fire sale Archives - The Automatic Earth

No. The Fed took that leap in 2008. Bernanke himself talked about uncharted territory. Which is where they’ve been ever since. They literally don’t know what they’re doing.

• Fed To Take Historic Leap Into The Unknown (MW)

The Federal Reserve is set to take a leap into the unknown next week by beginning to sell some of the roughly $3.7 trillion of bonds and mortgage securities it amassed during the financial crisis. The Fed will meet on Tuesday and Wednesday and is widely expected at the end of the meeting to announce it plans to allow the run-off of its massive balance sheet beginning sometime in October. Fed Chairwoman Janet Yellen will hold a press conference afterwards to explain the decision. “It will be an historic day” for the Fed, said Lewis Alexander, chief U.S. economist at Nomura Securities, one the central bank has long thought about but was unsure when it would come. And still the final destination is unknown. “We are heading for a place that is very different from where we are now. It will take years to get there and figure out where we are,” Alexander said.

Trying to keep financial markets calm, the Fed is not celebrating this turning point. Officials have openly admitting they have designed the first steps to be so small it will be like watching paint dry. But economists have no doubt that bond yields will eventually move higher. “The Fed is just hoping desperately it has been transparent enough so that the adjustment will be orderly,” said Jim Glassman, head economist for the commercial bank at J.P. Morgan Chase. The central bank is trying to avoid a repeat “taper tantrum,” the swift run up of nearly 1 percentage point on the yield of the 10-year Treasury in 2013 after then-Chairman Ben Bernanke discussed the tapering of bond purchases for the first time. Fed officials have known they would have to reverse course eventually. Hawks and doves agree the policy is not sustainable over the medium term because it potentially adds too much stimulus to a healthy economy.

I don’t get how or why people can praise a man whose entire career has been one long litany of either wrong or intentionally bad decisions and policies. He was the teacher to all those central bankers who made all those decisions that the entire world will still be paying for many years from now. Fisher is the one outstanding symbol of everything that’s wrong in the shady area where finance touches politics.

• Janet Yellen’s Right-Hand Man Is Hanging Up His Boots (BI)

Federal Reserve Vice Chair Stanley Fischer announced last week he was resigning for personal reasons before the end of his term, opening yet another seat in the central bank’s powerful board for President Donald Trump to fill. The departure of Fischer, 73, represents a big loss of institutional knowledge and gravitas for the Fed at a time when many American institutions are sorely lacking in technocratic expertise. Fischer is considered the leader of a generation of prominent academic and professional economics, in part because he taught many of them at MIT. “He is often referred to as the dean of central bankers, having taught most central bankers including former Fed Chairman Ben Bernanke and ECB president Mario Draghi,” Shawn Baldwin, the chairman of AIA Group, wrote in a LinkedIn post. “Fischer’s departure creates a vacuum not easily filled, adding to the uncertainty in monetary policy.”

Larry Summers, the Harvard economist and former Treasury secretary, dubbed Fischer’s resignation “the end of an era.” Fischer, who was born in Zambia and later studied in London, started his career as an academic but became a policymaker at the World Bank and later the International Monetary Fund, where he rose to the role of first deputy managing director. Fischer then spent three years at Citigroup as a vice chairman before moving to Israel in 2005 to become the head of its central bank. Fischer returned to the US as Fed vice chairman in 2014. His term was not set to end until June 2018. “The Fed and the international monetary system will be weaker for his departure from official responsibility,” Summers wrote in a blog post. “Stan’s has been a singular career,” he said. “As an MIT professor he coauthored, with his close friend Rudi Dornbusch, the macro textbook that defined the basics of the field for a generation.

With Olivier Blanchard,” the former IMF chief economist, “he wrote the treatise that defined the state of the art for graduate students. His lectures were models of lucid exposition and balanced judgment. My view of monetary economics was shaped by my experience auditing his class in the Fall of 1978.” Not everyone is complimentary about the arc of Fischer’s career. To some, he represents the kind of establishment economics that led to financial instability and income inequality in many parts of the world. During his time at the IMF, Fischer became the face of austerity measures gone wrong. Many of his and the IMF’s recommendations for drastic spending cuts during the Asian financial crisis of the late 1990s have since been widely discredited as having made matters worse.

And that’s just the workers. Not their dependents. Or the unemployed.

• 97 Million American Workers Are Living Paycheck To Paycheck (ZH)

As we’ve noted time and time again, the number of Americans scraping by with almost no money in their savings account (if they even have a savings account) is staggeringly high – and growing. As the Motley Fool pointed out in a recent post, the St. Louis Federal Reserve, the personal saving rate in June 2017 was a measly 3.8%, or $3.80 for every $100 they earn. With the median household income in the US at just north of $50,000, that would amount to about $4,000 a year. And that’s when they’re saving money. Another study from GoBankingRates found that 69% of Americans surveyed had less than $1,000 in savings. And about one-third had no money in reserve.

Considering that the US economy is 70% based on consumption, Americans are probably over-consuming rather than saving. The Federal Reserve recently released data showing that aggregate credit card debt had hit an all-time high of $1.027 trillion, eclipsing the previous high that was set before the Great Recession. Add in another trillion of auto-loan debt and $1.4 trillion in student-loan debt, and the aggregate debt pile is not only larger than ever before – it’s growing at its fastest rate in decades. And in what’s perhaps the most troubling statistic highlighted by Motley Fool, a recent survey by CareerBuilder and The Harris Poll found that 78% of full-time US workers – nearly 100 million Americans – are now living paycheck to paycheck, up from 75% in 2016.

The survey suggested that only 19% of workers save more than $501 monthly, while at the other end of the spectrum, 56% were saving less than $100 a month, including 26% who saved nothing monthly. Fewer than one-third of respondents admitted to following a budget. Meanwhile, about half of respondents said they wouldn’t give up their internet, phone or car to save money. Maybe once the Federal Reserve has succeeded in “normalizing” interest rates, spendthrift Americans will have more of an incentive to save, while also making it more expensive to pay down debt – a powerful disincentive. Now, if only the central bank could find a way to revive stagnant wages…

Hendry has fallen prey to the central bankers. And shut his hedge fund.

• “Markets Are Wrong” (Hugh Hendry)

What if I was to tell you I wasn’t bearish on anything? Is that something you would be interested in? It wasn’t supposed to be like this and it is especially frustrating as nothing much has gone wrong with the economy over the summer. If anything we feel more convinced that our thesis of a healing global economy is understated: for the first time in an age all parts of the world are enjoying synchronised economic momentum and I can’t see it ending for some time. It’s just that our substantial risk book became strongly correlated over the short term to the maelstrom of President Trump and the daily news bombs emanating from the Korean Peninsula; that and the increasing regulatory burden which makes it almost impossible to manage small pools of capital today. Like I said, it wasn’t supposed to be like this…

But let me bow out by sharing my team’s views. For the implications of a sustained bout of economic growth are good for you. It’s good because it should continue to underwrite a continuation in the positive performance of global equities. I would stay long. It’s also good because I can’t see interest rates rising abruptly to interrupt the upward path of equities. And commodities have already acknowledged the upturn in the fortunes of the global economy and are likely to trend higher still. That’s a lot of good news. But it is bad news for me because funds like mine are required to demonstrate negative correlation with risk assets (when they go up like this I go down…), avoid large drawdowns and post consistent high risk adjusted returns. Oh, and I forgot, macro fund clients don’t like us investing in the stock market for the understandable fear that we concentrate their already considerable risk undertaking.

That proved to be an almighty puzzle for a fund like mine that has been proclaiming the stock market as a “safe-ish” bet ever since 2013. Let me explain the “markets are wrong and we boom now” argument. To begin with, and for the sake of clarity, I think we have to carefully go back and deconstruct the volatile engagement between capital markets and central banks for the last ten years for an understanding of where we stand today. The first die was cast by the central bankers in early 2009: having stared into the abyss of a deflationary spiral in 2008 the Fed and the BoE announced a radical new policy of bond purchases named Quantitative Easing. The bond market hated the idea as it was expected to cause a severe inflation problem.

Just yesterday I was telling a friend they would soon fire the next.

• Japanese Told To Find Shelter After North Korea ‘Fires New Missile’ (Y.)

North Korea has fired a ballistic missile directly over Japan. US Secretary of State Rex Tillerson branded the launch ‘reckless’ and called on China and Russia to take ‘direct action’ against Kim Jong-un, while Seoul responded to the test by launching the missiles of its own. The test sparked panic in Japan, where residents were immediately told to take shelter as the missile passed directly overhead – the second time Pyongyang has done so in the past few weeks. It flew over Hokkaido in northern Japan and fell into the Pacific Ocean, sparking a nationwide alert. South Korea said the missile probably reached an altitude of 770km and travelled 3,700km and called an urgent National Security Council meeting.

The North’s launch comes a day after it threatened to sink Japan and reduce the United States to “ashes and darkness” for supporting a U.N. Security Council resolution imposing new sanctions against it for its nuclear test on September 3. The severe sanctions include limits on imports of crude oil and a ban on exports of textiles – which is the country’s second biggest export, worth more than $700m a year. The North previously launched a ballistic missile from Sunan on August 29, which flew over Japan’s Hokkaido island and landed in the Pacific waters

Max is very crypto. But bitcoin et al had big overnight losses.

• JPMorgan Is In A Bubble And Not Bitcoin – Max Keiser (RT)

“JP Morgan, along with the entire finance sector, has been subsidized by the Federal Reserve’s corrupt practice of ‘financial repression’ that moves hundreds of billions from savers and pensioners, and workers, into JP Morgan and Jamie Dimon’s pocket. Jamie’s compensation is tied directly to manipulating JP Morgan’s stock and option prices, thanks to the Fed’s conflicted, corrupt, cozy malfeasance,” [..] “The US dollar, bond markets, and many property markets are in bubbles. Bitcoin and gold are the only financial assets not in bubbles.

To say bitcoin is fraudulent would be like saying gold is fraudulent. Some might say this, but no rational person would agree,” he said. “As the bubbles in fiat money, bonds and stocks pop, capital will flow into bitcoin, gold, and silver. At some point, when his customers start leaving JPMorgan and move to more bitcoin-focused options, Jamie will be forced to capitulate, or get replaced,”[..] “Bitcoin makes banks, essentially price gouging intermediaries and socially unacceptable leeches, obsolete. Bankers rightfully fear for their jobs as bitcoin replaces them,”

Nigel Gardner is a former European Commission spokesman.

