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Debt Rattle September 9 2019

Sep 092019

September 9, 2019 Posted by Raúl Ilargi Meijer at 9:48 am Finance Tagged with: backstop, Boris, Brexit, Britsh Airways, EU, fish, Google, sabotage, trade war, Varoufakis 4 Responses »

Pablo Picasso Portrait of Maya 1939

To everyone used to receiving Automatic Earth posts in their email, I’m sorry but since Saturday they’re suddenly bouncing again en masse. This makes me very tired by now, but I’ll look for a solution. I suspect there may be a connection between this and Google accusing me of violating their rules, without telling me what rules I’m supposed to have violated.

• Brexit Heading For Dramatic Supreme Court Showdown (Ind.)

• Boris Johnson ‘Sabotage’ Letter To EU ‘Would Break Law’ (G>)

• Johnson Has Reneged On Good Friday Agreement Vows, Says EU (G.)

• EU’s Ex-Legal Chief Says Johnson’s Plan To ‘Shut Down EU’ Will Fail (Ind.)

• China’s Exports To US Fell 16% In August As Trump Escalates Trade War (CNBC)

• Air China Denies Plans To Take Over Cathay Pacific (R.)

• Nearly All British Airways Flights Canceled As Pilots Go On Strike (CNN)

• States Expected To Target Google In New Antitrust Probe (AP)

• Yanis Varoufakis’ Close-Up (K.)

• Australia Launches Emergency Relocation Of Fish (G.)

Really, what is not to like about the Brexit comedy? it’s the British doing what they do best. Parliament will vote for a law that forces Boris to send a letter to Brussels asking for an extension to Article 50, and he plans to send a second letter saying he doesn’t want that extension.

Anyway, Supreme Court it always would be. But can that court tell parliamentarians or a prime minster what to do, or are they above the court in legal standing, as a lower court suggested last week? Too late to get a constitution now. But not too late to make this much more chaotic still.

There is even a plan for the UK to shut down the EU.

• Brexit Heading For Dramatic Supreme Court Showdown (Ind.)

The battle for Brexit is heading for a nailbiting showdown in the Supreme Court in late October – when the deadline for crashing out of the EU will be just days away – after Boris Johnson’s new strategy was revealed. Ministers plan to manufacture a legal fight to avoid directly breaking the law when compelled to ask for a further Article 50 extension, while also sidestepping the requirement to comply with it. The “plan B” paves the way for an unprecedented constitutional crisis after parliament’s deadline for seeking a Brexit delay passes on 19 October – with the threat of the prime minister being jailed for contempt of court. With the deadline for crashing out on 31 October, it will be a race against time to force Mr Johnson to Brussels before Halloween, or to bring him down in a vote of no confidence and send a replacement.

Labour condemned the strategy as behaving like “every tinpot dictator on the planet throughout history” – demanding that Mr Johnson obey the “duty” imposed by parliament. No10 is also reported to be considering sending a letter to the EU requesting a Brexit extension, in order to meet the conditions passed by MPs last week, but then immediately sending another saying the government does not actually want a delay. Legal experts, including former attorney general Lord Falconer, warned that this would still breach the law. If Mr Johnson disregards some or all of the bill’s requirements – which is set to receive royal assent on Monday – this could lead to an emergency judicial review in the courts by MPs.

The unprecedented case would start in the High Court and the expectation is that it would very quickly move to the Supreme Court, almost certainly before 31 October. And it triggered an extraordinary warning from the justice secretary, Robert Buckland, to obey “the rule of law”, as he denied he was poised to follow Amber Rudd by resigning.

“..he risked the resignation of the justice secretary, the attorney general, and other members of his cabinet…”

• Boris Johnson ‘Sabotage’ Letter To EU ‘Would Break Law’ (G>)

A former supreme court justice has said Boris Johnson would be in contempt of court if he applied for article 50 extension while simultaneously trying to get the EU to reject it. Reports in the Daily Telegraph suggested that the prime minister has drawn up plans to “sabotage” parliament’s efforts to force through a Brexit extension to prevent the UK leaving the bloc without a deal. He is said to be considering sending an accompanying letter to the EU alongside the request to extend article 50, which would say the government does not want any delay to Brexit. Lord Sumption, a former supreme court justice, said it would not be legal for the prime minister to ask for an extension while rubbishing the request at the same time.

He told BBC Radio 4’s Today programme: “The bill or the act as its about to become says that he’s got to apply for an extension. Not only has he got to send the letter, he’s got to apply for an extension. And to send the letter and then try and neutralise it seems to me to be plainly a breach of the act.” A Downing Street source said: “We intend to sabotage any extension. The ‘surrender bill’ only kicks in if an extension is offered. Once people realise our plans, there is a good chance we won’t be offered a delay. Even if we are, we intend to sabotage that too.” Sumption said he had read the bill and there was not “the slightest obscurity” about what the government was obliged to do. [..] Sumption said Johnson would not only be in contempt of court if he failed to do what the bill states, he risked the resignation of the justice secretary, the attorney general, and other members of his cabinet.

“This avoidance of the hard border, it is not just a desire, it is not just about preferences, it is legal obligation.”

• Johnson Has Reneged On Good Friday Agreement Vows, Says EU (G.)

European officials have accused Boris Johnson of reneging on pledges to uphold the Good Friday agreement, ahead of the prime minister’s first meeting with his Irish counterpart. Johnson will meet the Irish taoiseach, Leo Varadkar, in Dublin on Monday at a tumultuous moment in the Brexit process, with only 52 days until the UK’s departure. Talks are set to be tense as fears grow in Dublin and Brussels that the British prime minister is backsliding on promises to protect the tightly knit economic and social links on the island of Ireland. “The commitment to all aspects and all the provisions of the letter and spirit of the Good Friday agreement recently seems to be taken more lightly than before,” a senior diplomat from a continental member state told the Guardian.

“This avoidance of the hard border, it is not just a desire, it is not just about preferences, it is legal obligation.” A senior official working for the EU’s chief negotiator, Michel Barnier, told diplomats this week that the UK had reneged on commitments to protect north-south co-operation on the island of Ireland, a key pillar of the Good Friday agreement. Alarm bells were set off by Johnson’s recent letter to the European council president, Donald Tusk, which declared his government could not endorse a commitment made by Theresa May in a December 2017 EU-UK joint report. The Brexit secretary, Stephen Barclay, fuelled concerns that the government was seeking to back out of past commitments, when he tweeted that the government was “committed to no infrastructure on the NI border”.

Such comments were seen in Brussels as “meaningless” words that marked a significant dilution of the promise to uphold an open border. The May government pledged to protect “north-south cooperation” on the island of Ireland in the 2017 joint report, widely seen in Brussels as a landmark in Brexit talks.

Something tells me Dominic Cummings will have more before this is over.

• EU’s Ex-Legal Chief Says Johnson’s Plan To ‘Shut Down EU’ Will Fail (Ind.)

Brussels’ former top law officer has rubbished Boris Johnson’s extraordinary plan to sabotage the EU and make it ‘no longer legal’, arguing it makes no sense. Downing Street has threatened to render the bloc no longer “legally constituted”, paralysing its decision making, to force EU leaders to cave in to the UK’s demands. But Jean-Claude Piris, formerly the director-general of the EU Council’s legal service, said the idea – refusing to appoint a new commissioner – would fail to shut down the EU, as No 10 hoped. “The Commission can continue to work and decide legally,” Mr Piris wrote on Twitter, citing a precedent dating back to 1999. Instead, he said: “The UK will be brought to the EUCJ [the European Court of Justice] for violation of its obligation.”

Richard Corbett, the leader of Labour’s bloc of Euro-MPs, echoed the criticism, tweeting: “Nonsense idea that Johnson could paralyse EU to force it to expel UK. “If he refuses to nominate a Commissioner, the UK would be in breach of the treaty – that being so, EU Commission not at fault and can operate legally.” In a dramatic escalation of its battle with Brussels, No 10 believes it can put the EU in breach of its own legal duty for all 28 member states to be represented on its executive branch. The UK would be “disrupting” Brussels life to such a degree that member states will then make it clear they will refuse to grant an Article 50 extension – even if asked for – it hopes. A source told The Independent: “We will turn the pressure onto the EU to show how difficult it will be for them if the UK is still hanging around.”

That’s a lot.

• China’s Exports To US Fell 16% In August As Trump Escalates Trade War (CNBC)

China’s exports unexpectedly fell in August as shipments to the United States slowed sharply, pointing to further weakness in the world’s second-largest economy and underlining a pressing need for more stimulus as the Sino-U.S. trade war escalates. Beijing is widely expected to announce more support measures in coming weeks to avert the risk of a sharper economic slowdown as the United States ratchets up trade pressure, including the first cuts in some key lending rates in four years. On Friday, the central bank cut banks’ reserve requirements for a seventh time since early 2018 to free up more funds for lending, days after a cabinet meeting signalled that more policy loosening may be imminent.

August exports fell 1% from a year earlier, the biggest fall since June, when it fell 1.3%, customs data showed on Sunday. Analysts had expected a 2.0% rise in a Reuters poll after July’s 3.3% gain. That’s despite analyst expectations that a falling yuan would offset some cost pressure and looming tariffs may have prompted some Chinese exporters to bring forward or “front-load” U.S.-bound shipments into August, a trend seen earlier in the trade dispute. China let its currency slide past the key 7 per dollar level in August for the first time since the global financial crisis, and Washington labelled it a currency manipulator.

“..the biggest corporate casualty of anti-government protests after China demanded it suspend staff involved in, or who support, demonstrations..”

• Air China Denies Plans To Take Over Cathay Pacific (R.)

