists and criminals,” the commission vice-president Frans Timmermans said.

Not every European is a complete fool yet.

• EU Court Says Mass Data Retention Illegal (R.)

The mass retention of data is illegal, the European Union’s highest court said on Wednesday, dealing a blow to Britain’s newly passed surveillance law and signaling that security concerns do not justify excessive privacy infringements. The Court of Justice of the European Union (ECJ) said its ruling was based on the view that holding traffic and location data en masse allowed “very precise conclusions to be drawn concerning the private lives of the persons whose data has been retained”. Such interference with people’s privacy could only be justified by the objective of fighting serious crime and access to data should be subject to prior review by a court or independent body except in urgent cases, it said.

The ruling is likely to upset governments seeking to deal with the threat of attacks such as those in Paris and Brussels and, on Monday, in Berlin. Those attacks have reinforced calls from governments for security agencies to be given greater powers to protect citizens, while privacy advocates – who welcomed the ruling – say mass retention of data is ineffective in the fight against such crimes. The perpetual debate over privacy versus security took on an extra dimension after Edward Snowden leaked details of mass spying by U.S. and British agents in 2013. The ECJ said governments could demand targeted data retention subject to strict safeguards such as limiting it to a particular geographic location but the data must be stored within the EU given the risk of unlawful access.

The court was responding to challenges against data retention laws in Britain and Sweden on the grounds that they were no longer valid after the ECJ struck down an EU-wide data retention law in 2014. A spokesman for Britain’s interior ministry said it was disappointed with the judgment and would be considering its potential implications in the case launched before Britain voted in June to quit the European Union. “Given the importance of communications data to preventing and detecting crime, we will ensure plans are in place so that the police and other public authorities can continue to acquire such data in a way that is consistent with EU law and our obligation to protect the public,” he said.

Pretty cold for Athens too.

• Greek Low-Pensioners Stand Long Queues For The Christmas Bonus (KTG)

Greece’s low-pensioners have been waiting for the extra Christmas bonus announced by Prime Minister Alexis Tsipras for days. The magic, sparkling moment was set as December 22nd. The money started to flow into bank accounts already since Wednesday afternoon. Defying the icy-cold weather and Schaeuble’s objections, dozens of elderly rushed to ATMs to withdraw the unexpected Christmas present together with the pension for January. Those unable to use cards rushed to the banks as early as possible in the morning and stood line for many hours before the doors opened. 1.6 million low-pensioners receive the Christmas bonus which is the difference of the pension and lump sum to the amount of €850.

If a pensioner receives €600, the Christmas bonus will be €250. Due to capital controls, the amount that can be withdrawn within two weeks is €840. At the same time, 240,000 low pensioners will see the poverty allowance (EKAS) cut by 50%. It means they will lose €1,380 per year. I asked a neighbor how will he spend the Christmas bonus. “I will have my bones warmed,” the 87-year-old answered with a bright smile. He has been living without heating for the last three years. He went broke and spent all his savings after austerity cuts in 2010 deprived him of the 13th and 14th pension. He lost €1,200 per year.

My article from yesterday. Please help us help.

• The Automatic Earth in Greece: Big Dreams for 2017 (Automatic Earth)

Both Konstantinos and myself -and all the other volunteers at O Allos Anthropos- want to thank you so much for all the help you’ve given over the past year -and in 2015-. We’re around $30,000 for 2016 alone, another $5000 since my last article 4 weeks ago. I swear, for as long as I live, this will never cease to amaze me. And then of course what happens is people start thinking and dreaming about what more they can do for those in peril. Wouldn’t you know…

A Merry Christmas to all of you, to all of us. Very Merry. God bless us, every one. Thank you for everything.

If I may make a last suggestion, please forward this ‘dream’ to anyone you know -and even those you don’t-, by mail, Twitter, Facebook, Instagram, word of mouth, any which way you can think of. Go to your local mayor or town council, suggest they can help and get -loudly- recognized for it. There may be a dream involved for 2017, but that was our notion a year ago as well, and look what we’ve achieved a year later: it is very real indeed. And anyone, everyone can become part of that reality for just a few bucks. If the institutions won’t do it, perhaps the people themselves should. That doesn’t even sound all that crazy or farfetched. There’s a lot of us.

Konstantinos Polychronopoulos, Athens December 2016

Debt Rattle December 10 2016

Dec 102016

December 10, 2016 Posted by Raúl Ilargi Meijer at 9:57 am Finance Tagged with: animal spirits, bonus, capitalism, China, CIA, ECB, euro, Greece, Manus, strike, Trump, WaPo 6 Responses »

Arthur Rothstein Interior of migratory fruit worker’s tent, Yakima, Washington 1936

• Donald Trump Team Takes Aim At CIA (CNN)

• A Rising Stock Market Does Not Signal Economic Health (FEE)

• Economist Streeck Calls Time On Capitalism (G.)

• Nobel Economics Prize Winner: ‘The Euro Was A Mistake’ (EA)

• Beware Of Panic Buying In Bank Stocks (MW)

• Trump Has Unleashed The Stock Market’s ‘Animal Spirits’ (MW)

• The Bond Market Doesn’t Believe Draghi (BBG)

• Why China Can’t Stop Capital Outflows (Balding)

• EU Launches New Investigation Into Chinese Steel Imports (R.)

• ECB Refuses To Help Italy’s Crisis-Hit Monte dei Paschi Bank (G.)

• 60% Of Americans Who Usually Fly Home For The Holidays, Won’t This Year (MW)

• Greece Under Fire Over Christmas Bonus For Low-Income Pensioners (G.)

• Greece Seamen Strike: Angry Farmers Throw Flares, Set Offices On Fire (KTG)

• Broken Men in Paradise (NYT)

Tried to find a better source for this, not as one-sided as CNN, but does it really matter anymore at this point? Anyone who wants to believe more secret and anonymous ‘news’ about Russia and the US elections, can and will. Others find it hard to believe that the WaPo comes with yet another unsubstantiated ‘story’. CNN calls this ‘revelations’, but that really is not the word. And saying things like “the comments from Trump’s camp will cause concern in the Intelligence community” can probably best be seen as an attempt at comedy.

• Donald Trump Team Takes Aim At CIA (CNN)

President-elect Donald Trump’s transition team slammed the CIA Friday, following reports the agency has concluded that Russia intervened in the election to help him win. In a stunning response to widening claims of a Russian espionage operation targeting the presidential race, Trump’s camp risked an early feud with the Intelligence community on which he will rely for top secret assessments of the greatest threats facing the United States. “These are the same people that said Saddam Hussein had weapons of mass destruction,” the transition said in a terse, unsigned statement. “The election ended a long time ago in one of the biggest Electoral College victories in history. It’s now time to move on and ‘Make America Great Again.'”

The sharp pushback to revelations in The Washington Post, which followed an earlier CNN report on alleged Russian interference in the election, represented a startling rebuke from an incoming White House to the CIA. The transition team’s reference to the agency’s most humiliating recent intelligence misfire – over its conclusion that Iraq under Saddam Hussein had weapons of mass destruction — threatens to cast an early cloud over relations between the Trump White House and the CIA. The top leadership of the agency that presided over the Iraq failure during the Bush administration has long since been replaced. But the comments from Trump’s camp will cause concern in the Intelligence community about the incoming President’s attitude to America’s spy agencies.

CNN reported this week that Trump is getting intelligence briefings only once a week. Several previous presidents preparing for the inauguration had a more intense briefing schedule. Multiple sources with knowledge of the investigation into Russia’s hacking told CNN last week that the US intelligence community is increasingly confident that Russian meddling in the US election was intended to steer the election toward Trump, rather than simply to undermine or in other ways disrupt the political process. On Friday, the Post cited US officials as saying that intelligence agencies have identified individuals connected to the Russian government who gave Wikileaks thousands of hacked emails from the Democratic National Committee and Hillary Clinton’s campaign chairman John Podesta.

Trump has repeatedly said there is no evidence to suggest that President Vladimir Putin’s Russia, with which he has vowed to improve relations, played a nefarious role in the US election. “I don’t believe it. I don’t believe they interfered,” Trump said in an interview for the latest issue of Time magazine, adding that he thought intelligence community accusations about Russian interventions in the election were politically motivated.

“The Economy Isn’t A Thing”.