• Why Europe Will Miss The Disruptive Brits (Gardner)

The UK’s constant digging-in of heels has allowed other governments to steer clear of negotiating clashes, safe in the knowledge that Britain and its Eurosceptic media would do the blocking of unpopular measures for them. Take the seemingly trivial example from 2013, of rules about how olive oil could be served in restaurants. “There was a daft proposal that it couldn’t be served in bowls or glass jugs at the table, but only in sealed sachets,” recalls a senior Dutch official. “We didn’t have to do anything – the Brits and their tabloids did the heavy lifting for us, and the proposal was withdrawn … Every time the European Commission proposes something, we know we can rely on the British to kick and shout so it’s blocked. With Brexit, that’s no longer going to be possible.”

Even that opt-out over the 48-hour week for which the UK fought its lonely battle is now – 20 years later – quietly being used by 15 other member states. So which country may end up replacing Britain as Europe’s new troublemaker-in-chief? Poland and Hungary are the obvious candidates because, across a whole range of areas, from civil liberties to media freedoms, the two countries find themselves at odds with the EU. As one senior EU official put it: “They are simply not in line with fundamental EU policies. As new member states they should be enthusiastic, but it’s the opposite.” Beata Szydlo, for example, tells us a lot about what the EU will look like after 2019 when Britain is supposed to exit. The Polish prime minister’s intemperate language at a recent European summit was previously the kind of thing the EU’s top brass expected only from the British.

She would not accept “blackmail from a leader with an approval rating of 4%” she raged against France’s then president François Hollande. Poland is now facing EU legal action over judicial reforms which Brussels says would undermine Polish democracy. Ironically, we may need to look to a more unlikely quarter to find Europe’s true new bad boy. Because post-Brexit, the Germans will end up being much more unpopular. “Without Britain,” one EU official told me, “they will have to assume the role they are historically reluctant to play.”

Indeed, the eurozone crisis provided a foretaste of how this could play out. With Britain outside the single currency, all the anger was directed against Germany and its chancellor, Angela Merkel, when things went wrong. Pictures of Merkel with a Hitler moustache were everywhere in the Greek press. And the old joke about Merkel arriving at Athens airport – the one where the border guard asks “Occupation?” and Merkel replies, “No, just visiting” – took on new life. Expect much more of this.

He might as well have called it Brexit’s British Question.

• Brexit’s Irish Question (Fintan O’Toole)

Brexit is, in a sense, a misnomer. There are five distinct parts of the UK: Scotland, Wales, Northern Ireland, the global metropolis that is Greater London, and what the veteran campaigner for democratic reform Anthony Barnett, in his excellent new book The Lure of Greatness, calls England-without-London. In three of these parts—Scotland, Northern Ireland, and London—Brexit was soundly rejected in last year’s referendum. Wales voted narrowly in favor of Brexit. But in England-without-London Brexit was triumphant, winning by almost 11%. It was moreover a classic nationalist revolt in that the support for Brexit in non-metropolitan England cut across the supposedly rigid divides of North and South, rich and poor. Every single region of England-without-London voted to leave the EU, from the Cotswolds to Cumbria, from the green and pleasant hills to the scarred old mining valleys.

This was a genuine nationalist uprising, a nation transcending social class and geographical divisions to rally behind the cry of “Take back control.” But the nation in question is not Britain, it is England. The problem with this English nationalism is not that it exists. It has a very long history (one has only to read Shakespeare) and indeed England can be seen as one of the first movers in the formation of the modern nation-state. The English have as much right to a collective political identity as the Irish or the Scots (and indeed as the Germans or the French) have. But for centuries, English nationalism has been buried in two larger constructs: the United Kingdom and the British Empire. These interments were entirely voluntary. The gradual construction of the UK, with the inclusion first of Scotland and then of Ireland, gave England stability and control in its own part of the world and allowed it to dominate much of the rest of the world through the empire.

Britishness didn’t threaten Englishness; it amplified it. Now, the empire is gone and the UK is slipping out of England’s control. Britain’s pretensions to be a global military power petered out in the sands of Iraq and Afghanistan: the British army was effectively defeated in both Basra and Helmand and had to be rescued by its American allies. The claim on Northern Ireland has been ceded, and Scotland, though not yet ready for independence, increasingly looks and sounds like another country. In retrospect, it is not surprising that the reaction to these developments has created a reversion to an English, rather than a British, allegiance. In the 2011 census, 32.4 million people (57.7% of the population of England and Wales) chose “English” as their sole identity, while just 10.7 million people (19.1%) associated themselves with a British identity only.

The torture never stops.

• IMF Is Set On Asset Quality Review For Greek Banks (K.)

Greece looks set for another difficult series of negotiations with its international creditors in the third review of its third bailout program, as IMF spokesman Gerry Rice made it clear on Thursday that the issue of the asset quality review of Greek banks (AQR) “will form part of the review.” He also said the Fund may demand new measures for next year, stressing that the programs evolve and conditions change. Citing the IMF report dated July 20 – when the Fund approved its participation in the Greek program “in principle” – Rice left no doubt as to whether the AQR would be discussed, branding it an important matter. This will likely cause friction with the European Central Bank, which has scheduled its own stress tests for the banks in 2018.

Sources in Frankfurt have noted that only if the Greek government asks for an AQR will the ECB authorize it. However, Athens, as a senior Finance Ministry official has said, has no such intention. Greek banks are obviously against any such project that would upset their operations, and had hoped that the IMF would eventually decide against raising the issue. In July the IMF had estimated that local lenders would need at least 10 billion euros in additional capital, raising the prospects of another recapitalization. Rice said on Thursday that the Fund is cooperating with the ECB and other European institutions on all issues, but added that “the stability of the credit system is of great significance for the program.”

For €45 million? An entire railway national company? How much is the kitchen sink?

• Greece Sells Its Railway Company To Italian State Operator (AP)

Greece has agreed to sell its railways company to Italy’s own state-owned operator for 45 million euros ($54 million) as part of its privatization drive. The country’s Asset Development Fund said Thursday that the sale of Trainose to Ferrovie Dello Stato Italiane completed a four-year process. Greece has pledged to carry out an ambitious privatization program as part of its international bailout, under which it has received billions of euros in emergency loans in return for overhauling its economy. Many of the privatizations have been met with resistance from unions. No trains were running on Thursday as the railway workers’ union called a 24-hour strike to protest the company’s sale.

An awful mess in more ways than one.

• Greek Oil Spill Forces Closure Of Athens Beaches (G.)

An emergency operation is under way to clean up an oil spill from a sunken tanker that has blackened popular beaches and bays in Athens’ Argo-Saronic gulf. What had been thought a containable spill is being described by officials as an ecological disaster after thick tar and oil pollution drifted toward residential coastal areas. By Thursday, four days after the 45-year-old Agia Zoni II sank off Salamína island, mayors in suburbs south of the capital were forced to close beaches, citing public health risks. “This is a major environmental disaster,” said the mayor of Salamína, Isidora Nannou-Papathanassiou. “Clearly the danger [of pollution] was not properly gauged, the currents have moved the spill.” The vessel sank while at anchor in the early hours of Sunday. It was carrying 2,500 tonnes of fuel oil and marine gas when it went down in mild weather.

It has emerged that only two of its 11-strong crew – the captain and chief engineer – were on board when it began to take on water. Both men have since been charged with negligence but freed on bail. The company operating the small, Greek-flagged vessel insisted it was seaworthy. Merchant marine officials said initial emphasis had been placed on sealing the vessel’s cargo holds to stop further leakage. The merchant marine minister, Panagiotis Kouroumblis, who has brought in help from abroad including an anti-pollution truck to collect the oil, ruled out further seepage on Tuesday, saying the ship’s hull had been secured. Late on Wednesday, however, the ministry’s general secretary, Dionysis Kalamatianos, raised the possibility that oil was still leaking from the vessel, telling Skai TV that efforts to seal it were “almost complete”.

The contradictory statements sparked accusations that authorities had not only underestimated the scale of the spill, but also lost valuable time in tackling it. The slick extends for miles, and some officials said the cleanup could last four months – much longer than the 20 days Kouroumblis estimated. In the Athens suburb of Glyfada, where floating dams have been set up and chemicals used to dissolve the spillage, the mayor, Giorgos Papanikolaou, said 28 tonnes of fuel had been removed from one beach alone. Images of of dead and oil-coated turtles and birds underscored the economic and environmental impact, and experts estimated it could take years before the affected area fully recovered.

The only good alternative energy is the one you don’t use.

• 100% Wishful Thinking: the Green-Energy Cornucopia (Cox)

At the People’s Climate March back last spring, all along that vast river of people, the atmosphere was electric. But electricity was also the focus of too many of the signs and banners. Yes, here and there were solid “System Change, Not Climate Change” – themed signs and banners. But the bulk of slogans on display asserted or implied that ending the climate emergency and avoiding climatic catastrophes like those that would occur a few months later—hurricanes Harvey and Irma and the mega-wildfires in the U.S. West—will be a simple matter of getting Donald Trump out of office and converting to 100-percent renewable energy.

The sunshiny placards and cheery banners promising an energy cornucopia were inspired by academic studies published in the past few years purporting to show how America and the world could meet 100% of future energy demand with solar, wind, and other “green” generation. The biggest attention-getters have been a pair of reports published in 2015 by a team led by Mark Jacobson of Stanford University, but there have been many others. A growing body of research has debunked overblown claims of a green-energy bonanza. Nevertheless, Al Gore, Bill McKibben (who recently expressed hope that Harvey’s attack on the petroleum industry in Texas will send a “wakeup call” for a 100-percent renewable energy surge), and other luminaries in the mainstream climate movement have been invigorated by reports like Jacobson’s and have embraced the 100-percent dream.

