neoliberalism Archives - The Automatic Earth

The lawless are trying to run out the clock on the Spanish probe, because it’s bound to find the CIA’s involvement, and because if Julian, his lawyers and doctors were spied upon, the entire extradition thing may be null and void.

• UK Blocks Spanish Judge From Questioning Julian Assange (El Pais)

The British justice system is blocking a Spanish judge’s request to question Julian Assange in London as a witness in a case exploring allegations that the Spanish security firm Undercover Global S.L. spied on the WikiLeaks founder while he was living in the Ecuadorian embassy in London. The British position, unprecedented in these types of requests for judicial collaboration, is being viewed by Spanish judicial bodies as a show of resistance against the consequences that the case could have on the process to extradite the Australian cyberactivist to the United States.

On September 25, Judge José de la Mata sent British authorities an European Investigation Order (EIO) requesting permission to question Assange by videoconference as a witness in the case opened by Spain’s High Court, the Audiencia Nacional, against the owner of UC Global S. L., David Morales, for alleged offenses involving violations of privacy and client-attorney privileges, as well as misappropriation, bribery, money laundering and criminal possession of weapons. Morales was arrested in September and released on bail. Documents and video footage revealed by EL PAÍS show that UC Global S. L. spied on Assange’s meetings with his lawyers, where his legal defense strategy was discussed. Morales allegedly offered recordings of these and other conversations to US intelligence services.

The EIO is a new tool that speeds up cooperation between judges in the EU and circumvents laborious rogatory letters based on instruments of international law. The mechanism came into effect in Spain in 2018. With an EIO, a legal authority from an EU member state can ask a legal authority from another EU country for assistance in obtaining evidence or means of evidence (witness statements, telephone taps, DNA tests and so on). It is an automatic procedure, and requests can only be rejected in exceptional cases.

[..] On October 14, De la Mata sent the British agency a written reply that EL PAÍS has had access to. In the document, the judge expressed his surprise and referred to the “previous cases” in which the UKCA accepted requests for interviews via videoconference. De la Mata also quoted international cooperation treaties that say that the only obstacle in these cases would be if the person being questioned was the accused. “In this case, Julian Assange is a witness, not an accused party,” wrote De la Mata.

In the document, De la Mata also denied that his initial request was unclear: “We have provided a clear context for our case, describing all the events and crimes under investigation.” On the issue of jurisdiction, he replied: “The Spanish judicial system has jurisdiction and is able to hear cases of crimes committed by Spanish citizens outside of the country as long as the event is a crime in the place where it was committed, the victim or the public prosecutor present a criminal complaint, and the suspect has not been sentenced or acquitted in another country.” De la Mata added that the suspect (David Morales) is Spanish, the victim (Assange) has filed a complaint, and the crimes (unlawful disclosure of secrets and bribery) are crimes in the UK.

War On WikiLeaks: The US government is openly manipulating the judicial proceedings in #Assange's extradition case while Belmarsh prison continues to violate his human rights by denying him the ability to prepare his defense. @WikiLeaks #FreeAssange pic.twitter.com/15m545wR3j

— MintPress News (@MintPressNews) October 24, 2019

“Nancy Pelosi Democrats Produce More Subpoenas Than Laws…”

• Former House Lawyer Says Pelosi’s Impeachment Inquiry ‘Is Illegal’ (WT)

Thanks to a flurry of Ukraine activity, House Speaker Nancy Pelosi and her Democratic majority have approved more subpoenas to investigate President Trump than they have written laws. The subpoena issued Tuesday morning to former Ambassador William Taylor marked the 56th that has been publicly acknowledged and aimed at Mr. Trump and his team. That is 10 more than the 46 House bills that have become law this year. It’s far from a subpoena record, but it is complicating Mrs. Pelosi’s attempt to portray her troops as focused on their agenda. Perhaps more worrying to Mrs. Pelosi’s cause is the conclusion of a former senior oversight attorney for the House, who said the spate of subpoenas issued this month as part of Democrats’ impeachment inquiry is illegal.

Samuel Dewey, a lawyer at McDermott Will & Emery who used to lead investigations for the House Financial Services Committee, said the House Permanent Select Committee on Intelligence, led by Rep. Adam B. Schiff of California, is not authorized under the rules to lead an impeachment probe. “Unless there’s a bunch of stuff that’s not public, which would in itself be extraordinary, there is no way he has jurisdiction to conduct an impeachment inquiry. I think his proceeding is illegal,” Mr. Dewey said. Mr. Schiff’s impeachment inquiry subpoenas have all centered around Mr. Trump’s attempts to rope Ukraine into investigating a potential political opponent, former Vice President Joseph R. Biden. The Washington Times counts 15 publicly acknowledged subpoenas issued on the Ukraine matter so far, including the one Tuesday to Mr. Taylor.

