flipping Archives - The Automatic Earth

Emerging markets were rattled again, with the Argentine peso, Turkish lira and Indonesian rupiah tumbling overnight. The negative sentiment is set to weigh on other Asian currencies, although they will remain fairly resilient to the impact, analysts say. The peso crashed nearly 12 percent, following a domestic crisis which saw its central bank hike rates to 60 percent in an attempt to shore up its currency. Extending its steep losses this year, the lira fell 2.94 percent to a fourth straight day of declines. In Asia, India’s rupee fell to a new record low against the dollar on Friday — a more than 11 percent fall since the start of the year, and the Indonesian rupiah hit a near three-year low.

“Emerging markets will remain pressured by the Argentine peso and Turkish lira crises,” DBS analysts said in a note Friday morning. The peso is down more than 45% against the greenback this year. “Argentina has hiked rates to a record 60% to address double-digit inflation, but this would exacerbate the recession, and coupled with budget/current account deficits of around 5% of GDP, have increased the risk of for the government to default on its debt,” they added.

Likely to be pushed hard ahead of mid terms.

• US, China To Regulate Big Tech Firms ‘Like National Security Companies’ (CNBC)

The U.S. and China may be at odds on trade, but both are lining up to crack down on big tech, according to an analyst. “I think this is actually wrapped up in the trade issue, which is around national security and tech companies,” Michael Hessel, political economy analyst at Absolute Strategy Research, told CNBC’s “Squawk Box Europe” on Thursday. “There’s a growing push both within China and the U.S. to regulate some of these companies increasingly like national security companies, which could have huge implications for their business model.” President Donald Trump on Tuesday made Google his latest target in a tirade against big tech, saying the firm’s search service is “rigged” against conservatives in favor of left-leaning media.

The president subsequently took another shot at the tech giant on Wednesday, claiming it snubbed twice his State of the Union speeches, while promoting Barack Obama’s during each year of the latter’s presidency. Google later responded to this claim, saying it did promote Trump’s State of the Union address this year, but not in 2017. [..] Absolute Strategy Research’s Hessel did not expand on how he expected either country to clamp down on their respective tech industries. He said that a lack of regulation in the U.S. on tech — while the media industry is more heavily regulated — meant it could be a long-term concern for lawmakers in Washington. “I think the regulation of the tech industry is going to be a huge issue on a three-to-five year view,” Hessel said.

2nd Special Counsel preparations.

• Trumps Legal Team Preparing Counter Report To Delegitimize Mueller (ZH)

President Trump’s lawyers are preparing a rebuttal to any negative report issued by special counsel Robert Mueller following the DOJ’s probe into Russian collusion with the Trump campaign, reports the Daily Beast following an interview with Trump attorney Rudy Giuliani. Part of the rebuttal, says Giuliani, would focus on whether the “initiation of the investigation was…legitimate or not.” “According to Giuliani, the bulk of the report will be divided into two sections. One section will seek to question the legitimacy of the Mueller probe generally by alleging “possible conflicts” of interest by federal law enforcement authorities. The other section will respond to more substantive allegations of Trump campaign collusion with Russian government agents to sway the 2016 election, and obstruction of justice allegations stemming from, among other things, the president’s firing of former FBI director James Comey.” -Daily Beast

The latter section of the rebuttal will focus on Deputy Director Rod Rosenstein’s mandate when he ordered the Mueller’s investigation – though Giuliani admits he has no idea what the final report will consist of. “Since we have to guess what it is, [our report so far] is quite voluminous,” Giuliani said, claiming that he would spend much of this weekend “paring it down” and that he was editing the document created by the “whole team.” “The first half of it is 58 pages, and second half isn’t done yet…It needs an executive summary if it goes over a hundred” -Daily Beast In other words, Mueller has fair warning that the Trump administration intends to fight this tooth and nail.

The Weekly Standard’s Eric Felton offered this last month: “Appellate and constitutional lawyers David B. Rivkin, Jr. and Elizabeth Price Foley recently made a compelling case that the political bias among the FBI agents working on “Crossfire Hurricane” renders illegitimate everything flowing from that investigation. If “Crossfire was politically motivated then its culmination, the appointment of a special counsel, inherited the taint,” Rivkin and Foley wrote in the Wall Street Journal. “All special-counsel activities—investigations, plea deals, subpoenas, reports, indictments and convictions—are fruit of a poisonous tree, byproducts of a violation of due process.” Rivkin and Foley add: “That Mr. Mueller and his staff had nothing to do with Crossfire’s origin offers no cure.” -Weekly Standard

Another fully crazy story. And yes, if such moles existed, nobody would tell the media.

• ‘Vital’ US Moles in the Kremlin Go Missing! (Stephen Cohen)

on August 25, the ever-eager New York Times published yet another front-page Russiagate story—one that if true would be sensational, though hardly anyone seemed to notice. According to the Times’ regular Intel leakers, US intelligence agencies, presumably the CIA, has had multiple “informants close to…Putin and in the Kremlin who provided crucial details” about Russiagate for two years. Now, however, “the vital Kremlin informants have largely gone silent.” The Times laces the story with misdeeds questionably attributed to Putin and equally untrustworthy commentators, as well as a mistranslated Putin statement that incorrectly has him saying all “traitors” should be killed. Standard US media fare these days when fact-checkers seem not to be required for Russia coverage. But the sensation of the article is that the US had moles in Putin’s office.