And that vision is merging with a broader, even more spurious claim that has become especially popular in the Trump era: the private sector, we are told, has now taken the lead on climate, and market forces will inevitably achieve the 100-percent renewable dream and solve the climate crisis on their own. [..] America does need to convert to fully renewable energy as quickly as possible. The “100-percent renewable for 100% of demand” goal is the problem. Scenarios that make that promise, along with the studies that dissect them, lead me to conclude that, at least in affluent countries, it would be better instead to transform society so that it operates on far less end-use energy while assuring sufficiency for all. That would bring a 100%-renewable energy system within closer reach and avoid the outrageous technological feats and gambles required by high-energy dogma. It would also have the advantage of being possible.

Quantum is per definition unbreakable. The CIA is not going to like it.

• China Takes The Lead In Building Quantum Data Security Networks (Axios)

For decades, physicists have looked to use the behavior of particles of light to securely send information. The basic science underlying quantum cryptography has been determined over the past 40 years, but a slew of papers published this summer by physicist Jian-Wei Pan establishes China as the early leader in deploying the technology on a global scale. Why it matters: Networks using quantum keys theoretically allow for very private communications and safe transactions — because if attacked, the key would be altered and the parties would know it wasn’t secure. That would be valuable for financial transactions or voting that involves transmitting information between two points. But beyond a handful of field tests, there hasn’t been a commitment to develop the technology at this scale until now.

How it works: Two people who want to communicate would share a number key encoded in a string of single photons (particles of light) that can be used to encrypt and decrypt a message. It’s secure because if someone tries to intercept the message, the photons would be physically altered and the key would no longer work, but the data would be secure. The vision: Optical fibers carry photons short distances on the ground (anything more than about 200 kilometers and the fiber absorbs the photon signal). So researchers want to pair them with satellites that can relay the signal and then drop it back down to a receiver on Earth. That goes on and on, ultimately carrying the information around the globe to the intended receiver. What they did: China built a 2,000-km fiber optic network between Beijing and Shanghai and launched a satellite last year — both dedicated to basic research on quantum satellite communications. So far, they’ve used it to:

• Send photons from the satellite to telescopes 1,200 km apart on the ground that acted as receivers. • Transmit quantum-encoded information from the ground to the satellite. • Distribute an actual quantum key string of photons from the satellite to the ground. • Shared the key between two ground receivers — during the day. (That’s key because light from the sun, moon and cities on Earth can drown out the photon signal. The current satellite only operates at night.) “They all together prove that a number of different concepts relevant for the quantum internet really do work in a space setting,” says Anton Zeilinger, a quantum physicist at the University of Vienna who was Pan’s advisor.

The bottom line: China’s achievements are more technological than scientific, but they represent a true advance in the development and deployment of these technologies, says Ray Newell of Los Alamos National Laboratory. He points out that many of the fundamental science and technologies for quantum key distribution were invented in the United States. (Satellite-based quantum key distribution was invented at Los Alamos, which holds the original patent for the technology.) Other countries possess the knowledge to build these systems, but China is the first to make a major investment. “In China, the decision to build it was done at the beginning, and then they went through with a lot of manpower and money,” says Norbert Lutkenhaus from the University of Waterloo.

The Only Real Europe is Greece

Sep 132017

September 13, 2017 Posted by Raúl Ilargi Meijer at 7:09 pm Finance Tagged with: austerity, EU, fire sale, Greece, investors, Juncker, Merkel, mob, property, sock puppet, sovereignty 2 Responses »

Eugene Delacroix Greece expiring on the Ruins of Missolonghi 1826

European Commission president Jean-Claude Juncker, famous for his imbibition capacity and uttering -not necessarily in that order- the legendary words “when it becomes serious, you have to lie”, presented his State of the Union today. Which is of pretty much limited interest because, as Yanis Varoufakis’ book ‘Adults in the Room’ once again confirmed, Juncker is nothing but ventriloquist Angela Merkel’s sock puppet.

But of course he had lofty words galore, about how great Europe is doing, and how that provides a window for more Europe, in multiple dimensions. Juncker envisions a European Minister of Finance (Dutch PM Rutte immediately scorned the idea), and he wants to enlarge the EU by inviting more countries in, like Albania, Montenegro and Serbia (but not Turkey!).

Juncker had negative things to say about Britain and Brexit, about Poland, Prague and Hungary who don’t want to obey the decree about letting in migrants and refugees, and obviously about Donald Trump: Brussels apparently wants ‘to make our planet great again’.

What the likes of Jean-Claude don’t seem to be willing to contemplate, let alone understand or acknowledge, is that the EU is a union of sovereign countries. The meaning of ‘sovereignty’ fully escapes much of the pro-EU crowd. And if they keep that up, it will break the union into pieces.

The European Court of Justice has ruled that Poland, the Czech Republic and Hungary must accept their migrant ‘quota’, as decided in Brussels, and that, too, constitutes an infringement on these countries’ sovereignty. And don’t forget, sovereignty is not something that can be divided into separate parts, some of which can be upheld while others are discarded. A country is either sovereign or it is not.

The single euro currency is already shirking awfully close to violating sovereignty, if not passing over an invisible line, and a European Finance Minister would certainly constitute such a violation. At some point, the politicians in all these countries will have to tell their voters that they’re about to surrender -more of- their sovereignty and become citizens of Merkel Land. But they don’t want to do that, because as soon as people would realize this, the pitchforks would come out and the union would be history.

The EU will be able to muddle on for a while longer, but Europe is not at all doing great economically (however, to maintain the illusion ECB head Draghi buys €60 billion a month in ‘assets’), and when the next crisis comes people will demand their sovereignty back. It really is that simple. And what will the negotiations look like to make that happen? 27 times Brexit?

The real Europe is not the one Juncker paints a portrait of. The real Europe is Greece. That’s where you can see the economic reality as well as the political one. Greece has no sovereignty left to speak of, despite the fact that it is guaranteed it in EU law. Europe’s political reality is about raw power. About the rich waterboarding the poor, to the point that they are turned from sovereign citizens of their countries into lost souls in debt prisons.

This week, another chapter has been added to the dismal annals of the Greek adventures in the European Union. It’s like the Odyssee, I kid you not. Like the previous chapters, this one will not solve the Greek crisis, or even alleviate it, but instead it will deepen it further, and not a little bit. This chapter concerns the forced auctioning of -real estate- properties.

Not to Greeks, 90% of whom can’t afford to buy anything at all, let alone property, but to foreigners, often institutional investors. At the same time, bad loans, including mortgage loans, will be offloaded for pennies on the dollar to that same class of ‘investors’. Once the Troika is done with this chapter, Greece will have seen capital destruction the likes of which the world has seldom if ever witnessed.

People in the country have a hard time understanding the impact:

Greece Property Auctions Certain To Drive Market Prices Even Lower

Ilias Ziogas, head of property consultancy company NAI Hellas and one of the founding members of the Chartered Surveyors Association, said that the property market is certain to suffer further as a result of the auctions: “The impact on prices will be clearly negative, not because the price of a property will be far lower at the auction than a nearby property, but because it will diminish demand for the neighboring property.”

[..]Giorgos Litsas, head of the GLP Values chartered surveyor company, which cooperates with PQH [..] told Kathimerini that the only way is down for market rates. “I believe that unless there is an unlikely coordination among the parties involved – i.e. the state (tax authorities, social security funds etc.), the banks and the clearing firms – in order to prevent too many properties coming onto the market at the same time, rates will go down by at least 10%.”

He noted that “we estimate the stock of unsold properties of all types comes to 270,000-280,000, in a market with no more than 15,000 transactions per year. Therefore the rise in supply will send prices tumbling.” Yiannis Xylas, founder of Geoaxis surveyors, added, “I fear the auctions will create an oversupply of properties without the corresponding demand, which translates into an immediate drop in rates that may be rapid if one adds the portfolios of bad loans secured on properties that will be sold to foreign funds at a fraction of their price.”

A 10% drop? Excuse me? Even in the center of Athens, rental prices for apartments that are not yet absorbed by Airbnb have plummeted. With so many people making just a few hundred euro a month that is inevitable. You can rent a decent place for €200 a month, and if you keep looking I’m sure you can find one for €100. An 80% drop?! But property prices would only go down by 10% in a market that has 20 times more unsold properties than it sells in a year?

The Troika creditors found they had to deal with attempts to prevent the wholesale fire sale of Greek properties. They now think they’ve found the solution. First, they will force the government to lower official valuations concerning the so-called “primary residence protection”, which protected homes valued at below €300,000 from foreclosure. Second, they will bypass the associations of notaries who refused to cooperate in ‘physical’ auctions, as well as protesters, by doing the fire sale electronically:

E-Auctions Of Foreclosed Property For First Time This Month In Greece

Environment and Energy Minister Giorgos Stathakis confirmed the development in statements to a local television station, announcing the relevant justice ministry is ready to begin electronic auctions in the middle of next week.At the same time, Stathakis noted that a law protecting a debtor’s primary residence from creditors will be expanded until the end of 2018. According to reports, the e-auctions will take place every Wednesday, Thursday and Friday over a four-hour period, i.e. from 10 a.m. to 2 p.m. or 2 p.m. to 6 p.m. Some 5,000 foreclosed commercial properties will be up for sale by the end of the year, which translates into 1,250 properties per month, on average.

Currently, the primary residence protection against foreclosure extends to properties valued (by the State tax bureau) at under €300,000, a very high threshold that shields the “lion’s share” of mortgaged residential real estate in the country, if judged by current commercial property values in Greece. Creditors and local lenders have called for a decrease in the protection threshold, a prospect that is very likely.

The development is also expected to generate another round of acrimonious political skirmishing, given that both leftist SYRIZA, and its junior coalition partner, the rightist-populist Independent Greeks party, rode to power in January 2015 on a election campaign platform that included an almost universal protection of residential property from bank foreclosures and auctions.

Associations representing notaries – professionals who in Greece are law school graduates specializing in drawing up contracts and maintaining registries of deeds, property transactions, wills etc. – had also blocked old-style auctions from taking place in district courts by ordering their members not to take part. The e-auction process aims to bypass this opposition, as well as disruptions and occupations of courtrooms by anti-austerity protesters.

The claim is that Greek banks must be made healthy again by removing bad loans from their books. The question is if selling both properties and bad loans to foreign institutional investors for pennies on the buck is a healthy way to achieve that. But yeah, if 50% of your outstanding loans are bad, you have a problem. Still, at the same time, the problem with that is that many if not most of those loans have turned sour because of the neverending carrousel of austerity measures unleashed upon the country. It’s a proverbial chicken and egg issue.