The House also has approved 22 subpoenas related to special counsel Robert Mueller’s investigation into Russian meddling and Trump campaign behavior in 2016, seven subpoenas dealing with the president’s finances, three concerning White House matters such as security clearances or the activities of Trump aide Kellyanne Conway, five subpoenas over immigration policy, three over Mr. Trump’s now-abandoned attempt to ask about citizenship on the 2020 census, and one subpoena to the State Department over U.S. policy in Afghanistan.

[..] Mr. Dewey said Democrats could face a legal challenge over any impeachment-related subpoenas because the House has yet to vote to authorize an inquiry. Mrs. Pelosi created an inquiry by proclamation, turning the reins over to Mr. Schiff. Mr. Nadler, meanwhile, has argued to the courts that he has been in the midst of an inquiry for months. Mr. Dewey said those arguments aren’t frivolous, but “I think they’re wrong.” “I do not think as a matter of law that the Judiciary Committee can exercise the impeachment power without a vote of the full House,” he said. “And I think independently of that, I do not think any other committee can exercise the impeachment power.”

Two big problems:

1) Pelosi needs to solve the legitimacy issue.
2) Democrats are selectively leaking to the press they like, creating a picture that may not be realistic at all

• Democrats Set December Impeachment Target, But Obstacles Abound (R.)

Democratic lawmakers hope to complete their impeachment inquiry into President Donald Trump by year’s end and are coalescing around two articles of impeachment – abuse of power and obstruction, lawmakers and aides told Reuters. But some Democrats fear that a costly distraction may be the looming battle between the Republican Trump and Congress over funding the government when money runs out for many federal operations on Nov. 21, Democratic aides said. Some Democratic lawmakers said they believed they already had gathered enough evidence from the testimony of current and former U.S. officials to impeach Trump for asking Ukraine to investigate a political rival, Joe Biden, a leading contender for the Democratic presidential nomination in 2020.

Other Democrats were more cautious and said more information was needed to solidify the case for impeachment and make it an easier sell to a deeply polarized American public. Only two U.S. presidents have been formally impeached by the House of Representatives, and both were later acquitted by the Senate. Val Demings, a Democratic lawmaker who sits on the House Intelligence and Judiciary committees, said congressional investigators should be able to wrap up their inquiry by December. “We need to be thorough, we need to be methodical, but we need to be timely,” she told Reuters. Three Democratic congressional sources said there had been talk among some Democrats about trying to wrap up hearings and hold an impeachment vote by the Nov. 28 Thanksgiving holiday, but this appeared highly unlikely as of Wednesday.

Why turn the House into a circus?

• Republicans Storm Closed-Door Hearing To Protest Impeachment Inquiry (Hill)

House Republicans stormed a closed-door hearing Wednesday to protest Democrats’ impeachment inquiry process, breaking up the deposition of a top Defense Department official who was testifying about President Trump’s dealings with Ukraine. “They crashed the party,” said Rep. Harley Rouda (D-Calif.), a member of the Oversight and Reform Committee, one of three House panels leading the impeachment probe. Dozens of Republicans, including some members of leadership like House Minority Whip Steve Scalise (R-La.), barged into the secure hearing room in the Capitol basement where Laura Cooper, the deputy assistant secretary of Defense for Russia, Ukraine and Eurasia, was set to provide private testimony.

The deposition got underway after a five-hour delay. Several lawmakers said that, in response to the Republican protest on Wednesday morning, House Intelligence Committee Chairman Adam Schiff (D-Calif.) left the room with Cooper and postponed her interview. “The fact that Adam Schiff won’t even let the press in — you can’t even go in and see what’s going on in that room,” Scalise told reporters outside the hearing room. “Voting members of Congress are being denied access from being able to see what’s happening behind these closed doors, where they’re trying to impeach the president of the United States with a one-sided set of rules, they call the witnesses.”

