elite Archives - The Automatic Earth

Signed Away by Midgets

May 032019

May 3, 2019 Posted by Raúl Ilargi Meijer at 1:49 pm Primers Tagged with: bureaucrats, Cameron, democracy, elite, EU, Forsyth, Greece, midgets, Monnet 6 Responses »

Founding father of the EU, French economist and financier, Jean Monnet

Though I was doing other stuff and wanted to leave the whole Brexit issue alone for a while anyway (boring!), the outcome of yesterday’s local elections, which saw both the Tories and Labor lose bigly while the only real anti-Brexit party, the LibDems, gained a lot, made Theresa May declare that “the British people made clear they want Brexit delivered”. And peace is war too.

So I thought I’d re-run this piece which I wrote the day before the Brexit vote, June 22 2016, as “The European Union: Government by Deception”. I still think Brexit could be a feasible and even good thing, but not the way it’s been executed this time. I would be very careful with the next steps, whichever they are. What an incredible mess. They couldn’t have done worse if they tried.

I stumbled upon an article by Day of the Jackal author Frederick Forsyth, published last week in the Daily Express, that I think every Briton and European and everyone else should read. Forsyth doesn’t delve into the American pressure to form a European Union as a counterweight to the Soviet Union, he sticks with ‘founding father’ Jean Monnet and his reasoning behind the particular shape the Union took. And that is bad enough.

All Forsyth has to do is to quote from Monnet’s work, and I have to admit that while reading it I increasingly got the feeling that it’s quite remarkable that no-one, especially no journalist, does this. It’s there for everyone to see, but that means little if and when no-one actually sees it.

I have repeatedly talked about how the very structure of the EU self-selects for sociopaths and/or worse, but perhaps not enough about how that was deliberately built into the design. A feature not a flaw.

And I don’t think Monnet ever thought about how structures like that develop over time, in which the flaws in that design become ever more pronounced and the more severe cases of sociopathy increasingly take over the more powerful positions. A development that is well visible in present day Brussels.

For me, as I’ve written before, being here in Athens these days is plenty testimony to what the EU truly represents. Not only do we need to help feed many tens of thousands on a daily basis, depression levels are up 80% or so and life expectancy is plunging because proper health care is ever further away for ever more people in a country that not long ago had a health care system anyone would have been proud of.

That is the EU. And, yeah, Britons, do reflect on the NHS. Sure, you can argue it’s not the EU but Cameron and his people that are breaking it down, but it’s also Cameron who is pleading with you to vote to stay in the union.

If it can do this today to one of its member states, it will do it tomorrow to others, and more, if it sees fit. The benefits of the union flow to a select few countries, and to a select few within those countries. And ever fewer are selected as economic policies continue to fail.

It is frankly beyond me to see why anyone would want to be part of that. It’s not about Boris Johnson or Nigel Farage or George Osborne, that is just more deception. It’s about being ruled by midgets, as Forsyth puts it.

Here are some snippets from Frederick Forsyth’s article:

Birth of superstate: Frederick Forsyth on how UNELECTED Brussels bureaucrats SEIZED power

There was nothing base or inhumane about Jean Monnet, the French intellectual now seen as the founding father of the dream, nor those who joined him: De Gasperi the Italian, Hallstein the German, Spaak the Belgian and Schumann the Frenchman. In 1945 they were all traumatised men. Each had seen the utter devastation of their native continent by war and after the second they swore to try for the rest of their lives to ensure nothing like it ever happened again. No one can fault that ambition.

First Monnet analysed what had gone wrong and became obsessed by one single fact. The German people had actually voted the Austrian demagogue into the office of chancellor. What could he, Monnet, learn from this? What he learned stayed with him for the rest of his life and stays with us today in the EU.

The continent of Europe, from western Ireland to the Russian border, from Norway’s North Cape to Malta’s Valletta harbour, must be unified into one huge superstate. Politically, socially, economically, militarily and constitutionally.

There could be no war between provinces so war would be banished. (For a man who had witnessed the Spanish Civil War that was an odd conclusion but he came to it. And there was more).

As coal, iron and steel were the indispensable sinews of war machinery, these industries should be unified under central control. Thus would also be prevented any single state secretly rearming. That at least had the benefit of logic and the Coal and Steel Community was his first success.

But the big question remained: how should this Europe-wide single state be governed? Then he came to the conclusion that still prevails today. In the 1930s democracy had failed. In Germany, Italy and elsewhere desperate people had flocked to the demagogues who promised full bellies and a job in exchange for marching, chanting columns.

So democracy must go. It could not be the governmental system of the new Utopia. It was not fit to be. (He was already president of the Action Committee for the Superstate, his official title. There is nothing new about the word superstate).

Instead there would be a new system: government by an enlightened elite of bureaucrats . The hoi polloi (you and me) were simply too dim, too emotional, too uneducated to be safely allowed to choose their governments.

It never occurred to him to devise a way to strengthen and fortify democracy to ensure that what happened in Italy and Germany in the 1920s and 1930s could not happen again. No, democracy was unsafe and had to be replaced. (This is not propaganda, he wrote it all down).

He faced one last stigma as he sought the support of the six who would become the kernel of his dream: Germany (still ruined by war), France (fighting dismal colonial wars in Indochina and Algeria), Italy in her usual chaos, Holland, Belgium and tiny Luxembourg. How could the various peoples ever be persuaded to hand over their countries from democracy to oligarchy, the government of the elite? Let me quote from what he wrote:

“Europe’s nations should be guided towards the Super-state without their people understanding what is happening. This can be accomplished by successive steps, each disguised as having an economic purpose, but which will eventually and irreversibly lead to federation.”

In other words he could not force them (he had no tanks). He could not bribe them (he had no money). He could not persuade them (his arguments were offensive). Hence the deliberate recourse to government by deception. Both nostrums continue to this day. Study the Remain campaign and the people behind it.

Almost without exception they are pillars of the establishment, London-based, accustomed to lavish salaries, administrative power and enormous privilege. None of this applies to 95% of the population. Hence the need for deception.

At every stage the Remain campaign has stressed the issue is about economics: trade, profits, mortgages, share prices, house values – anything to scare John Citizen into frightened submission. The gravy train of the few must not be derailed. Some of them are already sticking pins into a wax figurine of David Cameron for being soft enough to offer the proles a chance to recover their parliamentary democracy and thus their sovereignty.

Forsyth then continues with a bunch of typically British issues, and ends with:

[..] You have repeatedly been told this issue is all about economics. That is the conman’s traditional distraction. This issue is about our governmental system, parliamentary. Democracy versus non-elective bureaucracy utterly dedicated to the eventual Superstate.

Our democracy was not presented last week on a plate. It took centuries of struggle to create and from 1940 to 1945 terrible sacrifices to defend and preserve.

It was bequeathed to us by giants, it has been signed away by midgets.

Now we have a chance, one last, foolishly offered chance to tell those fat cats who so look down upon the rest of us: yes, there will be some costs – but we want it back.

Debt Rattle October 17 2016

Oct 172016

October 17, 2016 Posted by Raúl Ilargi Meijer at 9:24 am Finance Tagged with: Bageant, Brexit, crony, elite, EU, Germany Inc, media, oil, substandard, Trump 1 Response »

Harris&Ewing Ninth Street N.W., Washington, DC 1915

• Dangerous Idiots: The Liberal Media Elite and Working-Class Americans (Smarsh)

• If You Think Donald Is Bad, Imagine Donald Trump 2.0 (Carr)

• Big Central Bank Assets Jump Fastest in 5 Years to $21 Trillion (BBG)

• Euro ‘House Of Cards’ To Collapse, Warns ECB Prophet (AEP)

• Let The Pound Fall and The Economy Rise (G.)

• Europe’s Dramatic Fulcrum Point: Only Precedent Is 1930s (Hugh Hendry)

• 43% of Britons and 73% of Londoners Live in Substandard Homes (Ind.)

• Crowd-Funded Legal Case Wants To See Politicians Jailed For Brexit Lies (Ind.)

• Rattled German CEOs Seek “Revival of Germany Inc.” (WS)

• Will Italy Leave the EU? Follow the Money (BBG)

• 15 Swiss Banks In Money Laundering ‘Red Zone’ (R.)

• China’s Crony Capitalism: The Dynamics of Regime Decay (Econ.)

• The Oil Market is Bigger Than All Metal Markets Combined (VC)

A wonderfully rich, must-read, multi-layered expose of the distance between various groups of Americans. Makes me wish Joe Bageant were still alive to shine his light on the elections.

• Dangerous Idiots: The Liberal Media Elite and Working-Class Americans (Smarsh)

Last March, my 71-year-old grandmother, Betty, waited in line for three hours to caucus for Bernie Sanders. The wait to be able to cast her first-ever vote in a primary election was punishing, but nothing could have deterred her. Betty – a white woman who left school after ninth grade, had her first child at age 16 and spent much of her life in severe poverty – wanted to vote. So she waited with busted knees that once stood on factory lines. She waited with smoking-induced emphysema and the false teeth she’s had since her late 20s – both markers of our class. She waited with a womb that in the 1960s, before Roe v Wade, she paid a stranger to thrust a wire hanger inside after she discovered she was pregnant by a man she’d fled after he broke her jaw.

Betty worked for many years as a probation officer for the state judicial system in Wichita, Kansas, keeping tabs on men who had murdered and raped. As a result, it’s hard to faze her, but she has pronounced Republican candidate Donald Trump a sociopath “whose mouth overloads his ass”. No one loathes Trump – who suggested women should be punished for having abortions, who said hateful things about groups of people she has loved and worked alongside since childhood, whose pomp and indecency offends her modest, midwestern sensibility – more than she. Yet, it is white working-class people like Betty who have become a particular fixation among the chattering class during this election: what is this angry beast, and why does it support Trump?