The real novelty of Russiagate is the allegation that a Kremlin leader, Putin, personally gave orders to affect the outcome of an American presidential election. In this regard, Russiagaters have produced even less evidence, only suppositions without facts or much logic. With the Russiagate narrative being frayed by time and fruitless investigations, the “mole in the Kremlin” may have seemed a ploy needed to keep the conspiracy theory moving forward, presumably toward Trump’s removal from office by whatever means. And hence the temptation to play the mole card again, now, as yet more investigations generate smoke but no smoking gun.

The pretext of the Times story is that Putin is preparing an attack on the upcoming November elections, but the once-“vital,” now-silent moles are not providing the “crucial details.” Even if the story is entirely bogus, consider the damage it is doing. Russiagate allegations have already delegitimized a presidential election, and a presidency, in the minds of many Americans. The Times’ updated, expanded version may do the same to congressional elections and the next Congress. If so, there is an “attack on American democracy”—not by Putin or Trump but by whoever godfathered and repeatedly inflated Russiagate.

Common practice, but in this case questionable.

• Trump Is Right About “Flipping” (FFF)

Suppose a federal criminal defendant contacts a prospective witness in a case and offers him $50,000 in return for his “cooperation” in his upcoming trial. The money will be paid as soon as the trial is over. The defendant makes it clear that he wants the witness to “tell the truth” but that his “cooperation” when he testifies at trial would be greatly appreciated. What would happen if federal officials learned about that communication and offer? They would go ballistic. They would immediately secure an indictment for bribery and witness tampering. What if the defendant says, “Oh, no, I wasn’t tampering with the witness. I specifically told him that I wanted him to tell the truth when he took the witness stand. I was just seeking his friendly ‘cooperation’ with my $50,000 offer to him.”?

It wouldn’t make a difference. Federal prosecutors would go after him with a vengeance on bribery and witness-tampering charges. And it is a virtual certainty that they would get a conviction. There is good reason for that. The law recognizes that the money could serve as an inducement for the witness to lie. Even though the defendant tells him to “tell the truth,” the witness knows that the fifty grand is being paid to him to help the defendant get acquitted, especially since it is payable after the trial is over. The temptation to lie, in return for the money, becomes strong, which is why the law prohibits criminal defendants from engaging in this type of practice.

Suppose a federal prosecutor says to a witness, “You are facing life in prison on the charges we have brought against you. But if you ‘cooperate’ with us to get John Doe, we will adjust the charges so that the most the judge can do is send you to jail for only 5 years at most. If you are really ‘cooperative,’ we will recommend that the judge give you the lowest possible sentence, perhaps even probation. Oh, one more thing, we want to make it clear that we do want you to tell the truth.” Do you see the problem? The temptation to please the prosecutor with “cooperation” becomes tremendous. If the witness can help secure a conviction of Doe, he stands to get a much lighter sentence for his successful “cooperation.” The inducement to commit perjury oftentimes takes over, notwithstanding the prosecutor’s admonition to the witness to “tell the truth.”

Are the UK going to use this to justify Brexit?

• France Says EU Needs Strategic Relationship With Russia On Defense (R.)

The European Union needs a strategic relationship with Turkey, including in defense matters, and should modernize its post-Cold War relations with Russia, French President Emmanuel Macron said on Thursday. Macron is a strong advocate for a Europe that is able to defend its strategic interests and financial independence and respond to new global economic and defense situation brought on by Donald Trump’s presidency in the United States. He has sought to improve relations with Russia’s President Vladimir Putin, although his efforts have been complicated by allegations of Russian meddling in elections from the United States to France and a nerve agent attack in Britain.

“It is in our interest for the EU to have a strategic relationship with Turkey as well as with Russia that brings stability, that will in the long term and bring more strength and coherency,” Macron said in a news conference in Helsinki alongside Finnish President Sauli Niinisto. He said the EU’s relations with Russia needed to be “brought up to date”, using the Italian word “aggiornamento”. “I think that on matters like cybersecurity, defense, strategic relationships, we could envisage the outlines of a new relationship between Russia and the EU which is coherent with the direction Europe is headed in,” Macron said.

Not enough, says Trump.

• EU Says It Is Willing To Scrap Car Tariffs In US Trade Deal (Pol.eu)

Brussels is willing to scrap tariffs on all industrial products, including cars, in its trade talks with the United States, EU trade chief Cecilia Malmström said Thursday. “We said that we are ready from the EU side to go to zero tariffs on all industrial goods, of course if the U.S. does the same, so it would be on a reciprocal basis,” Malmström told the European Parliament’s trade committee. “We are willing to bring down even our car tariffs down to zero … if the U.S. does the same,” she said, adding that “it would be good for us economically, and for them.”

Malmström’s comment went beyond what was agreed in July in the joint statement between European Commission President Jean-Claude Juncker and U.S. President Donald Trump, which only mentioned eliminating tariffs, non-tariff barriers and subsidies for “non-auto industrial goods.” [..] The EU’s car tariff of 10 percent is higher than the general U.S. auto tariff of 2.5 percent, but America imposes a 25 percent duty on light trucks and pick-ups. Malmström insisted that the discussions were not about “restarting TTIP” but aiming for “a more limited trade agreement.” “Agriculture would not be in the agreement, nor public procurement as it looks to today,” she said.

Same as Silk Road: loading countries up with debt. Then take their assets.