[..] Some Democrats were outraged by GOP lawmakers bringing cellphones and cameras into a secure room. “In short, they have compromised the security of the room. And they not only brought in their unauthorized devices, they may have brought in the Russian and Chinese with electronics in a secure space,” Rep. Eric Swalwell (D-Calif.) told reporters. Rep. Mark Meadows (R-N.C.), a member of the Oversight Committee and a key Trump supporter, suggested the concerns over the cellphones were overblown. “There’s no cameras or phones in the SCIF, so I think that those phones actually went in, just because everybody went in,” Meadows told reporters. “I can tell you I actually collected phones and brought them back out. You certainly want a secure environment but at the same time I think everybody wants to hear exactly what’s going on.”

“one of the gravest modern offenses against government transparency.”

• Benghazi Coverup Discussed on Emails to Clinton’s Unsecured Server (ET)

Judicial Watch made public on Oct. 21 a 2012 email chain showing multiple senior U.S. State Department executives used then-Secretary of State Hillary Clinton’s unsecured private email to discuss the most sensitive details of the Sept. 11, 2012, terrorist attack on the U.S. Consulate in Benghazi, Libya. Four Americans, including Ambassador Christopher Stevens, died in the assault, which within hours was attributed by the Obama White House to an internet video that critically portrayed Islam and its founder, Mohammed. While Judicial Watch first sought the emails released on Oct. 21 in a 2014 Freedom of Information Act (FOIA) request, they weren’t released to the nonprofit government watchdog until earlier in October by a federal court and only after the group threatened to expand its litigation in the case against the State Department.

It was this FOIA litigation that led to the public disclosure of Clinton’s use of the private email system, according to Judicial Watch. Hundreds of other State Department and White House documents sought in the 2014 suit were previously released, but only after years of litigation and discovery, which continues and may soon include deposing Clinton and Cheryl Mills, her former chief of staff. U.S. District Court Judge Royce C. Lamberth, who has heard much of the Judicial Watch litigation seeking the documents, has called Clinton’s private email system “one of the gravest modern offenses against government transparency.”

Another ghost story.

• Steele, State and the Alfa Bank Conspiracy Theory Exposed (Solomon)

When Russia investigation Special Counsel Robert Mueller finally testified this summer, one of the few substantive revelations he made about something not specifically addressed in his final report involved a long-pedaled allegation that Donald Trump and Vladimir Putin had a secret communications network through a computer server at Russia’s Alfa Bank. “I believe it’s not true,” Mueller testified when questioned by Republican Rep. Will Hurd of Texas, confirming in public what FBI officials had privately told me and other reporters going back to late 2016.

We now have strong evidence that one of the events that gave life to that conspiracy theory was an Oct. 11, 2016 visit by the British intelligence operative Christopher Steele to the State Department, where the author of the now infamous anti-Trump dossier met with Deputy Assistant Secretary of State Kathleen Kavalec. Just a few days after the visit, Kavalec forwarded a document to FBI official Stephen Laycock on Oct. 13, 2016 as a followup to her contact with Steele that offered significant detail about the Alfa Bank theory based on unexplained pings between a server at the bank and one used by the Trump organization on the East Coast.

Would she settle for Hillary? Why doesn’t Oprah herself run?

• Oprah Has ‘Begged’ Disney CEO Bob Iger To Run For President (Week)

The Democratic field isn’t sitting well with Oprah. Despite being enthralled with former Texas Rep. Beto O’Rourke and South Bend, Indiana, Mayor Pete Buttigieg early in the 2020 race, Oprah Winfrey is now reportedly dissatisfied with who’s running. And she’s not the only one — Hillary Clinton is still thinking about jumping into the race, The Washington Post reports. Oprah has made her presidential ambitions for Disney CEO Bob Iger well known, and has reportedly “repeatedly begged” him to run. She said in September she hoped to be “knocking on doors in Des Moines, wearing an ‘Iger 2020’ T-shirt.”

“Bob Iger’s guidance and decency is exactly what the country needs right now,” she continued. Clinton similarly “has not ruled out jumping in herself,” suggesting she’s also seeing “dissatisfaction” with the race’s current frontrunners, two people tell the Post. Party leaders have said they’re worried about former Vice President Joe Biden’s involvement in President Trump’s impeachment, and that the other top-tier candidates, Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.), are “too liberal” to beat Trump.

They might as well heat their villas with the money.

• Biden Allies Push For Super PAC After Lackluster Fundraising Quarter (CNN)

A coalition of top Democratic strategists and donors are intensifying conversations about setting up an outside group to bolster Joe Biden’s presidential candidacy, people familiar with the matter tell CNN, aiming to create a super PAC designed to fight back against a barrage of well-funded attacks from President Donald Trump’s campaign. The idea of building an outside organization has been the subject of discussion for weeks by Biden allies, but the conversations intensified in the wake of a cash crunch for the former vice president’s campaign. He reported last week having less than $9 million in the bank, significantly less than his leading rivals.