Air China has no plans to take over Hong Kong’s Cathay Pacific Airways, an independent director of the state-owned Chinese carrier told the South China Morning Post newspaper. “Based on what I know, I wouldn’t think that is anywhere on the agenda, no way,” Air China non-executive director Stanley Hui told the newspaper when asked if the carrier, a 30% shareholder, might seek to buy Cathay outright. The Hong Kong airline has become the biggest corporate casualty of anti-government protests after China demanded it suspend staff involved in, or who support, demonstrations that have plunged the former British colony into a political crisis.

Cathay Chairman John Slosar last week announced plans to step down in November, less than three weeks after CEO Rupert Hogg left amid mounting regulatory scrutiny. Air China is Cathay’s second-largest shareholder, behind manager Swire Pacific with a 45% stake. Long-time Swire executive Patrick Healy was last week appointed as Slosar’s replacement.

No flights tomorrow either. Big airline.

• Nearly All British Airways Flights Canceled As Pilots Go On Strike (CNN)

British Airways says it was forced to cancel “nearly 100 per cent” of flights for Monday and Tuesday after the British pilots union went ahead with a strike. The strike was called for by the British Airline Pilots Association (BALPA) amid a heated dispute over pay with the airline. BALPA said Sunday on Twitter that it put forward a proposal to the carrier’s management Wednesday, but had yet to receive a reply. British Airways said in a statement posted Monday it remains “ready and willing to return to talks with BALPA.”

The airline said it was forced to cancel so many flights because “with no detail from BALPA on which pilots would strike, we had no way of predicting how many would come to work or which aircraft they are qualified to fly.” Customers who had flights booked for Monday and Tuesday will likely “not be able to travel as planned,” British Airways said. The airline also advised customers not to go to the airport. Members of the pilots union voted 93% in favor of a strike in July. BALPA said last week that it would be willing to call it off if British Airways returned to the negotiating table. According to its website, BALPA represents more than 10,000 pilots in the United Kingdom — more than 85% of all commercial pilots who fly there.

And Facebook in a different probe. But Google is CIA.

• States Expected To Target Google In New Antitrust Probe (AP)

A group of states led by Texas is expected to announce an investigation into Google on Monday to examine whether the Silicon Valley tech giant has gotten too big and effective at stomping or acquiring rivals. The probe is the latest blow against big tech companies as antitrust investigations ramp up in the U.S. and around the world. A separate group of states announced an investigation into Facebook’s dominance on Friday. The Department of Justice , the Federal Trade Commission and Congress are also conducting probes.

Texas Attorney General Ken Paxton has said only that the investigation will look at “whether large tech companies have engaged in anticompetitive behavior that stifled competition, restricted access, and harmed consumers.” Reports in The Washington Post and The Wall Street Journal say Google will be the primary target. Google expects state attorneys general will ask it about past similar investigations in the U.S. and internationally, senior vice president of global affairs Kent Walker wrote in a blog post Friday . Google’s parent company, Alphabet, has a market value of more than $820 billion and controls so many aspects of the internet that it’s hard to imagine surfing the web for long without running into at least one of its services. Experts believe the antitrust probe could focus on at least one of three aspects of Google’s business that have caught regulators’ eyes.

Background: renowned Greek film director Costa-Gravas has made a movie based on Varoufakis’ book “Adults in the Room,” which recounts Yanis’ dealings with the EU. It was presented at the Venice film festival this week. Well, the Greek press still doesn’t like him (but they dare not ignore Costa-Gavras either). And because of the structure of the press, neither do many Greeks. But they make it about how Yanis presents himself, and sure, maybe it’s too much about him at times. But really, it should be about his ideas, about substance. Unfortunately, those ideas go above their paygrade and understanding. So appearance it is then…

• Yanis Varoufakis’ Close-Up (K.)

The term “narcissist,” which has become almost a permanent fixture in any description of Yanis Varoufakis – in tones ranging from the deliberate and angry to the lighthearted and playful, sometimes to the point of absolving him of his sins – is inadequate. A man who writes a book while simultaneously envisioning himself as a big-screen hero does not simply fall into the category of garden-variety delusions of stardom because his actions are rife with intent. Viewing reality through the realm of fiction neither clears nor burdens an official of complicity with regard to how he managed the country’s economic affairs and the stance he adopted more generally, and especially when this concerns an exceptionally crucial period.

Walking down the red carpet does not instantly transform Varoufakis from a former finance minister (who is co-credited with a memorandum and capital controls) into a movie star. The Venice International Film Festival – the glamour, the camera flashes, the gowns – and the reviews of critics neither erase nor transfer political responsibility. The publicity shone on Greece as a result of Costa-Gavras’ film “Adults in the Room,” based on Varoufakis’ book of the same title, shifts the focus of the conversation from the intentions and rules according to which officials with institutional responsibilities ought to abide, to the rule-free realm of art. It takes it away from the need for political figures to answer for their actions and omissions, to the extremely capacious realm of film production and artistic creativity.

Noah.

• Australia Launches Emergency Relocation Of Fish (G.)

Faced with a looming ferocious summer with little rain forecast, the New South Wales government has embarked on a Noah’s Ark type operation to move native fish from the Lower Darling – part of Australia’s most significant river system – to safe havens before high temperatures return to the already stressed river basin. Researchers have warned of other alarming ecological signs that the Lower Darling River – part of the giant Murray-Darling Basin – is in a dire state, following last summer’s mass fish kills. Professor Fran Sheldon, from Griffith University’s Australian Rivers Institute, said only one surviving colony of river mussels had been found along the river and there were signs that river red gums were under severe stress.

“If the river red gums die, and some are hundreds of years old, there will be a domino effect. Banks will collapse, there will be massive erosion and it will send sediments down the river.” “These sort of ecological collapses are much harder and expensive to reverse,” she warned. The New South Wales government announced a $10m rescue package last week to mitigate the effects of the river crisis on native fish this summer. The NSW agriculture minister, Adam Marshall, said the unprecedented action would provide “a lifeline for key native species ahead of an expected summer of horror fish kills”. “We’re staring down the barrel of a potential fish Armageddon, which is why we’re wasting little time rolling out this unprecedented action,” Marshall said.

Debt Rattle October 31 2018

Oct 312018

October 31, 2018 Posted by Raúl Ilargi Meijer at 9:59 am Finance Tagged with: Bolsonaro, Brexit, China, Erdogan, fish, Khashoggi, Mattis, Merkel, ocean, Shiller, Volcker, Yemen 9 Responses »

Francisco Goya Witches’ Sabbath 1798

• US Calls For Yemen Ceasefire, Peace Talks ‘In The Next 30 Days’ (AFP)

• Erdogan Urges Saudi Prosecutor To Find Out Who Ordered Khashoggi Hit (AFP)

• Housing Market Now ‘Reminds Me Of 2006′ – Robert Shiller (MW)

• China Debt Bomb Ready to Explode (Rickards)

• China Factory Growth Weakest In Over 2 Years, Export Orders Slump Deepens (R.)

• Ray Dalio Hails Paul Volcker As ‘The Greatest Man’ He Knows (MW)

• The Monster Mash (Kunstler)

• No-Deal Brexit Would Trigger Lengthy UK Recession – S&P (G.)

• Welcome to the Jungle (Escobar)

• After Germany’s Merkel Comes Chaos (John Rubino)

• Ocean Shock (Reuters)

Both Mattis and Pompeo, a coordinated effort. 30 days seems ambitious, but MbS doesn‘t have much leverage left.

• US Calls For Yemen Ceasefire, Peace Talks ‘In The Next 30 Days’ (AFP)

The United States called Tuesday for a ceasefire and peace talks in Yemen, as the Saudi-led military coalition sent more than 10,000 new troops toward a vital rebel-held port city ahead of a new assault. Pentagon chief Jim Mattis said the US had been watching the conflict “for long enough,” adding that Saudi Arabia and the United Arab Emirates, which are in a US-backed coalition fighting Shiite Huthi rebels, are ready for talks. “We have got to move toward a peace effort here, and we can’t say we are going to do it some time in the future,” Mattis said at the US Institute of Peace in Washington. “We need to be doing this in the next 30 days.”

He said the US is calling for all warring parties to meet with United Nations special envoy Martin Griffiths in Sweden in November and “come to a solution.” US-Saudi ties have cooled in recent weeks after the murder of journalist Jamal Khashoggi, a prominent critic of the conservative kingdom, that has also tarnished the image of Crown Prince Mohammed bin Salman. Saudi Arabia and its allies intervened in the conflict between embattled Yemeni President Abedrabbo Mansour Hadi, whose government is recognized by the United Nations, and the Huthis in 2015. Nearly 10,000 people have since been killed and the country now stands at the brink of famine, with more than 22 million Yemenis — three quarters of the population — in need of humanitarian assistance.

[..] US Secretary of State Mike Pompeo called for an end to all coalition air strikes in Yemen’s populated areas. “The time is now for the cessation of hostilities, including missile and UAV (drone) strikes from Huthi-controlled areas into the Kingdom of Saudi Arabia and the United Arab Emirates,” Pompeo said in a statement. “Subsequently, coalition air strikes must cease in all populated areas in Yemen.”

Body still not found.

• Erdogan Urges Saudi Prosecutor To Find Out Who Ordered Khashoggi Hit (AFP)

Turkish President Recep Tayyip Erdogan on Tuesday called on Saudi Arabia’s chief prosecutor to find out who ordered the murder of journalist Jamal Khashoggi, and not spare “certain people” in his investigation. “Who sent these 15 people? As Saudi public prosecutor, you have to ask that question, so you can reveal it,” Erdogan said, referring to the 15-man team suspected of being behind the hit. “Now we have to solve this case. No need to prevaricate, it makes no sense to try to save certain people,” he told reporters in Ankara. Khashoggi was killed after entering the Saudi consulate in Istanbul on October 2 to obtain paperwork ahead of his upcoming wedding. His body has not yet been found.