• A Rising Stock Market Does Not Signal Economic Health (FEE)

The headlines tell us that the Dow Jones is up around 1,000 points since Donald Trump won the election on November 8th. The conventional wisdom is that this shows how much confidence people have in Trump’s ability to generate a healthy American economy. The argument is that if people are willing to buy stock in American firms, this indicates their belief that those firms will see improving profits over the next few years. They then draw the conclusion that more profitable firms indicate a healthier American economy. Although this argument is correct about stock prices reflecting an increasing belief in the profitability of US firms, it makes a major error in assuming that profitable firms necessarily mean a better economy. First, it’s important to understand that phrases like “a healthier economy” are themselves problematic. The “economy” is not the thing we should be concerned about. In fact, in some fundamental sense there’s no such thing as “the economy.”

As Russ Roberts and John Papola memorably put it in the music video “Fight of the Century:”
The economy’s not a car.
There’s no engine to stall.
No experts can fix it.
There’s no “it” at all.
The economy is us

Things are not “good/bad for the economy.” They are good or bad for the people who comprise the market process, specifically in our capacity as consumers. All the economy amounts to is people engaging exchanges in order to better satisfy their wants. What we should care about is whether or not people are able to better satisfy those wants. And “better satisfy” here means not just more and better goods and services, but at cheaper prices too. Lower prices mean that consumers have income left over to purchase goods they otherwise couldn’t, enabling them to better satisfy their wants by satisfying more of them. In a genuinely free market, the profitability of firms is a good reflection of their ability to better satisfy the wants of consumers. Our willingness to pay for their goods and services reflects the fact that we receive value from those products, so their profits are at least a general signal of having created that value and satisfied consumer wants.

Trump’s policies may well enrich many firms, but they will impoverish the average American. In fact, consumers get much more value out of most innovations than is reflected in the profits of firms. A famous study by economist William Nordhaus estimated that profits made up only about 2.2% of the total benefits created by innovations. If you doubt this, ask yourself how much it would take for you to give up your smartphone and its connectivity. Then multiply that by all of the smartphone users in the world. Then compare that to the profits made off smartphones. The total value to consumers will dwarf the profits of smartphone producers. However, when markets aren’t free, profits do not necessarily reflect value creation. Firms who profit through privileges, protections, and subsidies from governments demonstrate that they are able to please political actors, not that they can deliver value to consumers by better satisfying their wants.

Can’t give the article the space it deserves here.

• Economist Streeck Calls Time On Capitalism (G.)

Nothing in his work prepares you for meeting Streeck (pronounced Stray-k). Professionally, he is the political economist barking last orders for our way of life, and warning of the “dark ages” ahead. His books bear bluntly fin-de-siecle titles: two years ago was Buying Time, while the latest is called How Will Capitalism End? (spoiler: not well). Even his admirers talk of his “despair”, by which they mean sentences such as this: “Before capitalism will go to hell, it will for the foreseeable future hang in limbo, dead or about to die from an overdose of itself but still very much around, as nobody will have the power to move its decaying body out of the way.”

What does such gloom look like in the flesh? Small glasses, neat side parting and moustache, a backpack, a smart anorak and at least a decade younger than his 70 years. Alluding to Trump’s victory, he cheerily declares “What a morning!” as if discussing the likelihood of rain, then strolls into the gallery. [..] At a time when macroeconomists have failed and other academics have retreated into disciplinary solipsism, Streeck is one of the few to have risen to the moment. Many of the themes that will define this year, this decade, are in his work. The breakup of Europe, the rise of plutocrat-populists such as Trump, the failures of Mark Carney and the technocratic elite: he has anatomised all of them.

This summer, Britons mutinied against their government, their experts and the EU – and consigned themselves to a poorer, angrier future. Such frenzies of collective self-harm were explained by Streeck in the 2012 lectures later collected in Buying Time: “Professionalised political science tends to underestimate the impact of moral outrage. With its penchant for studied indifference … [it] has nothing but elitist contempt for what it calls “populism”, sharing this with the power elites to which it would like to be close … [But] citizens too can “panic” and react “irrationally”, just like financial investors … even though they have no banknotes as arguments but only words and (who knows?) paving stones.”

The structure of the EU makes it impossible for it to survive. That’s what these people miss.

• Nobel Economics Prize Winner: ‘The Euro Was A Mistake’ (EA)

The European Union should embark on a process of decentralisation and return certain areas of decision making to the member states if it wants to survive and thrive, according to Nobel Memorial Prize in Economic Sciences winner Oliver Hart. Today (9 December), Hart and his colleague, Bengt Holmström, will receive the top prize for their work on contract theory, which covers everything from how CEOs are paid to privatisation. Hart told EFE that he believes the keyword in EU politics is now “decentralisation” and that Brussels has “gone too far in centralising power”. The British-born economist said that “if it abandons this trend, the EU could survive and flourish, otherwise, it could fail”.

The Harvard University professor insisted that the EU member states are not “sufficiently homogeneous” to be considered one single entity, adding that trying to make the EU-28 into one was an “error”. Hart said that the concerns felt by the member states about decision making and centralisation of power in Brussels should be addressed by returning competences to the EU capitals. The Nobel winner conceded that the EU should retain control of “some important areas”, like free trade and free movement of workers, the latter of which he admitted is “ultimately, an idea that I personally like, although I understand that there are political worries”.

His prize-winning colleague, Holmström, also told EFE that the EU needs to “redefine its priorities, limiting its activities and its regulatory arm, in order to focus on what can be done on the essential things”. The Finnish economist, who also teaches at the Massachusetts Institute of Technology (MIT), said that Brussels needs to rejig its system of governance and its basic rules in order to make them “clearer and simpler”. Hart argued that “the euro was an mistake” and said that it’s an opinion that he has maintained ever since the monetary union was first introduced. The economist added that it “wouldn’t be a sad thing at all” if in the future Europe abandoned the single currency and that the British were “very clever” to stay out of it.

Wait till January.

• Beware Of Panic Buying In Bank Stocks (MW)

Buying of banking stocks has reached panic proportions, suggesting a trend reversal over the next couple of weeks may be likely. The SPDR Financial Select Sector exchange-traded fund rose 0.2% Friday, closing at the highest level since Feb. 1, 2008. Financials have been the best performer of the S&P 500’s 11 key sectors since Donald Trump was elected president, with the sector tracking stock (XLF) soaring 18.8% since Nov. 8, compared with a 5.6% gain in the S&P 500 index. The XLF produced this week its best rolling one-month (22 sessions) %age gains since August 2009, as the financial crisis was ending. Investors appear to be banking that President-elect Donald Trump will provide a Goldilocks scenario for financials, as his promises of lower regulations, lower corporate taxes and a revived economy that results in higher longer-term interest rates are just right for the sector.

A number of technical warnings signs have flashed, however, suggesting the postelection buying frenzy is petering out. On Thursday, 73% of the S&P 500 financial sector hit 52-week highs, the most since Feb. 13, 1997, and the second highest%age since 1990, according to Jason Goepfert, president of Sundial Capital. His research suggests that the previous five-largest surges in 52-week highs in financials produced a median loss of 1.9% over the next week, and a decline of 2.5% over the next two weeks. In comparison, his data showed the average for all days was a gain of 0.2% in a week and a 0.4% rise in two weeks. “There is no doubt that momentum is impressive in the sector—the problem is that it seems to have entered panic mode and that rarely lasts,” Goepfert wrote in a note to clients.

Question is, how long for?

• Trump Has Unleashed The Stock Market’s ‘Animal Spirits’ (MW)

You don’t have to call it a Trump rally. But some market specialists appear to be struggling to pin a name to the recent moves across global markets, which has pushed the S&P 500, DJIA, the Nasdaq – and most recently the Dow Jones Transportation Average – into record territory since President-elect Donald Trump’s Nov. 8 victory over rival Hillary Clinton. The Dow scored its 14th record close on Friday. Steve Barrow at Standard Bank said in a Nov. 30 research note that “whatever fears might exist in some quarters about Trump’s win, some sort of animal spirits might have been spurred.” So-called animal spirits is an oft-used term on Wall Street coined by famed economist John Maynard Keynes to describe gut instinct.

Or as Keynes explained, “a spontaneous urge to action rather than inaction”. A certain verve to scoop up assets has certainly appeared to be at play since early November. Indeed, the Dow industrials as of Friday’s close have risen nearly 8% since the election outcome, the broad-stock benchmark S&P 500 index has climbed 5.6%, while the Nasdaq has picked up 4.8% over the same 30-day period. The Nasdaq scored its first record close since Nov. 29 on Wednesday. Meanwhile, the small-cap focused Russell 2000 which is most sensitive to economic prospects for the country, has jumped more than 15.2% since Nov. 8. To be sure, the U.S. has been a shining star compared with its weaker sisters abroad when it comes to economic growth. The ECB on Thursday said it planned on scaling back elements of its stimulus program but noted that it would extend it “if necessary.”