Although he sits atop or near the top of recent polls, Biden’s lackluster financial performance has set off rounds of public hand-wringing among Democratic establishment figures about his ability to competitively fund his campaign through the battery of state primaries early next year. While Biden has previously spoken out against the creation of a super PAC, which would operate entirely separately from his campaign, several longtime allies say it’s clear that his presidential bid needs help. No final decision has been made about launching the outside group, but allies have started contacting potential vendors and lining up possible donors to fuel a super PAC, sources familiar with the efforts tell CNN. “They know they can use all the help they can get,” one Biden ally told CNN, speaking on condition of anonymity to discuss the group. “Trump is crushing him with spending.”

[..] Biden’s fundraising haul last quarter totaled nearly $15.7 million, but the candidate spent more than he raised, ending the quarter with $8.98 million cash on hand. Biden is outmatched in cash reserves by South Bend Mayor Pete Buttigieg, Sen. Kamala Harris of California, Sen. Elizabeth Warren of Massachusetts, and Sen. Bernie Sanders of Vermont, who has amassed a stockpile of $33.7 million. Biden’s allies are most concerned about combating the attacks coming from Trump. His reelection campaign, joint fundraising committees and the Republican National Committee ended the quarter with a combined $158 million cash on hand.

Keyword: IMF.

• Burn, Neoliberalism, Burn (Escobar)

Neoliberalism is – literally – burning. And from Ecuador to Chile, South America, once again, is showing the way. Against the vicious, one-size-fits-all IMF austerity prescription, which deploys weapons of mass economic destruction to smash national sovereignty and foster social inequality, South America finally seems poised to reclaim the power to forge its own history. Three presidential elections are in play. Bolivia’s seem to have been settled this past Sunday – even as the usual suspects are yelling “Fraud!” Argentina and Uruguay are on next Sunday. Blowback against what David Harvey has splendidly conceptualized as accumulation by dispossession is, and will continue to be, a bitch. It will eventually reach Brazil – which as it stands continues to be torn to pieces by Pinochetist ghosts.

Brazil, eventually, after immense pain, will rise up again. After all, the excluded and humiliated all across South America are finally discovering they carry a Joker inside themselves. The question posed by the Chilean street is stark: “What’s worse, to evade taxes or to invade the subway?” It’s all a matter of doing the class struggle math. Chile’s GDP grew 1,1% last year while the profits of the largest corporations grew ten times more. It’s not hard to find from where the huge gap was extracted. The Chilean street stresses how water, electricity, gas, health, medicine, transportation, education, the salar (salt flats) in Atacama, even the glaciers were privatized. That’s classic accumulation by dispossession, as the cost of living has become unbearable for the overwhelming majority of 19 million Chileans, whose average monthly income does not exceed $500.

[..] Evo Morales represents a project of sustainable, inclusive development, and crucially, autonomous from international finance. No wonder the whole Washington Consensus apparatus hates his guts. Economy Minister Luis Arce Catacora cut to the chase: “When Evo Morales won his first election in 2005, 65% of the population was low income, now 62% of the population has access to a medium income.” The opposition, without any project except wild privatizations, and no concern whatsoever for social policies, is left to yell “Fraud!”, but this could take a very nasty turn in the next few days. In the tony suburbs of southern La Paz, class hate against Evo Morales is the favorite sport: the President is referred to as “indio”, a “tyrant” and “ignorant”. Cholos of the Altiplano are routinely defined by white landowning elites in the plains as an “evil race”.

Russia in control.

• Kremlin Says US Betrayed Kurds In Syria (R.)

The Kremlin said on Wednesday that the United States had betrayed and abandoned the Syrian Kurds and advised the Kurds to withdraw from the Syrian border as per a deal between Moscow and Ankara or be mauled by the Turkish army. The comments by Kremlin spokesman Dmitry Peskov to Russian news agencies followed a deal agreed on Tuesday between Russia and Turkey that will see Syrian and Russian forces deploy to northeast Syria to remove Kurdish YPG fighters and their weapons from the border with Turkey.