[..] Erdogan said that during the talks Fidan requested the 18 suspects be sent to Turkey for trial, as the killing took place in Istanbul. The Istanbul prosecutor’s office last week prepared a written request for the extradition of the 18 suspects “involved in the premeditated murder”, the justice ministry said, but Riyadh rejected Ankara’s request. Erdogan also urged Saudi Foreign Minister Adel al-Jubeir to explain who the “local co-conspirators” were that were reportedly given Khashoggi’s body after his death. “Again either the Saudi foreign minister or the 18 suspects must explain who the local co-conspirators are. Let’s know who this co-conspirator is, we can shed further light. We cannot let this subject end mid-way.”

Only this time it’s global.

• Housing Market Now ‘Reminds Me Of 2006′ – Robert Shiller (MW)

Famed housing-watcher Robert Shiller said Tuesday that the weakening housing market reminded him of the last market top, just before the subprime housing bubble burst, slashing prices by nearly a third and costing millions of Americans their homes. Home price gains moderated again in the most recent version of the closely-watched housing index that bears his name, which was released Tuesday, and Shiller, a Nobel Prize-winning economist, told Yahoo Finance that such data shows “a sign of weakness.” Housing pivots take more time than those in the stock market, Shiller said. Still, “the housing market does have a momentum component and we’re seeing a clipping of momentum at this time.”

When a startled reporter reminded Shiller that 2006 predated the greatest financial crisis in a lifetime, the Yale economist acknowledged that any correction would likely be far less severe. “The drop in home prices in the financial crisis was the most severe drop in the U.S. market since my data begin in 1890,” Shiller said. “It could be that we’re primed to repeat it because it’s in our memory and we’re thinking about it but still I wouldn’t expect something as severe as the Great Financial Crisis coming on right now. There could be a significant correction or bear market, but I’m waiting and seeing now.”

Foreign reserves runnning out.

• China Debt Bomb Ready to Explode (Rickards)

The great Chinese growth slowdown has been proceeding in stages for the past two years. The reason is simple. Much of China’s “growth” (about 25% of the total) has consisted of wasted infrastructure investment in ghost cities and white elephant transportation infrastructure. That investment was financed with debt that now cannot be repaid. This was fine for creating short-term jobs and providing business to cement, glass and steel vendors, but it was not a sustainable model since the infrastructure either was not used at all or did not generate sufficient revenue. China’s future success depends on high-value-added technology and increased consumption. But shifting to intellectual property and the consumer means slowing down on infrastructure, which will slow the economy.

In turn, that means exposing the bad debt for what it is, which risks a financial and liquidity crisis. China started to do this last year but quickly turned tail when the economy slowed. Now the economy has slowed so much that markets are collapsing. But doesn’t China have over $1 trillion of reserves to prop up its financial system? On paper, that’s true. But in reality, China is “short” U.S. dollars. The Chinese may have $1.4 trillion of U.S. Treasury securities in its reserve position, but they need those assets possibly to bail out their banking system or defend the yuan. Meanwhile, the Chinese banking sector, which in many ways is an extension of the state, owes $318 billion in U.S. dollar-denominated deposits of commercial paper.

From a bank’s perspective, borrowing in dollars is going short dollars because you need dollar assets to back up those liabilities if the original lenders want their money back. For the most part, the banks don’t have those assets because they converted the dollar to yuan to prop up local real estate Ponzis and local corporations. There’s not much left over to bail out the corporate, individual and real estate sectors. This is all part of a global “dollar shortage” attributable to Fed tightening, both in the forms of higher rates but also a reduction in base money. A dollar shortage seems implausible in a world where the Fed printed $4.4 trillion. But while the Fed was printing, the world borrowed over $70 trillion (on top of prior loans), so the dollar shortage is real. The math is inescapable.

Everyone’s going to call on Beijing to come to the rescue.

• China Factory Growth Weakest In Over 2 Years, Export Orders Slump Deepens (R.)

China’s manufacturing sector in October expanded at its weakest pace in over two years, hurt by slowing domestic and external demand, in a sign of deepening cracks in the economy from an intensifying trade war with the United States. Anxiety about China’s cooling growth and its likely drag on the global economy have vexed financial markets recently, and Wednesday’s official Purchasing Managers’ Index (PMI) indicates more stress for investors through coming months. The official PMI – which gives global investors their first look at business conditions in China at the start of the last quarter of the year – fell to 50.2 in October, the lowest since July 2016 and down from 50.8 in September.

It was a touch above the 50-point mark that separates growth from contraction for a 27th straight month, but undershot the 50.6 forecast in a Reuters poll. The latest reading suggests a further loss of momentum in the world’s second-biggest economy, and the deteriorating environment for businesses could prompt more policy support from Beijing on top of a raft of recent initiatives. “All the numbers from China’s PMI release today confirm a broad-based decline in economic activity,” said Raymond Yeung, chief economist for China at ANZ in a client note, adding that conditions for the private sector is “much worse” than headline data suggested. “Besides an expected reserve requirement ratio (RRR) cut next January, we expect future supportive policy actions to be measured. The government’s priority is to avoid a financial blow-up.”

Not hard to be better than The Oracle, Bernanke and Yellen. But where was Volcker when these three went off the rails?

• Ray Dalio Hails Paul Volcker As ‘The Greatest Man’ He Knows (MW)

Those weighty words of praise were tweeted out Tuesday by Ray Dalio, founder of hedge-fund behemoth Bridgewater Associates. Dalio’s social-media nod to the former Fed chair coincides with the release of Volcker’s memoir, “Keeping at It: The Quest for Sound Money and Good Government.”

In his new book, Volcker says he’s worried about the impact of money in politics and argues that the U.S. is devolving into a plutocracy. “We face a huge challenge in this country to restore a sense of public purpose and of trust in government,” he wrote in the book. “It will require critically needed reforms in our political processes and leaders who can restore and preserve a consensus upon which our great democracy can depend.” Volcker, 91, served as Fed chair from 1979 until 1987, and he’s widely credited for stopping runaway inflation during that time. He was also chairman of the Economic Recovery Advisory Board under Obama from 2009 to 2011.

Dalio wasn’t the only one to give Volcker some love in light of his memoir. Martin Wolf of the Financial Times is also a big fan, saying that he’s “the greatest man I have known,” because “he is endowed to the highest degree with what the Romans called virtus (virtue): moral courage, integrity, sagacity, prudence and devotion to the service of country.” Wolf said “the pinnacle of Volcker’s career” was when he achieved something many thought impossible: he slew inflation. “Great credit is due to Jimmy Carter, who appointed him, and Ronald Reagan, who supported him. But Volcker did it, despite great criticism,” Wolf explained. “The costs were huge. But he was right: it had to be done.”

“And if it happens that the Dems don’t prevail, and don’t manage to get their hands on the machinery of congress — then what?”

• The Monster Mash (Kunstler)

The Democratic Party war on white people and their dastardly privilege has been the theme all year long, with its flanking movement against white men especially and super-especially the hetero-normative white male villains who rape and oppress everybody else. Anyway, that’s the strategy du jour. I’m not persuaded that it’s going to work so well in the coming election. The party could not have issued a clearer message than “white men not welcome here.” Very well, then, they’ll vote somewhere else for somebody else. And if it happens that the Dems don’t prevail, and don’t manage to get their hands on the machinery of congress — then what?

For one thing, a lot of people get indicted, especially former top officers from various glades of the Intel swamp. It shouldn’t be a surprise, given the numbers of them already called before grand juries and fingered by inspectors general. But it may be shocking how high up the indictments go, and how serious the charges may be: sedition… treason…? These midterm election may bring the moment when the Democratic Party finally blows up, at least enough to sweep away the current coterie of desperate idiots running it. It’s time to shove the crybabies offstage and allow a few clear-eyed adults to take the room, including men, yes even white men. And let all the shrieking, clamoring, marginal freaks return to the margins, where they belong.

That recession is now certain, deal or not. Even in case of a deal, 1000s of documents must be signed. A deal will not mean a return to BAU.

• No-Deal Brexit Would Trigger Lengthy UK Recession – S&P (G.)

Britain’s economy will suffer rising unemployment and falling household incomes that would trigger a recession should Theresa May fail to secure a deal to prevent the UK crashing out of the European Union next year, according to analysis by the global rating agency Standard & Poor’s. Property prices would slump and inflation would spike to more than 5% in a scenario that S&P said had become more likely in recent months following deadlock with Brussels over a post-Brexit deal. In a warning that included a possible downgrade to the UK’s credit rating, which would bring with it an increase in the Treasury’s borrowing costs, S&P said it still expected both sides in the Brexit talks to come to an agreement before next March, when the UK is scheduled to leave the European Union.

But it warned that the chance of a “no-deal” Brexit had risen in recent months to such an extent that it needed to warn international investors about the potential challenges ahead. [..] S&P Global Ratings credit analyst Paul Watters, said: “Our base-case scenario is that the UK and the EU will agree and ratify a Brexit deal, leading to a transition phase lasting through 2020, followed by a free trade agreement. “But we believe the risk of no deal has increased sufficiently to become a relevant rating consideration. This reflects the inability thus far of the UK and EU to reach agreement on the Northern Irish border issue, the critical outstanding component of the proposed withdrawal treaty.”

Coming only a day after the chancellor said the failure to secure a deal would force him to hold an emergency budget, S&P’s analysis joins a welter of independent reports that forecast that a split from the EU without a deal will deal a serious blow to the prospects of the UK economy. Last month rival agency Moody’s said the risks to the British economy had “risen materially” in recent months.