• China-Africa Summit To Target Investment Despite Debt Worries (AFP)

African leaders will gather in Beijing Monday for a summit focused on economic ties, granting China a feel-good photo opportunity as it comes under increasing fire for its debt-laden approach to aid in the developing world. President Xi Jinping will host leaders from across the continent for the two-day Forum on China-Africa Cooperation, which will include talks on his cherished “Belt and Road” infrastructure programme. The massive scheme, aimed at improving Chinese access to foreign markets and resources, and boosting its influence abroad, has already seen Beijing loan billions of dollars to countries in Asia and Africa for roads, railways, ports and other major building projects.

“The initiative will probably be expanded to include the whole of Africa,” said Cobus van Staden, senior researcher on Africa-China relations at the South African Institute of International Affairs. While some critics have branded the strategy a debt-trap, African leaders have long embraced Chinese investment, helping make Beijing the continent’s largest trading partner for the past decade. At the last three-yearly gathering in Johannesburg in 2015, Xi announced $60 billion of assistance and loans for Africa. This year, China will want to add more African countries to “its ever-expanding list of ‘friendly’ nations”, especially from the north and francophone west, said Adebusuyi Isaac Adeniran, an expert on the relationship at Nigeria’s Obafemi Awolowo University.

Starting to short all of Big Tech. Buffett calling iPhones underpriced may be seen in that light.

• As Tesla Shares Fall, Amazon Takes Over As Most Shorted US Stock (R.)

With Tesla’s shares briefly dipping below the $300 level on Thursday, the electric carmaker ceded its seat as the most shorted U.S. stock to Amazon.com, according to data from financial technology and analytics firm S3 Partners. Tesla short interest in dollars, calculated using the number of shares sold short and the share price, stood at $9.93 billion, on Thursday, just shy of $9.95 billion for Amazon, S3 Partners data showed. Analysts said investors were still shorting Tesla shares, or taking positions that amounted to bets the stock would keep declining. Short-sellers aim to profit by selling borrowed shares, hoping to buy them back later at a lower price.

“While there was some short covering the week after the tweet, there has still not been any significant net Tesla short covering on the Street,” said Ihor Dusaniwsky, head of research at S3 in New York. “Any traders who have closed down their positions to realize some profits have been replaced by new ones looking for continued price weakness,” he said. Tesla shares whipsawed this month after Chief Executive Elon Musk on Aug. 7 tweeted he planned to take the company private, only to abandon the idea by Aug. 24.

Sovereign nation.

• IMF Unwavering On Greek Pension Cuts (K.)

The government’s aim to suspend pension cuts due to come into effect in January is likely to fuel friction in the coming weeks, Kathimerini understands, as the IMF is adamant that the reductions should be made even if they are not required for Greece to meet budget targets. The IMF’s stance is at odds with that of European officials who are more flexible on the issue, as European Economic and Monetary Affairs Commissioner Pierre Moscovici has suggested in a series of recent comments. Indeed, according to sources, the EC’s envoy to Greece, Declan Costello, is working on a compromise that would be acceptable to the government.

The IMF has not publicly declared its position on the Greek pensions issue yet but sources say the Fund has not shifted from its stance in favor of pension cuts despite the more favorable than expected fiscal forecasts, due to fears about the Greek pension system, which remains unsustainable partially due to the country’s aging population. The IMF’s unofficial position, it seems, is that fiscal savings worth 1 percent of GDP – the value of the planned pension cuts – are not required for Greece to achieve a primary surplus of 3.5 percent of GDP but it is preferable that they be carried out and offset by countermeasures than not carried out.

US Republicans and German social democrats have the same agenda. But the latter have all but vanished.

• The Three Tribes of Austerity (Varoufakis)

The first, and best known, “austerian” tribe is motivated by the tendency to view the state as no different from a business or a household that must tighten its belt during bad times. Overlooking the crucial interdependence between a government’s expenditure and (tax) income (from which businesses and households are blissfully free), they make the erroneous intellectual leap from private parsimony to public austerity. Of course, this is no arbitrary error; it is powerfully motivated by an ideological commitment to small government, which in turn veils a more sinister class interest in redistributing risks and losses to the poor.

A second, less recognized, austerian tribe can be found within European social democracy. To take one towering example, when the 2008 crisis erupted, Germany’s finance ministry was in the hands of Peer Steinbrück, a leading member of the Social Democratic Party. Almost immediately, Steinbrück prescribed a dose of austerity as Germany’s optimal response to the Great Recession. Moreover, Steinbrück championed a constitutional amendment that would ban all future German governments from deviating from austerity, no matter how deep the economic downturn. [..] Against a background of failing banks and a mighty recession, he opined that fiscal deficits deny elected politicians “room for maneuver” and rob the electorate of meaningful choices.

The third austerian tribe is American and perhaps the most fascinating of the three. Whereas British Thatcherites and German social democrats practiced austerity in an ill-conceived attempt to eliminate the government’s budget deficit, US Republicans neither genuinely care to limit the federal government’s budget deficit nor believe that they will succeed in doing so. After winning office on a platform proclaiming their loathing of large government and pledging to “cut it down to size,” they proceed to boost the federal budget deficit by enacting large tax cuts for their rich donors. Even though they seem entirely free of the other two tribes’ deficit phobia, their aim – to “starve the beast” (the US social welfare system) – is quintessentially austerian.

Mindless and braindead.

• Trade Of Coastal Sand Is Damaging Wildlife, Coastlines Of Poorer Nations (G.)