Peskov, who was reported to be reacting to comments by U.S. President Donald Trump’s special envoy for Syria James Jeffrey, complained that it appeared that the United States was encouraging the Kurds to stay close to the Syrian border and fight the Turkish army. “The United States has been the Kurds’ closest ally in recent years. (But) in the end, it abandoned the Kurds and, in essence, betrayed them,” Peskov was cited as saying. “Now they (the Americans) prefer to leave the Kurds at the border (with Turkey) and almost force them to fight the Turks.” If the Kurds did not withdraw as per the deal between Moscow and Ankara, Peskov said that Syrian borders guards and Russian military police would have to withdraw, leaving the Kurds to be dealt with by the Turkish army.

WHen you read the article, it appears perhaps not the best way to report this.

• Amazon Rainforest ‘Close To Irreversible Tipping Point’ (G.)

Soaring deforestation coupled with the destructive policies of Brazil’s far-right president, Jair Bolsonaro, could push the Amazon rainforest dangerously to an irreversible “tipping point” within two years, a prominent economist has said. After this point the rainforest would stop producing enough rain to sustain itself and start slowly degrading into a drier savannah, releasing billions of tonnes of carbon into the atmosphere, which would exacerbate global heating and disrupt weather across South America. The warning came in a policy brief published this week by Monica de Bolle, a senior fellow at the Peterson Institute for International Economics in Washington DC.

The report sparked controversy among climate scientists. Some believe the tipping point is still 15 to 20 years away, while others say the warning accurately reflects the danger that Bolsonaro and global heating pose to the Amazon’s survival. “It’s a stock, so like any stock you run it down, run it down – then suddenly you don’t have any more of it,” said de Bolle, whose brief also recommended solutions to the current crisis. Bolsonaro has vowed to develop the Amazon, and his government plans to allow mining on protected indigenous reserves. Amazon farmers support his attacks on environmental protection agencies. His business-friendly environment minister, Ricardo Salles, has met loggers and wildcat miners, while deforestation and Amazon fires have soared since he assumed office in January.

The policy brief noted that Brazil’s space research institute, INPE, reported that deforestation in August was 222% higher than in August 2018. Maintaining the current rate of increase INPE reported between January and August this year would bring the Amazon “dangerously close to the estimated tipping point as soon as 2021 … beyond which the rainforest can no longer generate enough rain to sustain itself”, de Bolle wrote.

“Hell is empty and all the devils are here.”

William Shakespeare

The Great Discontent

Feb 112019

February 11, 2019 Posted by Raúl Ilargi Meijer at 5:48 pm Primers Tagged with: AOC, bills, blindness, Brexit, Great Discontent, Great Unraveling, Green New Deal, media, neoliberalism, Onfray, Trump, tsunami, yellow vests 7 Responses »

Johannes Vermeer Woman holding a balance 1662-63

The problem is, of course, that not only is economics bankrupt but it has always been nothing more than politics in disguise.
-Hazel Henderson

It’s often hard to understand how people can be aware of something but then fail to link it to a perfectly logical next step, or even multiple steps, and see where it fits in a larger scheme. There really are people out there, believe it or not, who look at economic and political developments over the past decade in any particular western country and believe they are unique to that country.

In reality, while things may play out slightly differently from one place to the other, the core causes of what’s been unfolding are the exact same ones in every single location. The reactions of incumbent politicians and economics has been the same as well: massage the numbers and the media, keep the rich and powerful happy, and make sure you and yours are on the ‘right side’ of the line.

In France, the main complaint that the Yellow Vests movement has now taken into its 13th consecutive weekend is crystal clear: people can’t pay their bills anymore. In the UK, austerity has demolished wages, social care, the NHS and much else. In the US, many millions of Americans can’t afford a $400 emergency payment, have ever scarcer access to healthcare and live from paycheck to paycheck.

Rinse and repeat for every western nation. The storylines vary somewhat, but they all tell the same tale, they could be, they are, chapters in the same book. And it makes one think if people are not connecting them.

Renowned French philosopher Michel Onfray summarizes Emmanuel Macron’s ongoing Yellow Vests (Gilets Jaunes) problem in these words: “Macron is trying to explain that there is not enough liberalist Europe in our lives, while the Gilets Jaunes are saying back to him that there is too much – not too much Europe, but too much liberalism.”

That is true in France, and it is also true in the UK, US and many other countries. People may not see liberalism as their problem, or even know, let alone understand the term, but what they do understand is they can’t pay their bills anymore. And Macron’s response, just like that of Washington and London, is more neoliberalism, or, again in Onfray’s words:

“This is an order that is strong against the week, as we can see on the streets, and weak against the strong”. [..] “The [liberal] Maastricht state is “cruel to those who carry the burdens of globalization” and “simply by declaring their poverty, these people have been ideologically criminalized.”

