NPC Fire at S. Kanns warehouse, Washington, DC 1908
You guessed it: interest rates.
• Why Corporate America’s Debt Is a ‘Major Risk’ (BBG)
Are investors in denial about how dim the outlook is for American businesses? That’s the question Société Générale’s Andrew Lapthorne, global head of quantitative strategy, posed to his bank’s clients. “Asset valuations are extreme; returns are poor, the probability of losses is high and the ability to recover any losses quickly is low,” he writes. In particular, the strategist sounded an alarm over the state of corporate America’s balance sheet. Company spending exceeds cash flow by a near-record amount—a fundamentally unsustainable situation—as net debt continues to increase at a rapid pace.
In many cases, companies have used debt to repurchase their own stock, flattering their bottom-line financial performance. While not all buybacks are financed by debt, Lapthorne did note a correlation between net repurchases and the change in corporate indebtedness. “U.S. corporate balance sheets are a major risk going forward,” he says. “U.S. corporates are massively overspending.” To be fair, servicing this debt load isn’t as onerous as it might appear, because of low interest rates. And despite the recent steepening of corporations’ yield curve, companies have continued to extend duration, which offers them more certainty about what their interest payments will be over the long term. “For corporate credit, there’s very little concern about short-term coverage from the market,” write analysts at Bespoke Investment Group. “We note that maturities continue to creep up slowly; despite higher spread costs, corporates are generally borrowing further out the curve and ‘locking’ low rates.”
As Steve Keen observes, ironically, it’s Volcker and Peterson themselves who ignore the biggest debt problem: private debt. Which is much higher:
• Ignoring the Debt Problem (Volcker/Peterson)
Together, the two of us have 179 years of life experience and 13 grandchildren. We have served presidents of both parties. We have seen more campaign seasons than we care to count — but none as strange as this one. Insults, invective and pandering have been poor substitutes for serious debate about the direction in which this country is going — or should be going. And a sound and sustainable fiscal structure is a key ingredient of any viable economic policy. Yes, this country can handle the nearly $600 billion federal deficit estimated for 2016. But the deficit has grown sharply this year, and will keep the national debt at about 75% of GDP, a ratio not seen since 1950, after the budget ballooned during World War II.
Long-term, that continued growth, driven by our tax and spending policies, will create the most significant fiscal challenge facing our country. The widely respected Congressional Budget Office has estimated that by midcentury our debt will rise to 140% of GDP, far above that in any previous era, even in times of war. Unfortunately, despite a brief discussion during the final presidential debate, neither candidate has put forward a convincing plan to restrain the growth of the national debt in the decades to come. Throughout the campaign, Donald J. Trump has called for a combination of deep tax cuts that appear to far exceed proposed spending reductions, at the clear risk of substantially increasing the ratio of debt to GDP. Hillary Clinton has set out more balanced and detailed proposals, but they would still fail to stabilize and reduce our debt burden.
Whoever wins, the new president will eventually face fiscal realities that force him or her to develop strategies for decreasing the national debt as a share of the economy over the long term. Our current debt may be manageable at a time of unprecedentedly low interest rates. But if we let our debt grow, and interest rates normalize, the interest burden alone would choke our budget and squeeze out other essential spending. There would be no room for the infrastructure programs and the defense rebuilding that today have wide support. [..] we’d be dependent on foreign investors’ acquiring most of our debt — making the government dependent on the “kindness of strangers” who may not be so kind as the I.O.U.s mount up.
Always good to read Bill.
• Bank of England Says Authorities Mustn’t Fine Banks Because Groaf (Bill Black)
Elite bankers and the pathetic economists who serve as apologists for their frauds specialize in proving our family saying that it is impossible to compete with unintentional self-parody. The subtitle of the WSJ article providing the latest proof is “Fines on banks translate into $5 trillion of ‘reduced lending capacity,’ bank says.” The “bank” referred to is the Bank of England, which is supposed to be the UK’s primary bank regulator. To be kind, the “study” by BOE is so embarrassing that a better descriptor of the BOE would be “fraud enabler.” “The roughly $275 billion in legal costs for global banks since 2008 translates into more than $5 trillion of reduced lending capacity to the real economy,” Minouche Shafik, a deputy governor of the BoE, told a New York conference of regulators and bankers Thursday.