Former Australian foreign affairs minister and former NSW premier Bob Carr on the future after Trump.

• If You Think Donald Is Bad, Imagine Donald Trump 2.0 (Carr)

Amid the bleakness of Shakespeare’s King Lear one character, Edgar declares: the worst is not/so long as we can say “this is the worst”. Just when you think it can’t get any worse – Trump as candidate – here comes a more troubling prospect: the Trump next time, four years off, who defeats an unpopular President Clinton. It’s easy to tick off what gave the Republican nomination this time to a bossy, ignorant demagogue – the loss of industrial jobs, anxiety over borders and trade, racist resentment of minorities. Perhaps, as well, bewilderment at a multipolar world where America can’t get its way. None of these is about to fade. The anger of white working-class males, incited by Trump, is bound to simmer angrily at a distrusted woman in the White House imposing background checks for gun buyers and appointing three or four liberal justices to the Supreme Court.

After years of decline violent crime is increasing. The cost of Obamacare is rising and will need higher premiums and bigger subsidies. The Congressional Budget Office projects debt to rise from 2.9 to 4.9% of GDP over the decade. The US genius for innovation runs strong but the US system does a lousy job of distributing the gains. Stagnant real wages will feed grievance over immigration and there’s little a president can do about it. The US will continue to be defied – not just by Putin, even by President Duterte of the Philippines. North Korea or Syria are problems without solutions, leaving chauvinists to lament the US has never been more powerless. The truth is this catch cry has been thrown at every president since Harry Truman, including Ronald Reagan in his last years. But the US Right stridently insists America is surrounded by enemies.

The neo-cons who gave us Iraq and unleashed Islamic State are demanding America prove its greatness with new wars in the Middle East. If Clinton takes office on January 20 she will have been defined as “crooked Hillary” by Republican attacks over emails, the family foundation and paid speeches to Wall Street. Only one voter in three sees her as honest or trustworthy and she may have the lowest approval rating of any victor since polls began. No honeymoon. Little goodwill. Add lashings of misogyny to this toxic atmosphere and all is tailored for a Republican revival, and a revival with strong elements of Tea Party radicalism and Trump’s populist white nationalism. As a result the Republican Party of 2020 will be different from that of Reagan, the Bushes and McCain.

Funny how they stick to the term ‘assets’.

• Big Central Bank Assets Jump Fastest in 5 Years to $21 Trillion (BBG)

The world’s biggest central banks are bulking up their balance sheets this year at the fastest pace since 2011’s European debt crisis to boost lackluster economic recoveries with asset purchases that are supporting stock and bond prices. The 10 largest lenders now own assets totaling $21.4 trillion, a 10% increase from the end of last year. Their combined holdings grew by 3% or less in both 2015 and 2014. The accelerating expansion of central banks’ balance sheets comes as debate rages over whether their asset purchases and continued low interest rates are creating bubbles, especially in the bond market. Such quantitative-easing programs are aimed at driving up the prices of the securities they purchase to lower bond yields, encourage investment and boost economic growth.

The growth of central-bank holdings has coincided with the mostly upward trend of stock and bond prices. As the top 10 expanded their balance sheets by 265% since mid-October 2006, the MSCI All Country World Index of equities gained 19% and the Bloomberg Barclays Global Aggregate Index of bonds advanced 50%. Over the past decade, the Swiss National Bank expanded its holdings the most among those with the largest portfolios, almost eight-fold in U.S. dollar terms. The Bank of Russia was the least aggressive with a 68% increase. As the biggest banks’ holdings grew 10.4% this year, the stock gauge gained 3% and the bond benchmark jumped 7.4%. The BOJ and the ECB together have expanded their assets by $2.1 trillion since Dec. 31, more than accounting for all of the top 10’s combined increase. The balance sheets of the PBOC and the Fed fell 2% or less as the Swiss and the Central Bank of Brazil boosted their holdings 15% or more.

Ambrose agrees with Issing, but doesn’t like his explanations. The consequences of accepting that the euro has failed are too dire.

• Euro ‘House Of Cards’ To Collapse, Warns ECB Prophet (AEP)

The ECB is becoming dangerously over-extended and the whole euro project is unworkable in its current form, the founding architect of the monetary union has warned. “One day, the house of cards will collapse,” said Professor Otmar Issing, the ECB’s first chief economist and a towering figure in the construction of the single currency. Prof Issing said the euro has been betrayed by politics, lamenting that the experiment went wrong from the beginning and has since has degenerated into a fiscal free-for-all that once again masks the festering pathologies. “Realistically, it will be a case of muddling through, struggling from one crisis to the next. It is difficult to forecast how long this will continue for, but it cannot go on endlessly,” he told the journal Central Banking in a remarkable deconstruction of the project.

The comments are a reminder that the eurozone has not overcome its structural incoherence. A beguiling combination of cheap oil, a cheap euro, quantitative easing, and less fiscal austerity have disguised this, but the short-term effects are already fading. The regime is almost certain to be tested again in the next global downturn, this time starting with higher levels of debt and unemployment, and greater political fatigue. Prof Issing the lambasted the European Commission as a creature of political forces that has given up trying to enforce the rules in any meaningful way. “The moral hazard is overwhelming,” he said. The ECB is on a “slippery slope” and has in his view fatally compromised the system by bailing out bankrupt states in palpable violation of the Treaties.

“The Stability and Growth Pact has more or less failed. Market discipline is done away with by ECB interventions. So there is no fiscal control mechanism from markets or politics. This has all the elements to bring disaster for monetary union. “The no bail-out clause is violated every day,” he said, dismissing the European Court’s approval for bail-out measures as simple-minded and ideological. The ECB has “crossed the Rubicon” and is now in an untenable position, trying to reconcile conflicting roles as banking regulator, Troika enforcer in rescue missions, and agent of monetary policy. Its own financial integrity is increasingly in jeopardy. The central bank already holds over €1 trillion of bonds bought at “artificially low” or negative yields, implying huge paper losses once interest rates rise again.

[..] “During the first eight years, unit labour costs in Portugal rose by 30pc versus Germany. In the past, the escudo would have devalued by 30pc, and things more or less would be back to where they were.” “Quite a few countries – including Ireland, Italy and Greece – behaved as though they could still devalue their currencies,” he said. The elemental problem is that once a high-debt state has lost 30pc in competitiveness within a fixed exchange system, it is almost impossible to claw back the ground in the sort of deflationary world we face today. It has become a trap. The whole eurozone structure has acquired a contractionary bias. The deflation is now self-fulling. Prof Issing’s purist German ideology has no compelling answer to this.

Ah! Happy days!

• Let The Pound Fall and The Economy Rise (G.)

It has been just like old times. The pound has been falling on the foreign exchanges and, like a patient in intensive care, there are daily bulletins about its health. Charts show that when adjusted for different patterns of trade down the ages it is at its lowest for 168 years. If you have been gouged by a foreign exchange desk at Heathrow airport, this is a bad thing. If you consider sterling to be a symbol of national virility, it is a bad thing. If you think that the future for the UK outside the European Union is unremittingly bleak, it is definitely a very bad thing. But put the Brexit vote to one side for a second and ask yourself the following questions:

Is the economy currently unbalanced? Is growth too dependent on consumer spending and asset price bubbles? Is the productive base of the economy too small? Is it a problem that the UK is running a balance of payments deficit worth 6% of GDP, bigger than ever before in peacetime? If your answer to these four questions is yes – as it should be – then you need to accept that there is an upside to the falling pound. Indeed, many of those who are now talking about a sterling crisis were last year bemoaning the fact that Greece – trapped as it was inside the eurozone – did not have the benefit of a floating currency and so had to use a brutal internal devaluation involving wage cuts, pension reductions and welfare retrenchment to restore its competitiveness.

[..] Britain has discovered a way of living beyond its means. Assets are sold to overseas buyers bringing capital into the country to offset the balance of payments deficit. It is the equivalent of a once well-to-do household that has fallen on hard times pawning the silver to keep up appearances. At some point, referendum or no referendum, the financial markets were going to say enough is enough and it is delusional to think otherwise. Running permanent balance of payment deficits amounts to borrowing growth from the future. Sooner or later, it has to be paid back and Brexit means it will be sooner. A weaker pound works by making exports cheaper and imports dearer.

The effect, as after all the other devaluations and depreciations of the past 100 years – 1931, 1949, 1967, 1976, 1992 and 2007 – will make the economy less dependent on consumers and more reliant on producers. Lord Mervyn King, a former governor of the Bank of England, thinks the latest fall in sterling is a good thing and he is right. There have been suggestions from some in the remain camp that the hollowing out of manufacturing will make it impossible to gain any benefit from the cheaper pound. This, frankly, is nonsense. The current account deficit will shrink as a result of stronger exports from the manufacturing and service sectors, the boost provided to the tourism industry, and because cheaper domestic goods and services will be substituted for more expensive imports. To say that dearer imports will make life more difficult for consumers is to miss the point. That’s how rebalancing works.

“..just two years after the UK similarly rejected the gold standard back in 1931 there were just 12 remaining members versus the 45 that had previously been committed.”

• Europe’s Dramatic Fulcrum Point: Only Precedent Is 1930s (Hugh Hendry)

Since the Brexit referendum we have been developing our thoughts about what the Leave vote might mean, not just for the UK, but for the European project as a whole. An our main conclusion is that by doing the unthinkable and actually voting to leave, Brexit substantially increases the likelihood that other members of the European Union will also seek to break away. Remember, just two years after the UK similarly rejected the gold standard back in 1931 there were just 12 remaining members versus the 45 that had previously been committed. And the so far robust performance of the UK economy since the vote will do little to dissuade others from following suit.