The secretive trade of coastal sand to wealthy countries such as China is seriously damaging the wildlife of poorer nations whose resources are being plundered, according to a new study. Sand and gravel are the most extracted groups of materials worldwide after water, with sand used in the concrete and asphalt of global cities. China consumed more sand between 2011 and 2013 than the US did during the entire 20th century. India has more than tripled its annual use of construction sand since 2000. But coastal sand is also being used to make wealthy countries larger via land reclamation projects, and the cost to poorer nations is revealed in a presentation to the Royal Geographical Society’s annual conference.

Research by Melissa Marschke and Laura Schoenberger of the University of Ottawa highlights that the dredging of coastal sand from Cambodia is causing the loss of mangrove swamps, coastal erosion, and damaging local fishing. They also allege that the sheer scale of the multimillion dollar trade of sand must be illegal, given that the volumes permitted for import are being exceeded. Singapore is built on sand: its land area has grown by more than a fifth since its independence in 1965 from 581 sq km to 719 sq km in 2015, according to the researchers. Between 2007 and 2017, Singapore imported more sand from Cambodia than any other country. Sand worth US$752m was imported by Singapore from Cambodia between 2007 and 2016, according to UN data.

Cambodia is not the only place experiencing vast sand extraction. A study recently estimated that 236m cubic metres of sand were extracted from Poyang Lake in China, causing its water levels to drop dramatically. Sand miners have destroyed at least two dozen islands in Indonesia since 2005. The UK obtains about one fifth of its sand from the seabed.

But the minister who made it possible resigned last week. Watch out.

• France’s Ban On Bee-Killing Pesticides Begins Saturday (AFP)

A ban on five neonicotinoid pesticides enters into force in France on Saturday, placing the country at the forefront of a campaign against chemicals blamed for decimating critical populations of crop-pollinating bees. The move has been hailed by beekeepers and environmental activists, but lamented by cereal and sugar beet farmers who claim there are no effective alternatives for protecting their valuable crops against insects. With its ban, France has gone further than the European Union, which voted to outlaw the use of three neonicotinoids — clothianidin, imidacloprid and thiamethoxam — in crop fields. Heavily agriculture-reliant France banned these three neonicotinoids plus thiacloprid and acetamiprid, not only outdoors but in greenhouses too.

These are the only five neonicotinoid pesticides hitherto authorised for use in Europe. Introduced in the mid-1990s, lab-synthesised neonicotinoids are based on the chemical structure of nicotine, and attack the central nervous system of insects. They were meant to be a less harmful substitute to older pesticides, and are now the most widely-used to treat flowering crops, including fruit trees, beets, wheat, canola, and vineyards. In recent years, bees started dying off from “colony collapse disorder,” a mysterious scourge blamed partly on pesticides along with mites, viruses, and fungi, or some combination of these. Scientific studies have since shown that neonicotinoids harm bee reproduction and foraging by diminishing sperm quality and scrambling the insects’ memory and navigation functions.

Watching with great interest.

• The Ocean Cleanup Is Starting, Aims To Cut Garbage Patch By 90% By 2040 (F.)

A massive cleanup of plastic in the seas will begin in the Pacific Ocean, by way of Alameda, California. The Ocean Cleanup, an effort that’s been five years in the making, plans to launch its beta cleanup system, a 600-meter (almost 2,000-foot) long floater that can collect about five tons of ocean plastic per month. It’s a start. The launch date is September 8, and the Great Pacific Garbage Patch being targeted is more than 1,000 nautical miles from the launch point and on the move. The Ocean Cleanup plans to monitor the performance of the beta, called System 001, and have an improved fleet of 60 more units skimming the ocean for plastics in about a year a half. The ultimate goal of the project, founded by Dutch inventor Boyan Slat when he was 18, is to clean up 50% of the patch in five years, with a 90% reduction by 2040.

The organization will take time to learn lessons from System 001, but “we are in a big hurry,” said Lonneke Holierhoek, chief operating officer at The Ocean Cleanup. “We really see the urgency in starting the cleanup because there’s so much harm that could happen with this plastic that’s floating out there.” The total cost of System 001 is about 21 million euros ($24.6 million U.S.), according to a rep for startup. That includes design, development, production, assembly and monitoring during the first year of operation. The company will welcome corporations and philanthropists to sponsor their own cleanup system in coming years, the rep says. These systems will sport a sponsor logo and related app that follows the unit’s course through the gyre and shows how much plastic has been collected.

Debt Rattle December 29 2016

Dec 292016

December 29, 2016 Posted by Raúl Ilargi Meijer at 10:36 am Finance Tagged with: China, flipping, Greece, hackers, Hillary, Israel, Putin, sanctions, Starwars, Trump 5 Responses »

Esther Bubley Negro alley dwellings near the Capitol, Washington DC 1943

• Trump On Russia Sanctions: ‘We Ought To Get On With Our Lives’ (R.)

• Moscow Says It’s “Tired Of The Lie About The ‘Russian Hackers'” (Ptv)

• Talking about Starwars: What is Henry Kissinger Up To? (PCR)

• US Escalates Tensions With Israel (WSJ)

• Hillary Clinton Could Face New Email Probe After Explosive Ruling

• House Flipping Makes a Comeback as Home Prices Rise (WSJ)

• A China-Watcher’s Guide to 2017 (Balding)

• China’s ‘Godfather of Real Estate’ Pitches Reverse Mortgages (NYT)

• China Slashes First Round Of Oil Products Export Quotas (R.)