If Brussels were serious about Greek sovereignty, it would make sure that Greek homes were to remain in Greek hands. You can’t be sovereign if foreigners own most of your real estate. By bleeding the country dry, and forcing the sale of Greek property to Germans, Americans, Russians and Arabs, the Troika infringes upon Greek sovereignty in ways that will scare the heebees out of other EU nations.

It’s not for nothing that the entire Italian opposition is talking about a parallel currency next to the euro. That is about sovereignty.

5,000 Greek Properties Under the Electronic Auction System by End of 2017

Auctions of foreclosed properties to settle bad debts are seen as key to returning Greek banks to health by helping reduce the burden of non-performing loans. These currently stand at roughly €110 billion, or 50% of the banks’ total loans. Under pressure from its lenders, in the summer of 2016 the Greek government passed measures allowing the sale of delinquent mortgages and small business loans to international funds, a move seen by many as yet another betrayal by the SYRIZA-led government.

Greek banks won’t return to health, they’ll simply shrink the same way the people do who can’t afford to rent a home or eat decent food. Austerity kills entire societies, including banks. If Mario Draghi would decide tomorrow morning to include Greece in his €60 billion a month QE bond-buying program, and Greece could use that money to stop squeezing pensions and wages, and no longer raise taxes and unemployment, both the people AND the banks could return to health. It would take a number of years, but still.

Attica! Attica!

Whatever you call what happens to Greece, and what’s been happening for nearly 10 years now, whether you call it fiscal waterboarding or Shock Doctrine, it is definitely not something that has a place in a union of sovereign nations bound together in mutual respect and dignity. And that will ensure the demise of that union.

Another aspect of the fire sale is the valuation of the properties austerity has caused to crumble (so many buildings in Athens are empty and falling apart, it’s deeply tragic, at times it feels like the entire city is dying). The press calls it a hard task, but that doesn’t quite cover it.

It’s not just about mortgages, many Greeks simply give up their properties because they can’t afford the taxes on them. People that inherit property refuse to accept their inheritance, even if it’s been in their families for generations, and it’s where they grew up. In that sense, it may be good to lower valuations to more realistic levels. But tax revenues will plunge along with the valuations, and the government is already stretched silly. Add a new tax, then?

Greece Property Value Review A Hard Task

The government is facing a daunting task in adjusting the so-called objective values (the property rates used for tax purposes) to market levels by the end of the year, as its bailout agreement dictates. The huge slump in transactions and the forced sales of properties due to their owners’ debts do not lead to any safe conclusions for the values per area. One in four sales are conducted with prices that lag the objective value by 60-70%, and the prices of 2008 by 70-80%. The Finance Ministry must overcome all the obstacles to bring to Parliament all the necessary adjustments and regulations.

Moreover, once the objective values are brought in line with market rates, the government will have to maintain the same amount of revenues from the Single Property Tax (ENFIA) either by raising the tax’s rates or by introducing a new tax in the form of the old Large Property Tax.

Furthermore, once the objective values are reduced by 40-50% to match the going prices, banks may see problems with their capital adequacy, as lenders will incur losses by having to revise the collateral they get. Mortgage loans in Greece amount to €59.44 billion, of which 42%, or €25.4 billion are nonperforming.

Yeah, there’s the health of the banks again. And the government. And the people. A wholesale fire sale is the worst possible thing that could happen at this point in time. Greece needs help, stimulus, hope, not more austerity and fire sales. Juncker and his Berlin ventriloquist have this all upside down and backwards, squared. The one thing the EU cannot afford itself to do, is the one thing it engages in.

They may as well pack in the whole thing today, and go home. Actually, that would be by far the best option, because more of this will inevitably lead to the very thing Europe prides itself in preventing for the past 70 years: battle, struggle, war, fighting in the streets, and worse. If the EU cannot show it exists for the good and benefit of its people, it no longer has a reason to exist.

Saving the banks in the richer countries by waterboarding an entire other country is not just the worst thing they could have thought of, it’s entirely unnecessary too. The EU and ECB could easily have saved Greece from 90% of what it has gone through, and will go through going forward, at virtually no cost at all. But yes, German, French, Dutch banks would likely have had to cut the bonuses of their bankers, and their vulture funds couldn’t have snapped up the real estate quite that cheaply.

Summarized: the EU is a disgrace, morally, politically, economically. I know that French President Macron on the one side, and Yanis Varoufakis’ DiEM25 movement on the other, talk about reforming the EU. But the EU is the mob, and you don’t reform the mob. You dismantle their organization and then you lock them up.

Debt Rattle December 2 2016

Dec 022016

December 2, 2016 Posted by Raúl Ilargi Meijer at 10:34 am Finance Tagged with: austerity, bonds, China, fire sale, meltdown, oil, OPEC, outflows, Putin, Renzi, Trump 2 Responses »

Harris&Ewing Washington, DC, Storm damage..” Between 1913 and 1918

• Global Bonds Suffer Worst Monthly Meltdown as $1.7 Trillion Lost (BBG)

• What’s Causing The Fire Sale In The Bond Market (CNBC)

• Donald Trump Promises to Usher In New ‘Industrial Revolution’ (WSJ)

• Trump Will End Growth-Zapping Fiscal Austerity – McCulley (CNBC)

• China’s Central Bank Is Facing a Major New Headache (BBG)

• Rural China Banks With $4 Trillion Assets Face Debt Test (BBG)

• Obama Set To Block Chinese Takeover Of German Semiconductor Supplier (BBG)

• QE Infinity Eyed In Europe If Renzi Loses Crucial Italian Referendum (CNBC)

• December 4 Could Trigger the “Most Violent Economic Shock in History” (IM)

• How Putin, Khamenei And Saudi Prince Got OPEC Deal Done (R.)

• Russian Oil Output Near Post-Soviet Record as It Prepares to Cut (BBG)

• US Veterans Arrive At Pipeline Protest Camp In North Dakota (R.)

• Joy As China Shelves Plans To Dam ‘Angry River’ (G.)

• World’s Growing Inequality Is ‘Ticking Time Bomb’: Nobel Laureate Yunus (R.)

• This Is The Most Dangerous Time For Our Planet (Stephen Hawking)

Things get crowded, it’s inevitable. And much more so in manipulated markets.

• Global Bonds Suffer Worst Monthly Meltdown as $1.7 Trillion Lost (BBG)

The 30-year-old bull market in bonds looks to be ending with a bang. The Bloomberg Barclays Global Aggregate Total Return Index lost 4% in November, the deepest slump since the gauge’s inception in 1990. Treasuries extended declines Thursday along with European bonds on speculation that the ECB will consider sending a signal that stimulus will eventually end. The reflation trade has been driving markets since Donald Trump’s election victory due to his promises of tax cuts and $1 trillion in infrastructure spending. Calling an end to the three-decade bond bull market is no longer looking like a fool’s errand: the Federal Reserve is expected to raise interest rates again – and do so more often than once a year, inflationary expectations are climbing and there are hints global central banks may buy less sovereign debt going forward.

Investors pulled $10.7 billion from U.S. bond funds in the two weeks after Trump’s victory, the biggest exodus since 2013’s “taper tantrum,” while American stock indexes jumped to records. “The market has moved with remarkable swiftness to price in the anticipated reflationary impact of a Trump administration,” said Matthew Cairns, a strategist at Rabobank International in London. “This has, in turn, prompted a notable rotation out of fixed income and into equities.” Still, Cairns cautioned the moves are “remarkable given the distinct lack of clarity as regards what policies the president-elect will actually pursue.” November’s rout wiped a record $1.7 trillion from the global index’s value in a month that saw world equity markets’ capitalization climb $635 billion.

Eevrybody’s been on the same side of the boat for too long.

• What’s Causing The Fire Sale In The Bond Market (CNBC)

There’s a fire sale in the bond market, and the November jobs report could make it burn even hotter. The wild move came amid speculation that Friday’s employment report could be better-than-expected and drive interest rates even higher. Interest rates surged Thursday, with the 10-year yield spiking as much as 12 basis points at its peak, to 2.49%, the highest yield since June 2015. Yields move inversely to prices and rates snapped higher across the whole yield curve. The 2-year pressed up against 1.17% and the 30-year rose to as high as 3.15%. In afternoon trading, some of the selling subsided, and the 10-year yield slipped back to just under 2.44%, but 2.50 is being watched as the next psychological line in the sand.

“In order to stay above 2.50, it’s got to be a really good number. The way we’re going, it’s like an unhinged market. It’s also going to be counterproductive for things down the road. This is not a healthy adjustment in rates. There’s going to be some losses on this,” said George Goncalves at Nomura. The 10-year yield affects consumer loans especially home mortgage rates, which have already risen near 4%, slowing borrowing activity. The 2-year is the rate most closely watched as a signal about the market’s expectation for Fed rate activity. The Fed is expected to hike rates Dec. 14 but traders have been speculating a stronger economy could force it into a faster hiking cycle next year.

Strategists say Thursday’s rate spike was driven by a combination of factors and at the same time inexplicable in its scope. The overriding themes are that the world is moving to a higher interest rate environment and for the first time in years, there could be inflation. OPEC’s deal to cut production Wednesday, drove oil prices 15% higher in just two days, ramping up inflation expectations that already had been on the rise.

“There is no global anthem, no global currency..”

• Donald Trump Promises to Usher In New ‘Industrial Revolution’ (WSJ)

President-elect Donald Trump on Thursday said his administration would usher in a new “Industrial Revolution,” one of numerous promises he made in Cincinnati as he began a nationwide “Thank You” tour following his Nov. 8 election. Mr. Trump used the 53-minute speech, the first of its kind since he became president-elect, to reflect on his victory but also to outline a number of goals, many of them lofty, for his term as president. The speech was more than just thematic, however. He said for the first time that on Monday he would announce that he was nominating Ret. Gen. James Mattis as his first secretary of defense. Mr. Trump promised sweeping changes to trade policy, national security, infrastructure, military spending and immigration. He said he wanted to work with Democrats but said he could get the work done without them, even without his supporters.