So we have the precedent from a much earlier time (the 1930s) when the defection of just one member from a currency union caused the system to unwind rapidly. And we can clearly sense the seeds of another popular political revolt in other member countries; a flurry of upcoming elections and referendums provides an immediate catalyst. First of all we have the still too close to call US presidential election where a Trump victory would be hailed as a triumph for the same arguments that led to Brexit. Closer to home there is the Italian referendum on constitutional reform set for the first week in December, where it looks increasingly likely the government will be defeated.

Such a defeat would likely force Prime Minister Renzi to step down, potentially allowing populist parties to step into the resulting political vacuum and push a more nationalist agenda. 2017 is a big year for elections on the continent. In France both major parties have yet to decide on who will represent them in next year’s elections. But regardless of who the parties choose to run, both are likely to be pulled towards the distinctly anti-European nationalist agenda of Marine Le Pen who seems almost assured of reaching the second round run-off in the Presidential election next May.

And I kid you not, some people will still fail to see where Brexit came from.

• 43% of Britons and 73% of Londoners Live in Substandard Homes (Ind.)

More than four in 10 homes in Britain are falling short of an acceptable standard to live in, according to an alarming new report from the housing charity Shelter. Britons were asked if their homes met a series of conditions which together make up what Shelter has dubbed the “Living Home Standard”, and 43% said their home failed the test. The charity said it came up with the new criteria for what constitutes an acceptable place to live in consultation with the public. From having an affordable rent to being free from mould, pests and safety hazards, the list sets a “not unreasonable” standard which all homes should be meeting, Shelter said. Yet despite working with thousands of cases every week where homes are not up to scratch, even Shelter was shocked by how far the country was falling short.

Nearly one in five homes failed the Living Home Standard based on a lack of decent conditions. Some didn’t have running hot and cold water, others were not structurally sound, and many had serious pest infestations or issues with mould and damp. The research, conducted by Ipsos Mori, found more than one in four of the nearly 2,000 surveyed said their homes failed basic standards of affordability. In these cases, people had to cut back on essentials like food and heating just to pay their rent or mortgage, or they were worried those payments could rise to a level they would no longer be able to afford. And one in 10 respondents failed the test due to instability, mostly renters on short term contracts worried they could be kicked out of their homes at short notice.

“At Shelter we see all these problems every single day through our services, we help thousands of people every week, but even then – 43% was higher than we imagined,” Anne Baxendale, Shelter’s campaign chief, told The Independent. The problem appears particularly pronounced in London, where a staggering 73% said their home failed the test on some level. “It is really shocking, and it is up and down the country. Yorkshire is least badly affected – and it’s still one in four [failing],” Ms Baxendale said. “It’s affects people living in every kind of home, and people of all ages, but particularly the young. This is the start out in life that we are giving young people.

Comedy: “..the group wants to set a legal precedent in the common law that prevents political leaders from lying to the public..”

• Crowd-Funded Legal Case Wants To See Politicians Jailed For Brexit Lies (Ind.)

A crowd-funded project to prosecute politicians for “lying” during the EU referendum campaign has raised over £175,000 and now wants to see dishonest politicians jailed, the project’s founder has told The Independent. Marcus J. Ball, who founded the Brexit Justice campaign, says his team of lawyers are now building a case to take politicians to court to be held accountable for “dishonest” claims about Brexit. He set up the group online following the EU referendum citing his frustration at what he feels were misleading claims from some politicians during the campaign. After appealing for donations, he received more than £145,000 for legal fees as well as a salary of £32,000 for him to lead the project full time. Speaking to The Independent, Mr Ball admitted the project is a “highly ambitious and difficult challenge”.

However, he believes it is essential to make politicians accountable for broken promises: “We need to end this bizarre relationship we have with politicians, they are not untouchable. They are not above the law.” The 27-year-old, from Norwich, says the group wants to “set a legal precedent in the common law that prevents political leaders from lying to the public in the future. We also want to challenge the legitimacy of Brexit by legally establishing that it resulted from criminal wrongdoing on both sides.” Mr Ball said he is unable to discuss at this stage which politicians he will be singling out as the focus of the legal action. He told The Independent: “Now our solicitors have to build the case and formally instruct barristers, including some formidable QCs”.

I don’t think too many people have signed up to my statement that globalization is over. But Germany leans there, even if it’s heavily dependent on exports.

• Rattled German CEOs Seek “Revival of Germany Inc.” (WS)

About 20 German industry chieftains, rattled by the hits German companies have recently taken, including Deutsche Bank and Volkswagen, spent Saturday and Sunday two weeks ago on the phone with each other. They were fretting about the future of Germany’s export-dependent industry and outlining solutions. Some of the participants have since talked to the German daily, Die Welt, which published its report on Sunday. Participants included Siemens CEO Joe Kaeser, BASF CEO Kurt Bock, Deutsche Bank CEO John Cryan, BDI (Association of German Industry) president Ulrich Grillo, and BDI General Manager Markus Kerber. How to protect key industries in Germany is also topic of a paper being worked on by the Economy Minister Sigmar Gabriel and his folks, the Welt reported.

They’re searching for “protective walls,” and are working on a “list of options for actions to protect key German industries.” Finance Minister Wolfgang Schäuble and Finance State Secretary Thomas Steffen are in on it. For months, top executives and politicians have been discussing the impact of foreign governments on the “pillars of the German economy.” The recent “re-nationalization” of economic policies in many countries, in parallel with the “destabilization of the world,” scares these managers. “We are in a new phase in global politics, in which many countries are reverting to their national interests, where globalization is being turned back,” Kerber explained. Other executives have used similar words in their confidential conversations. Everyone is looking for answers. Nothing has been decided. Solutions are being worked on “behind the scenes.” And it shows, the Welt said, that “protectionism is suddenly no longer a dirty word” in business and politics.

JP Morgan and Qatar want to save Italy’s banks. That should never be allowed.

• Will Italy Leave the EU? Follow the Money (BBG)

Will Italy follow the UK’s example and leave the EU? Far-fetched as it may seem, capital flows suggest that some people aren’t waiting to find out. To keep the euro area’s accounts in balance, Europe’s central banks track flows of money among the members of the currency union. If, for example, a depositor moves €100 from Italy to Germany, the Bank of Italy records a liability to the Eurosystem and the Bundesbank records a credit. If a central bank starts building up liabilities rapidly, that tends to be a sign of capital flight. Lately, Italy’s central bank has been building up a lot of liabilities to the Eurosystem.

As of the end of September, they stood at about €354 billion, up €118 billion from a year earlier – and up €78 billion since the end of May, before the U.K. voted to leave the EU. The outflow isn’t quite as large as during the sovereign-debt crisis of 2012, but it’s still significant. The main beneficiary seems to be Germany, which has seen its credits to the Eurosystem increase by €160 billion over the past year. Here’s a chart showing the cumulative six-month flows between Italy and Germany and the rest of the euro area:

Why the accelerating outflows from Italy? One explanation is that people are worried about the state of the country’s banks, which are suffering the consequences of bad lending, poor governance and a new euro-area oversight system that makes rescues difficult. Another is political: Italian PM Matteo Renzi has staked his fate on a December government-reform referendum that, if it goes against him, could strengthen opponents who want to force a vote on whether Italy should remain in the EU. In that context, it’s not surprising that some depositors prefer not to hold Italian euros, given the chance that they might eventually be converted into lira. Either way, the capital flight doesn’t speak well of confidence in the European project – something EU leaders will have to keep in mind as they negotiate the terms of Britain’s exit.

Empty threats.

• 15 Swiss Banks In Money Laundering ‘Red Zone’ (R.)

Roughly 15 Swiss banks are in a “red zone” of lenders particularly exposed to money laundering risks, the head of Swiss banking watchdog FINMA said in a newspaper interview published on Sunday. Swiss federal prosecutors last week said that they have opened criminal proceedings against Zurich-based Falcon Private Bank for alleged failure to prevent suspected money laundering linked to Malaysia’s scandal-tainted 1MDB fund. Falcon is the second Swiss bank, after BSI, to face a criminal investigation by Switzerland’s Office of the Attorney General over links to 1Malaysia Development Berhad (1MDB). The move is partly based on an investigation by FINMA, which has also opened proceedings against several other lenders.

“We have introduced a warning system in relation to money laundering risks,” FINMA Chief Executive Mark Branson said in an interview with Swiss newspaper SonntagsZeitung. “Roughly 15 banks are in the red zone here. That means they are particularly exposed.” Branson did not name the banks concerned but said that most of them are involved in asset management and often have clients from emerging markets, adding that the lenders were from all areas of the country and of various sizes. Asked whether any major Swiss banks were among them, he said: “I would not use the plural, but yes.”

“To rebuild the loyalty of those who would continue to rule in the party’s name, its leaders went on to create the conditions in which officials at all levels could loot state property.”

• China’s Crony Capitalism: The Dynamics of Regime Decay (Econ.)

In 1989 the movement for democracy brought the Chinese Communist Party to within days of extinction. According to official reports, on one day alone, May 22nd, 6m people joined demonstrations in 132 cities across the country. The party’s immediate response was to use the people’s army to crush the people by force, in Tiananmen Square. To rebuild the loyalty of those who would continue to rule in the party’s name, its leaders went on to create the conditions in which officials at all levels could loot state property. Thus, the biggest democracy movement in history was countered by the greatest opportunity for predation the world has ever seen. China has never had a formal privatisation programme.