If you think Trump’s scary, this guy’s in a league of his own.

• Welcome to the Jungle (Escobar)

It’s darkness at the break of (tropical) high noon. Jean Baudrillard once defined Brazil as “the chlorophyll of our planet”. And yet a land vastly associated worldwide with the soft power of creative joie de vivre has elected a fascist for president. Brazil is a land torn apart. Former paratrooper Jair Bolsonaro was elected with 55.63 percent of votes. Yet a record 31 million votes were ruled absent or null and void. No less than 46 million Brazilians voted for the Workers’ Party’s candidate, Fernando Haddad; a professor and former mayor of Sao Paulo, one of the crucial megalopolises of the Global South. The key startling fact is that over 76 million Brazilians did not vote for Bolsonaro. His first speech as president exuded the feeling of a trashy jihad by a fundamentalist sect laced with omnipresent vulgarity and the exhortation of a God-given dictatorship as the path towards a new Brazilian Golden Age.

French-Brazilian sociologist Michael Lowy has described the Bolsonaro phenomenon as “pathological politics on a large scale”. His ascension was facilitated by an unprecedented conjunction of toxic factors such as the massive social impact of crime in Brazil, leading to a widespread belief in violent repression as the only solution; the concerted rejection of the Workers’ Party, catalyzed by financial capital, rentiers, agribusiness and oligarchic interests; an evangelical tsunami; a “justice” system historically favoring the upper classes and embedded in State Department-funded “training” of judges and prosecutors, including the notorious Sergio Moro, whose single-minded goal during the alleged anti-corruption Car Wash investigation was to send Lula to prison; and the absolute aversion to democracy by vast sectors of the Brazilian ruling classes.

That is about to coalesce into a radically anti-popular, God-given, rolling neoliberal shock; paraphrasing Lenin, a case of fascism as the highest stage of neoliberalism. After all, when a fascist sells a “free market” agenda, all his sins are forgiven.

My old buddy John Rubino is right, but the story’s bigger than this. Merkel’s been given far too much power.

• After Germany’s Merkel Comes Chaos (John Rubino)

After a long, initially-successful run promoting European integration and mass immigration, German Chancellor Angela Merkel saw the bottom fall out of her political fortunes this year. This week she stepped down as leader of the formerly-dominant Christian Democrat party and promised not run again when her term as Chancellor ends in 2021. What happens next is almost certain to be chaotic, as the following chart (courtesy of this morning’s Wall Street Journal) makes clear. Note that in August of 2017 the two least popular parties were the far right Alternative for Germany (blue line) and the far left Greens (green line). In the ensuing 14 or so months AfG’s support rose from single digits to around 17% while the Greens rocketed from the bottom of the pack to 20%.

If you didn’t know what these two parties stood for you might think, “Fine, they’re new and interesting, so let them form a coalition and govern for a while.” Unfortunately they’re more likely to kill each other in street fights than work together, since the former want closed borders and free markets while the latter want increased regulation and unlimited immigration. The alternative to an AfG/Green coalition then becomes some combination of the remaining, more centrist (by European standards at least) parties. But the biggest of those parties – Merkel’s Christian Democrats and their coalition partner Social Democrats – are in freefall, precisely because of what they’ve done while in power. So there appears to be no way to put these puzzle pieces together to produce a stable government.

And – here’s where things get truly scary – a stable Germany under Merkel’s bland but firm hand has been the only thing holding the European Union and eurozone together. If Germany descends into internal turmoil without a coherent government to push the Italys and Hungarys around, European populists/nationalists will fill the resulting vacuum. Borders will be re-imposed within and without the EU, national government budgets – already above EU deficit limits in many cases – will explode. Already-debilitating debts will keep rising, and the ECB will be forced to bail out Italy for sure and probably several other member states after that.

Intro to an elaborate series of reports by Reuters, kudos for the effort. Fish have moved north and deeper, leaving entire communities without their proteins.

• Ocean Shock (Reuters)

To stand at the edge of an ocean is to face an eternity of waves and water, a shroud covering seven-tenths of the Earth. Hidden below are mountain ranges and canyons that rival anything on land. There you will find the Earth’s largest habitat, home to billions of plants and animals – the vast majority of the living things on the planet. In this little-seen world, swirling super-highway currents move warm water thousands of miles north and south from the tropics to cooler latitudes, while cold water pumps from the poles to warmer climes. It is a system that we take for granted as much as we do the circulation of our own blood. It substantially regulates the Earth’s temperature, and it has been mitigating the recent spike in atmospheric temperatures, soaking up much of human-generated heat and carbon dioxide.

Without these ocean gyres to moderate temperatures, the Earth would be uninhabitable. In the last few decades, however, the oceans have undergone unprecedented warming. Currents have shifted. These changes are for the most part invisible from land, but this hidden climate change has had a disturbing impact on marine life – in effect, creating an epic underwater refugee crisis. Reuters has discovered that from the waters off the East Coast of the United States to the coasts of West Africa, marine creatures are fleeing for their lives, and the communities that depend on them are facing disruption as a result. As waters warm, fish and other sea life are migrating poleward, seeking to maintain the even temperatures they need to thrive and breed.

The number of creatures involved in this massive diaspora may well dwarf any climate impacts yet seen on land. In the U.S. North Atlantic, for example, fisheries data show that in recent years, at least 85 percent of the nearly 70 federally tracked species have shifted north or deeper, or both, when compared to the norm over the past half-century. And the most dramatic of species shifts have occurred in the last 10 or 15 years. Fish have always followed changing conditions, sometimes with devastating effects for people, as the starvation that beset Norwegian fishing villages in past centuries when the herring failed to appear one season will attest. But what is happening today is different: The accelerating rise in sea temperatures, which scientists primarily attribute to the burning of fossil fuels, is causing a lasting shift in fisheries.

Debt Rattle June 6 2018

Jun 072018

June 7, 2018 Posted by Raúl Ilargi Meijer at 2:24 am Finance Tagged with: Airbnb, Austria, Brexit, debt default, extiction, fish, Greece, narrative, shadow, Turkey, volatility, Xi 3 Responses »

Vincent van Gogh The good Samaritan (after Delacroix) 1890

• UK House Prices Have Soared 100-Fold Since 1966 (CityAM)

• No Need To Buy US Gas At Triple The Price, Will Buy From Russia – Austria (RT)

• European Businesses Advised To Avoid Using British Parts Ahead Of Brexit (Sky)

• Volatility May Hit Wall Street As Alphabet, Facebook Leave Tech Sector (R.)

• China’s Debt Default Avalanche (ZH)

• Turkey Escalates Row With Greece Over ‘Putschist’ Soldiers (G.)

• Merkel Backs Macron’s European Defense Force Initiative (RT)

• Airbnb Culls Japan Listings Ahead Of New Rental Law (AFP)

• Whoever Controls The Narrative Controls The World (CJ)

• How Humanity Could Become Impossible To Propagandize (CJ)

• Study Warns Of Alarming Decline In Australian Fish (AFP)

Shifting priorities. Homes are no longer places to live.

• UK House Prices Have Soared 100-Fold Since 1966 (CityAM)

UK house prices are 106 times higher than they were when England won the World Cup in 1966, according to research from online mortgage broker Trussle. Average house prices have gone up from £2,006 to £211,000, the company found, while wages have risen at around a third of the rate, moving from £798 to £26,500. But for the country’s footballers, the story is somewhat different. On average Premier League footballers earn 1,136 times more than top-flight stars like Bobby Moore and George Best did back in 1966. It’s estimated that the average wage of the current England squad is just below £80,000 per week – more than 3 times the annual UK average wage.

Ishaan Malhi, CEO and founder of Trussle, said: “A lot of has changed since England won the World Cup. We’ve put a man on the moon, invented the internet and we’ve seen technology transform almost every aspect of our lives. “We’ve also seen the UK housing market change dramatically. Prices have soared in the last 52 years, wages have struggled to keep pace and for young people, the chances of getting on the property ladder today will feel a lot slimmer than they did in 1966.” The research from Trussle comes as analysis from trade union GMB published yesterday showed that rents in London are far outpacing wage growth. Analysing data from the Valuation Office Agency, GMB found that between 2011 and 2017, rent prices for two-bedroom flats in London increased by 25.9%, whilst over the same period, monthly earnings increased by just 9.1%.

European ties to Russia are old and deep.

• No Need To Buy US Gas At Triple The Price, Will Buy From Russia – Austria (RT)

The US is force-feeding Europe its liquefied natural gas, which is three times more expensive that buying it from Russia, Austrian President Alexander Van der Bellen said after signing a gas-supply contract with Moscow until 2040. While US politicians are accusing Europe of being dependent on Russian gas, they forget that “American liquefied gas is two or three times more expensive than Russian gas. Under such circumstances, it makes little sense in purely economic terms to replace Russian gas with American LNG,” Van der Bellen said at a press conference after meeting Russian President Vladimir Putin in Vienna on Tuesday.

Putin noted that Austria is a major transportation hub for Russian gas being exported to Europe. “Austria has become one of the key, if not to say, one of the most important units of Russian gas transportation to Western Europe and plays an important role in ensuring the energy security of the entire European continent,” Putin said. He recalled that Russia has exported more than 200 billion cubic meters of natural gas to Austria in the past 50 years. After the meeting, Russia’s Gazprom and Austria’s OMV signed a gas supply contract until 2040.

Trade deals can be bitches.