BOE’s methodology and “logic” (which it did not make public) are easy to guess. It is not sufficient that elite banksters are able to become wealthy from leading the worlds’ most destructive financial frauds with impunity from prosecution, civil suits, and enforcement actions. It is vital that the banks no longer be fined for conducting these massive frauds. When banks are fined they lose some of their profits from these epidemics of frauds, bid-rigging cartels, predatory lending, aiding and abetting elite tax fraud, and money laundering for terrorists and violent drug cartels. For the sake of brevity, I will call these collectively “fraud proceeds.” Banks remain highly leveraged despite modest increases in capital requirements, so the BOE’s staff is assuming that each dollar of fraud proceeds that the banks lose to fines reduces total bank size by $18.18. They are assuming that the typical bank has a miserably inadequate capital requirement of slightly over five percent.
There are a number of fatal problems with BOE’s “logic” and (unstated) methodology. First, under the BOE’s “logic” the more profitable banks become by defrauding their customers the faster the economy will grow. The bank CEOs who led the three most destructive epidemics of financial fraud in history were apparently Soviet-style (pun intended) “Heroes of Capitalism.” Except, of course, what they actually drove was a massive financial bubble that produced the Great Recession. The projected loss of GDP in the U.S. due to the Great Recession is $24.3 trillion – and the loss of eurozone GDP is far larger because their economic losses have occurred over a far longer time and have been far deeper than in the United States. Only central bank economists would be so dogmatically divorced from reality and so moral challenged that they would think that allowing banksters to keep their fraud proceeds and avoid all accountability for their crimes would be good for the economy.
“When your next-door neighbour is a billionaire celebrity genius with automatic weapons and an undying need for attention, you can get away with all sorts of stuff.”
• Think Canada is a Progressive Paradise? That’s Mooseshit (G.)
Quick – picture Canada. What comes to mind? A progressive wonderland of polite manners and majestic moose? What America might be if it evolved a little? That place you’ll move to if Trump wins? If that’s what you think, that’s fine by us. In fact, it’s our brand: not America. The nice guys. Dull, kind and harmless. That’s how we like to be thought of. But it’s mooseshit. We are not the country you think we are. We never have been. The first prime minister and founding father of Canada, John A Macdonald, was a raging alcoholic. He spent entire campaigns fabulously drunk and once vomited on stage during a stump speech. When his rival pointed it out, Macdonald shot back that he hadn’t puked because of booze, but because he had been “forced to listen to the ranting of my honourable opponent”.
It was a deflection worthy of Trump. Macdonald handily won the election. The reason the Royal Canadian Mounted Police (our “Mounties”) ride horses is because during the labour movement of the 30s, horseback was the best way to trample protesting immigrants and miners. By the 60s, the horses were mostly just for show and the Mounties’ regular activities included subjecting suspected homosexuals to the “Fruit Machine”, a device designed to measure erotic responses to gay porn. These days, Canada is the third-largest arms dealer in the world. Our Alberta oil sands produce more carbon emissions each year than the entire state of California. Our intelligence agency is allowed to act on information obtained through torture. And a lot of French Canadians are into blackface comedy.
Little of this is widely known, because we happen to share a border with America. When your next-door neighbour is a billionaire celebrity genius with automatic weapons and an undying need for attention, you can get away with all sorts of stuff. It’s nice to be thought of as the world’s nice guys. And it’s useful – it obscures a lot of dirt.
When I first hears her make that claim, I was thinking Russia must have been real eager to get caught. Why Trump didn’t jump on it, I can’t tell. Take a look for yourself which agencies are included:
• No, Hillary, 17 US Intel Agencies Did Not Say Russia Hacked Dem E-mails (NR)
Hillary Clinton in last night’s presidential debate tried to avoid talking about the substance of the damaging WikiLeaks disclosures of DNC and Clinton campaign officials by claiming 17 U.S. intelligence agencies determined that Russia was responsible for this. After Clinton made this claim, she scolded Trump for challenging U.S. intelligence professionals who have taken an oath to help defend this country. What Clinton said was false and misleading. First of all, only two intelligence entities – the Office of the Director of National Intelligence (DNI) and the Department of Homeland Security (DHS) – have weighed in on this issue, not 17 intelligence agencies. And what they said was ambiguous about Russian involvement. An unclassified October 7, 2016 joint DNI-DHS statement on this issue said the hacks
. . . are consistent with the methods and motivations of Russian-directed efforts. These thefts and disclosures are intended to interfere with the US election process. Such activity is not new to Moscow — the Russians have used similar tactics and techniques across Europa and Eurasia, for example, to influence public opinion there. We believe, based on the scope and sensitivity of these efforts, that only Russia’s senior-most officials could have authorized these activities.