Instead, as Minxin Pei, a professor of government at Claremont McKenna College in California, writes in “China’s Crony Capitalism”, decentralising the rights of control over state property without clarifying the rights of ownership gave those who rule “maximum advantage to extract wealth from society”. Rights of control have been separated from rights of ownership in China—and where ownership is uncertain, control is key. Mr Pei’s book is quietly devastating. In sober, restrained language, he exposes the full gravity of corruption in China. Presenting a wealth of evidence, he shows that this is not the unfortunate by-product of rapid economic growth but the result of strategic choices by the party. With clinical precision, Mr Pei explains how corruption operates at every level, perverting each branch of the party-state and subverting the political authority of the regime.

The party cannot mitigate, let alone eradicate, “crony capitalism” because, since 1989, it has been “the very foundations of the regime’s monopoly of power”, the author argues. The conclusion, he believes, is that far from saving the regime, President Xi Jinping’s anti-corruption drive may accelerate its demise by creating divisions within the ruling elite even as it reinforces strong popular resentment of corruption. The state continues to hold the residual property rights to at least half of the net worth of the economy. Since 1978, when Deng Xiaoping launched his economic programme, the party-state has jealously guarded this walled garden for its officials and their business cronies. Throughout this time there has been some economic reform but no political reform. Thus the party, as Mr Pei points out, can only protect its interests with the full Leninist range of repressive instruments—and daily displays its willingness to do so.

Jeff fails to mention the chemical industry. But great graphics.

• The Oil Market is Bigger Than All Metal Markets Combined (VC)

Ever since the invention of the internal combustion engine, oil has been one of the most crucial commodities on Earth. Without it, modern transportation as we know it would not be possible. Industries such as aviation, aerospace, automobiles, shipping, and the military would look nothing like they do today. Of course, as we now know, this has all come with some extreme drawbacks from an environmental perspective. And while new green technology and the lithium revolution will aid in eventually reducing the role of oil in transportation, the fact is we still use 94 million barrels per day of crude worldwide.

As a result, the energy industry continues to have huge amounts of influence on our lives. Special interest groups with a focus on energy have influence on a domestic level. Meanwhile, from a foreign policy angle, countries like Saudi Arabia and Russia wield additional geopolitical and economic power because of their natural resources. It’s even arguable that everything from the Gulf War to the more recent Middle East interventions in Libya, Syria, and Iraq have been at least partially to do with oil. This week’s chart of the week aims to help explain the influence that oil has on countries and markets by using a very simple perspective: the size of the crude oil market vs. all metal markets combined.

Debt Rattle October 5 2016

Oct 052016

October 5, 2016 Posted by Raúl Ilargi Meijer at 9:12 am Finance Tagged with: coal, Deutsche, elite, Gundlach, high yield, IMF, NIRP, plastic, pound, refugees Comments Off

DPC El Paso, Texas 1903

• Existential Threat To World Order Confronts Elite At IMF Meeting (BBG)

• US High-Yield Default Rates Hit 6-Year High (S&P)

• Gundlach Says Deutsche Bank Shows Harm of Negative Rates (BBG)

• Jeff Gundlach Thinks A ‘Pivot’ Is Coming To Economic Policy (BI)

• Pound Sinks To 1985 Low, Is Likely ‘Going To Go Down The Tubes’ (CNBC)

• Manhattan Apartment Sales Plunge 20% (BBG)

• Rescue of Italy’s Monte dei Paschi Gets ‘Dark’ & ‘Complicated’ (DQ)

• China’s Efforts To Shrink Bloated Coal Industry May Have Worked Too Well (BBG)

• Obama Warned to Defuse Tensions with Russia (CN)

• ‘Great Pacific Garbage Patch’ Far Bigger Than Imagined (G.)

• At Least 28 Migrants Found Dead Off Libya (AFP)

Three things: First, in the jargon, “the backlash against globalization” has now become equal to the anti-trade movement. Which is nonsense: preferring another approach to trade is not the same as being against it altogether.

And second, look at that first graph! See that upward line at the end? Well, it’s an IMF growth ‘forecast’. Which are always so wrong, and always revised downward, that you must wonder if the term ‘forecast’ is even appropriate.

Third: “Existential Threat To World Order” ?! Isn’t that perhaps what the IMF and the rest of the elites themselves are?

• Existential Threat To World Order Confronts Elite At IMF Meeting (BBG)

Policy-making elites converge on Washington this week for meetings that epitomize a faith in globalization that’s at odds with the growing backlash against the inequities it creates. From Brexit to Donald Trump’s championing of “America First,” pressures are mounting to roll back the economic integration that has been a hallmark of gatherings of the IMF and World Bank for more than 70 years. Fed by stagnant wages and diminishing job security, the populist uprising threatens to depress a world economy that IMF Managing Director Christine Lagarde says is already “weak and fragile.” The calls for less integration and more trade barriers also pose risks for elevated financial markets that remain susceptible to sudden swings in investor sentiment, as underscored by recent jitters over Deutsche Bank’s financial health.

“The backlash against globalization is manifesting itself in increased nationalistic sentiment, against the outside world and in favor of increasing isolation,” said Louis Kuijs at Oxford Economics, a former IMF official. “If we lose consensus on what kind of a world we want to have, the world will probably be worse off.” In its latest World Economic Outlook released Tuesday, the fund highlighted the threats from the anti-trade movement to an already subdued global expansion. After growth of 3.2% in 2015, the world economy’s expansion will slow to 3.1% this year before rebounding to 3.4% in 2017, according to the report, keeping those estimates unchanged from July projections. The forecasts for U.S. growth were cut to 1.6% this year and 2.2% in 2017. “We’d like to see an end to the creeping protectionism in the world and more progress on moving ahead with free-trade agreements and other trade-creating measures,” Maurice Obstfeld, director of the IMF’s research department, said.

[..] Perhaps the biggest beneficiary of free trade over the past generation, China, still restricts access to many of its key industries, with economists worried about increasingly mercantilist policies. It’s also seeking a larger role in the existing global framework, with entry of the yuan into the IMF’s basket of reserve currencies on Oct. 1 the most recent example. An all-out trade war would be a disaster for China’s economy, with Trump’s threatened tariff potentially wiping off almost 5% of its GDP, according to a calculation by Daiwa Capital Markets. John Williamson, whose Washington Consensus of open trade and deregulation was effectively the governing ethos for the IMF and World Bank for decades, said the 2008-09 financial meltdown had undercut support for economic integration. “There was agreement on globalization before the crisis and that’s one thing that’s been lost since the financial crisis,” said Williamson.

Deteriorating quality of debt. Not good.

• US High-Yield Default Rates Hit 6-Year High (S&P)

The U.S. speculative-grade default rate has hit a six-year high of 4.79%, while the global default rate has crept to 4.04%, also a six-year high, according to S&P Global Fixed Income Research. Of course, the long-troubled energy sector plays a major role here. Excluding energy and natural gas companies, the U.S. default rate drops to 2.44%. Looking ahead, S&P says the number of ‘Weakest Links’ – issuers rated B- or lower, with either a negative outlook or implication – grew to 249 as of Sept. 20, the second-highest total since 2009.

“You cannot save your faltering economy by killing your financial system..”

• Gundlach Says Deutsche Bank Shows Harm of Negative Rates (BBG)

Famed bond investor Jeffrey Gundlach said Deutsche Bank’s slumping share price highlights the impact of the negative-interest-rate policy in Europe on the region’s lenders and may help prompt central bankers to reconsider their approach. “You cannot save your faltering economy by killing your financial system and one of the clear poster children for this is Deutsche Bank’s stock price,” Gundlach, 56, said at Grant’s Fall 2016 Investment Conference on Tuesday in New York. “If you keep these negative interest rate policies for a sufficient future period of time you are going to bankrupt these banks.” Europe’s banks have seen their value shrink by about $280 billion this year, with Deutsche Bank losing almost half its market value.

Germany’s largest lender extended losses after the U.S. Department of Justice last month requested $14 billion to settle a probe into residential mortgage-backed securities, sparking concerns that it will have to raise capital. While the Frankfurt-based bank would ultimately be rescued by the German government if needed, other banks in the region wouldn’t be able to count on such support, Gundlach said. “Deutsche Bank will be supported by Germany if push comes to shove,” he said. “But what about Credit Suisse, which has shown a similar decline in stock price? Who’s there to bail them out?”

More Gundlach. “I can bring back inflation by 5:00 pm by giving everyone $1 billion. The lines at BMW lots would be a sight to see..”

• Jeff Gundlach Thinks A ‘Pivot’ Is Coming To Economic Policy (BI)

Jeff Gundlach, Wall Street’s bond god, thinks the world of monetary and fiscal policy is about to pivot. “How in the world could we be talking about rates never going up when in fact rates have bottomed?” he asked the crowd of investors at the Grant’s Interest Rates Observer conference in New York City on Tuesday. He explained that it was on July 6th when he decided that the narrative that benchmark interest rates around the world would stay lower for longer was “getting quite old.” He cited several reasons: inflation is picking up, the dollar did not strengthen after the Federal Reserve raised rates the last time. Also there’s this: “In the investment world when you hear ‘never’,” ( as in rates are ‘never going up’), “it’s probably about to happen,” said Gundlach, who is CEO of DoubleLine Funds.

Now, an uptick in inflation and the dollar’s tolerance for higher rates are factors that don’t necessarily require urgency. And generally without urgency there is no change in policy. They are also factors he discussed in his last presentation, ‘Turning Points,’ back in September. But there is one thing that has changed since then. That thing is Deutsche Bank. “You cannot save your faltering economy by killing the financial system,” said Gundlach. That is, in effect, what low rates do. Over the last few weeks the world has watched as Deutsche Bank has struggled to convince investors and the public that it is in a sound fiscal position. Two weeks ago the US threatened the bank with a massive $14 billion fine for transgressions that led up to the financial crisis, and the bank’s stock really started to plummet.