• European Businesses Advised To Avoid Using British Parts Ahead Of Brexit (Sky)

European governments are advising businesses not to use British parts in goods for export ahead of Brexit, Sky News has established. In its advice rolled out to all Dutch businesses, the Dutch government has told its exporters that “if a large part of your product consists of parts from the UK” domestic exporters may lose free trade access under existing deals. The advice says: “Brexit will have consequences for exports outside the EU. “After Brexit, parts made in the UK no longer count towards this minimum production in the European Union.” This is a reference to what are known as “rules of origin” and “local content” under international trade rules. In order to qualify for EU free trade deals, a certain proportion, typically 55% of a product’s parts, needs to come from the EU.

The Dutch government says UK parts “no longer count towards EU origin” in its official “Brexit impact scan” advice to Dutch businesses. That warning has also been underpinned by the EU’s own technical notice on this issue. “As of withdrawal date, the UK becomes a third country. UK inputs are considered ‘non-originating’,” it says. A leading car industry executive told Sky News that not using UK parts for EU exports would be a “catastrophe” for the British industry. “The hard Brexiteers have built a bomb under the UK automotive industry and the EU have lit it,” said one chief executive. Sky News has also heard of major UK automotive suppliers now ceasing UK supply of major components to cars for export to countries currently covered by EU Free Trade Areas – countries such as South Korea, South Africa and Canada.

A new day.

• Volatility May Hit Wall Street As Alphabet, Facebook Leave Tech Sector (R.)

Volatility could well be in the cards for Wall Street again early this fall, but not for the same reason stocks got rattled in February. This time the culprit would be the largest-ever shakeup of the stock market’s broad business sectors, which will mean some of the hottest stocks, like Facebook and Google parent Alphabet, will shift from their traditional homes in the top-performing technology sector and into a deepened pool of telecommunications and media stocks. The sweeping reorganization of the Global Industry Classification Standard, or GICS, means that funds tracking the telecom, tech and consumer discretionary sectors will be forced to trade billions of dollars of stock to realign their holdings by a Sept. 28 effective date.

While the choppiness many investors expect to see is unlikely to hit stocks in quite the same way that wave of the global uncertainty did in early 2018, the fact that so much money must be shifted among index funds in a short time will cause a stir. In a bid to ensure a smooth transition, leading fund provider Vanguard Group has have already started adjusting its sector exchange-traded funds, or ETFs, while State Street Global Advisors is launching an entirely new fund. Other investors predict price swings and commotion on trading desks if last-minute sales of Alphabet and Facebook shares by heavyweight technology index funds dwarf demand from a handful of telecom funds buying those stocks.

“There’s probably going to be net selling,” said Andrew Bodner, president of Double Diamond Investment Group in Parsippany, New Jersey. “That will be a temporary scenario, and it could be a good buying opportunity for a lot of those stocks.” Maintained by S&P Dow Jones Indices and MSCI since 1999 and widely used by portfolio managers, the GICS classifies companies across 11 sectors. The newest, real estate, was split off from financials in 2016. The upcoming changes, which have yet to be finalized, are meant to reflect evolving industries. Facebook and Alphabet will move from information technology and sit alongside AT&T Inc and Verizon Communications in a broadened telecommunication services sector that will be renamed communications services.

Who’s the boss in China? Xi or the shadows?

• China’s Debt Default Avalanche (ZH)

[..] what if the first domino to fall in the coming corporate debt crisis is not in the US, but in China? After all, as part of China’s aggressive deleveraging campaign, there has already been a spike of corporate bankruptcies as banks shed more of their massive note holdings and de-risk their balance sheets. According to Logan Wright, Hong Kong-based director at research firm Rhodium, there have already been least 14 corporate bond defaults in China in 2018; a separate analysis by Economic Information Daily, as of May 25, there had already been no less than 20 corporate defaults, involving more than 17 billion yuan, a shockingly high number for a country which until recently had never seen a single corporate bankruptcy, and a number which is set to increase as Chinese banks pull pull back from lending to other firms that use the funds to buy bonds, exacerbating the pressure on the market.

“You have seen banks redeeming funds placed with non-bank financial institutions that have reduced the pool of funds available for corporate bond investment overall,” Wright told Bloomberg, adding that additional bond defaults are especially likely among those property developers and local-government financing vehicles which have relied on shadow banking sources of funds. As we discussed last year, as part of Beijing’s crackdown on China’s $10 trillion shadow banking sector, strains have spread from high-yield trust products to corporate bonds as the lack of shadow funding has choked off refinancing for weaker borrowers. Separately, Banks’ lending to other financial firms, a common route for funds and securities brokers to add leverage for corporate bond investments, declined for three straight months, or a total of 1.7 trillion yuan ($265 billion), since January according to Bloomberg calculations.

The deleveraging campaign is also depressing bond demand: “Unlike the U.S., where the majority of buyers of bonds are mutual funds, individuals and investment companies, in China, the key holders of bonds are bank on-and off-balance sheet positions,” said Jason Bedford at UBS, who noted that Chinese banks are buying far fewer bonds as a result. Putting the number in context, according to Bloomberg, China’s four largest banks held about 4.1 trillion yuan in bonds issued by companies and other financial institutions at the end of 2017, nearly 20% below 5.1 trillion yuan a year earlier; all Chinese banks held about 12 trillion yuan of corporate bonds on or off their balances sheets, some 70% of outstanding issuance, according to Citic.

It is therefore hardly surprising to see that Chinese corporate bonds, especially riskier issues, have been getting slammed in recent weeks. According to Chinabond data, as noted first by Bloomberg, the yield premium of three-year AA- rated bonds over similar-maturity AAA notes has blown out 72 bps since March to 225 basis points, the highest level since August 2016, an indication of the recent pressures on weaker firms. One can imagine what is going on with deep junk-rated corps.

Under heavy police protection in Greece. Because the Turks may come and get them. Elections June 24.

• Turkey Escalates Row With Greece Over ‘Putschist’ Soldiers (G.)

Turkey has sent fighter jets roaring into Greek airspace as tensions mount between the two neighbours following the release from pre-trial detention of eight Turkish army officers described as traitors by Ankara. Formations of F-16s flew at low altitude over Aegean isles for more than 20 minutes on Tuesday as Turkey furiously accused Greece of sheltering terrorists. Ankara vowed to trace the commandos who it claimed participated in the failed July 2016 coup against the president, Recep Tayyip Erdogan and his government. “It is our duty to find these ‘putschist’ soldiers wherever they are, pack them up and bring them to Turkey,” the country’s deputy prime minister, Bekir Bozdag, said late on Monday.

He personally criticised the Greek prime minster, Alexis Tsipras, for failing to hand the soldiers over to Turkey after they flew into Greek airspace. “From statements made in Greece by its prime minister right after the coup, we were of the positive opinion that they would be extradited to Turkey,” he said. “We thought that Mr Tsipras would keep his word. With time, though, we saw that the judicial authorities were mobilised and these ‘putschists’ were not extradited.” The fate of the eight has been in Greek hands ever since the army officers took local authorities aback, landing their helicopter outside the northern border town of Alexandroupolis a day after the abortive coup.

[..] On Monday Greek authorities moved the military personnel out of police custody; following expiry of the 18-month pre-trial period they are legally allowed to be detained while they apply for asylum. They have been placed in top-secret locations under heavy police protection. “Given Turkey’s mindset, the situation is very dangerous,” said a senior judicial source. “But this is an issue of justice and we feel strongly that we must stand up for it.”

Competition for NATO?!

• Merkel Backs Macron’s European Defense Force Initiative (RT)

Chancellor Angela Merkel has supported “in principle” the idea of a joint European Defense Force proposed by French President Emmanuel Macron. Germany’s opposition had been the main stumbling block for the much-discussed project. “I am in favor of President Macron’s proposal for an intervention initiative,” the German chancellor told Frankfurter Allgemeine newspaper on Sunday. “However, such an intervention force with a common military-strategic culture must fit into the structure of defense cooperation,” she said. Merkel said that the German military, the Bundeswehr, “must, in principle, be part of such an initiative,” but added that her statement “doesn’t mean that we are to be involved in every mission.”

During his key speech at Sorbonne University last September, Macron proposed a European military “intervention force” that would protect the continent by taking action in hotspots around the globe. It’s a crucial element of the French leader’s defense reform, which is aimed at integrating European defense capacities. But the talks on implementing the European Defense Force have so far been complicated due to Berlin’s cautions approach to the initiative. “European defense cooperation is very important. Of the 180 weapon systems that currently co-exist in Europe, we must move to a situation like the United States, which has only about 30 weapons systems,” Merkel said.

Still a pretty weak law.

• Airbnb Culls Japan Listings Ahead Of New Rental Law (AFP)

Rental platform Airbnb has suspended a large majority of its listings in Japan ahead of a new law that goes into effect next week regulating short-term rentals in the country. The law, which will comes into force on June 15, requires owners to obtain a government registration number and meet various regulations that some have decried as overly strict. “This weekend we reached out to those hosts who have not yet obtained their notification number to let them know that they will need this to accept any new bookings,” Airbnb spokesman for Asia-Pacific Jake Wilczynski told AFP. “We have informed those hosts that we are in the process of turning off future listing capabilities.”

He declined to confirm the exact number of listings affected, but local media reports and sources put the figure at about 80 percent of the rentals available on the site across Japan. Wilczynski said many Airbnb hosts had already obtained their registration, and others were “going through or finalising” the process. “We are on course to register tens of thousands of new listings in Japan in the months ahead,” he added. [..] The law limits stays to 180 days a year, and allows local governments to impose additional restrictions, with the tourist magnet of Kyoto only permitting rentals in residential areas between mid-January and mid-March, the low season for tourists.

Two excellent pieces from Caitlin Johnstone.