“Now that you put me in this position, even if you don’t help me one bit, I’m going to get it done,” he said. “Don’t worry.” The Cincinnati rally resembled, in some ways, the campaign rallies he held for months as his candidacy gained steam during the year. There were chants of “U.S.A.,” and vendors sold Trump campaign memorabilia. But there was one notable difference: with the election over, the crowd was far smaller[..] During his speech, he stuck to many of his campaign promises. He said a wall would be built along the U.S.-Mexico border. He said his administration would “repeal and replace” the Affordable Care Act. He said the Trump administration would seek plans and deals that benefited Americans first and not get duped into deals with other countries. “There is no global anthem, no global currency,” he said. “We pledge allegiance to one flag, and that flag is the American flag.”

It’ll fail. You can’t ‘make’ growth.

• Trump Will End Growth-Zapping Fiscal Austerity – McCulley (CNBC)

Economist Paul McCulley told CNBC on Thursday he’s had a “big ax to grind” with Washington for years over the need for more deficit spending, and it appears Republican Donald Trump may actually be the one to deliver. The stock market rally since Trump won the presidential election has been reflecting that notion, argued McCulley, who said he voted for Democrat Hillary Clinton. “The market is essentially celebrating the end of fiscal austerity. And it just happens to be a vehicle of Mr. Trump. But the end of fiscal austerity is the key economic issue.” “My big ax to grind in recent years — not months but years — is that we needed to have more fiscal policy expansion, because we’re in a liquidity trap,” said McCulley, former chief economist at Pimco. He said too much responsibility has fallen on the Federal Reserve for growing the economy.

“We needed some help with larger budget deficits.” “I’ve never had an issue with increasing the size of the budget deficit. I think it’s been too small. I have zero problem with increased public investment and funding it with deficits,” he said. “To the extent that Mr. Trump wants to do that, I think that is the right Keynesian policy.” McCulley was referring to the British economist John Maynard Keynes, who is often credited with the concept of deficit spending as a means of fiscal policy. “My biggest complaints for the person I voted for, Mrs. Clinton, is that she said, ‘I will not add a penny to the national debt.’ That was basically putting you in a straightjacket of fiscal austerity forever,” said McCulley, senior fellow in financial macroeconomics at Cornell Law School.

Mundell: “..nations can’t sustain a fixed exchange rate, independent monetary policy, and open capital borders all at the same time..”

• China’s Central Bank Is Facing a Major New Headache (BBG)

People’s Bank of China Governor Zhou Xiaochuan already has one policy headache with the currency falling to near an eight-year low. He could have an even bigger one next month. That’s when a $50,000 cap on how much foreign currency individuals are allowed to convert each year resets, potentially aggravating capital outflow pressures that are already on the rise. If just 1% of China’s almost 1.4 billion people max out those limits, that’s an outflow of about $700 billion – more than the estimated $620 billion that Bloomberg Intelligence estimates indicate has already flowed out in the first 10 months of this year. Middle class and wealthy Chinese have been converting money into other currencies to protect themselves from devaluation, exacerbating downward pressure on the yuan.

Outflows could intensify if Federal Reserve interest-rate hikes fuel further dollar appreciation. That leaves Zhou in a bind identified by Nobel-prize winning economist Robert Mundell as the “impossible trinity” – a principle that dictates nations can’t sustain a fixed exchange rate, independent monetary policy, and open capital borders all at the same time. “At a moment like this, you have to compare two evils and pick the less-worse one,” said George Wu, who worked as a PBOC monetary policy official for 12 years. “Capital free flow may have to be abandoned in order to maintain a relatively stable currency rate.” China is moving further away from balance among trinity variables, at least temporarily, and “it may take a while before the situation stabilizes” for the yuan and capital outflows, said Wu, who’s now chief economist at Huarong Securities in Beijing.

[..] rather than raise borrowing costs to try to make domestic returns more attractive – China has added new restrictions on the flow of money across its borders. They include a pause on some foreign acquisitions and bigger administrative hurdles to taking yuan overseas, people familiar with the steps have told Bloomberg News. China should cut intervention in foreign exchange markets while stepping up capital control, Yu Yongding, a former academic member of the PBOC’s monetary policy committee, said Friday at a conference in Beijing. Yuan internationalization shouldn’t be promoted too aggressively, said Yu, a senior research fellow at the Chinese Academy of Social Sciences.

About $1.5 trillion has exited the country since the beginning of 2015. While China still has the world’s largest foreign exchange stockpile, the hoard shrank in October to a five-year low of $3.12 trillion, PBOC data show. That means there’s less in the armory to battle depreciation if China’s famously frugal savers park more cash abroad. The outflow pressure rose in January as individuals socked away a record amount in domestic bank accounts denominated in other currencies. Household foreign deposits surged 8.1% to $97.4 billion, according to the central bank, for the biggest jump since it began tracking the data in 2011. Those holdings stood at $113.1 billion in October.

The correct way to write this is: “Assets”.

• Rural China Banks With $4 Trillion Assets Face Debt Test (BBG)

Bond investors are weighing rising risks that smaller Chinese banks will fail against growing signs the government will do anything to avoid a financial meltdown. A lender called Guiyang Rural Commercial Bank in the southwestern province of Guizhou sparked concern that risks among smaller lenders are spreading after its rating outlook was cut last month following a jump in overdue loans to 30% of the total. That compares with just 3% at the nation’s biggest lender. Short-term borrowing costs surged for the riskiest lenders including rural commercial banks, which hold 29 trillion yuan ($4.2 trillion) of assets, 13.4% of the total amount in China’s banking system.

Yet confidence in the government’s readiness to step in and offer support to struggling borrowers is rising as authorities allow a credit-fueled recovery of manufacturing activity, helping an official factory gauge match a post-2012 high last month. While 17 onshore public bonds defaulted in the first half of the year, there have since been only seven. The combination of government support and desperation for yield helps explain why Guiyang Rural was able to sell a junior bond at 4.7% last month, 1.7 %age points less than a similar offering last year. “Investors have yet to suffer losses from any bank capital securities, which adds to their confidence,” said He Xuanlai at Commerzbank.

“Smaller banks have a less diversified business profile and will likely get less support from the central government compared with bigger banks. Still, the base case is the government is still not ready to let any bank fail in a disorderly way.” That assumption has helped cut the extra yield investors demand to hold AA- rated five-year bank subordinated notes over AAA rated peers to a record low of 81 basis points, from 113 at the start of the year. There are some positive fundamentals. Rural banks are tied with the big five state-owned banks for the best Tier 1 capital ratio at 12%, according to an analysis by Natixis.

And Germany says what?

• Obama Set To Block Chinese Takeover Of German Semiconductor Supplier (BBG)

U.S. President Barack Obama is poised to block a Chinese company from buying Germany’s Aixtron, people familiar with the matter said, which would mark only the third time in more than a quarter century that the White House has rejected an investment by an overseas buyer as a national security risk. The president is expected Friday to uphold a recommendation by the Committee on Foreign Investment in the U.S. that the sale of the semiconductor-equipment supplier to China’s Grand Chip Investment should be stopped, according to the people, who asked not to be identified as the details aren’t public. Blocking the €670 million ($714 million) acquisition would mark the second time Obama has rejected a deal on national security grounds. The first was in 2012 when he stopped Chinese-owned Ralls Corp. from developing a wind farm near a Navy base in Oregon.

Before that, in 1990 then-president George H.W. Bush stopped a Chinese acquisition of MAMCO, an aircraft-parts maker. CFIUS reviews purchases of U.S. companies by foreign buyers and pays particular attention to purchases of technology, especially when it has defense applications. It has a say in the Aixtron deal because the company has a subsidiary in California and employs about 100 people in the U.S., where it generates about 20% of its sales. Aixtron technology can be used to produce light-emitting diodes, lasers, transistors, solar cells, among other products, and can have military applications in satellite communications and radar. Northrop Grumman, a major U.S. defense contractor, is among its customers, according to a Bloomberg supply chain analysis. “It will be extremely difficult for China’s state owned enterprises to do deals in the semiconductor industry looking forward,” said He Weiwen at the Center for China and Globalization.

A No vote is also a vote against the ECB.

• QE Infinity Eyed In Europe If Renzi Loses Crucial Italian Referendum (CNBC)

Dovish words from the ECB this week have fueled speculation of more accommodative monetary policy if Italians reject constitutional reforms this weekend, but one economist has told CNBC that it might not be that simple. “The market believes that we are basically in for QE infinity in Europe and that might be a stretch of the imagination,” said Elga Bartsch, Morgan Stanley’s global co-head of economics. While the Morgan Stanley economist acknowledged the rhetoric emanating from ECB President Mario Draghi this week arguably did imply there could be a so-called “Draghi put” in the case of a “no” vote in the referendum, she also posited that this view was somewhat simplistic.

“There was strong communication from him (Draghi) and a number of executive board members at the ECB, but at the same time, the views of the broader council and among the national central bank governors seem to be a little bit more mixed,” she explained. “For instance, the debate as to whether instead of extending by six months at €80 billion, just to do nine months of €60 billion doesn’t really want to go away,” Bartsch noted.

“December 4 referendum fails >> M5S comes to power >> Italians vote to leave the euro currency >> European Union collapses.”

• December 4 Could Trigger the “Most Violent Economic Shock in History” (IM)

The Five Star Movement (M5S) is Italy’s new populist political party. It’s anti-globalist, anti-euro, and vehemently anti-establishment. It doesn’t neatly fall into the left–right political paradigm. M5S has become the most popular political party in Italy. It blames the country’s chronic lack of growth on the euro currency. A large plurality of Italians agrees. M5S has promised to hold a vote to leave the euro and reinstate Italy’s old currency, the lira, as soon as it’s in power. That could be very soon. Given the chance, Italians probably would vote to return to the lira. If that happens, it would awaken a monetary volcano. The Financial Times recently put it this way: “An Italian exit from the single currency would trigger the total collapse of the eurozone within a very short period. It would probably lead to the most violent economic shock in history, dwarfing the Lehman Brothers bankruptcy in 2008 and the 1929 Wall Street crash.”