In euros, Deutsche Bank’s stock price has hovered near the single digits. “There’s something about big banks being in the single digits that makes people nervous,” Gundlach said. He believes that Germany will bail out Deutsche Bank, despite the fact that the government has said that it intends to do no such thing. The problem isn’t Deutsche Bank in his mind, though — it’s other banks in a similar position that don’t have countries like Germany to bail them out. He mentioned Credit Suisse, arguing that Switzerland can’t handle a banking catastrophe its size.

So what will the new world order be if rates must go up to save international banks? “I can bring back inflation by 5:00 pm by giving everyone $1 billion. The lines at BMW lots would be a sight to see,” he joked. What he’s saying is that now is the time to pivot to fiscal stimulus. Both presidential candidates Donald Trump and Hillary Clinton have talked about spending hundreds of billions on infrastructure and other investments. Meanwhile, US debt to GDP has been stable since 2011, and no one is really talking about the deficit anymore. Here’s a key chart he showed to the crowd. It was also in his last presentation:

Sounds doable.

• Pound Sinks To 1985 Low, Is Likely ‘Going To Go Down The Tubes’ (CNBC)

Sterling’s tumble isn’t finished, Koon How Heng, a senior foreign-exchange strategist at Credit Suisse, told CNBC, as the currency dropped below July’s post-Brexit referendum low. “We still have a very negative view on the sterling,” Heng said. Sterling was fetching as little as $1.2683 in Asia trading hours on Wednesday, under the $1.2796 low it hit on July 6 in the wake of Brexit. Wednesday’s levels were down from levels over $1.30 last week and well off the high of $1.5018 the currency touched before the June 23 poll. The pair is currently at their lowest level since March 1985, when the pound neared parity with the U.S. dollar amid an acrimonious miners’ strike in the U.K. “Officially, our forecast for sterling dollar is at 1.25,” Heng told CNBC’s “Street Signs” just hours before the currency took its latest leg lower. “We would think it’s going to head lower. It’s probably going to go down the tubes.”

It’ll take more to prick that bubble.

• Manhattan Apartment Sales Plunge 20% (BBG)

There are a lot more apartments available for purchase these days in Manhattan. And fewer people are buying. Sales of previously owned condominiums and co-ops fell 20% in the third quarter from a year earlier as potential buyers grew cautious amid more choices, according to a report Tuesday from appraiser Miller Samuel and brokerage Douglas Elliman Real Estate. There were 5,290 resale apartments on the market at the end of September, 53% more than the number available in late 2013, the lowest point for listings. The swelling inventory is providing an opportunity to New Yorkers shut out of a market in which construction has been dominated by ultra-luxury condos aimed at the wealthiest buyers.

Resales, particularly those priced at less than $1 million, were in chronically short supply in recent years, and those that made it to the market sparked bidding wars. Now, more owners are listing apartments to profit from climbing values, and they’re finding lots of company. “Rapidly rising prices over the years have pulled more sellers into the market hoping to cash out,” Jonathan Miller, president of Miller Samuel, said in an interview. “But buyers are more wary. There isn’t the same intensity of activity to burn through the new supply.”

Funny, Don Quijones makes the same comparison I did last week between Monte dei Paschi and Goldman’s very lucrative and very shady derivatives deals enabling former Greek governments to hide debt. Italy has indicted MPS, Nomura and Deutsche Bank over MDP. Goldman was never charged over Greece.

• Rescue of Italy’s Monte dei Paschi Gets ‘Dark’ & ‘Complicated’ (DQ)

Shares of Monte dei Paschi di Siena, the world’s oldest bank and by now the world’s most famous penny stock, trade at €0.18. Things have gotten so bad that Italy’s financial markets regulator Consob extended the deadline and widened the scope of its ban on short selling of the bank’s shares. The restrictions were initially introduced on July 7 just after the bank’s shares had crashed 20% in one day. Since then they have shed a further 45%. Doubts continue to mount over the chances of success for the bank’s latest rescue program, its third since the Global Financial Crisis began. “The situation has got more complicated,” reported Il Corriere della Sera, one of Italy’s most influential newspapers. It’s also apparently quite “dark” — as in sinister.

“For weeks, MPS has been in the center of dark, worrying maneuvers,” said Azione Mps, an association of the bank’s retail shareholders. If the worst comes to the worst, the institution they’re invested in will either be bailed-in, resulting in a complete loss of their already basically worthless investment, and/or bailed-out by either Italy’s government or the ECB, in the process massively diluting the value of their already basically worthless shares. Nonetheless, “dark” is an interesting turn of phrase, especially given that the Italian bank’s latest desperate bid to save its derriere without outright state intervention is being led by America’s most corrupt financial institution (according to Forbes), JP Morgan Chase.

Also, in recent days MPS’ head offices, fittingly housed within a restored ancient fortress, have been transformed into a gargantuan crime scene after a Milan court ordered MPS, Nomura and Deutsche Bank to stand trial for a string of alleged financial crimes, including crimes that the Bank of Italy, under Mario Draghi’s tutelage, apparently knew about yet sat on its hands. The court also indicted 13 former and current managers from the three banks over the case, with prosecutors alleging they had used complex derivatives trades to conceal losses at MPS, in much the same way that Goldman Sachs helped the Greek government to conceal its mountain of excess debt with complex derivatives.

Rock and a hard place or two.

• China’s Efforts To Shrink Bloated Coal Industry May Have Worked Too Well (BBG)

China’s efforts to shrink its bloated coal industry may have worked too well, too fast. Prices have surged more than 50% this year after the government ordered miners to cut output to ease a glut and help lift the industry out of crisis. Now, as winter looms and fuel demand peaks, the consumer and producer of about half the world’s coal is having to relax some of those controls, or face even higher fuel costs, according to analysts at Citigroup and ICIS China, as well as China Coal Transport and Distribution Association. “The extent of the production cuts earlier this year has been too severe,” David Fang, a director with the CCTD, said. “Now the government is trying to fix the problem by relaxing some controls on output, but there is only limited time now before the winter arrives.”

The government earlier this year unveiled efforts to revitalize the coal industry and throw a lifeline to miners, many of them government-controlled, who struggled to repay debts as prices of the fuel used in power stations fell to the lowest in about a decade amid excess supply. President Xi Jinping’s administration ordered miners to lower output to the equivalent of 276 days of production, from the standard 330 days. And as part of the country’s broader “supply side structural reform,” regulators went after the industry’s massive overcapacity, cutting about 150 million tons of unneeded capacity as of August, out of a target of 500 million tons by 2020. The reforms may be a victim of their own success. Output fell more than 10% in the first eight months of this year, pushing up domestic prices and helping imports, including coking coal used to make steel, rise to the highest since December 2014.

Veteran Intelligence Professionals for Sanity.

• Obama Warned to Defuse Tensions with Russia (CN)

A group of ex-U.S. intelligence officials is warning President Obama to defuse growing tensions with Russia over Syria by reining in the demonization of President Putin and asserting White House civilian control over the Pentagon.
ALERT MEMORANDUM FOR: The President
FROM: Veteran Intelligence Professionals for Sanity
SUBJECT: PREVENTING STILL WORSE IN SYRIA

We write to alert you, as we did President George W. Bush, six weeks before the attack on Iraq, that the consequences of limiting your circle of advisers to a small, relatively inexperienced coterie with a dubious record for wisdom can prove disastrous.* Our concern this time regards Syria. We are hoping that your President’s Daily Brief tomorrow will give appropriate attention to Saturday’s warning by Russia’s Foreign Ministry spokesperson Maria Zakharova: “If the US launches a direct aggression against Damascus and the Syrian Army, it would cause a terrible, tectonic shift not only in the country, but in the entire region.”

Speaking on Russian TV, she warned of those whose “logic is ‘why do we need diplomacy’… when there is power… and methods of resolving a problem by power. We already know this logic; there is nothing new about it. It usually ends with one thing – full-scale war.” We are also hoping that this is not the first you have heard of this – no doubt officially approved – statement. If on Sundays you rely on the “mainstream” press, you may well have missed it. In the Washington Post, an abridged report of Zakharova’s remarks (nothing about “full-scale war”) was buried in the last paragraph of an 11-paragraph article titled “Hospital in Aleppo is hit again by bombs.” Sunday’s New York Times totally ignored the Foreign Ministry spokesperson’s statements.

In our view, it would be a huge mistake to allow your national security advisers to follow the example of the Post and Times in minimizing the importance of Zakharova’s remarks. Events over the past several weeks have led Russian officials to distrust Secretary of State John Kerry. Indeed, Foreign Minister Sergey Lavrov, who parses his words carefully, has publicly expressed that distrust. Some Russian officials suspect that Kerry has been playing a double game; others believe that, however much he may strive for progress through diplomacy, he cannot deliver on his commitments because the Pentagon undercuts him every time. We believe that this lack of trust is a challenge that must be overcome and that, at this point, only you can accomplish this.

Maybe the clean-up will work. But we add more faster.

• ‘Great Pacific Garbage Patch’ Far Bigger Than Imagined (G.)

The vast patch of garbage floating in the Pacific Ocean is far worse than previously thought, with an aerial survey finding a much larger mass of fishing nets, plastic containers and other discarded items than imagined. A reconnaissance flight taken in a modified C-130 Hercules aircraft found a vast clump of mainly plastic waste at the northern edge of what is known as the “great Pacific garbage patch”, located between Hawaii and California. The density of rubbish was several times higher than the Ocean Cleanup, a foundation part-funded by the Dutch government to rid the oceans of plastics, expected to find even at the heart of the patch, where most of the waste is concentrated. “Normally when you do an aerial survey of dolphins or whales, you make a sighting and record it,” said Boyan Slat, the founder of the Ocean Cleanup.