• Whoever Controls The Narrative Controls The World (CJ)

MSNBC host Joy Reid still has a job. Despite blatantly lying about time-traveling hackers bearing responsibility for bigoted posts a decade ago in her then-barely-known blog, despite her reportedly sparking an FBI investigation on false pretenses, despite her colleagues at MSNBC being completely fed up with how the network is handling the controversy surrounding her, her career just keeps trundling forward like a bullet-riddled zombie. To be clear, I do not particularly care that Joy Reid has done any of these things. I write about war, nuclear escalations and the sociopathy of US government agencies which kill millions of people; I don’t care that Joy Reid is or was a homophobe, and I don’t care that she lied to cover it up.

The war agendas that MSNBC itself promotes on a daily basis are infinitely worse than either of these things, and if that isn’t obvious to you it’s because military propaganda has caused you to compartmentalize yourself out of an intellectually honest understanding of what war is. What is interesting to me, however, is the fact that Reid’s bosses are protecting her career so adamantly. Both by refusing to fire her, and by steering the conversation into being about her controversial blog posts rather than the fact that she told a spectacular lie in an attempt to cover them up, Reid is being propped up despite this story constantly re-emerging and making new headlines with new embarrassing details, and despite her lack of any discernible talent or redeeming personal characteristics. This tells us something important about what is going on in the world.

It is not difficult to find someone to read from a teleprompter for large amounts of money. What absolutely is difficult is finding someone who is willing to deceive and manipulate to advance the agendas of the privileged few day after day. Who else would be willing to spend all day on Twitter smearing everyone to the left of Hillary Clinton while still claiming to stand on the political left? Who else would advance the point-blank lieabout “17 intelligence agencies” having declared Russia guilty in US election meddling months after that claim had been famously and virally debunked? Who else would publicly claim that Edward Snowden’s NSA leaks did not benefit anyone besides Russia? Who else could oligarchs like Comcast CEO Brian L Roberts, whose company controls MSNBC, count on to consistently advance his agendas?

While it’s easy to find someone you can count on to advance one particular lie at one particular time, it is difficult to find someone you can be absolutely certain will lie for you day after day, year after year, through election cycles and administration changes and new war agendas and changing political climates. A lot of the people who used to advance perspectives which ran against the grain of the political orthodoxy at MSNBC like Phil Donahue, Ed Schultz and Dylan Ratigan have vanished from the airwaves never to return, while reporters who consistently keep their heads down and toe the line for the Democratic establishment like Chris Hayes, Rachel Maddow and Joy Reid are richly rewarded and encouraged to remain.

It’s just that I’m asking myself if maybe the notion that ‘we can change and be better people’ is itself a narrative?!

• How Humanity Could Become Impossible To Propagandize (CJ)

Narrative rules our world today, from our most basic concepts about ourselves to the behavior of nations and governments. Right now your direct experience of life is little more than the air going in and out of your respiratory system, your gaze moving from left to right over this text, and perhaps the sensation of your bum in a chair or sofa; without any narrative overlay, those experiences are all you are in this moment. Add in mental narrative and all of a sudden you’re a particular individual with a particular name and a particular story, who has perhaps some concerns about the future and regrets about the past, with all sorts of desires and goals and fears and aversions. As far as your actual present experience is concerned, all that stuff is pure mental noise. Pure narrative.

The same is true of things like power, money, and government. There is nothing grafted onto the electrons of the universe which says that the world needs to be mostly ruled by a few billionaires and their lackeys. Only the made-up rules about how power, money and government operate cause that to be the case, and those rules are only as true as we all collectively agree to pretend they are. They are all mental constructs that people made up, and we can therefore change them whenever we want to. Which is why so much plutocratic effort goes into making sure that we don’t.

Narrative dominates our society from top to bottom, which means that all someone has to do to control society is control its narratives. If people are sick, hungry, or poor, you don’t have to give them medicine, food or money to pacify them; you can just give them a narrative instead. If you can get them subscribed to the notion that attempts to rectify these problems with economic justice ought to be rejected and avoided by all hardworking Americans, you can have them defending the plutocracy and advocating their own poverty without giving them a thing. In a society where power is relative and money equals power, the rich are necessarily incentivized to keep everyone else poor in order to retain power, so using narrative control to pacify the masses is a common and useful tactic.

Wherever you look, life itself appears to be exiting the planet. Rapidly.

• Study Warns Of Alarming Decline In Australian Fish (AFP)

Conservation experts warned Wednesday of alarming falls in Australian fish populations and called for more marine reserves and better management to halt the decline. A 10-year study, looking at nearly 200 species at 544 sites, found the main cause was overfishing, with climate change also contributing, although the organisation that manages the nation’s fisheries disputed the findings. The research, in the decade to 2015 by the University of Tasmania and Sydney’s University of Technology, indicated that the numbers of large fish species – over 20 centimetres (eight inches) – had decreased by about 30 percent.

Claimed to be the first independent assessment of the size and abundance of coastal fish species off the Australian continent, it used frequent underwater surveys by divers along blocks of reef. Researchers compared areas where fishing was allowed with marine parks where it was limited or not permitted at all. “We found consistent population declines amongst many popular commercial and recreational fishes, including in marine parks that allowed limited fishing, while numbers increased within no-fishing reserves,” said lead author Graham Edgar. The study, published in the journal Aquatic Conservation, warned that the present situation globally — with more than 98 percent of seas open to some form of fishing — needed “immediate multinational attention”.

Debt Rattle August 16 2017

Aug 162017

August 16, 2017 Posted by Raúl Ilargi Meijer at 8:57 am Finance Tagged with: American Dream, China, crazy, crisis, debt, fish, leverage, plastic, property, Syria, war 2 Responses »

Fred Stein Hydrant, New York 1947

• The Greatest Crisis In World History Is About To Be Unleashed (von Greyerz)

• After 100 Months of Buying The Dips – Peak Crazy (Stockman)

• China Has Got To Fix Its Debt Problem, IMF Says (CNBC)

• China Money Supply Growth Slips Again as Leverage Crunch Goes On (BBG)

• UK Risks ‘Losing Its Place As Property-Owning Democracy’

• The New American Dream: Rent Your Home From A Hedge Fund (Black)

• Trump Signs Order to Speed Up Public-Works Permits (BBG)

• German Challenge To ECB QE Asset Buys Sent To European Court (R.)

• Washington’s Long War on Syria (Ren.)

• Fish Confusing Plastic Debris In Ocean For Food (G.)

Debt leads to war.

• The Greatest Crisis In World History Is About To Be Unleashed (von Greyerz)

Totally irresponsible policies by governments and central banks have created the most dangerous crisis that the world has ever experienced. Risk doesn’t arise quickly as the result of a single action or event. No, risk of the magnitude that the world is experiencing today is the result of many years or decades of economic mismanagement. Cycles are normal in nature and in the world economy. And cycles that are the result of the laws of nature normally play out in an orderly fashion without extreme tops or bottoms. “Just take the seasons. They go from summer to autumn, winter and spring, with soft transitions that seldom involve drama or catastrophe. Economic cycles would be the same if they were allowed to happen naturally without the interference of governments.

But power corrupts and throughout history leaders have always hung on to power by interfering with the normal business cycle. This involves anything from reducing the precious metals content of money from 100% to nothing, printing money, leveraging credit, manipulating interest rates, taking total taxes from at least 50% + today from nothing 100 years ago etc, etc. Governments will always fail when they believe that they are gods. But not only governments believe they perform godly tasks but also hubristic investment bankers like the ex-CEO of Goldman Sachs who proclaimed that the bank was doing God’s work. It must be remembered that Goldman, like most other banks, would have gone under if they and JP Morgan hadn’t instructed the Fed to save them by printing and guaranteeing $25 trillion. Or maybe that was God’s hand too?

We now have unmanageable risks at many levels – politically, geopolitically, economically and financially. This is a RISK ON situation that is extremely dangerous and will have very grave consequences. There are numerous risks that can all cause the collapse of the world economy and they all have equal relevance. However, the political situation in the USA is very dangerous for the world. This the biggest economy in the world, albeit bankrupt with debt growing exponentially and real deficits every year since 1960. Before the dollar has collapsed, the US will still be seen as a powerful nation, although a massive economic decline will soon weaken the country burdened by debt at all levels, government, state, and private.

“There is absolutely no reason for the stock markets to be at current levels, let alone melting-up day after day.”

• After 100 Months of Buying The Dips – Peak Crazy (Stockman)

Just call it Peak Crazy and move on. There is absolutely no reason for the stock markets to be at current levels, let alone melting-up day after day. The fact that this is happening is a measure of how impaired capital markets have become as a result of massive central bank intrusion. The robo-machines and day traders keep buying the dips because that has “worked” for the last 100 months. There is nothing more to it than residual momentum. Under a regime of honest money and price discovery, the stock market discounts the future. There is no plausible future from here that’s worth 24 times S&P 500 value or 96 times the Russell 2000. Surely the year-ahead earnings boom that Wall Street’s artists have penciled in is not in the slightest bit plausible. With 84% of the S&P 500 reporting Q2 results, LTM earnings are still 1.3% below where they were in September 2014.

Nothing has happened to corporate earnings in the last three years except deflation in the energy, materials and industrial sectors. After hitting $106 per share in September 2014, the global deflation cycle brought them to a low point of $86.44 per share in March 2016 in response to low $30s oil prices. The latter has since recovered to the $50 dollar zone – bringing S&P 500 earnings back to $104.61 during the current quarter. The question remains: How does an aging business cycle and immense global headwinds justify the expectation of a red hot earnings breakout during the next 18 months? Yet that’s what’s happening on Wall Street. We’ve hit nearly $133 per share of GAAP earnings (and $145 of the ex-items variety) for the LTM period ending in December 2018, meaning a prospective surge of 27%.