Barrow speculates that global growth has mostly stagnated in the aftermath of the 2008-09 financial crisis because the market didn’t put much faith in the tools, namely asset-repurchases and ultralow rates, that have been put in place by central bankers. By contrast, Trump has proposed a raft of fiscal-stimulus measures to upgrade the U.S.’s ailing infrastructure. The market now appears to be betting, in part, that the incoming leader of the free world will make good on those promises, which could inject a dose of spending that could create jobs and break a trend of economic stagnation. As a result infrastructure companies, commodities associated with construction and bank shares, among other asset classes, vaulted higher. Wall Street is euphoric over the possibilities.

People like Draghi have come to rely on docile markets. Once that’s gone….

• The Bond Market Doesn’t Believe Draghi (BBG)

The beatings will continue until morale improves, the saying goes. That’s one interpretation of the ECB’s somewhat convoluted rejig of its quantitative easing program this week. By insisting he’s not tapering bond buying while simultaneously reducing the monthly purchases and extending the time frame, President Mario Draghi is sending a mixed message that likely reflects disagreements among his Governing Council members. Cutting the program to €60 billion per month from €80 billion throws a bone to those who worry that it’s time to withdraw the monetary medicine; lengthening the timeline until the end of next year pacifies policy makers who fear the patient isn’t yet on the road to recovery.

But in financial markets, bond yields are effectively tightening monetary conditions on the central bank’s behalf, suggesting investors are beginning to anticipate an improved economic outlook. That could play out in two ways: Either bonds are correct, and the ECB will find itself tapering properly next year, or bonds are wrong, in which case Draghi will have to make good on his pledge to do more if needed. The 10-year German bond yield has climbed to about 0.4% from a low of almost -0.2% in July. That’s still a ridiculously low level; the average in the past two decades is about 3.4%, and for most of the 1990s the range was between 5% and 9%. Nevertheless, it amounts to a significant tightening in monetary conditions in just three months as the yield curve has steepened:

Also, don’t forget that the euro zone remains a fractured economic landscape. Germany, with an unemployment rate of 6%, will find it easier to withstand rising borrowing costs than Italy, where the jobless rate is almost twice as high. And the Italian yield curve has replicated the move seen in Germany, at higher levels that have doubled 10-year yields to 2% since August:

“China is caught between trying to prop up a currency facing long-term decline and letting capital leave at will, risking a bank crisis…”

• Why China Can’t Stop Capital Outflows (Balding)

How China manages its currency is likely to be the global economic story of 2017. Despite the government’s best efforts, capital continues to leave the country at a brisk pace, with a balance-of-payments deficit through the third quarter of $469 billion. Attempts to arrest this flow probably won’t work. But they may well create new risks. Capital outflows began gathering steam in 2012, when the government liberalized current-account payment transactions in goods and services. Enterprising Chinese figured out that while they couldn’t officially move money abroad to buy a house via the capital account – individuals are barred from moving more than $50,000 out of the country each year – they could create false trade invoices that would allow them to deposit money where they needed it.

The result was a huge discrepancy between payments recorded for imports and the declared value of goods passing through customs, amounting to $526 billion in hidden outflows last year. The problem has only worsened in 2016. French investment bank Natixis estimates that outflows will total more than $900 billion this year, despite new restrictions on yuan movements, including prohibitions on using credit and debit cards to pay for insurance products in Hong Kong. Last week, the government added yet another restriction. It announced that all international capital-account transactions of more than $5 million will need to be approved by the State Administration of Foreign Exchange. This has businesses deeply concerned, given that the administration likely doesn’t have the manpower for the sheer number of transactions it will need to review.

And if such restrictions can be placed on the capital account, it seems only a matter of time until they’re imposed on goods and services transactions. All of which raises a simple question: Why is Beijing working so hard to prop up the yuan and crack down on outward capital flows? The common answer is that it fears the trade consequences of a declining yuan. But that’s not it. Since the government devalued the yuan on Aug. 11, the combined value of imports and exports has fallen by only 8%, even as the value of the yuan has fallen 8% against the U.S. dollar. Any coming decline in the currency won’t make much difference, given the weak global economy and the product mix China is buying and selling.

The real reason is that the government is concerned about the implications of further liberalizing. China’s rickety banks, with delinquency rates of 30%, are receiving regular liquidity injections from the PBOC. Money market rates have been rising, from under 2% this summer to above 2.3% in Shanghai today. Allowing international capital mobility could easily trigger larger withdrawals – and hence liquidity crunches for banks already feeling the pinch of bad loans. In other words, China is caught between trying to prop up a currency facing long-term decline and letting capital leave at will, risking a bank crisis.

This is far from over.

• EU Launches New Investigation Into Chinese Steel Imports (R.)

The EU has launched an investigation into whether Chinese producers of certain corrosion-resistant steels are selling into Europe at unfairly low prices, in its latest action against cheap Chinese steel imports. The European Commission has determined that a complaint brought by EU steelmakers association Eurofer merits an investigation, the EU’s official journal said on Friday. The EU has imposed duties on a wide range of steel grades after investigations over the past few years to counter what EU steel producers say is a flood of steel sold at a loss due to Chinese overcapacity.

Some 5,000 jobs have been axed in the British steel industry in the last year, as it struggles to compete with cheap Chinese imports and high energy costs. G20 governments recorecognized in September that steel overcapacity was a serious problem. China, the source of 50% of the world’s steel and the largest steel consumer, has said the problem is a global one. In October, the European Commission set provisional import tariffs of up to 73.7% for heavy plate steel and up to 22.6% for hot-rolled steel coming from China. Those investigations are set to conclude in April.

Feels political. They could have announced this just as easily a week ago, before the referendum. Now a crisis threatens that may help make the case for interim technocrats to step in, and keep Grillo out.

• ECB Refuses To Help Italy’s Crisis-Hit Monte dei Paschi Bank (G.)

Fears that the Italian government will have to prop up Monte dei Paschi di Siena (MPS) are mounting after the European Central Bank refused to give the world’s oldest bank more time to find major investors to back a €5bn (£4.2bn) cash injection. Trading in the troubled bank’s shares was repeatedly halted on the Italian stock exchange on Friday. The MPS share price closed 10% lower as the bank’s board held a meeting that had already been scheduled before the reports that the ECB had rejected its calls for an extension to the deadline to bolster its financial position. The ECB [..] decision may have closed the door to a private sector solution, under which major investors including the sovereign wealth fund of Qatar would pump billions into the bank.

But MPS said on Friday night that its board would next meet on Sunday night and that it was pressing on with its private sector solutions Even so there were concerns that the Italian government would still have to embark on a “precautionary recapitalisation” of the bank and potentially impose losses on retail investors who hold €2.1bn of the bank’s bonds. Under new EU rules, taxpayer money cannot be used unless bondholders take losses first. A precautionary recapitalisation takes place before a bank becomes insolvent. ECB officials had told Reuters they hoped the refusal to extend the deadline would pave the way for similar support for other Italian banks which are struggling with €360bn of bad loans.

It appeared to leave the Italian government with little option but to embark on a “precautionary recapitalisation” of the bank and potentially impose losses on retail investors who hold €2.1bn of the bank’s bonds. Under new EU rules, taxpayer money cannot be used unless bondholders take losses first. A precautionary recapitalisation takes place before a bank becomes insolvent. The bank has capital above regulatory minimums.

[..] The eurosceptic Five Star Movement, the second most popular party in Italy, said the government needed to step into the fray. “MPS can only be saved by state aid in order to avoid bail-in rules [that hurt] small savers, as happened a year ago,” the party’s MEPs said in a statement on founder Beppe Grillo’s blog. “This is not the time to fear the EU and a possible infraction procedure. The consequences of a disordered bail-in would be disastrous to say the least, almost apocalyptic if one considers the size of MPS.” They added that it was time to “slam our fists at the table in Brussels … while not giving a damn about the deficit”.

Not as bad as numbers suggest perhaps, but not exactly encouraging wither.

• 60% Of Americans Who Usually Fly Home For The Holidays, Won’t This Year (MW)

Rising travel costs, airport delays, and other stressors mean fewer people will be flying home for the holidays this December. Almost 60% of people who normally fly home for the holidays will not this year, a survey of more than 1,000 visitors to travel deals website Airfarewatchdog found; 36% of whom say because it is too expensive and 21% would prefer to drive than deal with delays and long lines. An additional 13% said “the skies are too crowded” to fly home this year. It’s also not cheap: 70% of people who fly home for the holidays spend between $500 and $1,000 and 20% spend more than $1,000, according to a study of more than 1,000 users from travel assistant app Mezi.