“That was the plan for this survey. But then we opened the door and we saw the debris everywhere. Every half second you see something. So we had to take snapshots – it was impossible to record everything. It was bizarre to see that much garbage in what should be pristine ocean.” The heart of the garbage patch is thought to be around 1m sq km (386,000 sq miles), with the periphery spanning a further 3.5m sq km. [..] Following a further aerial survey through the heart of the patch on Sunday, the Ocean Cleanup aims to tackle the problem through a gigantic V-shaped boom, which would use sea currents to funnel floating rubbish into a cone. A prototype of the vulcanized rubber barrier will be tested next year, with a full-sized 100km (62-mile) barrier deployed by 2020 if trials go well.

1000 on one crappy boat.

• At Least 28 Migrants Found Dead Off Libya (AFP)

Twenty-eight Europe-bound migrants were found dead on a day of frantic rescues off Libya on Tuesday, including at least 22 in an overloaded wooden boat, an AFP photographer and the Italian coastguard said. The photographer, who was able to go aboard the vessel, said it appeared that many of the dead had suffocated. He said there were about 1,000 people on three levels. He counted 22 bodies and said there were more dead in the hold. The Italian coastguard – which is coordinating rescue efforts in international waters north of Libya – said 28 bodies had been recovered over the course of 33 operations on Tuesday, while 4,655 migrants had been rescued.

The photographer was travelling on the Astral, a ship chartered by Spanish NGO ProActiva Open Arms, which rescues migrants at sea. Late on Tuesday, the Italian navy took over helping survivors and retrieving bodies, the photographer said. It was yet another day of drama at sea after more than 6,000 migrants, most of them Africans in packed rubber dinghies, were rescued off Libya on Monday. Nine bodies were found in those operations, including a pregnant woman.

Debt Rattle August 5 2016

Aug 052016

August 5, 2016 Posted by Raúl Ilargi Meijer at 9:46 am Finance Tagged with: bonds, elite, EU, evergreen, Gulen, Ike, peace, rate cut, Trump, Tsipras, war 1 Response »

G.G. Bain Three-ton electric sign blown into Broadway, New York. 1912

• New Tool for Central Banks: Buying Corporate Bonds (WSJ)

• UK Interest Rate Cut Is A ‘Hammer Blow’ For Workplace Pensions (G.)

• UK Labor Market Enters “Freefall” After Brexit Vote (R.)

• China Regulator Tells Banks to Evergreen Loans of Troubled Companies (ET)

• For Europe’s Elite the Party Lives On After Brexit (BBG)

• Tsipras Eyes Southern EU Alliance To Back Debt Deal (Kath.)

• The 60-Year Decay of American Politics (Bacevich)

• US Unlikely To Extradite Imam Turkey Blames For Coup (CNBC)

• How Europe Is Getting Rich by Fueling Its Own Terror Epidemic (TAM)

• War Or Peace: The Essential Question For American Voters On November 8th (RI)

Maybe we need to remind ourselves from time to time that we do NOT have functioning markets. Central banks buying up corporate bonds is of course about as distorting for markets as it comes.

We will yet take debt to its inevitable conclusion.

• New Tool for Central Banks: Buying Corporate Bonds (WSJ)

Central banks have a new favorite tool for boosting lackluster growth: corporate-debt purchases. Two months after the ECB started buying corporate bonds, the Bank of England said Thursday that it would adopt a similar strategy. It will buy as much as £10 billion ($13.33 billion) of U.K. corporate debt starting in September as part of a larger package of stimulus measures, including £60 billion of additional government-bond purchases. The move, investors and analysts say, is likely to drive down borrowing costs even further around the globe for large companies already benefiting from ultralow interest rates.

But the decision again raises concerns about possible side effects of unconventional monetary policies, including excessive risk taking by investors, and faces substantial skepticism from investors who doubt such programs meaningfully address the global economy’s core deficiencies, centering on soft demand for goods and services. Already this year, negative-interest-rate policies and aggressive bond buying by central banks in Japan and Europe have helped create trillions of dollars of negative-yielding government bonds. That in turn has driven down corporate-bond yields, leading to robust debt issuance among companies in the U.S., if not all developed countries.

In the U.S., the average yield of investment-grade corporate bonds was 2.85% Wednesday, compared with 3.67% at the end of 2015, according to Barclays data. The average spread to Treasury yields also has shrunk, to 1.48 percentage points from 1.72. Companies have issued $519.2 billion of investment-grade corporate bonds this year, just below their pace at this time last year when issuance ultimately reached a record $794.6 billion, according to Dealogic.

Wait till the stock market crashes, that’s when pensions will be hit.

• UK Interest Rate Cut Is A ‘Hammer Blow’ For Workplace Pensions (G.)

Pension savers could be big losers from the Bank of England rate cut, as critics warned of a “hammer blow” to workplace schemes and forecast that pension payouts would fall to record lows. Within minutes of the Bank’s decision to cut the base rate to 0.25%, yields on government bonds, otherwise known as gilts, dived to all-time lows. Companies that still offer final salary pension schemes will as a result see the cost of maintaining them soar. Hymans Robertson, a pensions consultancy, said the rate cut meant a £70bn increase in the amount company schemes needed to meet their commitments to scheme members, to a total of £2.4trn. “To put this in context, UK GDP currently stands at £1.8trn. This has pushed the aggregate UK [company scheme] deficit up to £945bn – the worst it has ever been,” it said.

Companies will have to find the money to fill the gap in their pension schemes, or like most already have, close them to new members. In extreme cases, some may attempt to redraw pension contracts to cap their future liabilities. Patrick Bloomfield of Hymans Robertson said: “Pension schemes are being hit hard by recent events, but we need to remember that the impact will not be felt equally by all … There are schemes with robust funding plans that don’t take more risk than they need to, which will be able to weather this. The gap between pension schemes that hedged their risks and those that haven’t is starker than ever before.”

A forced reset is not necessarily a bad thing.

• UK Labor Market Enters “Freefall” After Brexit Vote (R.)

Britain’s labour market entered “freefall” after the vote to leave the European Union, with the number of permanent jobs placed by recruitment firms last month falling at the fastest pace since May 2009, a survey showed on Friday. The monthly report from the Recruitment and Employment Confederation (REC) showed starting salaries for permanent jobs rose in July at the slowest pace in more than three years. Overall, the survey added to evidence that business confidence and activity slowed sharply after the June 23 vote to leave the European. “The UK jobs market suffered a dramatic freefall in July, with permanent hiring dropping to levels not seen since the recession of 2009,” said REC chief executive Kevin Green. “Economic turbulence following the vote to leave the EU is undoubtedly the root cause.”

Different countries have different ways of hiding their debt.

• China Regulator Tells Banks to Evergreen Loans of Troubled Companies (ET)

On the surface, China is talking the reform talk. But is it also walking the walk? There are many examples to demonstrate it isn’t. The most recent one is a directive from the China Banking Regulatory Commission (CBRC) to not cut off lending to troubled companies and evergreening bad loans. This first reported by The Chinese National Business Daily on Aug. 4. “A Notice About How the Creditor Committees at Banks and Financial Institutes Should Do Their Jobs” tells banks to “act together and not ‘randomly stop giving or pulling loans.’ These institutes should either provide new loans after taking back the old ones or provide a loan extension, to ‘fully help companies to solve their problems,’” the National Business Daily writes.

“It’s big news. A couple of weeks ago they were threatening Liaoning Province to cut off all lending to them if they didn’t tighten loan standards,” said Christopher Balding, a professor of economics at Peking University in Shenzen. “This is a pretty significant turn-around for them to do and it indicates how significant the problem is.” The official reform narrative is espoused in this Xinhua piece which claims China has to reform because there is no Plan B. “Supply-side structural reform is also advancing as the country moves to address issues like industrial overcapacity, a large inventory of unsold homes and unprofitable ‘zombie companies.’” Clearly resolving the bad debt of zombie companies is not high on the priority list.

Goldman Sachs complained in a recent note to clients that companies can default on payments and often nothing happens. The investment bank notes that companies like Sichuan Coal default on payments of interest and principal for weeks or months and then maybe pay creditors later. The company in question defaulted on 1 billion yuan ($150 million) worth of commercial paper in June but made full payments later during the summer, a somewhat arbitrary process. Another case is Dongbei Special Steel, which missed at least five payments on $6 billion of debt since the beginning of the year, but has done nothing to resolve the problem. This is why creditors wrote an angry letter to the local government to help resolve the issue.

Why the EU can’t be reformed.

• For Europe’s Elite the Party Lives On After Brexit (BBG)

Europe’s political elite may have missed the Brexit memo. Six weeks since U.K. voters rebuked the ruling class by choosing to leave the European Union, the region’s establishment has reacted by carrying on as before. The revolving door of former policy makers joining the finance industry has spun again, with European Commission President Jose Manuel Barroso signing up with Goldman Sachs and former Bank of England Governor Mervyn King joining Citigroup. Meanwhile departed Prime Minister David Cameron is facing criticism for nominating numerous aides for honors, including his wife’s stylist.

The perception of elite coziness risks further disenfranchising those backing Brexit, and peers across the continent who share the feeling of being left behind by the powerful and wealthy in the era of globalization and financial crises. A potential upshot is more support for populist parties that tap into alienation such as the U.K. Independence Party or France’s National Front. “Anything that doesn’t show government or public institutions in a good light merely confirms some of the attitudes that probably contributed to the Brexit vote,” said Chris Roebuck, a visiting professor at London’s Cass Business School. For some voters, “there is a group of people out there who aren’t normal people like you or me, who have benefited since the financial crisis – because they’re an elite.”