[..] In this machine driven market, any of these indices could resume their mad momentum based climb. But negative divergences are breaking out everywhere, and that’s usually a sign that the end is near. Margins on debt has again reached an all-time high of $550 billion. The chart below leaves little doubt as to what comes next. After the 2000 peak, margin debt collapsed by 50% as stocks were violently liquidated to meet margin calls. All this while in 2008 the shrinkage of margin debt was even larger – nearly 60%. This time, however, a similar shrinkage would cause a $325 billion decline in margin balances. That’s a lot of stocks on a fire sale.

“..outstanding bank loans and total social financing, both of which rose roughly 13% in July versus the same period last year..”

• China Has Got To Fix Its Debt Problem, IMF Says (CNBC)

China’s economy is looking good enough that the IMF is raising its outlook, but the organization is doing so with a strong warning over growing debt in the world’s second-largest economy. The IMF issued its annual review of China on Tuesday, and has revised its growth forecast to 6.7% for 2017, which was up from 6.2%. The organization also said it expects China to average 6.4% growth between now and 2021, versus its previous estimate of 6%. Still, the organization warned that things were far from peachy. “The growth outlook has been revised up reflecting strong momentum, a commitment to growth targets, and a recovering global economy,” the IMF said. “But this comes at the cost of further large and continuous increases in private and public debt, and thus increasing downside risks in the medium term.”

What Beijing needs to do is to seize its current strong growth momentum “to accelerate needed reforms and focus more on the quality and sustainability of growth,” said the report. At the top of that list is working to tackle the debt issue: Going forward, the IMF sees China’s non-financial sector debt to hit nearly 300% of GDP by 2022, up from around 240% last year. Debt-fueled growth, the IMF warned, is a short-term solution that isn’t sustainable in the long run unless China tackles deeper structural issues. Experts have been sounding the alarm bell over this issue for years, urging China to rein in its old model of opening credit lines to fuel investment and spending and to find a better balance between supporting growth and controlling risks to the economy.

Chinese banks extended 825.5 billion yuan (about $123.44 billion) in new loans in July, down from 1.54 trillion yuan in June. Outstanding total social financing — a broad measure of credit and liquidity — came in at 1.22 trillion yuan last month versus 1.78 trillion yuan in June. Part of the drop is seasonal, and it’s “masking an uptick in underlying credit growth,” wrote China economist Julian Evans-Pritchard at Capital Economics. A better way to look at credit creation is to gauge growth in outstanding bank loans and total social financing, both of which rose roughly 13% in July versus the same period last year.

As long as things look good for the Party Congress, who cares?

• China Money Supply Growth Slips Again as Leverage Crunch Goes On (BBG)

Growth in China’s broad money supply slipped to a fresh record low, signaling authorities aren’t letting up in their drive to curb excess borrowing and safeguard the financial system. Aggregate financing stood at 1.22 trillion yuan ($182.7 billion) in July, the People’s Bank of China said on Tuesday, compared with an estimated 1 trillion yuan in a Bloomberg survey. New yuan loans stood at 825.5 billion yuan, versus an projected 800 billion yuan. Broad M2 money supply increased 9.2%, while economists forecast a 9.5% increase . Authorities pushing to cut excess leverage have squeezed the massive shadow bank sector, which shrank for the first time in nine months. Yet with aggregate financing remaining robust and bond issuance rebounding, the central bank is still providing ample support for businesses to avoid derailing growth ahead of a key Communist Party congress this fall.

Slower M2 growth will become a “new normal,” the PBOC said Friday in its quarterly monetary policy report. “The relevance of M2 growth to the economy and its predictability has reduced, and its changes should not be over-interpreted.” “The deleveraging campaign is still focused on the financial sector, which leads to the slowdown in M2 growth,” said Yao Shaohua at ABCI Securities in Hong Kong. “Bank support for the real economy remains solid.” “The easing in credit conditions in July was probably part of the concerted stability play ahead of the Party Congress, thus more likely to be temporary,” said Yao Wei, chief China economist at Societe Generale in Paris. “We’re still looking for more deleveraging measures and tougher regulations afterwards.”

“The divergence between M2 growth and aggregate financing reflects that the PBOC is trying to balance cutting leverage while ensuring enough funds to support the real economy,” said Wen Bin at China Minsheng Banking in Beijing. “Single-digit M2 growth is likely to stretch until year-end. And with ample support from the central bank’s credit supply, the drag effect of financial deleveraging on the economic expansion will be limited.” “Banks are still creating credit, and this credit is important to support economic growth,” said Iris Pang, an analyst at ING in Hong Kong. “If liquidity is too tight, or credit growth shrinks, the whole deleveraging reform will run into the risk that there will be too many defaults and the whole banking system will be shaken up.”

“..first-time buyer registrations drop by almost 20% on the year..”

• UK Risks ‘Losing Its Place As Property-Owning Democracy’

The UK risks losing its place as a property-owning democracy if house prices continue to rise, according to the boss of the UK’s largest independent estate agent. Paul Smith, chief executive of haart, said that “unaffordability is reaching crisis point” and urged the Government to stop “excessive profiteering” at the expense of aspiring home owners. The call comes as official figures showed that the price of the average house in the UK increased by £10,000 last year to £223,000. Property values increased by 0.8% between May and June according to joint figures from the Office for National Statistics, Land Registry and other bodies. In the year to June average prices were up 4.9%, down marginally from 5% growth in the year to May.

The report released on Tuesday said the annual growth rate had slowed since mid-2016 but has remained steady at about 5% this year so far. “House prices continued to rally with unflinching determination once again in June despite the ongoing economic uncertainty,” Mr Smith said. “However this means that the average UK buyer now has to fork out an extra £10,000 more to own a home than the same time last year. “Along with consumer price hikes and falling wage growth, unaffordability is reaching a crisis point. This is creating real impact on the ground as we see first-time buyer registrations drop by almost 20% on the year across our branches.”

“..if you’re lucky enough to not be living in your parents’ basement, you’ll be relegated to renting your house from Blackstone.”

• The New American Dream: Rent Your Home From A Hedge Fund (Black)

About a month ago I joined the Board of Directors of a publicly-traded company that invests in US real estate. The position brings a lot of insight into what’s happening in the US housing market. And from what I’m seeing, the transformation that’s taking place today is extraordinary. Buying and renting out single-family homes has long been the mainstay investment of small, independent, individual investors. The big banks and hedge funds pretty much monopolize everything else. They own the stock market. They own the bond market. They own all the commercial real estate. They even own the farmland. Single-family homes were one of the last bastions of investment freedom for the little guy. (Real estate is how I got my own start in business and investing so many years ago; I was a 21-year-old Army lieutenant fresh out of the academy when I bought my first rental property.)

But all that’s changing now. Last week a huge merger was announced between Invitation Homes (owned by private equity giant Blackstone Group) and Starwood Waypoint Homes (owned by real estate giant Starwood Capital). If the deal goes through, the combined entity would be the largest owner of single-family homes in the United States with a portfolio worth over $20 billion. And this is only the latest merger in an ongoing trend. Three years ago, for example, American Homes 4 Rent bought Beazer Pre-Owned Rental Homes, creating another enormous player. A few months later, Starwood Waypoint bought Colony American Homes. And of course, Blackstone was one of the first institutional investors to start buying distressed homes, forking over around $10 billion on houses since the Great Financial Crisis.

[..] medium-sized funds are buying up all the little guys. And mega-funds like Blackstone are buying up all the medium-sized funds. This means there’s essentially an ‘arms race’ building among the world’s biggest funds to control the market, squeezing small, individual investors out of the housing market. [..] the average guy isn’t making any more money, or able to save anything… all while home prices soar to record levels as major funds gobble up the supply. This means that the new reality in America, especially for young people, is that if you’re lucky enough to not be living in your parents’ basement, you’ll be relegated to renting your house from Blackstone.

Prolonging the emergency with America’s own bridges to nowhere.

• Trump Signs Order to Speed Up Public-Works Permits (BBG)

President Donald Trump signed an executive order Tuesday that’s designed to streamline the approval process for building roads, bridges and other infrastructure by establishing “one federal decision’’ for major projects and setting an average two-year goal for permitting. “This over-regulated permitting process is a massive self-inflicted wound on our country,” Trump said in a press conference at Trump Tower in New York. “It’s disgraceful.” Among other things, the president’s order will rescind a previous decree signed by former President Barack Obama that required federal agencies to account for flood risk and climate change when paying for roads, bridges or other structures.

It also allows the Office of Management and Budget to establish goals for environmental reviews and permitting of infrastructure projects and then track their progress – with automatic elevation to senior agency officials when deadlines are missed or extended, according to the order. The order calls for tracking the time and costs of conducting environmental reviews and making permitting decisions, and it allows the budget office to consider penalties for agencies that fail to meet established milestones. Critics say there’s danger in streamlining the reviews. “This is yet another outrageous example of Trump’s insistence on putting corporate interests ahead of people’s health and safety,” said Alex Taurel, deputy legislative director with the League of Conservation Voters, a political advocacy group.

Way too late.

• German Challenge To ECB QE Asset Buys Sent To European Court (R.)

The European Central Bank may be violating laws on monetary financing in its €2.3 trillion ($2.7 trillion) asset purchase programme, Germany’s constitutional court said on Tuesday, and it asked Europe’s top court to make a ruling. In the biggest challenge yet to the ECB’s unprecedented effort to revive growth, the court said bond buys under the scheme may go beyond the bank’s mandate and inhibit euro zone members’ activities. “Significant reasons indicate that the ECB decisions governing the asset purchase programme violate the prohibition of monetary financing and exceed the monetary policy mandate of the European Central Bank, thus encroaching upon the competences of the Member States,” the court said. It said it would ask the European Court of Justice to review the programme.