• China Fault Lines: Where Economic Turbulence Could Erupt in 2017 (BBG)

• Trump Tax Reforms Could Depend On Little-Known ‘Scoring’ Panel (R.)

• Greek Migration Minister Vows To Improve Conditions At Camps (Kath.)

It’s very simple: either the White House shows us prrof of hacking today when sanctions are announced, or all credibility is shot, across US intelligence.

• Trump On Russia Sanctions: ‘We Ought To Get On With Our Lives’ (R.)

U.S. President-elect Donald Trump on Wednesday suggested that the United States and Russia lay to rest the controversy over Moscow’s computer hacking of Democratic Party computers, saying, “We ought to get on with our lives.” Trump has cast doubt on the findings of U.S. intelligence agencies that Russian hackers took information from Democratic Party computers and individuals and posted it online to help Trump win the election. The Obama administration plans to announce on Thursday a series of retaliatory measures against Russia for hacking into U.S. political institutions and individuals and leaking information, two U.S. officials said on Wednesday.

Asked by reporters if the United States should sanction Russia, Trump replied: “I think we ought to get on with our lives. I think that computers have complicated lives very greatly. The whole age of computer has made it where nobody knows exactly what’s going on.” Trump made his remarks at Mar-a-Lago, his seaside Florida resort where he is spending the Christmas and New Year’s holidays while also interviewing candidates for administration jobs. Trump said he was not familiar with remarks earlier on Wednesday by Republican Senator Lindsey Graham, who said Russia and President Vladimir Putin should expect tough sanctions for the cyber attacks. “We have speed. We have a lot of other things but I’m not sure you have the kind of security that you need. But I have not spoken with the senators and I certainly will be over a period of time,” he said.

Again: proof or ridicule.

• Moscow Says It’s “Tired Of The Lie About The ‘Russian Hackers'” (Ptv)

Moscow has vowed retaliation if Washington issues further economic sanctions over alleged Russian cyber attacks during the US presidential elections. “To be honest, we are tired of the lie about the ‘Russian hackers’, which is being poured down in the United States from the very top,” said Russian Foreign Ministry spokeswoman Maria Zakharova on Wednesday. She warned that her country would respond to any manner of “hostile steps” the US decides to undertake. “It concerns any actions against the Russian diplomatic missions in the US which will immediately ricochet the American diplomats in Russia,” she added.

Zakharova went on to stress that the US was attempting to intimidate Moscow with extending sanctions, taking diplomatic measures and sabotage against Russian computer systems, in retaliation for alleged Russian hacking interference during the US presidential elections in November. Earlier in the day, US Republican Senator Lindsey Graham of South Carolina said that Moscow needed to understand it had gone too far during the election, and that new sanctions would target Russian President Vladimir Putin. “It is now time for Russia to understand – enough is enough,” he said. “You can expect that the Congress will investigate the Russian involvement in our elections and there will be bipartisan sanctions coming that will hit Russia hard, particularly Putin as an individual,” he added.

Oh, right, Starwars. Paul Craig Roberts contends the neocons are still as strong as ever in the US, even under Trump.

• Talking about Starwars: What is Henry Kissinger Up To? (PCR)

The myth is widespread that President Reagan won the cold war by breaking the Soviet Union financially with an arms race. As one who was involved in Reagan’s effort to end the cold war, I find myself yet again correcting the record. Reagan never spoke of winning the cold war. He spoke of ending it. Other officials in his government have said the same thing, and Pat Buchanan can verify it. Reagan wanted to end the Cold War, not win it. He spoke of those “godawful” nuclear weapons. He thought the Soviet economy was in too much difficulty to compete in an arms race. He thought that if he could first cure the stagflation that afflicted the US economy, he could force the Soviets to the negotiating table by going through the motion of launching an arms race. “Star wars” was mainly hype. (Whether or nor the Soviets believed the arms race threat, the American leftwing clearly did and has never got over it.)

Reagan had no intention of dominating the Soviet Union or collapsing it. Unlike Clinton, George W. Bush, and Obama, he was not controlled by neoconservatives. Reagan fired and prosecuted the neoconservatives in his administration when they operated behind his back and broke the law. The Soviet Union did not collapse because of Reagan’s determination to end the Cold War. The Soviet collapse was the work of hardline communists, who believed that Gorbachev was loosening the Communist Party’s hold so quickly that Gorbachev was a threat to the existence of the Soviet Union and placed him under house arrest. It was the hardline communist coup against Gorbachev that led to the rise of Yeltsin. No one expected the collapse of the Soviet Union.

The US military/security complex did not want Reagan to end the Cold War, as the Cold War was the foundation of profit and power for the complex. The CIA told Reagan that if he renewed the arms race, the Soviets would win, because the Soviets controlled investment and could allocate a larger share of the economy to the military than Reagan could. Reagan did not believe the CIA’s claim that the Soviet Union could prevail in an arms race. He formed a secret committee and gave the committee the power to investigate the CIA’s claim that the US would lose an arms race with the Soviet Union. The committee concluded that the CIA was protecting its prerogatives. I know this because I was a member of the committee.

Place this in the context of what’s being said about Russian hackers at the same time.

• US Escalates Tensions With Israel (WSJ)

Secretary of State John Kerry rebuked Israel for its settlement policy and warned in unusually harsh terms that a two-state solution was in serious jeopardy as the Obama administration raced to preserve its approach to the Middle East weeks before President-elect Donald Trump takes power. Mr. Kerry’s speech on Wednesday—in which he defended a U.S. decision to allow a United Nations resolution condemning Israel’s settlements—was seen by Israeli leaders as a parting shot from an unfriendly American administration in its final weeks. But the address appeared equally intended as a message to the incoming Trump team.