Most Americans have less than $1,000 in savings, making such steep spending a major yearly commitment. Still, 18% of respondents in the Airfarewatchdog study said they fly home every year and still plan to do so. Air travel makes up a small%age of holiday travel – less than 10% in 2015, according to travel and automotive services non-profit AAA. But whether driving or flying home for the holidays, the majority of Americans are stressed out – 65% of people say they have anxiety about going home for the holidays, including 72% of women and 58% of men. The top sources of dread for these respondents include being bored and having nothing to do, conflict with family members, and questions about their relationship status.

Makes you wonder how Schäuble spends Christmas. Scrooge comes to mind, prominently.

• Greece Under Fire Over Christmas Bonus For Low-Income Pensioners (G.)

A goodwill gesture to ease the plight of those hardest hit in Greece by tax increases and budget cuts has backfired spectacularly on the prime minister, Alexis Tsipras, with the country’s international creditors making clear he has acted out of step. In the starkest case yet of how closely watched loan-reliant Athens is, lenders reacted with unusual alacrity on Friday after the leftist leader announced a one-off Christmas bonus for 1.6 million low-income pensioners. “The programme includes clear commitments to discuss all measures related to programme objectives with the institutions in advance,” an EU spokeswoman said. “The commission was not made aware of all the details of the announcements before they were made. We will now need to study them.”

Retirees have been among those most affected by the gruelling regime of austerity the debt-stricken country has been forced to enact in exchange for over €300bn in emergency rescue funding. Once unassailable, Tsipras’s own popularity has plummeted amid scenes of pensioners being teargassed and beaten as they took to the streets in protest. Under the scheme – announced in a televised address following a nationwide strike when anti-austerity demonstrations had swept the country – Tsipras said handouts of €617m would be given to those living on €800 or less a month. [..] State minister Alekos Flambouraris, the 42-year-old politician’s closest mentor, said creditors had not been forewarned as the money came out of the surplus Greece had managed to achieve through stringent belt-tightening.

[..] social tensions are also spiralling. “Tsipras is worried and that is why he made this move,” Grigoris Kalomoiris, chief policy maker at the union of public sector employees Adedy, told the Guardian. “Come January there will be more cuts to salaries and pensions in very real terms. We are all being pushed to breaking point. This, believe me, is the calm before the storm.” Ignoring creditor anger, Tsipras’s beleaguered administration dug in its heels late on Friday, saying the bonus did not threaten fiscal targets and would not be rescinded. “It is up to the Greek government to distribute expenditure in the way it sees most fit and socially correct, as long as agreed goals are reached,” the prime minister’s office said. “Greece is not a colony.”

No ferries for 9 days?! In Greece, land of ferries?!

• Greece Seamen Strike: Angry Farmers Throw Flares, Set Offices On Fire (KTG)

The port of Heraklion on the island of Crete turned into a battle field when hundreds of raging farmers attacked striking seamen and set the ticket offices of ANEK shipping company on fire on Friday evening. Angry about the ongoing strike of the seamen, the farmers threw flares at a ferry docked at the port. The sailors of Blue Horizon ferry answered with water drops. A farmer from Ierapetra had claimed that the ferry captain had put in operation the machines so that the ferry depart from the pier and that the lines were cut at risk of injuring farmers. The farmers were shouting “traitors” and some climbed on the lines. They kept demanding that the ferry opens its doors so that they can ship their products to the mainland.

Almost at the same time, a group of farmers moved to the ticket offices of shipping company ANEK and set it on fire. Hundreds of angry and determined farmers arrived at the port of Heraklion around 5pm and declared that they will not step back until 150 trucks loaded with vegetables get on board and leave for Piraeus. The harbormaster of Heraklion was injured and taken to the hospital with an ambulance. He was reportedly when he hit at a door during the incidents. In the 9th day of the seamen strike, the farmers are in rage as they cannot forward their products to the mainland and abroad, thus losing thousands of euros.

I’m not at all a fan of these kinds of comparisons, but what exactly sets Australian ‘policy’ apart from German concentration camps?

• Broken Men in Paradise (NYT)

MANUS, Papua New Guinea — The plane banks over the dense tropical forest of Manus Island, little touched, it seems, by human hand. South Pacific waters lap onto deserted beaches. The jungle glistens, impenetrable. At the unfenced airport, built by occupying Japanese forces during World War II, a sign “welcomes you to our very beautiful island paradise in the sun.” It could be that, a 60-mile-long slice of heaven. But for more than 900 asylum seekers from across the world banished by Australia to this remote corner of the Papua New Guinea archipelago, Manus has been hell; a three and a half year exercise in mental and physical cruelty conducted in near secrecy beneath the green canopy of the tropics.

A road, newly paved by Australia as part payment to its former colony for hosting this punitive experiment in refugee management, leads to Lorengau, a capital of romantic name and unromantic misery. Here I find Benham Satah, a Kurd who fled persecution in the western Iranian city of Kermanshah. Detained on Australia’s Christmas Island after crossing in a smuggler’s boat from Indonesia and later forced onto a Manus-bound plane, he has languished here since Aug. 27, 2013. Endless limbo undoes the mind. But going home could mean facing death: Refugees do not flee out of choice but because they have no choice. Satah’s light brown eyes are glassy. His legs tremble.

A young man with a college degree in English, he is now nameless, a mere registration number — FRT009 — to Australian officials. “Sometimes I cut myself,” he says, “so that I can see my blood and remember, ‘Oh, yes! I am alive.’ ” Reza Barati, his former roommate at what the men’s ID badges call the Offshore Processing Center (Orwell would be proud), is dead. A fellow Iranian Kurd, he was killed, aged 23, on Feb. 17, 2014. Satah witnessed the tall, quiet volleyball player being beaten to death after a local mob scaled the wall of the facility. Protests by asylum seekers had led to rising tensions with the Australian authorities and their Manus enforcers.

The murder obsesses Satah but constitutes a mere fraction of the human cost of a policy that, since July 19, 2013, has sent more than 2,000 asylum seekers and refugees to Manus and the tiny Pacific island nation of Nauru, far from inquiring eyes. (Unable to obtain a press visa to visit Manus, I went nonetheless.) The toll among Burmese, Sudanese, Somali, Lebanese, Pakistani, Iraqi, Afghan, Syrian, Iranian and other migrants is devastating: self-immolation, overdoses, death from septicemia as a result of medical negligence, sexual abuse and rampant despair. A recent United Nations High Commissioner for Refugees report by three medical experts found that 88% of the 181 asylum seekers and refugees examined on Manus were suffering from depressive disorders, including, in some cases, psychosis.

On a lighter note:

And On The Seventh Day God Shorted His People

Dec 092014

December 9, 2014 Posted by Raúl Ilargi Meijer at 8:04 pm Finance Tagged with: bonus, central banker, god, gold, market, oil, price discovery, short, stocks 11 Responses »

DPC North approach, Pedro Miguel Lock, Panama Canal 1915

And on the Seventh Day, God sold his shares? What do you think, is He short the market? Short oil? Oil does look up a tad, but then the dollar lost about a percent vs the euro, so that definitely feels like a headfake from where I’m sitting. The dollar lost more vs the euro than oil gained against the dollar. Gold and silver have somewhat more solid looking gains, but that’s against the same feverish buck, so what does it really mean? We’ll have to wait and see.

Now, be honest, who’s getting nervous yet? WTI oil yesterday fell 4.5% and tumbled through $63. $63, brother, you remember when it was $80 and you were thinking wow, that’s a long way down? That’s when you took that suit to the cleaners, and that feels like just yesterday, don’t it, and here we are, it’s down another 20%+. Anyone worried about their Christmas bonuses yet? New Year’s?

The central-bank-propped-up stock exchanges didn’t even like what they saw anymore either yesterday, let alone today. Greece down -13%, Shanghai -5.4%, Argentina -7.1%, Europe on average -2.5%. And that’s on a weak dollar day… Think we’ll have a lot of those days? Think God is short the greenback?

Is oil going to break the whole facade? What do YOU think? You think that maybe we’ve had enough of this charade? Is this the one God, let alone the Yellens and Draghis on this planet can’t manipulate from their comfy seats? The Fed can buy Exxon and Conoco, and Draghi can try and support Shell and BP, or maybe the Bank of England should, but oil is a global thing, it’s not like Treasuries or Greek debt that you can just buy a $1 trillion handful of every week or so.