Tsipras already lost the ‘fight’. Beppe Grillo may lead such an alliance, not Tsipras.

• Tsipras Eyes Southern EU Alliance To Back Debt Deal (Kath.)

Prime Minister Alexis Tsipras is planning to forge an alliance with the leaders of other countries in Southeastern Europe in a bid to bolster Greece’s bid for a debt restructuring and lower the primary surplus targets set by creditors. Tsipras is expected to explore the prospects for such an alliance at a meeting of European socialist heads of state scheduled to take place in Paris on August 25, particularly with Italian Prime Minister Matteo Renzi and French President Francois Hollande. The meeting had originally been planned for May 20 in Rome but was postponed after an Egyptian passenger plane crashed in the Mediterranean. The Greek premier’s aim, according to sources, is to arrange a subsequent meeting in Athens, probably on September 9, and in any case before a scheduled European Union leaders’ summit on September 16, to further explore the prospect of forming a Southeastern European alliance.

Tsipras and Renzi had agreed at their last meeting on the sidelines of an EU summit on June 28 on the need for southern states to create their own growth-focused agenda, compared to the austerity prescribed by Northern European countries. At the time, Hollande and Portuguese Prime Minister Antonio Costa had appeared open to the prospect of such an alliance. In Athens, sources close to Tsipras believe the time is right to pursue the creation of a strong southern “axis” to counter the stance of countries in Northern Europe. The idea of a united front of Southern European countries was first mooted by leftist SYRIZA before the general elections of January 2015 that brought it to power.

At the time, Tsipras thought Athens would attract the solidarity of Southern European countries in SYRIZA’s rhetoric against austerity and that those countries would stand by Greece in its negotiations with international creditors. That solidarity did not transpire then. However, sources close to Tsipras believe the current situation is potentially more beneficial for Athens as the protracted imposition of austerity on Greece and elsewhere has increased the pressure on countries in Southern Europe. Athens is also hopeful about forming a common front on another crucial issue that has divided Southern and Northern European countries: the ongoing refugee crisis. Indications by Turkey that it might not honor a migrant deal with the EU have fueled concerns in Greece that a slowed migrant influx could pick up again.

Nostalgia. “And don’t kid yourself that things really can’t get much worse. Unless Americans rouse themselves to act, count on it, they will.”

• The 60-Year Decay of American Politics (Bacevich)

Presidential campaigns today are themselves, to use Boorstin’s famous term, “pseudo-events” that stretch from months into years. By now, most Americans know better than to take at face value anything candidates say or promise along the way. We’re in on the joke — or at least we think we are. Reinforcing that perception on a daily basis are media outlets that have abandoned mere reporting in favor of enhancing the spectacle of the moment. This is especially true of the cable news networks, where talking heads serve up a snide and cynical complement to the smarmy fakery that is the office-seeker’s stock in trade. And we lap it up. It matters little that we know it’s all staged and contrived, as long as — a preening Megyn Kelly getting under Trump’s skin, Trump himself denouncing “lyin’ Ted” Cruz, etc., etc. — it’s entertaining.

This emphasis on spectacle has drained national politics of whatever substance it still had back when Ike and Adlai commanded the scene. It hardly need be said that Donald Trump has demonstrated an extraordinary knack — a sort of post-modern genius — for turning this phenomenon to his advantage. Yet in her own way Clinton plays the same game. How else to explain a national convention organized around the idea of “reintroducing to the American people” someone who served eight years as First Lady, was elected to the Senate, failed in a previous high-profile run for the presidency, and completed a term as secretary of state? The just-ended conclave in Philadelphia was, like the Republican one that preceded it, a pseudo-event par excellence, the object of the exercise being to fashion a new “image” for the Democratic candidate.

The thicket of unreality that is American politics has now become all-enveloping. The problem is not Trump and Clinton, per se. It’s an identifiable set of arrangements — laws, habits, cultural predispositions — that have evolved over time and promoted the rot that now pervades American politics. As a direct consequence, the very concept of self-government is increasingly a fantasy, even if surprisingly few Americans seem to mind.

At an earlier juncture back in 1956, out of a population of 168 million, we got Ike and Adlai. Today, with almost double the population, we get — well, we get what we’ve got. This does not represent progress. And don’t kid yourself that things really can’t get much worse. Unless Americans rouse themselves to act, count on it, they will.

Can’t see US handing Gulen over on a platter, but Turkey is not done demanding his head. And many others.

• US Unlikely To Extradite Imam Turkey Blames For Coup (CNBC)

U.S. officials weren’t likely to extradite Fethullah Gulen, an imam Turkey blames for plotting the recent failed coup, The Wall Street Journal reported Thursday, citing people familiar with the discussion. Those people said the evidence presented so far by Turkey wasn’t convincing and U.S. officials were also concerned about Turkish officials’ threatening public statements, which made the fairness of his potential treatment questionable, the report said. Gulen, who lives in Pennsylvania, has denied wrongdoing, the report said.

Separately, Reuters reported that Turkey’s President Tayyip Erdogan pledged on Thursday to cut off revenues from businesses tied to the 75-year-old Gulen, which include schools, firms and charities. Even before the failed coup, authorities in Turkey had seized Islamic lender Bank Asya, closed media businesses and arrested businessmen on accusations of funding the imam’s movement, Reuters reported. The failed coup, which took place on July 15, left more than 230 dead. Since then, more than 60,000 people across various branches of government have been detained, suspended or put under investigation, Reuters reported. That’s spurred concerns Erdogan was cracking down on all dissent.

“68 flights that took place within 13 months transported weapons and ammunition to the Middle East, including to NATO member Turkey, which in turn “funnelled arms into brutal civil wars in Syria and Yemen.”

• How Europe Is Getting Rich by Fueling Its Own Terror Epidemic (TAM)

Though Europe does not have the rates of gun violence the United States continues to grapple with, European governments have made over a billion euros by fueling gun violence in the Middle East and North Africa. A report conducted by a team of reporters from the Balkan Investigative Reporting Network (BIRN) and the Organized Crime and Corruption Reporting Project (OCCRP) found a group of European nations has been funneling arms into the Middle East region since 2012, making at least 1.2 billion euros in the process. According to the report, 68 flights that took place within 13 months transported weapons and ammunition to the Middle East, including to NATO member Turkey, which in turn “funnelled arms into brutal civil wars in Syria and Yemen.”

The report also notes that these flights make up only a small portion of the 1.2 billion euros in arms deals between Europe and the Middle East since 2012. The report’s conclusions are horrifying, to say the least. The report states: “Arms export licenses, which are supposed to guarantee the final destination of the goods, have been granted despite ample evidence that weapons are being diverted to Syrian and other armed groups accused of widespread human rights abuses and atrocities.” Considering Europe is battling a continually rising terrorist threat, they seem to be going about tackling this issue the wrong way. Surely the best way to counter terrorism is to cease funding it in the first place.

One astounding aspect of the report is that the lucrative war-profiteering business involves nations the world would not usually regard as overly-interested in war. The countries contributing to the rising terror threat, as identified by the report, are Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, and Romania, among others. This report adds to the already glaring problem of European countries making billions of dollars off the death and destruction of Middle Eastern civilian life. The Stockholm International Peace Research Institute (SIPRI) found the United Kingdom was second only to the United States in arms sales, making up 10.4% of the total $401 billion worth of arms sold around the world for the 2014 period.

Trump for Peace. We have 3 months left to get used to that.

• War Or Peace: The Essential Question For American Voters On November 8th (RI)

In matters of substance as opposed to character assassination that both parties’ candidates have engaged in freely, what separates the candidates and makes it worthwhile to register and vote on November 8th is the domain of international relations. This, as a general rule, is the only area where a president has free hands anyway, whatever position his party holds in the Congress. Here the choice facing voters is stark, I would say existential: do we want War or Peace? Do we want to pursue our path of global hegemony, which is bringing us into growing confrontation with Russia, meaning a high probability of war, (the policy of Hillary Clinton), or do we want a harmonious international order in which the U.S. plays its role at the board of governors, just like other major world powers (the policy of Donald Trump).

Let me go one step further and explain what “war” means, since it is not something that gets much attention in our media, whereas it is at the top of the news each day in Russia. “War” does not mean Cold War-II, a kind of scab you can pick to indulge a pleasure in pain that is not life threatening. War means what our military like to call “kinetics” to mask the horror of it all. It means live ammunition, ranging from conventional to thermonuclear devices that can devastate large swathes of the United States if we play our hand badly, as would likely be the case for reasons I explain below should Hillary and her flock of Neocon armchair strategists take the reins of power in January 2017.

The European Union: Government by Deception

Jun 222016

June 22, 2016 Posted by Raúl Ilargi Meijer at 1:08 pm Finance Tagged with: bureaucrats, Cameron, democracy, elite, EU, Forsyth, Greece, midgets, Monnet, NHS 10 Responses »

Founding father of the EU, French economist and financier, Jean Monnet

Here are some snippets from Frederick Forsyth’s article:

Birth of superstate: Frederick Forsyth on how UNELECTED Brussels bureaucrats SEIZED power

There was nothing base or inhumane about Jean Monnet, the French intellectual now seen as the founding father of the dream, nor those who joined him: De Gasperi the Italian, Hallstein the German, Spaak the Belgian and Schumann the Frenchman. In 1945 they were all traumatised men. Each had seen the utter devastation of their native continent by war and after the second they swore to try for the rest of their lives to ensure nothing like it ever happened again. No one can fault that ambition.