If the FT is even partially right, it means a stock market crash of historic proportions could be imminent. It could devastate anyone with a brokerage account. Here’s how it could all happen… On December 4, Italian Prime Minister Matteo Renzi’s current pro-EU government is holding a referendum on changing Italy’s constitution. In effect, a “Yes” vote is a vote of approval for Renzi’s government. A “No” vote is a chance for the average Italian to give the finger to EU bureaucrats in Brussels. Given the intense anger Italians feel right now, it’s very likely they’ll do just that. According to the latest polls, the “No” camp has 54% support and all of the momentum. Even prominent members of Renzi’s own party are defecting to the “No” side.

If the December 4 referendum fails, Renzi has promised to resign. Even if he doesn’t, the loss would politically castrate him. In all likelihood his government would collapse. (Italian governments have a short shelf life. There have been 63 since 1945. That’s almost a rate of a new government each year.) One way or another, M5S will come to power. It’s just a matter of when. If Renzi’s December 4 referendum fails—and it looks like it will—M5S will likely take over within months. Once it’s in power, M5S will hold a referendum on leaving the euro and returning to the lira. Italians will likely vote to leave. [..] December 4 referendum fails >> M5S comes to power >> Italians vote to leave the euro currency >> European Union collapses.

Don’t be fooled: it’s all Putin, the one non-OPEC voice. And he’s playing the rest like so many fiddles.

• How Putin, Khamenei And Saudi Prince Got OPEC Deal Done (R.)

[..] Heading into the meeting, the signs were not good. Oil markets went into reverse. Saudi Prince Mohammed had repeatedly demanded Iran participate in supply cuts. Saudi and Iranian OPEC negotiators had argued in circles in the run-up to the meeting. And, then, just a few days beforehand, Riyadh appeared back away from a deal, threatening to boost production if Iran failed to contribute cuts. But Putin established that the Saudis would shoulder the lion’s share of cuts, as long as Riyadh wasn’t seen to be making too large a concession to Iran. A deal was possible if Iran didn’t celebrate victory over the Saudis. A phone call between Putin and Iranian President Rouhani smoothed the way.

After the call, Rouhani and oil minister Bijan Zanganeh went to their supreme leader for approval, a source close to the Ayatollah said. “During the meeting, the leader Khamenei underlined the importance of sticking to Iran’s red line, which was not yielding to political pressures and not to accept any cut in Vienna,” the source said. “Zanganeh thoroughly explained his strategy … and got the leader’s approval. Also it was agreed that political lobbying was important, especially with Mr. Putin, and again the Leader approved it,” said the source. On Wednesday, the Saudis agreed to cut production heavily, taking “a big hit” in the words of energy minister Khalid al-Falih – while Iran was allowed to slightly boost output. Iran’s Zanganeh kept a low profile during the meeting, OPEC delegates said.

Zanganeh had already agreed the deal the night before, with Algeria helping mediate, and he was careful not to make a fuss about it. After the meeting, the usually combative Zanganeh avoided any comment that might be read as claiming victory over Riyadh. “We were firm,” he told state television. “The call between Rouhani and Putin played a major role … After the call, Russia backed the cut.”

As you can see here, Putin even prepared for the cuts: all Russia needs to cut is that 2016 production surge. Which may have been untenable to begin with. And it catches out those who haven’t created a surge, but will have to cut anyway.

• Russian Oil Output Near Post-Soviet Record as It Prepares to Cut (BBG)

Russia, the world’s largest energy exporter, held November output near a post-Soviet record , which is likely to remain a high-water mark in the near term after a pledge to cut production. Russian crude and condensate production averaged 11.21 million barrels a day in November, compared with a record 11.23 million barrels a day in October, according to the Energy Ministry’s CDU-TEK statistics unit. Russia promised to support a push by OPEC to reduce a global oil oversupply after the group agreed to cut production by 1.2 million barrels a day on Wednesday.

Energy Minister Alexander Novak pledged Russia would cut its own output by as much as 300,000 barrels a day, a stronger move than the previously preferred position of a freeze. Russia will make a gradual reduction over the first half of the year starting in January, Novak said Thursday. The reduction, supported by Russian oil producers, would be spread proportionally among companies, he said without providing further detail. Gazprom Neft and Novatek led Russian output growth in November compared with a year earlier, although both companies posted lower oil production than October, according to the data.

“I bought a one-way ticket [..] Hopefully we can shut this down before Christmas.”

• US Veterans Arrive At Pipeline Protest Camp In North Dakota (R.)

U.S. military veterans were arriving on Thursday at a camp to join thousands of activists braving snow and freezing temperatures to protest a pipeline project near a Native American reservation in North Dakota. However, other veterans in the state took exception to the efforts of the group organizing veterans to act as human shields for the protesters, saying the nature of the protests reflected poorly on the participants. Protesters have spent months rallying against plans to route the $3.8 billion Dakota Access Pipeline beneath a lake near the Standing Rock Sioux reservation, saying it poses a threat to water resources and sacred Native American sites.

State officials on Monday ordered activists to vacate the Oceti Sakowin camp, located on U.S. Army Corps of Engineers land near Cannon Ball, North Dakota, citing harsh weather conditions. Officials said on Wednesday however that they will not actively enforce the order. Matthew Crane, a 32-year-old Navy veteran who arrived three days ago, said the veterans joining the protest were “standing on the shoulders of Martin Luther King Jr and Gandhi” with the their plans to shield protesters. “I bought a one-way ticket,” he told Reuters as he worked to build a wooden shelter at the main camp. “Hopefully we can shut this down before Christmas.”

[..]Veterans Stand for Standing Rock, a contingent of more than 2,000 U.S. military veterans, intends to reach North Dakota by this weekend and form a human wall in front of police, protest organizers said on a Facebook page. The commissioner of the state’s Department of Veterans Affairs, who appeared at the West Fargo event, said he was worried about the involvement of individuals who have been in war situations. “We’re going to have veterans that we don’t know anything about coming to the state, war time veterans possibly with PTSD and other issues,” Lonnie Wangen told Reuters. “They’re going to be standing on the other side of concertina fence looking at our law enforcement and our (National) Guard, many of whom have served in war zones also,” he added. “We don’t want to see veterans facing down veterans.”

“Thirty years ago there were 50,000 rivers in China; today there are less than 23,000.”

• Joy As China Shelves Plans To Dam ‘Angry River’ (G.)

Environmentalists in China are celebrating after controversial plans to build a series of giant hydroelectric dams on the country’s last free-flowing river were shelved. Activists have spent more than a decade campaigning to protect the Nujiang, or “angry river”, from a cascade of dams, fearing they would displace tens of thousands of people and irreparably damage one of China’s most spectacular and bio-diverse regions. Since the start of this year, hopes had been building that Beijing would finally abandon plans to dam the 1,750-mile waterway, which snakes down from the Tibetan plateau through some of China’s most breathtaking scenery before entering Myanmar, Thailand and eventually flowing into the Andaman Sea.

On Friday, campaigners said that appears to have happened after China’s State Energy Administration published a policy roadmap for the next five years that contained no mention of building any hydroelectric dams on the Nu. “I am absolutely thrilled,” said Wang Yongchen, a Chinese conservationist and one of the most vocal opponents of the plans, which first surfaced in 2003. Wang, who has made 17 trips to the Nu region as part of her crusade to protect the river, said geologists, ecologists, sociologists and members of the public who had been part of the campaign could all take credit for halting the dams. “I think this is a triumph for Chinese civil society,” the Beijing-based activist said. Stephanie Jensen-Cormier, the China programme director for International Rivers, said environmentalists were “very happy and very excited” at what was a rare piece of good news for China’s notoriously stressed waterways.

“The state of rivers in China is so dismal. Thirty years ago there were 50,000 rivers in China; today there are less than 23,000. Rivers have completely disappeared. They have become polluted, they have become overused for agriculture and manufacturing,” she said. “So it is so exciting when a major river – which is a major river for Asia – is protected, at least where it flows in China.” Jensen-Cormier said the shelving of plans to dam the Nu – which is known as the Salween in Thailand and the Thanlwin in parts of Myanmar – represented “a great turning point for the efforts to preserve China’s rivers”. “It is a really good indication that China is starting to look at other ways of developing energy, and renewable energies especially, that mean they don’t have to sacrifice their remaining healthy river.”

I don’t know, I think perhaps many people are born followers: “People are not born to be job seekers – they are entrepreneurs by nature..”

• World’s Growing Inequality Is ‘Ticking Time Bomb’: Nobel Laureate Yunus (R.)

The widening gap between rich and poor around the world is a “ticking time bomb” threatening to explode into social and economic unrest if left unchecked, Nobel Peace laureate Muhammad Yunus said on Thursday. The banking and financial system has created a world of “the more money you have, the more I give you” while depriving the majority of the world’s population of wealth and an adequate standard of living, Yunus told the Thomson Reuters Foundation. “Wealth has become concentrated in just a few places in the world … It’s a ticking time bomb and a great danger to the world,” said the founder of the microfinance movement that provides small loans to people unable to access mainstream finance.

Yunus cited Donald Trump’s victory in the U.S. presidential election on Nov. 8 and Britain’s vote to leave the EU on June 23 as expressions of popular anger with ruling elites who have failed to stem the widening global wealth gap. A 2016 report by charity Oxfam showed that the wealth of the world’s richest 62 people has risen by 44% since 2010, with almost half of the super-rich living in the United States, while the wealth of the poorest 3.5 billion fell 41%. “This creates tension among people at the bottom (of the income ladder). They blame refugees and minorities – and unscrupulous politicians exploit this,” said Yunus [..]

To break free from an unequal financial system that disadvantages the poor, people should use their creative energy to become entrepreneurs themselves and spread wealth among a broader base of citizens, said Yunus. “People are not born to be job seekers – they are entrepreneurs by nature,” he said, adding that businesses that are focused more on doing social good than generating maximum profit can help to rectify economic and gender inequality. “If wealth comes to billions of people, this wealth will not come to the top one percent (of rich people), and it will not be easy to concentrate all the wealth in a few hands,” he said.

It’s a little painful to see Hawking lose himself in a field of logic that is not his. He claims we should go to Mars, but then he says earth is our only planet. Isn’t it true that the time and energy dispensed in efforts to get to Mars might be better used in saving earth? Or are we going to claim we can do both?