But maybe God found a way to keep some more of the stuff in the ground. Who was it again that said nature developed man only to get rid of a carbon imbalance on the planet, to get it out of the soil and back into the atmosphere?

God’s representatives on earth anno 2014, central bankers, can’t control oil anymore than they can consumer spending. Anything else, they’re fine. But that makes them weak, it’s their Achilles heel, the things they can’t control. It didn’t used to be that way, but today central bankers are like movie stars. Exactly because they did everything they could to keep asset prices up. These days, you never leave home without one. Or as the Rolling Stones put it 40 years ago (when central banking was something entirely different from what it is now):

When your spine is cracking and your hands, they shake
Heart is bursting and you butt’s gonna break
Your woman’s cussing, you can hear her scream
You feel like murder in the first degree

Ain’t nobody slowing down no way
Everybody’s stepping on their ~~accelerator~~ crude oil tanker
Don’t matter where you are
Everybody’s gonna need a ~~ventilator~~ central banker

US Thanksgiving weekend spending was down 11%, and movie theatre box office no less than 20%. Sure online sales and Netflix went up a notch, but come on, a 16 year low Thanksgiving box office and the second installment of the Hunger Games trailing 25% behind the first, how does that spell recovery to you? Think God liked part 1 that much better?

Americans, like everybody else, are down and out. Their spines are cracking and their hands are shaking, and they don’t have a central banker on their side. Their central banker has sold all she could to the ‘other side’, and now she has no choice but to let oil prices kill millions of jobs, unless somehow an actual supply and demand market rises from its zombie state, the same market she has been very complicit in killing off.

If you don’t have real markets, and nobody knows anymore what anything’s worth, the only thing left to drive the financial world is herd mentality. Lemmings have that too. The world is going to regret letting Yellen et al destroy the market principle, and price discovery. Capitalism as a system cannot possibly work without price discovery. It leads to the few making out – literally – like bandits in the night, to the many left with nothing but debt, and to imploding societies.

Oil is the one substance that can make them implode. Because our entire societies are built on it. And from it, too. The industry that drives it, drives everything. And bringing down its revenues by 40% and falling will break that industry, and the society it designed and built. When oil was briefly at $40 in 2008, that was less of a factor, because their was some resilience still left in the whole global economic make-up. Today, it’s whole different story.

The American miracle idea of energy independence is fully reliant on a shale patch that went over $100 billion deeper into debt every year for years running just to produce that not-so-miracle. Take away 40%+ of what revenue it did take in, and there is no independence left. All that’s left is fracking fluids in your drinking water, and a few trillion in debt that the Big Kahuna lenders will seek to unload upon the real economy.

Oil prices at some point will rise again, but by then, and when is anyone’s guess, the price fall we see today may have done so much damage to the very structure of our economies that far fewer people will be able to afford it.

Those box office and holiday sales numbers are only a first red flag for where we’re going. As are the snap elections in Greece (spinned by Brussels) and Japan: incumbents who feel they have an edge for now, and decide to grab the opportunity.

It’s panic and fear and most of all it’s volatility. That’s our foreland. A weaker dollar for a day, which lets oil prices breath a little, which in turn lets gold sit pretty while it lasts. Tomorrow could be very different all over again. But most of all, looking at the trend in a wider context, this means a whole lot more trouble for the 95% of people who live in the real economy. Much much more. There’s nobody left to protect them from anything at all that goes on. They’ve been sold out to the highest bidder and the lowest common denominator.

And they can pray to God, but I hear he might be shorting them too.

Debt Rattle November 16 2014

Nov 162014

November 16, 2014 Posted by Raúl Ilargi Meijer at 1:15 pm Finance Tagged with: austerity, bonus, clawback, eurozone, G20, Growth, OECD, oil, Putin 1 Response »

Wyland Stanley Indian guides and Nash auto at Covelo stables, Mendocino County, CA 1925

• We Need To Ramp Up Global Growth: OECD (CNBC)

• G-20 Plans $2 Trillion Growth Boost to Uneven Global Economy (BW)

• The G-20 Doesn’t Need a Growth Target (Bloomberg)

• How The UK Coalition Has Helped The Rich By Hitting The Poor (Observer)

• The Centre Is Falling Apart Across Europe (Observer)

• Across Europe Disillusioned Voters Turn To Outsiders For Solutions (Observer)

• How Can The Eurozone Escape A Lost Decade? (Guardian)

• Europe Should Fear The Spectre Of Austerity, Not Communism (Observer)

• Putin Leaves G20 After Leaders Line Up To Browbeat Him Over Ukraine (Guardian)

• Why We Need Stock Prices To Fall 25% (MarketWatch)

• Time to Hide Under the Covers (Martin Armstrong)

• Forex Banks Prepare To Claw Back Bonuses (FT)

• JPMorgan Settles Claims It Cheated Shale-Rights Owners (Bloomberg)

• EC Says Starbucks’ Dutch Tax Deal At Odds With Competition Law (Guardian)

• Shipbrokers In Merger Talks After 30% Plunge In Oil Price (Guardian)

Blind clowns run this world, and we let them. Don’t tell me you don’t deserve what you’re going to get.

• We Need To Ramp Up Global Growth: OECD (CNBC)

The global economy should be growing at a much faster pace, the chief economist of the Organization for Economic Co-operation and Development (OECD) warned on Sunday, as world leaders agreed on hundreds of measures they hope will boost expansion. “As the emerging markets become a greater share of the global economy, we really ought to be seeing the global economy growing at 4% or more, so the tone is dour,” said OECD Chief Economist Catherine Mann, speaking to CNBC at the G-20 summit in Brisbane over the weekend. Growth of 4% is well behind the group’s projected global gross domestic product (GDP) of 3.3% for this year. In its latest Economic Outlook, published earlier this month, the OECD warned of “major risks on the horizon” for the world’s economy, such as further market volatility, high levels of debt and a stagnation in the euro zone recovery.

Mann’s comments come as world leaders at the G-20 agreed on measures they said will equate to 2.1% new growth, inject $2 trillion into the world economy and create millions of jobs. The Paris-based OECD has previously outlined a target of adding around 2 percentage points to global gross domestic product (GDP) by 2018, relative to the 2013 level. To achieve a faster growth rate, Mann said that countries had given the OECD a range of commitments – and the focus was now on holding them accountable. “Our job is to say to countries: OK, you’ve told us what you’re going to do, so next year we’re going to look at what you’ve said you’re going to do and determine whether or not you’ve done it. It’s challenging. It’s absolutely a process,” she said. World leaders at the summit in Brisbane agreed on around 800 new measures on issues including employment, global competition and business regulations.

Mann was optimistic that job creation would increase in tandem with global growth, as countries ramped up infrastructure investment. “We know that there’s usually a relationship between growth and jobs. It’s not always a tight relationship. There’s always an issue about the distribution, where the jobs are being created, what sectors, what countries and some of the disconnect there can be,” she said. “Mismatch can be a problem, but I do think we are going to see job creation go hand in hand with global growth.” One way to boost global growth is a renewed focus on infrastructure, and Mann stressed there was a “significant deterioration” in infrastructure around the world. “Every country needs to have more bridges, or rebuild bridges and ports,” she said.

Because, as we all know, all it takes to foster growth is deciding to have some. The emptiness that emanates from this is blinding.

• G20 Says Growth Plans To Boost GDP By 2.1% If Implemented (BW)

Group of 20 leaders agreed to take measures that would boost their economies by a collective $2 trillion by 2018 as they battle patchy growth and the threat of a European recession. Citing risks from financial markets and geopolitical tensions, the leaders said the global economy is being held back by lackluster demand, according to their communique following a two-day summit in Brisbane. The group submitted close to 1,000 individual policy changes that they said would lift growth and said they would hold each other to account to ensure they are implemented. “There are some worrying warning signs in the global economy that are threats to us and our growth,” U.K. Prime Minister David Cameron said after the meeting ended. “If every country that has come here does the things they said they would in terms of helping to boost growth,” including trade deals, then growth will continue, he said.

Action to bolster growth comes as policies around the world are diverging with the U.S. tapering its monetary easing as it boasts the strongest economy among advanced nations, while Europe and Japan add further stimulus to ward off deflation. The IMF last month cut its projection for world economic growth next year to 3.8%. The mostly structural policy commitments spelled out in each country’s individual growth strategy include China’s plan to accelerate construction of 4G mobile communications networks, a A$476 million ($417 million) industry skills fund in Australia and 165,000 affordable homes in the U.K. over four years.