The ECB acted swiftly to defend the scheme. “The extended asset purchase programme is in our opinion fully within our mandate,” it said in a statement. “That is ultimately for the European Court of Justice to assess.” It said the €60 billion per month asset buys would continue as normal. The European court has already backed the ECB’s more contentious emergency bond purchase scheme known as Outright Monetary Transactions or OMT with only relatively minor limitations, suggesting that the challenge – lodged by several academics and politicians – may face an uphill battle. The decision to pass the issue over to the ECJ means any final ruling will come either after the bond purchases end or near the end of the scheme, which has already been running for over two years and is expected to be wound down next year.

“The same State Department Official had written of Gadaffi in Libya that combining its oil wealth with public ownership of the economy “enabled Libyans to live beyond the wildest dreams of their fathers, and grandfathers.”

• Washington’s Long War on Syria (Ren.)

From Syria, to Iraq, Iran to Libya, our understandings of the long-wars in the Middle-East as moral, humanitarian interventions designed to democratise and civilise are the result of a carefully crafted propaganda campaign waged by the US and its allies. Each of these uprisings were launched by US proxies, designed to destabilize the regions, justifying regime change that suit the economic interests of its investors, banks and corporations, captured comprehensively in a new book by Canadian author and analyst, Stephen Gowans, Washington’s Long War on Syria. You might be surprised to know that both the Libyan, Syrian and Iraqi government, led by Muammar Gaddafi, Hafez Al Assad, (succeeded by Bashaar Al Assaad) and Sadaam Hussein respectively, were socialist governments. Or Ba’ath Arab Socialist governments, to be precise.

Ba’ath Arab Socialism can be summed up in their constitutions supporting the values of: ‘freedom of the Arab world, freedom from foreign powers and freedom of socialism’. Its doctrine was supported in Libya, as it was in Iraq and Syria. Of course, particularly in Hussein’s case, we cannot claim that these governments were without their problems. Ethnic cleansing is not to be overlooked, but condemned on the strongest grounds. But of course these were not the reasons the US and its allies decided to get into it. In the case of Iraq, it had combined its oil wealth with public ownership of the economy, leading to what is known as ‘The Golden Age’, where, according to a State Department Official: “Schools, universities, hospitals, factories, museums and theatres proliferated employment so universal, a labour shortage developed.”

When the Ba’ath Arab Socialists were driven from power in Iraq, the US installed military dictator, Paul El Briener who set about a ‘de-Ba’athification’ of the government, expelling every member of the Ba’ath Arab Socialist party and imposed a constitution forbidding any secular Arab leader from ever holding office in Iraq again. The same State Department Official had written of Gadaffi in Libya that combining its oil wealth with public ownership of the economy “enabled Libyans to live beyond the wildest dreams of their fathers, and grandfathers.” Gadaffi would soon be removed by Islamists, backed by NATO forces after Western oil companies agitated for his removal because he was “driving a hard bargain”. Canadian paramilitary forces even quipped that they were “al-Qaeda’s air-force”.

And then we eat it. Carbon will kill us yet.

• Fish Confusing Plastic Debris In Ocean For Food (G.)

Fish may be actively seeking out plastic debris in the oceans as the tiny pieces appear to smell similar to their natural prey, new research suggests. The fish confuse plastic for an edible substance because microplastics in the oceans pick up a covering of biological material, such as algae, that mimics the smell of food, according to the study published on Wednesday in the journal Proceedings of the Royal Society B. Scientists presented schools of wild-caught anchovies with plastic debris taken from the oceans, and with clean pieces of plastic that had never been in the ocean. The anchovies responded to the odours of the ocean debris in the same way as they do to the odours of the food they seek. The scientists said this was the first behavioural evidence that the chemical signature of plastic debris was attractive to a marine organism, and reinforces other work suggesting the odour could be significant.

The finding demonstrates an additional danger of plastic in the oceans, as it suggests that fish are not just ingesting the tiny pieces by accident, but actively seeking them out. Matthew Savoca, of the National Oceanic and Atmospheric Administration and lead author of the study, told the Guardian: “When plastic floats at sea its surface gets colonised by algae within days or weeks, a process known as biofouling. Previous research has shown that this algae produces and emits DMS, an algal based compound that certain marine animals use to find food. [The research shows] plastic may be more deceptive to fish than previously thought. If plastic both looks and smells like food, it is more difficult for animals like fish to distinguish it as not food.”

Institutional Fish

Oct 232014

October 23, 2014 Posted by Raúl Ilargi Meijer at 11:23 pm Finance Tagged with: fish, fund, institutional, pension, poker, QE 8 Responses »

Jack Delano. Cars being precooled at the ice plant, San Bernardino, CA Mar 1943

Large and/or institutional investors, your pension funds, your market funds, you name them, have one glaringly obvious and immense Achilles heel that they very much prefer not to talk about. That is, they MUST invest their funds, in something, anything, they can’t NOT invest. They are trapped in the game. They have to roll over debt, investments, all the time.

In today’s markets, they can move into Treasuries, as we see bond funds (and undoubtedly others) do recently, and while that’s already a sign of unrest in the ranks, at the same time it exposes the funds. And not only because everyone knows it won’t allow them to meet the targets they must meet. Oil, gas and gold are unattractive alternatives.

The big funds can play the game, but they really shouldn’t, because they can’t win. Not in the end. Not when the chips are down. The reason is that they cannot fold. And the others at the table know this, and immediately recognize this for the fatal flaw it is. No matter how smart and sophisticated institutional investors and their fund managers may be, in ultimo they are, to put it in poker terms, the ‘designated’ fish.

It may take a long time before this plays out, and they realize it for what it is (fish don’t recognize themselves for what they are, other than, and even that’s a maybe, once they’ve been exposed as such by others), since in times of plenty there is no urgent need for the other players to catch and filet the fish.

As long as there’s enough to eat at the table, the ‘solid’ players can bide their time and let the fish fatten themselves (as long as it’s not from their money), only to gut them when times get leaner. In a way, the solid players use the fish as a way to stow away for a rainy day some of the ultra cheap QE money has made available, the money without which there would be no markets left, if only so their own actions don’t become too conspicuous.

Funds that invest for a living, and whose managers must meet, say, a 7-8% profit target, can appear to be well run and profitable for many years, provided they operate in a rich environment and no solid players decide to go after them (if these do, it’s game over in a heartbeat).

Seven years of QE et al have made this possible. As have many years of increasing debt and leverage and ever looser rules in global finance (re: the infamous murder of Glass-Steagall) before that. But. But that play is coming to a close. The ‘free’ money that’s been arriving at the table from outside sources for so many years is finally, thankfully, starting to dry up (and no, Mario Draghi won’t fill in the gaps).

I’ll quote out of context something then-poker playing law student and now-bankruptcy lawyer Ashvin Pandurangi wrote here at the Automatic Earth on February 9 2011. Out of context in the sense that Ashvin when he spoke of ‘fish’ meant speculators and the like, not institutional investors.

However, because of the fatal flaw for any player of having to play no matter what, the description of the psychology of fish versus solid players at the poker table is still spot on.

A Glimpse Into the Stubborn Psychology of Fish

What makes poker a profitable venture for “solid” players, unlike blackjack, craps or roulette, is their opportunity to capitalize on the mental mistakes of other players, by accurately “reading” the opponent’s potential range of hole cards in any given hand (mostly from betting tendencies and style of play), and accurately calculating the “pot odds” they are being laid (money that must be put in on the present and future betting rounds as a percentage of money that could be won from the pot). The pot odds calculation allows the solid player to determine the best course of action (bet, call, raise, fold) by comparing it to the equity his/her hand carries against the opponent’s range.[..]

Institutional investors such as your pension fund may not suffer from too many ‘mental mistakes’, they may be as smart as other players, but in their place comes the worse flaw of not being able to fold. Which means the the other players have a very easy time of calculating the “pot odds” they are being laid. They just, until today, haven’t been forced to call the hands of the fish, because of the money being injected from outside.

The best feature of a true fish is that they never learn or adapt to an opponent’s style of play. They will keep calling you with weak hands even when you only show down “monsters” at the table, because they are only concerned with their own cards and they always assume you are holding even weaker than they are.

There are not many real-life players who fit exactly into this idealized style of play, but there are many who generally harbor its underlying psychology – one of permanent and irrational belief in an ability to win a hand, despite any mounting evidence to the contrary. They cannot possibly conceive of folding, because that means giving up any chance of winning, slim as it may be, and also giving up any money already invested in the pot.[..]

Your pension fund manager may not believe in his ability to win a hand, but still be forced to play it. Because (s)he must always play something, some hand. (S)he is forced into the psychology of the fish.

The fish never stop to think what your strong bets out of position imply about your hand, especially given the fact that you most likely know that they are fish. If the fish do stop to think about these factors, then they most likely dismiss the thought before it has any chance to settle, since it would be too disruptive to their goal of never folding a potential winner. While the solid players are constantly engaged in several different layers of critical psychoanalysis, the fish are forever stuck in a one-track mindset.

It’s sort to fun to play around with, and take out of context, what Ashvin wrote, and what mindsets managers at pension- and other funds may have, not just fun for me but even far more for the solid players sitting opposite those managers. Because they know they have a rich source of profits waiting from them after QE has been cancelled, in the vaults of those whose job descriptions say they must play every day no matter what hand they’re dealt.

In essence it’s all just a pretend game, and the fish in today’s investment world are probably far more aware of their own identity than the fish at a real life poker table. But it doesn’t matter. They’re still fish, and everybody knows they’re going down. And therefore so are your pensions and your other institutional investments. What are they going to do, stop playing? They can’t.

So who are the solid players in this game, you ask? Why, Wall Street, of course. They’ve had their eye on your remaining cash all along.