• This Is The Most Dangerous Time For Our Planet (Stephen Hawking)

As a theoretical physicist based in Cambridge, I have lived my life in an extraordinarily privileged bubble. Cambridge is an unusual town, centred around one of the world’s great universities. Within that town, the scientific community that I became part of in my 20s is even more rarefied. And within that scientific community, the small group of international theoretical physicists with whom I have spent my working life might sometimes be tempted to regard themselves as the pinnacle. In addition to this, with the celebrity that has come with my books, and the isolation imposed by my illness, I feel as though my ivory tower is getting taller. So the recent apparent rejection of the elites in both America and Britain is surely aimed at me, as much as anyone.

Whatever we might think about the decision by the British electorate to reject membership of the EU and by the American public to embrace Donald Trump as their next president, there is no doubt in the minds of commentators that this was a cry of anger by people who felt they had been abandoned by their leaders. It was, everyone seems to agree, the moment when the forgotten spoke, finding their voices to reject the advice and guidance of experts and the elite everywhere. I am no exception to this rule. I warned before the Brexit vote that it would damage scientific research in Britain, that a vote to leave would be a step backward, and the electorate – or at least a sufficiently significant proportion of it – took no more notice of me than any of the other political leaders, trade unionists, artists, scientists, businessmen and celebrities who all gave the same unheeded advice to the rest of the country. What matters now, far more than the choices made by these two electorates, is how the elites react.

Should we, in turn, reject these votes as outpourings of crude populism that fail to take account of the facts, and attempt to circumvent or circumscribe the choices that they represent? I would argue that this would be a terrible mistake. The concerns underlying these votes about the economic consequences of globalisation and accelerating technological change are absolutely understandable. The automation of factories has already decimated jobs in traditional manufacturing, and the rise of artificial intelligence is likely to extend this job destruction deep into the middle classes, with only the most caring, creative or supervisory roles remaining. This in turn will accelerate the already widening economic inequality around the world. The internet and the platforms that it makes possible allow very small groups of individuals to make enormous profits while employing very few people. This is inevitable, it is progress, but it is also socially destructive.

Debt Rattle September 18 2016

Sep 182016

September 18, 2016 Posted by Raúl Ilargi Meijer at 9:15 am Finance Tagged with: cashless, fire sale, Greece, Hanjin, insolvency, ISIS, plastic, Renzi, Syria, TTIP, tulip fever Comments Off

John Collier FSA housing project for Martin aircraft workers, Middle River, MD 1943

• Rogoff’s Cashless Society Proposal Is An Admission Of US Insolvency (Sprott)

• How A ‘Twist’ By The Bank Of Japan Could Upstage The Fed (MW)

• China ‘Tulip Fever’ Sees House Prices Skyrocket 76% (CNBC)

• Italian Banking Crisis Turns into Mission Impossible (DQ)

• Most Likely Scenario For Hanjin Is Liquidation (WSJ)

• US Bombs Assad’s Troops, ISIS Makes Dramatic Advance as Result (McAdams)

• Italian PM Renzi Says He Is Tired Of Wasting Time At European Summits (DW)

• Greek Public Assets Being Sold For A Fraction Of Their Actual Value (Kath.)

• Hundreds Of Thousands Take To Streets In Germany To Protest TTiP (CNBC)

• France Bans All Plastic Cups, Plates And Cutlery (Ind.)

“..the US government and the Federal Reserve have spent, borrowed, and printed so much that there is no future left to mortgage.”

• Rogoff’s Cashless Society Proposal Is An Admission Of US Insolvency (Sprott)

Ken Rogoff is by all accounts a brilliant man. The Harvard professor and former IMF chief economist is a chess grandmaster. His thesis committee included current Fed vice-chair Stanley Fischer. But like many survivors of Ivy League hoop jumping, the poor fellow appears to have emerged punch drunk. That’s the only conclusion to be drawn from Rogoff’s new book, The Curse of Cash , which, in effect, proposes a ban on paper currency. It’s terrifying piece of work, for several reasons. [..]

Rogoff’s “cashless society” is an elegant solution to a key problem bedeviling the Federal Reserve: with interest rates at the zero bound, the US central bank has no ammunition left to fight the next recession – because if cuts rates below zero, savers will withdraw their cash and put it under their mattresses. “In principle, cutting interest rates below zero ought to stimulate consumption and investment in the same way as normal monetary policy,” Rogoff writes. “Unfortunately, the existence of cash gums up the works.” That argument is spurious at best. By now, it is fairly clear from experiences in Japan and the US since 2008 that below neutral level interest rates provide little or no net new economic stimulus. At best, easy monetary policy brings forward spending and investment from the future into the present.

However, the US government and the Federal Reserve have spent, borrowed, and printed so much that there is no future left to mortgage. Rogoff, one of the country’s top economists, knows this; which is an important clue that there is much more to his proposals than meet the eye. It seems clear that Rogoff’s negative interest rate/cashless society proposal is structured to engineer a back-door US government debt default. Over the long term, by forcing savers, businesses, and banks to give the US government their money, and allowing Washington to repay less of that money each year, the US can legally default – on all that it owes. More worrying for investors: the fact that Rogoff, Ben Bernanke and others are proposing negative rates despite the considerable evidence that they will do no economic good suggests that they believe that the US government cannot pay back its debts – that it is already insolvent.

[..] maybe Rogoff is just as good a player on the public policy front as he is on the chess board. There is a possibility that he wrote The Curse of Cash as a quasi-job application for a higher government post, possibly as Treasury Secretary in a Clinton Administration. “If you give me the job, I’ll help make sure that government can borrow all it wants and it won’t have to pay any of it back,” may be the sub-text to Rogoff’s book. There is a precedent for this. Ben Bernanke’s 2002 “helicopter money” speech is widely credited with having set the ground for his appointment as Fed Chairman several years later. Brilliant? Cynical? Delusional? Or maybe all three? Take your pick. Either way, you haven’t heard the last of Ken Rogoff.

“Speculation has mounted that the Bank of Japan could undertake an “inverse twist,” shifting its bond purchases away from the longer end of the yield curve. ..”

• How A ‘Twist’ By The Bank Of Japan Could Upstage The Fed (MW)

News reports paint a picture of a Bank of Japan board that remains solidly in favor of maintaining an ultra-easy monetary policy, but is sharply divided over the best way to proceed as the country’s banking sector feels the pinch of low rates and a flat yield curve. Ideas the Bank of Japan could ultimately move to adjust its program in a way designed to further steepen the yield curve are behind recent market moves, analysts said, and could pave the way for further steepening of yield curves around the world, including U.S. Treasurys. Speculation has mounted that the Bank of Japan could undertake an “inverse twist,” shifting its bond purchases away from the longer end of the yield curve.

That would be a mirror image of a Federal Reserve maneuver dubbed “Operation Twist” that the central bank used in 1961 and 2011 to flatten the yield curve by buying long-term debt and selling short term debt. Bond yields move inversely to prices. There are other measures the Bank of Japan could take to try to steepen the yield curve, including simply changing the mix of maturities it buys or setting a yield target. Christoph Rieger at Commerzbank urged against undertaking an inverse twist, noting that Kuroda has expressed concerns that a “bear steepening” of the yield curve—a phenomenon in which long-term rates rise faster than short term rates—tends to tighten monetary conditions. Obviously, that would blunt the impact of the BOJ’s easing efforts and prove unwelcome in an economy that’s contracting.

“The (stock) market exploded to the upside and then crashed dramatically. That money had to go somewhere, so it washed around the system … so a lot of it has gone into housing.”

• China ‘Tulip Fever’ Sees House Prices Skyrocket 76% (CNBC)

Housing in major cities in China has seen price hikes over the last year that resemble the famous Dutch “Tulip Fever” bubble of 1637, according to new research by economic consultancy firm Longview Economics. “I think what’s going on in China is troubling … some of the valuations there are really quite extraordinary,” Chris Watling, the CEO of Longview Economics, told CNBC Thursday. “We’ve double checked these numbers about seven times, because I found them quite hard to believe.” The firm’s research found that only San Jose in the Silicon Valley is more expensive than Shenzhen. The Chinese city has seen prices rise 76% since the start of 2015, with the acceleration beginning in April 2015 as the country’s stock market was nearing its peak.

The situation in Beijing and Shanghai is similar, albeit less extreme, the company states. “Housing in some of the tier 1 cities is more expensive than it is in London, which I think itself is on a bubble, Watling added. “The (stock) market exploded to the upside and then crashed dramatically. That money had to go somewhere, so it washed around the system … so a lot of it has gone into housing.” The analysis suggests that the typical home in Shenzhen costs approximately $800,000. Watling said that the house-income ratio in Shenzhen is now running at 70 times, compared to around 16 times in somewhere like London.

China, the biggest economic story of the last 30 years, has soured in the eyes of many analysts. A stock market crash that began in the country last summer has highlighted the vast difficulties Chinese lawmakers are now facing. Watling said Chinese housing was a story built on credit, lots of liquidity and lots of debt. He added that all bubbles, though, once established, will eventually burst and deflate. “It’s simply a question of when,” Watling said in a research note earlier this week, adding that the removal of cheap money would be the likely scenario that would lead to the beginning of the tightening and subsequent prices falls.

“.. the collapse of Unicredit, which has vast, sprawling operations across Germany and Eastern Europe, would threaten the stability of the entire Eurozone.”

• Italian Banking Crisis Turns into Mission Impossible (DQ)

[..] for Monte dei Paschi’s latest rescue plan to have any chance of working, both parts of the plan — Part A and Part B — must succeed. Part A consists of a €28 billion bad-loan sale for which JP Morgan Chase, Citi and Italian investment bank Mediobanca are already assembling a bridge loan, in return for very handsome fees. Atlante, Italy’s deeply opaque, Luxembourg-based bank rescue fund, has reportedly agreed to buy the so-called mezzanine tranche in Monte dei Paschi’s bad loan securitization. Apparently demand for heavily discounted, slowly-decomposing bank debt in Italy is high, which is great news considering Italy is purportedly home to roughly a third of all of the bad debt at EU banks.