IMF Managing Director Christine Lagarde told the leaders that in order to avoid the “new mediocre” of low growth, low inflation, high unemployment and high debt, all tools should be used at all levels. “That includes not just monetary policy, which is being significantly used, particularly in the euro zone, but also fiscal policy, structural reforms and, under certain conditions, infrastructure,” she said. The IMF and OECD assessed the policy commitments and said they would raise G-20 gross domestic product by an additional 2.1% from current trajectories by 2018, according to the communique. “It’s a worthy objective for the G-20 as global growth is still lagging,” said Shane Oliver, head of investment strategy at AMP Capital, which manages about $125 billion. “But a lot of those measures might not be fully implemented and, even if they do, they may not deliver the results.”

But Pesek still thinks it needs growth.

• The G-20 Doesn’t Need a Growth Target (Bloomberg)

Group of 20 host Tony Abbott went to great lengths to keep one topic — climate change — off the agenda at this weekend’s confab in Brisbane. There’s little mystery why: While the world hails China and the U.S. for moving forward on curbing carbon emissions, Australia is backsliding by scrapping a tax on carbon and resisting pressure to expand the use of renewables. Abbott’s justification? The need for growth. In fact, Australia’s prime minister wants the rest of the G-20 also to pledge to grow by an additional 2% or more over five years. The goal sounds unobjectionable, until one considers how much trouble arbitrary growth targets are already causing China. The mainland government’s annual pledge to generate a fixed expansion in gross domestic product – 7.5% this year – is also the biggest roadblock to clearing its air and eventually reducing emissions.

Pressure to meet that arbitrary target leads local officials to ignore anti-pollution directives. It could prompt additional stimulus, a second wind for investment in smokestack industries and even more smog. China may be considering a reduction in next year’s target; it shouldn’t set one at all. Neither should the broader G-20. This indiscriminate emphasis on a specific data point encourages short-term policy behavior. In the quest for higher growth at the lowest political cost, governments from Washington to Tokyo have abdicated their responsibility to unelected central bankers. The reliance on monetary easing to prop up growth is clearly dangerous. Too much liquidity chasing too little demand for credit and too few productive investments can only lead to fresh bubbles in a world already filled with them. The consequences are worryingly unpredictable.

Chinese officials like Vice Finance Minister Zhu Guangyao have begun to warn that “divergence” in monetary policies – ultra-loose ones among developed economies, tighter conditions among emerging ones – could have unforeseen effects. “It will create new risks and uncertainties for the global economy,” Zhu told Bloomberg yesterday, calling the global financial environment “uneven and brittle.” Ceding control to central banks relieves political leaders of the pressure to make more difficult changes – the kind that will sustain growth in the long run and broaden its benefits. The only way China can make good on its climate targets, for example, is by rebalancing the economy way from heavy industry. That requires a level of political will Xi has yet to display.

All the talk about growth serves only to implement more of this.

• How The UK Coalition Has Helped The Rich By Hitting The Poor (Observer)

A landmark study of the coalition’s tax and welfare policies six months before the general election reveals how money has been transferred from the poorest to the better off, apparently refuting the chancellor of the exchequer’s claims that the country has been “all in it together”. According to independent research to be published on Monday and seen by the Observer, George Osborne has been engaged in a significant transfer of income from the least well-off half of the population to the more affluent in the past four years. Those with the lowest incomes have been hit hardest. In an intervention that will come as a major blow to the government’s claim to have shared out the burden of austerity equally, the report by economists at the London School of Economics and the Institute for Social and Economic Research at the University of Essex finds that:

• Sweeping changes to benefits and income tax have had the effect of switching income from the poorer half of households to most of the richer half, with the poorest 5% in the country in terms of income losing nearly 3% of what they would have earned if Britain s tax and welfare system of May 2010 had been retained.

• With the exception of the top 5%, who lost 1% of their potential income, it is the better-off half of the country that has gained financially from the changes, with an increase of between 1.2% and 2% in their disposable income.

• The top 1% in terms of income have also been small net gainers from the changes brought in by David Cameron’s government since May 2010, which include a cut in the top rate of income tax.

• Two-earner households, and those with elderly family members, were the most favourably treated, as a result of direct tax changes and state pensions respectively.

• Lone-parent families did worst, losing much more through cuts in benefits and tax credits and higher council tax than they gained through higher income tax allowances. Families with children in general, and large families in particular, also did much worse than the average.

• A quarter of the lowest paid 10% have shouldered a particularly heavy burden, losing more than 5% of what would have been their income without the coalition’s reforms.

Brussels is blowing itself up. It’s not going to be pretty.

• The Centre Is Falling Apart Across Europe (Observer)

Wednesday morning in Brussels and Beppe Grillo has brought his anti-establishment roadshow to the European parliament. The committee room is packed, standing room only for the former standup act. Once he gets going, Grillo resembles a force of nature. He declines to sit on the parliamentary rostrum alongside the other participants. Instead he prowls the floor, spitting out a staccato torrent of abuse and grievance, unscripted, unstoppable, laugh-a-minute. “I’m a bit over the top,” Grillo admits when he first pauses to draw breath after half an hour. “Maybe I should stop here.” Grillo is the Mr Angry of Italian and, increasingly, European politics. His Five Star Movement is running a consistent second in the opinion polls at around 20% behind the modernising centre-left of the Democratic Centre of prime minister Matteo Renzi.

If Grillo is hammering on the establishment’s doors, across Europe upstarts, populists, mavericks, iconoclasts and grassroots movements are performing even more strongly, radically changing the face of politics, consigning 20th-century bipartisan systems to the history books, and making it ever trickier to construct stable governing majorities. Fragmentation is the new norm in the parliaments and politics of Europe. Voter volatility, the death of deference, the erosion of party loyalties,, the dissolution of the ties of class make for a chaotic cocktail and highly unpredictable outcomes. Especially during and in the aftermath of economic slump.

“The crisis has shredded voters’ trust in the competence, motives and honesty of establishment politicians who failed to prevent the crisis, have so far failed to resolve it, and who bailed out rich bankers while imposing misery on ordinary voters, but not on themselves,” said Philippe Legrain, a former adviser to the head of the European commission and author of European Spring: Why Our Economies and Politics are in a Mess – and How to Put Them Right. If elections were held tomorrow in half a dozen EU countries, according to current polls, the biggest single parties would be neither the traditional Christian nor social democrats of the centre-right and centre-left, but relative newcomers on the far right or hard left who have never been in government – from Greece and Spain, where far-left anti-austerity movements top the polls, to anti-EU, nationalist, anti-immigrant parties of the extreme right in France, the Netherlands, Austria and Denmark.

Lengthy article with reports fom France, Italy, Greece, Germany, Sweden, Ireland, Spain.

• Across Europe Disillusioned Voters Turn To Outsiders For Solutions (Observer)

Ever since Matteo Renzi became Italy’s youngest prime minister at 39 in February, styling himself as a political outsider and promising to prise open Italy’s closed-shop economy, commentators have been writing off Italy’s other great anti-establishment figure, Beppe Grillo. The former standup comedian, who rose to fame with rants at the establishment and a wildly popular blog, won a staggering 8.7 million votes in the 2013 elections to Italy’s lower house, running the centre-left Democratic Party a close second. But since then, the MPs and senators who flooded into parliament to represent him have been criticised for refusing to team up with other parties on key legislation. The few that did risked expulsion from his Five Star Movement. “There are continual divisions within Grillo’s parliamentary group – it’s pretty chaotic,” says Roberto D’Alimonte, a professor of politics at LUISS university in Rome. “They are still waiting for Renzi to fail so they can inherit whatever’s left after the disaster.”

Furthermore, Grillo’s anti-Europe rhetoric is now being matched by a resurgence of the rightwing Northern League. After being decimated by scandals, this party has dropped its focus on autonomy for northern Italy, and charismatic new leader Matteo Salvini is now picking up votes nationally with attacks on immigration. So why, despite the setbacks, are Grillo’s poll ratings still healthy? A survey of voting intentions this month put his movement at 19.9%, more than double the Northern League’s, albeit trailing Renzi’s 38.9%. “Until the economy turns around, Grillo will win votes – there is so much frustration in Italy,” says D’Alimonte, who adds that Grillo’s raging against corruption continues to strike a chord. “We still read every day about scandalous misuses of public funds.” Silvio Berlusconi’s decline is also helping the tousle-haired comedian, says D’Alimonte. “Grillo cuts across the political spectrum, taking votes from the left and the right, just like Ukip.”