Mr. Kerry spelled out principles that have long been largely consistent in American policy—the goal of Israel existing alongside a separate Palestinian state, the notion that the settlements are an impediment to peace, and the idea that Jerusalem should be the capital of both an Israeli and a Palestinian state. Mr. Trump has suggested he would consider breaking with those principles. “President Obama and I know that the incoming administration has signaled that they may take a different path,” Mr. Kerry said at the State Department. “But we cannot in good conscience do nothing, and say nothing, when we see the hope of peace slipping away.”

“This ruling means that the Trump Justice Department will have to decide if it wants to finally enforce the rule of law..”

• Hillary Clinton Could Face New Email Probe After Explosive Ruling

The U.S. Court of Appeals for the District of Columbia has ruled in favor of a conservative group’s lawsuit against the State Department over whether or not enough was done to try to restore Clinton’s missing emails, opening a potential further probe into Clinton’s emails by the Trump administration. Back in January, a District Court judge ruled that the lawsuit brought by the conservative group Judicial Watch, against the State Department, had no validity because it had there had been a “sustained effort” to recover the emails. In the new ruling, however, Judge Stephen Williams wrote that this wasn’t enough.

“The Department has not explained why shaking the tree harder – e.g., by following the statutory mandate to seek action by the Attorney General – might not bear more still,” wrote Williams. He added: “Absent a showing that the requested enforcement action could not shake loose a few more emails, the case is not moot.” Williams also said that it’s “abundantly clear that, in terms of assuring government recovery of emails” the conservative group that brought the lawsuit hasn’t “been given everything [they] asked for.” Additionally, because former State Secretary Clinton used her Blackberry email account during the first few weeks of her term, the judge felt that efforts to restore just the messages from Clinton’s private email server weren’t sufficient either.

“Because the complaints sought recovery of emails from all of the former Secretary’s accounts, the FBI’s recovery of a server that hosted only one account does not moot the suits,” he wrote. Judicial Watch president Tom Fitton issued a statement after the ruling, claiming “The courts seem to be fed up with the Obama administration’s refusal to enforce the rule of law on the Clinton emails.” Fitton added, “This ruling means that the Trump Justice Department will have to decide if it wants to finally enforce the rule of law and try to retrieve all the emails Clinton and her aides unlawfully took with them when they left the State Department,” he added.

Homes are definitely not places for people to live in. Not in the US.

• House Flipping Makes a Comeback as Home Prices Rise (WSJ)

House flipping, a potent symbol of the real-estate market’s excess in the run-up to the financial crisis, is once again becoming hot, fueled by a combination of skyrocketing home prices, venture-backed startups and Wall Street cash. After nearly being felled by real-estate forays almost a decade ago, a number of banks are now arranging financing vehicles for house flippers, who aim to make a profit by buying and selling homes in a matter of months. The sector is small—participants say roughly several hundred million dollars in financing deals have been made in recent months—but is expected to keep growing. In recent months, big banks, including Wells Fargo, Goldman Sachs and JP Morgan have started extending credit lines to companies that specialize in lending to home flippers.

[..] Over the past year, 37-year-old David Franco has collected profits of more than $200,000 on houses that he has quickly refurbished and resold, turning a hobby into an unexpectedly lucrative business. “There’s plenty of money to be made,” says Mr. Franco, who lives just outside of Los Angeles. House-flipping television shows and training “schools” for new investors are proliferating. One “super-intense, hardcore” house-flipping boot camp in Bourne, Mass., promised to teach students about real-estate investing in three days to make “REALLY MASSIVE PROFITS,” according to marketing literature. The increasing amount of speculative housing in recent months is “concerning,” ATTOM noted in a recent report. “We’re starting to see home flipping hit some milestones not seen since prior to the financial crisis.”

ATTOM said profit margins are getting squeezed in some markets. While house flippers typically aim to purchase a house at a 30% discount to the market, in some areas they’re buying homes at a 15% or 10% discount, said Senior Vice President Daren Blomquist. The research firm noted that the number of smaller, inexperienced house flippers entering the market is a sign of rising speculation. George Geronsin, 36, a Southern California real-estate agent and house-flipper who has been in the business since 2008, said he recently sold the majority of the homes he was working on and is sitting on cash “until the next big correction” in the housing market. “Anybody and everybody is getting into the business of house-flipping—that’s when you know it’s the end of the rope,” said Mr. Geronsin.

Chris Balding confirms what I wrote yesterday.

• A China-Watcher’s Guide to 2017 (Balding)

Last year, China’s leaders were touting plans for deleveraging and supply-side reform. This year, they’re touting yet more plans for deleveraging and supply-side reform. In between, total outstanding credit rose from 246% of gross domestic product to about 265%… Although reining in credit is essential for addressing many of China’s economic problems, the government is still targeting 6.5% growth next year, much of which will be reliant on yet more debt. So pay less attention to the talk and more to the data – specifically, metrics such as credit growth and real-estate prices.