Saying we think the hacks “are consistent with the methods and motivations of Russian-directed efforts” is far short of saying we have evidence that Russia has been responsible for the hacks. Maybe high-level officials would have authorized them if Russian hackers were responsible, but the DNI and DHS statement did NOT say there was evidence Russia was responsible. My problem with the DNI/DHS unclassified statement is that it appeared to be another effort by the Obama administration to politicize U.S. intelligence. Make no mistake, U.S. intelligence agencies issued this unprecedented unclassified statement a month before a presidential election that was so useful to one party because the Clinton campaign asked for it.
The Obama administration was happy to comply. Clinton tried to defend the DNI/DHS statement by repeating the myth that U.S. intelligence officers are completely insulated from politics. She must think Americans will forget how the CIA crafted the politicized Benghazi talking points in 2011 and how SOUTHCOM intelligence analysts were pressured to distort their analysis of ISIS and Syria to support Obama foreign policy. And that’s just under the Obama administration.
PCR could have done a tad more research, I’m thinking.
• Rigged Elections Are An American Tradition (Paul Craig Roberts)
Do Americans have a memory? I sometimes wonder. It is an obvious fact that the oligarchic One Percent have anointed Hillary, despite her myriad problems to be President of the US. There are reports that her staff are already moving into their White House offices. This much confidence before the vote does suggest that the skids have been greased. The current cause celebre against Trump is his conditional statement that he might not accept the election results if they appear to have been rigged. The presstitutes immediately jumped on him for “discrediting American democracy” and for “breaking American tradition of accepting the people’s will.” What nonsense! Stolen elections are the American tradition. Elections are stolen at every level—state, local, and federal.
Chicago Mayor Richard J. Daley’s theft of the Chicago and, thereby, Illinois vote for John F. Kennedy is legendary. The Republican US Supreme Court’s theft of the 2000 presidential election from Al Gore by preventing the Florida vote recount is another legendary example. The discrepancies between exit polls and the vote count of the secretly programmed electronic voting machines that have no paper trails are also legendary. So what’s the big deal about Trump’s suspicion of election rigging? The black civil rights movement has fought vote rigging for decades. The rigging takes place in a number of ways. Blacks simply can’t get registered to vote. If they do get registered, there are few polling places in their districts. And so on. After decades of struggle it is impossible that there any blacks who are not aware of how hard it can be for them to vote.
Yet, I heard on the presstitute radio network, NPR, Hillary’s Uncle Toms saying how awful it was that Trump had cast aspersion on the credibility of American election results. I also heard a NPR announcer suggest that Russia had not only hacked Hillary’s emails, but also had altered them in order to make incriminating documents out of harmless emails. The presstitutes have gone all out to demonize both Trump and any mention of election rigging, because they know for a fact that the election will be stolen and that they will have the job of covering up the theft. [..] Don’t vote early. The purpose of early voting is to show the One Percent how the vote is shaping up. From this information, the oligarchs learn how to program the electronic machines in order to elect the candidate that they want.
Well, it certainly dies hard. How many hours has Obama spent on the phone for this malt minute turn?
• EU Parliament Chief, Canada Minister In Bid To Save CETA Trade Deal (AFP)
EU parliament head Martin Schulz and Canada’s trade minister Chrystia Freeland were meeting Saturday, saying they hoped to revive a trade deal threatened by the refusal of a Belgian region to sign on. Schulz wrote on Twitter he would also meet with Wallonia’s socialist government head Paul Magnette, who has moved to stop the bloc’s 28 nations from signing the accord. The meetings in Brussels are aimed at “reviving CETA talks. We can’t stop at the last mile,” Schulz wrote, referring to the agreement’s name. On arriving at the parliament building, Freeland said: “The ball is in Europe’s court. We hope that it is possible to find a solution,” according to the Belga news agency.
Canada blasted the European Union on Friday as incapable of signing international agreements, as the talks to persuade Wallonia to sign up to the huge trade deal broke down. Freeland appeared on the verge of tears after walking out of negotiations with the head of the French-speaking Belgian region on the deal that has been seven years in the making. Canadian Prime Minister Justin Trudeau had planned to travel to Brussels next week to sign the deal but that visit looks almost certain to be called off.