There’s only one answer to that question: by disbanding itself.

• How Can The Eurozone Escape A Lost Decade? (Guardian)

It says something about the diminished expectations that the reaction to the latest growth figures for Germany and France was one of relief. Such is the gloom that has descended on the eurozone in the past few months, there was a fear that the data from the eurozone’s two biggest economies could have been worse. That’s true. Germany might now be in technical recession had the 0.1% contraction in the second quarter been followed by a further fall in gross domestic product in the third. As it was, growth of 0.1% was eked out. Similarly, France’s 0.3% expansion was a tad better than feared. But the headline growth number disguised underlying weakness. The growth was entirely due to government spending and the build-up of unsold stocks of goods.

The private sector in France remains painfully weak. What’s true of Germany and France is true of the 18-nation eurozone as a whole. Unlike the US and the UK, the eurozone has never really shown signs of emerging strongly from the financial crisis and recession of 2008-09. The recovery that began in 2013 has petered out. There are a number of reasons for that. The European Central Bank has been slower than the Bank of England and the Federal Reserve in taking action to boost growth – and less imaginative in its choice of weapons. Quantitative easing is now in the offing for the eurozone – almost six years after it was deployed in Britain and America. Blanket austerity for the eurozone has weakened domestic demand.

Attempting to slash budget deficits before growth returned has been a terrible mistake, and one for which Germany has to take the blame. With consumers not spending and businesses not investing, the eurozone has been dependent on exports to keep growth ticking over. But the slowdown in some of the world’s leading emerging markets this year – China, Brazil and Russia to name but three – has made it harder to sell goods overseas. Internal eurozone trade has also faltered. All is not completely lost. The plunge in oil prices will reduce energy bills and boost the real disposable incomes of consumers. A sharp fall in the value of the euro will make exports to the rest of the world more competitive.

The Observer sounds as hollow as the rest of them here.

• Europe Should Fear The Spectre Of Austerity, Not Communism (Observer)

The approach to macroeconomic policy in Brussels is dominated by Germany. The problem is that the Germans are urging further cuts on economies that are rapidly nearing the end of their tether. One close observer of policymaking in Germany says, only half jokingly, that advice is dominated by a combination of “those who don’t understand Keynes and those who do but are too scared to admit it”. The Tories, who may yet save the beleaguered Ed Miliband by tearing themselves apart over Europe, would be well advised to heed the words of one George Soros, who has pointed out that by being members of the European Union but not of the eurozone, we in Britain enjoy “the best of both worlds”. The Bank of England pointed out in the inflation report that “the potential positive impact of ECB policy actions” is likely to be outweighed in the near term by the factors that are already depressing growth in the euro area.

Carney, who has not hesitated on occasion to acknowledge that Osborne’s fiscal policy impeded the British recovery, manifested some sympathy with Draghi’s view that there needs to be a relaxation of fiscal policy. This means at the very least going easy on budget cuts, but ideally adopting a major expansionary policy involving much-needed infrastructure projects. Indeed, even Germany itself is crying out for renewal of its infrastructure. For “structural reform” read “infrastructure reform”! This does not seem to be understood in Berlin – or, for that matter, in Brussels. They go on relentlessly about the need to honour the EU’s “stability and growth pact”, with its strict targets for budgets and debt. But that pact was drawn up in what were reasonably normal times. The financial crisis changed everything. I always thought it significant that the word “stability” came before “growth” when the pact was signed. The problem now is that there is precious little growth, even in Germany itself, and the danger is that stability may soon turn into deflationary instability.

Fools like Harper, Cameron, Abbott are not going to make Putin nervous. All they’ve done over the summit is show him face to face just how stupid they are. Harper allegedly told Putin to get out of Russia. Nobody in the room wanted to provide his reply, but it may well have been: ‘You first’.

• Putin Leaves G20 After Leaders Line Up To Browbeat Him Over Ukraine (Guardian)

Vladimir Putin quit the G20 summit in Brisbane early saying he needed to get back to work in Moscow on Monday after enduring hours of browbeating by a succession of Western leaders urging him to drop his support for secessionists in eastern Ukraine. With the European Union poised this week to extend the list of people subject to asset freezes, the Russian president individually met five European leaders including the British prime minister, David Cameron, and the German chancellor, Angela Merkel, where he refused to give ground. Putin instead accused the Kiev government of a mistaken economic blockade against the cities in eastern Ukraine that have declared independence in votes organised in the past month. He said that action was short-sighted pointing out that Russia continued to pay the salaries and pensions of Chechenya throughout its battle for independence.

Justifying his early departure Putin said: “It will take nine hours to fly to Vladivostok and another eight hours to get Moscow. I need four hours sleep before I get back to work on Monday. We have completed our business.” In an interview with German TV he also accused the west of switching off their brains by imposing sanctions that could backfire. Putin said: “Do they want to bankrupt our banks? In that case they will bankrupt Ukraine. Have they thought about what they are doing at all or not? Or has politics blinded them? As we know eyes constitute a peripheral part of brain. Was something switched off in their brains?” The Russian leader also complained he had not been consulted by the EU about the recognition of Ukraine. However, British officials insisted behind Putin’s bluster, that they detected a new flexibility about the Ukraine orientating towards the EU so long as this did not extend to Nato assets being placed on Ukrainian soil.

Because that’s by how much, at the very least, they have been distorted (?!)

• Why We Need Stock Prices To Fall 25% (MarketWatch)

In early October, as share prices wobbled, I had high hopes that U.S. stocks would plummet to attractive levels. Instead, shares have shot higher, adding to the rip-roaring bull market that has seen stocks triple since March 2009. The long rally has done wonders for my portfolio’s value. But it also means stocks are now more richly valued—and expected returns are lower. Unless you never again plan to add to your stock portfolio, you should have mixed feelings about the market’s heady gains. Think about all the money you’ll invest in stocks in the years ahead, whether it’s with new savings, reinvested dividends or by shifting money from elsewhere in your portfolio. Wouldn’t you rather buy at 2009 prices than at today’s nosebleed valuations? Indeed, I find it hard to get enthused about the prospects for U.S. stocks over the next 10 years. Consider the three components of the market’s return: the dividend yield, corporate-earnings growth and the value put on those earnings, as reflected in the market’s price/earnings ratio.

We already know the dividend yield: It’s 2% for the S&P 500. But big question marks hang over the other two components of the market’s return. How fast will earnings grow? Over the 10 years through mid-2014, the per-share earnings of the S&P 500 companies grew 6.3% a year, far ahead of the 3.6% nominal (including inflation) growth in GDP. But there are three reasons to fear slower earnings growth over the next 10 years. First, the recent gains have been driven by rising profit margins. After-tax corporate profits rose from 7.9% of GDP in mid-2004 to 10.6% in early 2014. Without that boost, the S&P 500’s earnings would have lagged behind GDP growth. Suppose profits remain at 10.6% of GDP, rather than reverting to 7.9%. Even in that scenario, investors likely wouldn’t be happy, because corporate profits would grow no faster than the economy. That brings us to the second reason for worry: Economic growth may disappoint.

Over the past 50 years, roughly half the economy’s 3% after-inflation growth has come from increases in the working population and half from productivity gains. But the labor force is now growing more slowly, as the entrance of new workers barely outpaces retiring baby boomers. The Bureau of Labor Statistics projects that the civilian labor force will expand 0.5% a year over the 10 years through 2022, versus 0.7% for 2002-12 and 1.2% for 1992-2002. On top of that, many American families simply can’t afford to spend freely, either because they’re unemployed or underemployed or they remain handcuffed by hefty amounts of debt. That, too, could crimp economic growth. A third reason to worry: Over the past 10 years, companies have bought back as much stock as they’ve issued. That’s unusual—and it may not last. Historically, shareholders have seen their claim on the nation’s profits diluted by two percentage points a year, as new companies emerge and existing companies issue new shares.

“The liquidity is still off by 50% from 2007. Retail participation in the US share market is at historic lows. When the global economy turns down, it will drop faster than ever before BECAUSE liquidity is not there. We NEED to RESTRUCTURE the world economy NOW – RIGHT THIS VERY INSTANT.”