Follow the Fed.China remains tied to the U.S. economy, whether it wants to be or not. Unfortunately, not everything that’s good for the U.S. is good for China. With the U.S. labor market tightening, and President-elect Donald Trump promising a $1 trillion economic stimulus, it is all but certain that the Federal Reserve will continue raising interest rates in 2017. That could have some positive effects for China’s real economy, but it will also put pressure on the People’s Bank of China to raise its own interest rates or risk breaking the soft peg of the yuan to the U.S. dollar. Higher rates, in turn, would raise borrowing costs for heavily indebted Chinese companies, many of which could end up in bankruptcy. How fast the U.S. economy grows, and how many times the Fed raises rates, could have as much impact on China’s economy as anything next year.

The cure can be worse than the disease. Rising asset prices in China have helped prop up everything from coal and steel firms to consumer sentiment. But with potential bubbles popping up everywhere, the government seems to be laying the groundwork for reform. That could mean raising interest rates, applying new restrictions on trading or tightening other regulations. Remember that such measures, however necessary, carry risks of their own. For example, given that China has some of the world’s most expensive housing relative to income, and extremely low turnover, withdrawing credit could result in a real-estate price shock. That might cause indebted developers to fail, or lead to much stronger government action to prevent a hard landing. As regulators try to rein in other asset prices, watch for similar turmoil in bonds and the yuan.

Expect the unexpected. China has long been plagued by poor-quality data, with even senior leadership expressing frustration at getting inaccurate information from the provinces. Unreliable data makes it nearly impossible to properly assess risk, which raises the probability of some type of internal shock. It could come from the nearly $4 trillion market in murky wealth-management products. It could come from social instability tied to hidden unemployment. It could come from something totally unexpected: With the bond market in turmoil, liquidity concerns mounting and defaults rising, there are many ways in which a panic could materialize.

Prey on the elderly.

• China’s ‘Godfather of Real Estate’ Pitches Reverse Mortgages (NYT)

He is known in China as the “godfather of real estate,” helping lay the groundwork for private homeownership in China, a move that enriched millions and laid the foundations for a vibrant and thriving Chinese middle class. Now, Meng Xiaosu wants a lot of Chinese — the older ones, specifically — to cash out. Older people need to mortgage their homes to address China’s looming demographic bust, Mr. Meng argues. Because of China’s now-defunct one-child policy and other social trends, the country has a rapidly graying population that someday soon may become too expensive for the Chinese government to support. Mr. Meng’s proposed solution is to bring reverse mortgages to China. Called a house-for-pension plan in China, a reverse mortgage allows homeowners to tap the equity in their homes by taking out loans against it.

His argument faces deep business and cultural opposition – mortgaging homes is a tough sell in a country where parents traditionally passed them on to their children – and only a few dozen people in all the country have signed up so far. But he argues that China may have little choice. “China’s elderly do not have much money,” said Mr. Meng, who drew much of his inspiration about the Chinese property market from a stint studying in America, “but they have valuable homes.” China is increasingly pondering tough questions as it looks to a graying future. Right now, China’s 215 million elderly people account for 15% of the total population. By 2050, that number is expected to rise to 350 million – nearly one-quarter of the population.

That has China scrambling to find a more sustainable pension system for its people. In the 1990s, the government dismantled the cradle-to-grave welfare system and borrowed money from younger workers to pay older ones. The country’s pension fund will be $116 trillion in the red by 2050, according to the Chinese Academy of Social Sciences, a top government think tank. Enter Mr. Meng.

What I see between the lines is a huge glut building. They simply can’t sell it anymore. Oh, and what was that question? Market economy?

• China Slashes First Round Of Oil Products Export Quotas (R.)

China has cut oil product export quotas to the nation’s four oil majors by 40% in the first round of licences for 2017, according to two sources who have seen the documents, even as traders expect allowances for overseas sales to meet or exceed this year’s record levels. The notice did not include quotas for independent refiners, known as “teapots”, in line with a report by Reuters earlier this month that the government has ditched the small refiners from its export program. In a notice dated Dec. 23, the Ministry of Commerce and the General Administration of Customs said the four state majors will be allowed to sell 12.4 million tonnes of gasoline, gasoil and jet fuel abroad next year.

That’s down from 20.54 million tonnes in the same round this year. Still, the cut is likely to bring little relief to the stubbornly saturated Asian oil market as China’s majors did not use up the huge quotas issued at the start of last year, and have simply applied for more realistic quotas this year, traders said. “The shrinking quota doesn’t reflect shrinking demand from overseas. Instead, it reflects a shift in company exporting strategy,” said a China-based trader who declined to be named, adding that companies were better matching exports to quotas. “We expect the total quota for 2017 to be on par or a bit higher than 2016,” the trader added. China issued allowances for a record 46.08 million tonnes of oil products in 2016, up 80% from 2015. In the first 11 months of the year, it exported 43 million tonnes of oil products – including products other than gasoline, gasoil and jet fuel – up 35% on a year earlier.

“The real nightmare for Beijing – and for markets – is a vicious cycle of capital outflows triggering bigger devaluations of the yuan that in turn drive bigger and faster outflows..”

• China Fault Lines: Where Economic Turbulence Could Erupt in 2017 (BBG)

China’s balancing act isn’t getting any easier. Policy makers are grappling with how to attack excessive borrowing and rein in soaring property prices while maintaining rapid growth. They’re also battling yuan depreciation and capital outflow pressures as U.S. interest rates rise, while on the horizon looms the risk of confrontation with America’s President-elect Donald Trump on trade and Taiwan. It’s a high-wire act with the potential to produce shocks, like the one erupting in the bond market as tighter liquidity threatens financing for small companies. President Xi Jinping told top officials he’s open to growth below the 6.5% target to 2020 if it carries too much risk, a person familiar with the situation said last week. Leaders have pledged to reduce hazards for 2017.