May I suggest they get good lawyers.
• Greek Union Files EU Human Rights Case Against Austerity (COE)
A public hearing of the European Committee of Social Rights today focused on how austerity in Greece has affected social rights under the guidelines of the European Social Charter. The committee granted the hearing request, which was made by the complainant organisation, the Greek General Confederation of Labour (GSEE) v. Greece.
The complaint alleges that some laws enacted in Greece as part of the austerity programme affect workers’ rights in a manner that is contrary to Article 1 (the right to work); Article 2 (the right to just conditions of work); Article 4 (the right to a fair remuneration); and Article 7 (the right of children and young persons to protection) of the 1961 Social Charter; as well as of Article 3 of the 1988 Additional Protocol (the right to take part in the determination and improvement of working conditions and working environment). Greece’s Minister for Labour, Social Security and Social Solidarity George Katrougalos and GSEE president Yannis Panagopoulos attended the hearing. The Committee, which monitors commitments to the European Social Charter, is expected to issue its decision to the public by mid-2017.
Brits are funny even if they don’t mean to. Ming dynasty was 14th-17th century.
• Gove Says Criticizing Carney or BoE Policy ‘Equivalent Of A Thought Crime’ (DM)
Michael Gove has launched a scathing attack on the Governor of the Bank of England, comparing his arrogance to that of the cruel Ming emperors. The former justice secretary said that like the rulers of medieval China, the pro-EU Mark Carney believed his judgments had ‘near-divine’ status and that he was infallible in his actions. But in reality, many of his policies – such as printing money and cutting interest rates – had been shown to have created significant economic problems, he said. Mr Gove said the Canadian banker should show more humility – as it was technocrats like him who had brought the ‘disaster’ of the euro and failed to predict the 2008 crash. He said Mr Carney should ‘ponder the fate of the Chinese emperors’ who were finally overthrown because they could not bear any criticism.
The attack by Mr Gove, a senior figure in the Leave campaign, echoes his criticism before the referendum of ‘experts’ who predicted a slump if we left the EU. In an article for The Times, he wrote: ‘At different eras in world history there have been sacred figures who, while apparently of flesh and blood, have been elevated to inhabit a special realm of near-divinity above the rest of fallible mankind. In medieval China, they had the Ming Emperor, Lord of Ten Thousand Years, who employed the Mandate of Heaven to decide the fate of millions. ‘His person was held to be inviolable and without imperfections. ‘Those who dared to question his rule were flayed alive, their skin left hanging from a hook to emphasise the emperor would brook no challenge to his authority.
In contemporary Britain we have Mark Carney, the Governor of the Bank of England, who employs control over interest rates to decide the fate of millions. ‘His position is held to be independent and without any error. ‘And so any criticism of his actions is regarded as a thought crime – and those who dare to question his rule are flayed in the press with dire warnings left hanging in the air to emphasise the Governor will brook no challenge to his authority.’
Yeah, it wasn’t crazy enough yet.
• Up To 25 Feared Dead In Attack On Migrant Boat Off Libya (AFP)
Up to 25 people were missing, feared drowned, Friday after men on a Libyan coastguard speedboat attacked a packed migrant dinghy during a rescue operation off the north African state. German NGO Sea-Watch, which is taking part in the multinational search and rescue operation in the Mediterranean, said the tragedy happened after its boat Sea-Watch 2 and a passing oil tanker were sent to help the distressed dinghy in the early hours. As the rescue operation proceeded just beyond Libyan territorial waters north of the port of Sabrata, a speedboat bearing the Libyan coastguard insignia arrived and tried to steal the dinghy’s outboard engine, spokesman Ruben Neugebauer told AFP.
The men, who spoke Arabic, beat some of the migrants with sticks and some clambered onto the dinghy, causing panic which resulted in one side of the boat deflating and most of the passengers ending up in the sea. After the assailants left, Sea-Watch said it rescued 120 people and recovered four corpses from the water. Other bodies were seen floating but could not be recovered and it was estimated that between 15 and 25 of the people who had been on the board were unaccounted for. Sea-Watch said in a statement that its two speedboats had been “hassled in an aggressive way” during the attack, “preventing our crew from providing life vests and medical aid to the people in need.” “All of these deaths could have been avoided but for this intervention,” Neugebauer added.