• Time to Hide Under the Covers (Martin Armstrong)

The USA may not be as all-powerful as its tells its people or our politicians believe. For all the spying going on against American citizens to hunt them down for taxes intercepting all cell phone calls, the USA is vulnerable on many fronts. The Chinese have been able to compromise the US defense systems. Meanwhile, in the Black Sea, Russia sent a Su-24 jet which then simulated a missile attack against the USS Donald Cook. It carried a new device that rendered the ship literally deaf, dumb, and blind. The Russian aircraft repeated the same maneuver 12 times before flying away. Obama better wake up. This is not some video game. The world is on the brink of war and governments need this war because they are dead in the water economically. The government in Ukraine has told its people it cannot reform now, it is in war. So be patient. We will see this same excuse migrate to Europe and the USA. Government NEED such a diversion. It also does not hurt to kill off those anticipating being taken care of by the state.

The US economy is holding up the entire world economy right now and the growth rate is minimal. When we turn the economy down, look out below. These morons have been hunting taxes everywhere and as a result they have shut down global capital flows. Government lives in an illusion. They simply assumed they could always tax and never funded anything presuming they could always shake money from us. It has been the FREEDOM of investment capital on a global basis that built the economies of the world after World War II. This was the same aspect that built the Roman Empire. Conquering everything enabled global capital flows. Capital flows around the globe at all times and has done so since ancient times. Cicero commented that any event in Asia (Turkey) be it financial or natural disaster, sent waves of panic running through the Roman Forum. If capital has been restricted in movement as it is today, no American would have ever been able to invest in Europe or Asia. Where would the world be today had FATCA been around in 1945?

These idiots have destroyed the world economy and we will only understand this full impact after 2015.75. If you outlaw short-selling, there is nobody to buy during a panic. This is the same problem. The liquidity is still off by 50% from 2007. Retail participation in the US share market is at historic lows. When the global economy turns down, it will drop faster than ever before BECAUSE liquidity is not there. We NEED to RESTRUCTURE the world economy NOW – RIGHT THIS VERY INSTANT. Raising taxes and stopping global flows is the absolute worse case scenario you can possibly ever do in times like the present. This is turning VERY ugly. You better buy some extra heavy blankets because you are going to want to just hide in your bed when this chaos erupts. There are boggy-men under the bed and in the closet and he is listening and watching everything you do. Why? Because he is scared to death he may be losing power. They are in the final stages of insanity – the Stalin Phase where they are paranoid about what everyone even thinks and says.

Let’s hope this pisses off the traders enough to tell on their bosses.

• Forex Banks Prepare To Claw Back Bonuses (FT)

Five banks at the heart of the forex rate rigging probe are preparing to claw back millions of dollars in bonuses from traders as the City seeks to shore up its reputation in the wake of the latest scandal to hit the banking industry. This would be the first time that banks have applied this draconian measure on such a large scale. Under European rules, they have the power to take this step, but in practice they have largely restricted themselves to withholding as yet unpaid bonuses. This week’s move, however, by UK, US and Swiss regulators to fine six banks $4.3bn for their role in the global foreign exchange scandal has reignited calls for the sector to take tougher action against wrongdoers.

Royal Bank of Scotland, Citigroup, HSBC, JPMorgan Chase and UBS, five of the banks fined this week, are all looking at taking back bonuses from dozens of traders – although people familiar with their thinking say the plans are subject to internal reviews of the individuals’ cond[uit]. RBS is considering going even further by reducing this year’s overall bonus pool for the whole investment bank. Such a move would echo RBS’s stance last year after the Libor rate-rigging scandal, when the state-owned bank reduced its incentive pool by £300m after paying a £390m penalty to UK and US regulators. The forex scandal revealed that groups calling themselves “the players”, “the three musketeers” and “a co-operative” tried to rig key currency benchmarks including at least one provided by central banks, according to the UK’s Financial Conduct Authority.

JPMorgan fraud no. 826.

• JPMorgan Settles Claims It Cheated Shale-Rights Owners (Bloomberg)

JPMorgan settled a lawsuit by Texas mineral-rights owners who accused it of cutting sweetheart deals with oil company clients to cheat them out of $681 million in compensation. The dispute centered on payments for rights to drill in the Eagle Ford, a shale formation underlying much of central and southwest Texas that has helped put the U.S. in competition with Saudi Arabia and Russia for title of world’s largest oil producer. Beneficiaries of the South Texas Syndicate Trust accused the bank, which was supposedly working on their behalf, of instead hatching favorable deals with commercial-banking clients Petrohawk Energy and Hunt Oil for cut-rate prices on the trust’s rights in the Eagle Ford, the highest-yielding oil field in the U.S. Deal talks between the bank and the trust stalled and forced the start of a trial Nov. 12 in state court in San Antonio while negotiations continued.

The settlement was completed Nov. 14 as jurors heard a third day of testimony, according to lawyers for both the bank and trust’s beneficiaries. “The case was resolved with some conditions, and the jury was excused,” Dan Sciano, a lawyer for the trust beneficiaries, said yesterday in a phone interview. Sciano said he was optimistic “a sufficient number of beneficiaries” will sign the accord at their annual meeting in San Antonio this weekend. “Otherwise, we would not have dismissed the jury,” he said. Sciano declined to discuss the amount of the settlement. [..] The San Antonio Express News reported that the beneficiaries would receive $40 million from the bank. The trust beneficiaries claimed they got only $32.5 million on rights that yielded benefits worth $1.1 billion because JPMorgan wanted to curry favor with its oil company clients at their expense. The bank rejected the claims as speculation and hindsight.

Luxembourg, Holland, Ireland, they’re all doing the same, and they all claim it’s fully legal. Morals don’t enter the picture.

• EC Says Starbucks’ Dutch Tax Deal At Odds With Competition Law (Guardian)

Brussels has accused the Dutch government of cooking up an illegal deal with Starbucks that allowed the coffee chain to pay a very low rate of tax. In a preliminary report into an alleged sweetheart deal the European commission said the coffee shop’s tax arrangements in the Netherlands were at odds with EU rules on competition, which are intended to stop a government using state funds to give a company an unfair advantage. The report, published today, had been sent to the Dutch government on 11 June, when the commission officially launched its investigation into the tax affairs of Apple, Starbucks and Fiat. Starbucks ran into a political furore when it emerged in 2012 that it had paid just £8.3m in corporate taxes since coming to the UK in 1998, despite racking up sales of more than £3bn.

The British subsidiary of the coffee chain was classified as loss-making – so did not pay taxes on profits – largely because it made payments to other companies in the Starbucks group for its coffee supplies, use of the Starbucks logo and shop format, and interest on loans within the group. The commission’s investigation is focusing on these so-called transfer payments and has homed in on the role of the coffee chain’s roasting facility in Amsterdam and its relationship with other parts of the Starbucks business. Officials have also expressed doubts about the legality of a decision by the Dutch tax authorities to allow Starbucks to book in the Netherlands revenues it has earned in other countries. In 2012, Starbucks’ chief financial officer, Troy Alstead, told the UK’s public accounts committee of MPs that the group had legitimately secured a tax deal with the Netherlands that allowed it to pay tax at a “very low rate”. According to the commission, the coffee chain’s Dutch companies paid €716,000 (£570,000) of tax in 2011 in the Netherlands and between €600,000 and €1m in 2012.

An insanely overbuilt market faces reality.

• Shipbrokers In Merger Talks After 30% Plunge In Oil Price (Guardian)

Plunging oil prices have triggered merger talks among London’s shipping and offshore brokers, with key companies including Clarkson, Icap and Howe Robinson all in discussions. With shipping in the doldrums, brokers have been relying over the last couple of years on the offshore oil industry to boost profits but a 30% plunge in the crude price has caused panic. Clarkson, the world’s largest shipbroker, confirmed on Friday it was hoping to acquire RS Platou, a major Norwegian-based rival which also controls a significant operation in the UK. Icap and Howe Robinson are also understood to be looking at options and sources predicted some kind of merger deal between those firms could be unveiled as early as next week.

Clarkson said the purchase of privately-owned Platou, which some believe could cost up to £200m, made commercial sense: “Given the complementary activities, in terms of geographic locations, operations and industry specialisation, the boards of both Clarksons and Platou believe the enhanced offering of the combined business positions the enlarged group as a leading integrated global shipping and offshore group.” The move could have reunited Clarkson with its flamboyant former chief executive, Richard Fulford-Smith, who left and joined Platou, but the Ferrari-driving shipbroker has unveiled his own plans to buy out Platou’s UK business. While key parts of the shipping market such as dry bulk carriers and container ships have continued to struggle against massive overbuilding of tonnage and tepid volume growth, Clarkson has continued to prosper.