While forecasters have been raising growth estimates for next year and don’t expect major turbulence, the following are among areas they flag as having the potential to trigger a plunge in growth or systemic risk in the financial system: Outflows will exceed $200 billion in the fourth quarter and rise further in the first quarter, said Pauline Loong, managing director at research firm Asia-Analytica in Hong Kong. Capital is leaving for more fundamental reasons than rising U.S. rates and a stronger dollar, she said. Drivers include rising expectations of yuan weakness, fears of an abrupt policy U-turn trapping funds in the country, and a lack of profitable investment opportunities at home amid rising costs and slowing growth.

“The real nightmare for Beijing – and for markets – is a vicious cycle of capital outflows triggering bigger devaluations of the yuan that in turn drive bigger and faster outflows,” Loong said. “We expect capital outflows to increase in the coming months as Chinese money seeks to maximize exit quotas in case of more stringent restrictions later on.”

Clueless prognosticators.

• Trump Tax Reforms Could Depend On Little-Known ‘Scoring’ Panel (R.)

President-elect Donald Trump’s goal of overhauling the U.S. tax code in 2017 will depend partly on the work of an obscure congressional committee tasked with estimating how much future economic growth will result from tax cuts. Known as the Joint Committee on Taxation, or JCT, the nonpartisan panel assigns “dynamic scores” to major tax bills in Congress, based on economic models, to forecast a bill’s ultimate impact on the federal budget. The higher a tax bill’s dynamic score, the more likely it is seen as spurring growth, raising tax revenues and keeping the federal deficit in check. As Trump and Republicans in Congress plan the biggest tax reform package in a generation, the JCT has come under pressure from corporate lobbyists and other tax cut advocates who worry that too low a dynamic score could show the legislation to add billions, if not trillions of dollars to the federal deficit.

“The problem is that the Joint Committee staff has adopted a whole series of assumptions that truly minimize the effects and underestimate the impact that a properly done tax reform could have,” said David Burton at the conservative Heritage Foundation think tank. A low dynamic score could force Republicans to scale back tax cuts or make the reforms temporary, severely limiting the scope of what was one of Trump’s top campaign pledges. Other analysts warn that pressure for a robust dynamic score raises the danger of a politically expedient number that could help reform pass Congress but lead to higher deficits down the road. Until last year, JCT used a variety of economic models in its arcane calculations, reflecting the uncertainties in such work. But House of Representatives Republicans changed the rules in 2015 to require that a bill’s score reflect only a single estimate of the estimated impact on the wider economy and resulting impact on tax revenues.

Next year’s anticipated tax reform package would be the biggest piece of legislation that JCT has scored using this new, narrower approach, presenting the committee with a daunting challenge. JCT Chief of Staff Thomas Barthold acknowledged the challenge of dynamic scoring in an interview with Reuters. “The U.S. economy is so darn complex, you really can’t have one model that picks up all of the complexity and nuance. So the essence of modeling is to try to slim things down, try to emphasize certain points,” he said. Tax reform is still months away. But the initial legislation expected in 2017 is likely to fall somewhere between two similar but separate plans, one backed by Trump and the other by House Republicans including Speaker Paul Ryan.

[..]The Tax Foundation estimates that the House Republican tax plan would lead to a 9.1% higher GDP over the long term, 7.7% higher wages and 1.7 million new full-time-equivalent jobs. It predicts the plan would reduce government revenue by $2.4 trillion over a decade, not counting macroeconomic effects, but by only $191 billion once economic growth is taken into account. By contrast, the centrist Tax Policy Center estimates the House plan would add 1% to GDP over 10 years and erase $2.5 trillion of revenue, even with positive macroeconomic feedback, due to higher federal debt interest.

Biometric data cards and €400 a month allowances in a country where many pensioners don’t even get that much.

• Greek Migration Minister Vows To Improve Conditions At Camps (Kath.)

Migration Policy Minister Yiannis Mouzalas vowed on Wednesday to improve living conditions for migrants stranded on the islands, boost policing and create detention centers. “We are planning to have new, small venues on the islands, either by setting up small, two-story houses, in order to empty the tents, or by finding other places… to improve conditions,” he said, adding that it will take time but “we will do it.” Overcrowded conditions, coupled with the slow processing of asylum requests, have fueled tensions, while outbreaks of violence are not uncommon – especially on the islands, where some 15,000 migrants are crammed into ill-equipped camps. Mouzalas, however, insisted that the situation is better on the mainland and all refugees in the 36 camps there are staying in sheltered, heated areas.

The exception, he said, is the camp at Elliniko, southern Athens, where some migrants are still living outdoors in 70 tents. He also announced that by March, soup kitchens at camps around the country will be abolished. Instead, he said, migrants will be given money – no more than the minimum wage of €400. Mouzalas said Greece will hire more staff to deal with the slow pace of processing asylum requests, which he called an Achilles’ heel. Moreover, he said that migrants living legally in Greece will receive an electronic card that will replace their residence permits. The card, he said, will contain biometric data and other information, and will be given to migrants who want to renew their residence permits or to new arrivals.

The cards will be ready by April, he said, adding that they are part of the effort to modernize the system that processes residence permits, and to help fight forgeries. Roughly 60,000 migrants – mostly Syrians, Iraqis and Afghans fleeing war and poverty – are scattered throughout the country, many living in overcrowded and poor living conditions.