In a perfect sign of our yield-starved times, last week saw around 250 global investors converge on Venice to attend Banca Ifi s SpA’s “Non-performing Loan” conference. That’s twice as many as last year, reports Bloomberg. In other words, Part A of the rescue plan seems to be coming along nicely — as long as no one asks who will make up the difference between the book value of the bank’s toxic assets and the discount value at which they’re now being sold. As for Part B of the Plan — MPS’ €5 billion cash call scheduled for the end of this year — it’s going nowhere fast. Twice-bitten, thrice-shy investors are no longer buying the hype. Gennaro Pucci at London-based PVE Capital said that even if a significant proportion of MPS’ bad loans were “spun off into a special vehicle,” he would not buy more MPS shares out of fear that the bank could suffer further losses from the remaining soured debt.

This is a serious problem in today’s Italy: as long as the economy continues to stagnate, much of the supposedly good debt currently on the banks’ books will also, sooner or later, end up putrefying. It’s already happened to Banca Popolare di Vicenza, a regional lender that was rescued from bankruptcy late last year by the Atlante fund, but which is already in need of fresh funds. So, too, is Italy’s biggest and only global systemically important financial institution, Unicredit, which has a staggering €80 billion in bad debt on its balance sheets — more than any other European bank. While the downfall of MPS would be enough to cause serious damage to Italy’s already fragile financial system, the collapse of Unicredit, which has vast, sprawling operations across Germany and Eastern Europe, would threaten the stability of the entire Eurozone.

But first a fire sale.

• Most Likely Scenario For Hanjin Is Liquidation (WSJ)

Debt-ridden Hanjin Shipping is working on a restructuring plan that calls for the drastic reduction of its owned fleet and returning the vast majority of the ships it charters to their owners, according to people with direct knowledge of the matter. Despite the efforts, these people say the most likely scenario is still that the Korean operator— the world’s seventh-biggest in terms of capacity—will be liquidated, marking one of the shipping industry’s biggest failures. Hanjin filed for bankruptcy protection last month. The South Korean government has strongly indicated it has no plans to bail out the company. A Korean court will decide in December whether to accept the plan or let the company go under, according to court officials in Seoul.

One person with knowledge of Hanjin’s efforts to restructure said the operator is considering a number of scenarios but focusing on one that involves Hanjin keeping up to 15 of its 37 ships, and returning to owners almost all of the 61 chartered vessels. Under that scenario, which is subject to approval by the bankruptcy court, “Hanjin will emerge as a small regional operator in Asia that will move a small part of Korea’s exports,” the person said. [..] Hanjin’s main charterers, including Danaos, Navios and Seaspan, with a combined exposure of more than $1 billion to Hanjin, were hoping for a last-minute intervention by the Korean government that would allow Hanjin to honor its vessel-leasing commitments. That looks less and less likely.

“Hanjin now has two alternatives: either to drastically downsize or to liquidate,” said Iraklis Prokopakis, Danaos’s COO. “We have eight ships chartered to Hanjin and five will be returned. The other three still have cargo on them so I don’t know what will happen.” Danaos has a $560 million exposure to Hanjin. Mr. Prokopakis said the key issue at the December court hearing will be whether Hanjin has enough cash to continue operating, even at a much smaller scale.

“Yesterday, US-backed FSA “moderate” opposition troops chased US Special Forces out of one town in Syria.”

• US Bombs Assad’s Troops, ISIS Makes Dramatic Advance as Result (McAdams)

The US military has bombed Syrian government positions in the eastern province of Deir el-Zour today, where the Syrian military had been battling ISIS. According to the report, the US attack on Syrian troops “enabled an [ISIS] advance on the hill overlooking the air base.” This is the second time US forces have directly targeted Syrian government troops inside Syria. It would be the first time such an attack produced a battlefield advantage to ISIS. The US attack has killed at least 62 and perhaps as many as 100 Syrian government troops. Earlier today it was reported that the Syrian government had sent some 1,000 members of the elite Republican Guard into the Deir el-Zour province, as battles with ISIS in the area increase.

This US attack has wiped out perhaps 10% of this force and has obliterated Syrian army weapons and other materiel. The US government has admitted to the attack, but claims it was all a mistake. As some observers have pointed out, however, ISIS does not behave as traditional military units. They do not generally gather in large numbers like this or establish “bases.” The US Central Command released a statement earlier today claiming that the US coordinated the strike with the Russians, but Moscow has vehemently denied the claim. In fact, spokesman for the Russian Foreign Ministry Maria Zakharova was quoted by the state news agency Tass as saying that “after today’s attack on the Syrian army, we come to the terrible conclusion that the White House is defending the Islamic State.”

This dramatic development comes as the latest ceasefire begins to crumble. Russia has condemned Washington’s refusal to implement a key component of the agreement, to press US-backed rebels to cease fighting alongside al-Qaeda; and the main US-backed “moderate” Islamist group, Ahrar al-Sham, has refused to take part in the ceasefire at all. Yesterday, US-backed FSA “moderate” opposition troops chased US Special Forces out of one town in Syria. Is today’s attack a turning point in the war, where the US will begin to strike Syrian government forces more frequently? If so, how will Russia and Iran react to this overt shift in US strategy? Is this the flashpoint?

But that’s all he’s going to get.

• Italian PM Renzi Says He Is Tired Of Wasting Time At European Summits (DW)

Italian Prime Minister Matteo Renzi blasted the latest European Union summit in Bratislava on Saturday, effectively labeling Friday’s high-level meeting a waste of time. “I don’t think it would be right for Italy to pretend not to notice when things are not getting any better,” Renzi said at a conference in Florence. Hours earlier, he criticized the summit in an interview with TV broadcaster RTV38. “As Italy, we strongly believe that the EU has a future, but we need to be doing things for real, because we have no use for staged events,” he said. Renzi also said he did not partake in the closing press conference with Angela Merkel and Francois Hollande because he was unhappy with the decisions reached concerning economic and migrant policy.

Renzi said Italy would not “serve as a fig leaf” for the likes of France or Germany. In what was the first European summit without the United Kingdom in over four decades, European leaders sought to show unity in the wake of this summer’s Brexit vote. This, Renzi said, “signals a small step forward, but it is still a rather long way away from the idea of Europe that we have in mind.” Renzi castigated the summit for not raising the African migrant issue. The documents “didn’t even mention Africa,” he said. As the first European destination for migrants arriving from Africa, Italy has been left to cope with the influx of refugees largely on its own while politicians debate how to address refugees in Turkey and along the so-called Balkan Route though Greece, eastern and central Europe.

Italy has long pushed for an international agreement with African states that would close migrant routes to Europe in exchange for increased investment. Renzi repeated his critiques of the EU’s austerity policy. While the country is respecting the EU’s strict budget disciplinary rules, he said Italy retains the right to stress that the rules are not working and it is not prepared “to pretend not to notice.”

Insult to injury. It never stops. Electricity prices were raised 4-5% in Greece. Who can afford that?

• Greek Public Assets Being Sold For A Fraction Of Their Actual Value (Kath.)

Public properties, including real estate assets, are very often sold for extremely low prices, as the political risk factor supersedes even the crucial financial risk that comes with investing in Greece. The Hellenic Federation of Enterprises (SEV) this week commented on the issue, saying that this institutional shortfall of the Greek state and the lack of trust this generates in the three pillars of power (legislative, executive, judiciary) have turned the optimum utilization of state property into “a political point-scoring battle among parties.” As SEV pointed out, “in many instances we see the state’s assets devalued, owing to the delays that political tensions bring about in privatizations, so that they are sold off at particularly low prices. In other instances the prevailing criterion becomes the price of the privatization, without taking into consideration any distortions created in the market from incomplete planning.”

For the industrialists’ association there is no doubt that “the correct utilization of public property along clear and stable rules and terms of economic efficiency, both for state revenues and for the operation of markets, can become a key growth factor for the economy.” All this becomes clearer when one considers the tenders that the state privatization fund (TAIPED) has been conducting for the concession of real estate assets. As property market professionals observe, in most cases the prices investors offer – particularly in instances of plot development – are just a fraction of each asset’s actual value. The reason for that is not to be found in the financial crisis and the drop in market prices, but in investors’ need to factor the political risk into their calculations regarding the sustainability of their chosen investment, in order to secure the desired returns.

CNBC tries an odd twist by claiming it’s not really a TTiP protest, but a form of general ‘easy anti-Americanism’. The same tactics as used in Brexit and the US elections. Curious to see when these people will realize these are losing tactics.

• Hundreds Of Thousands Take To Streets In Germany To Protest TTiP (CNBC)

Hundreds of thousands of Germans took to the streets Saturday, in protest of pending trade deals with the United States and Canada. The deals in question are the Transatlantic Trade and Investment Partnership (TTIP) between the U.S. and the European Union and the Comprehensive Economic and Trade Agreement (CETA) for the Canadian-EU relationship. Neither free trade agreement has been ratified yet, but popular outcry has been growing for the last few years. The demonstrations took place in seven cities throughout Germany: Berlin, Frankfurt, Hamburg, Cologne, Leipzig, Munich and Stuttgart. Organizers told CNBC that the official estimate is 320,000 demonstrators across Germany.

In Berlin, where discussions of trade policy are frequently overheard in cafes and most available surfaces are plastered in posters and stickers against the deals, the largest demonstration of the day took place with about 70,000 attendees, according to the organizers. Earlier, local reports had indicated there could be as many as 80,000 in the German capital, but a heavy downpour close to the start time may have depressed turnout. A broad coalition of organizations helped plan the event, but the stated rationale for opposing the agreements centers on the belief that such deals “primarily serve the interests of powerful economic interest groups, and thus only cement the imbalance between the common good and economic interests,” according to one organization.

Under TTiP, this would have been impossible.

• France Bans All Plastic Cups, Plates And Cutlery (Ind.)

France has passed a new law to ensure all plastic cups, cutlery and plates can be composted and are made of biologically-sourced materials. The law, which comes into effect in 2020, is part of the Energy Transition for Green Growth – an ambitious plan that aims to allow France to make a more effective contribution to tackling climate change. Although some ecologists’ organisations are in favour of the ban, others argue that it has violated European Union rules on free movement of goods. Pack2Go Europe, a Brussels-based organization representing European packaging manufacturers, says it will keep fighting the new law and hopes it doesn’t spread to the rest of the continent. “We are urging the European Commission to do the right thing and to take legal action against France for infringing European law,” Pack2Go Europe secretary general Eamonn Bates told AP. “If they don’t, we will.”