First Monnet analysed what had gone wrong and became obsessed by one single fact. The German people had actually voted the Austrian demagogue into the office of chancellor. What could he, Monnet, learn from this? What he learned stayed with him for the rest of his life and stays with us today in the EU.

The continent of Europe, from western Ireland to the Russian border, from Norway’s North Cape to Malta’s Valletta harbour, must be unified into one huge superstate. Politically, socially, economically, militarily and constitutionally.

There could be no war between provinces so war would be banished. (For a man who had witnessed the Spanish Civil War that was an odd conclusion but he came to it. And there was more).

As coal, iron and steel were the indispensable sinews of war machinery, these industries should be unified under central control. Thus would also be prevented any single state secretly rearming. That at least had the benefit of logic and the Coal and Steel Community was his first success.

But the big question remained: how should this Europe-wide single state be governed? Then he came to the conclusion that still prevails today. In the 1930s democracy had failed. In Germany, Italy and elsewhere desperate people had flocked to the demagogues who promised full bellies and a job in exchange for marching, chanting columns.

So democracy must go. It could not be the governmental system of the new Utopia. It was not fit to be. (He was already president of the Action Committee for the Superstate, his official title. There is nothing new about the word superstate).

Instead there would be a new system: government by an enlightened elite of bureaucrats . The hoi polloi (you and me) were simply too dim, too emotional, too uneducated to be safely allowed to choose their governments.

It never occurred to him to devise a way to strengthen and fortify democracy to ensure that what happened in Italy and Germany in the 1920s and 1930s could not happen again. No, democracy was unsafe and had to be replaced. (This is not propaganda, he wrote it all down).

He faced one last stigma as he sought the support of the six who would become the kernel of his dream: Germany (still ruined by war), France (fighting dismal colonial wars in Indochina and Algeria), Italy in her usual chaos, Holland, Belgium and tiny Luxembourg. How could the various peoples ever be persuaded to hand over their countries from democracy to oligarchy, the government of the elite? Let me quote from what he wrote:

“Europe’s nations should be guided towards the Super-state without their people understanding what is happening. This can be accomplished by successive steps, each disguised as having an economic purpose, but which will eventually and irreversibly lead to federation.”

In other words he could not force them (he had no tanks). He could not bribe them (he had no money). He could not persuade them (his arguments were offensive). Hence the deliberate recourse to government by deception. Both nostrums continue to this day. Study the Remain campaign and the people behind it.

Almost without exception they are pillars of the establishment, London-based, accustomed to lavish salaries, administrative power and enormous privilege. None of this applies to 95% of the population. Hence the need for deception.

At every stage the Remain campaign has stressed the issue is about economics: trade, profits, mortgages, share prices, house values – anything to scare John Citizen into frightened submission. The gravy train of the few must not be derailed. Some of them are already sticking pins into a wax figurine of David Cameron for being soft enough to offer the proles a chance to recover their parliamentary democracy and thus their sovereignty.

Forsyth then continues with a bunch of typically British issues, and ends with:

[..] You have repeatedly been told this issue is all about economics. That is the conman’s traditional distraction. This issue is about our governmental system, parliamentary. Democracy versus non-elective bureaucracy utterly dedicated to the eventual Superstate.

Our democracy was not presented last week on a plate. It took centuries of struggle to create and from 1940 to 1945 terrible sacrifices to defend and preserve.

It was bequeathed to us by giants, it has been signed away by midgets.

Now we have a chance, one last, foolishly offered chance to tell those fat cats who so look down upon the rest of us: yes, there will be some costs – but we want it back.

The Only Thing That Grows Is Debt

Jun 082016

June 8, 2016 Posted by Raúl Ilargi Meijer at 2:18 pm Finance Tagged with: centralization, collapse, cycle, democracy, elite, EU, Growth, referendum, US 10 Responses »

Fred Stein Evening, Paris 1934

Two months ago, there was a referendum in Holland about an association agreement between the EU and Ukraine. A relatively new Dutch law states that with an X amount of signatures a referendum can be ‘forced’ by anyone. Before, during and -especially- after the vote, its importance was -and is actively being- pooh-poohed by both the Dutch government and the EU. That in itself paints the issue better than anything else. Both the call and the subsequent support for the referendum stem from resistance against exactly that attitude.

The Dutch voted No to the EU/Ukraine agreement. It was with a turnout not much above the validity threshold, but a large majority of those who did vote agreed they want no part of the deal. This puts Dutch PM Rutte in an awkward position, he can’t be seen ignoring the population. Well, at least not openly. The EU can’t validate the agreement, and with Holland still holding the chair of the Union until July 1, a meeting on the topic has been pushed forward until the last weekend of June. With Rutte still in charge, but only just, and with the June 23 UK Brexit vote decided.

Brussels is frantically looking for a way to push through the agreement despite the Dutch vote, and likely some sort of bland compromise will be presented, which Rutte’s spin doctors will put into words that he can -with a straight face- claim honor the vote while at the same time executing what that same vote specifically spoke out against.

The EU will claim that since 27 other nations did ‘ratify’ the agreement, the 67% of the 32% of Dutch voters who bothered to show up should not be able to block it. As they conveniently fail to mention that nobody in the other 27 countries had a chance to vote on the issue. Just imagine a Brexit-like vote in all 28 EU nations on June 23. Brussels knows very well what that would mean. There’s nothing it finds scarier than people having an active say in their lives.

All this is a mere introduction for what is a ‘western world wide’ trend that hardly anybody is able to interpret correctly. It what seems to many to be a sudden development, votes like the Dutch one are ‘events’ where people vote down incumbents and elites. But these are not political occurrences, or at least politics doesn’t explain them.

In the US, there’s Trump and Bernie Sanders. In Britain, the Brexit referendum shows a people that are inclined not to vote FOR something, but AGAINST current political powers. In Italy, a Five-Star candidate is set to become mayor of Rome, something two Podemos affiliated -former- activists have already achieved in Barcelona and Madrid.

All across Europe, ‘traditional’ parties are at record lows in the polls. As is evident when it comes to Brexit, but what when you look closer is a common theme, anything incumbents say can and will be used against them. (A major part of this is that the ’propaganda power’ of traditional media is fast coming undone.)

The collapse of the system doesn’t mean people swing to the right, as is often claimed, though that is one option. It means people swing outside of the established channels, and whoever can credibly claim to be on that outside has a shot at sympathy, votes, power, be they left or right. Whatever else it is they may have in common, first and foremost they’re anti-establishment.

To understand the reason all this is happening, we must turn our heads and face economics. Or rather, the collapse of the economy. Especially in the western world – the formerly rich world-, there is no such thing as separate political and economic systems anymore (if there ever were). There is more truth in Hazel Henderson’s quote than we should like: “economics [..] has always been nothing more than politics in disguise”.

What we have is a politico-economic system, with the former media establishment clinging to (or inside?!) its body like some sort of embedded parasite. A diseased triumvirate.

With the economy in irreversible collapse, the politico part of the Siamese twin/triplet can no longer hold. That is what is happening. That is why all traditional political parties are either already out or soon will be. Because they, more than anything else, stand for the economic system that people see crumbling before their eyes. They represent that system, they are it, they can’t survive without it.

Of course the triumvirate tries as hard as it can to keep the illusion alive that sometime soon growth will return, but in reality this is not just another recession in some cycle of recessions. Or, at the very minimum this is a very long term cycle, Kondratieff style, . And even that sounds optimistic. The system is broken, irreparably. A new system will have to appear, eventually. But…

‘Associations’ like the EU, and perhaps even the US, with all the supranational and global entities they have given birth to, NATO, IMF, World Bank, you name them, depend for their existence on an economy that grows. The entire drive towards globalization does, as do any and all drives toward centralization. But the economy has collapsed. So all this will of necessity go into reverse, even if there are very powerful forces that will resist such a development.

Despite what the media try to tell you, as do the close to 100% manipulated economic data emanating from various -tightly controlled- sources, the economy is not growing, and it hasn’t for years; the only thing that grows is debt. And you can’t borrow growth.

You can argue in fascinating philosophical debates about when this started, arguments can be made for Nixon’s 1971 abolishment of the -last vestiges of- the gold standard anywhere up to Clinton’s 1998 repeal of Glass-Steagall, or anything in between -or even after.

It doesn’t matter much anymore, the specifics are already gathering dust as research material for historians. The single best thing to do for all of us not in positions of politico/economic power is to recognize the irreversible collapse of the system. Since we all grew up in it and have never known anything else, that is hard enough in itself. But we don’t have all that much time to lose anymore.

The whole shebang is broke. This can easily be displayed in a US nominal debt vs nominal GDP graph:

That’s really all you need to know. That’s what broke the shebang. It is easy. And even if a bit more of the ‘surplus’ debt had been allowed to go towards the common man, it wouldn’t have made much difference. We’ve replaced growth with debt, because that is the only way to keep the -illusion of- the politico-economic system going, and thereby the only way for the incumbent powers to cling on to that power.

And that is where the danger lies. It’s not just that the vast majority of westerners will become much poorer than they are now, they will be forced to face powers-that-be that face the threat of seeing their powers -both political and economic- slip sliding away and themselves heading towards some sort of Marie-Antoinette model.

The elites-that-be are not going to take that lying down. They will cling to their statuses for -literally- dear life. That right there is the biggest threat we all face (including them). It would be wise to recognize all these things for what they really are, not for what all these people try to make you believe they are. Dead seriously: playtime is over. The elites-that-be are ready and willing to ritually sacrifice you and your children. Because it’s the only way they can cling on to their positions. And their own very lives.

It may take a long time still for people to understand the above, but it’s also possible that markets crash tomorrow morning and bring the facades of Jericho down with them. Waiting for that to happen is not your best option.