The sign in the picture below says: “We live in a world where those who make 100,000 a month convince those who make 1,800 that everything is going wrong because of those who live on 535 euro. And it works… (thanks to the media)” That’s what the Yellow Vests are about.

©Reuters/Gonzalo Fuentes

Again, it’s not about the term (neo-)liberalism, and it’s not some ideological question or fight, it’s about people not being able to pay their bills, and about politicians leaving them hanging all alone in a freezing wind. Nor is it a left against right issue. Western countries only have formerly left parties left; people who can’t pay their bills have been left to fend for themselves, no matter what they vote, and they finally understand that.

In Italy, traditional parties were all but wiped out to be replaced with the Lega and M5S. In France, ditto, but there Macron was the ‘new’ guy. In Germany, Merkel still holds the CDU/CSU ship somewhat steady, but she’s a goner and the right rises.

In Britain, there’s still only the two main parties, but they’re already history. It makes no difference what Jeremy Corbyn does or doesn’t do, he’ll be crushed by the betrayal Tony Blair inflicted on the nation in name of the same Labour Party now ‘led’ by Corbyn. While the Tories, like the Democrats in the US, rely on having taken over the media.

But it’s still a bit bewildering to see Andrew Rawnsley, the Observer’s “award-winning chief political commentator”, no less, write an entire article about what’s ailing British politics without linking this to the rest of the world, where the exact same issues play out. Of course it’s obvious that Brexit has become a divisive issue, not only in UK politics but also there, and not just between parties but also within them.

But if anything, Brexit is not a cause but a mere symptom of the British variety of the Great Discontent. The cause is that in Britain, too, people can’t pay their bills anymore. One country gets Trump, the next one Yellow Vests, and the third gets Brexit.

Why The Sickly Ugly Sisters Of UK Politics Deserve To Suffer The Splits

It is true that the big two can still gather up a lot of votes. After decades of decline in their combined vote share, it blipped up at the last election. But I don’t think that truly indicated renewed enthusiasm for either of them. It was a false positive induced by an electoral system that compels many voters to make a forced choice between the unappetising and the inedible.

It doesn’t mean that these nose-holding voters like what’s put before them. The current choice on offer is so disdained that, when pollsters ask who would make best prime minister, Theresa May and Jeremy Corbyn are regularly beaten into second and third place by Neither.

More than half of the electorate say their views are not properly represented by the existing political parties. Many politicians can’t stand the parties they represent. Some actively and publicly rage about what has become of them. I cannot recall a period in my lifetime when so many MPs have expressed so much disgust and despair with the state of their own parties.

Mr. Rawnsley manages to avoid any mention of anything at all existing outside of the British borders in the entire article, other than chiding Corbyn for failing to condemn Maduro. And you’re right, if that is the extent of your media, or even that of the formerly left-leaning bit, you may need an extra decade or so to figure out what the rest of the world already knows.

In the US, Trump replaced and/or took over the Republican Party, while Ocasio-Sanchez -AOC- is the only strong voice for the Democrats. Sure, she’s 29 and can’t run for the White House, but given that the alternative is Pelosi/Schumer and much more of that exact same cabal, anyone with presidential dreams had better get her blessings.

And sure, her Green New Deal/Dream can easily be dismissed as crazy, but pray tell what the difference is between how the Green New Deal might be financed, and how the Federal Reserve has financed its QE schemes. Perhaps the big difference is who profits; in one instance, the banks, in the other, society at large.

Or from a different perspective, there, too, AOC is like Trump: first, you start big and after, you see what can be done. Her version of the art of the deal. Besides, she has a plan, and nobody else has one. Except perhaps for Bernie, but his credibility was fatally wounded by letting the DNC waltz all over him in 2016.

And his age is not going to help: if you’re really fed up with what’s there because it’s disappointed you three ways to Sunday and now you can’t pay your bills, you’re not going to vote for grandpa, you’re going to go for someone young. Still, if Bernie hooks up with Ocasio, he may have a shot.

For all the others in the already crowded field, it’s what have you done for me lately, and they all either haven’t done dick all or they can’t string two words together without looking like someone wrote it all down for them. Look for a whole bunch from the Clinton/Wasserman mold (i.e. every candidate so far) to support the Green New Deal, but only to sabotage it, and Ocasio, at the first available opportunity.

If people already find the very large and very obvious political changes too much to comprehend, here’s some awkward news for you, and it’s not just that the media vs social media fight must inevitably lead to an ever stronger tsunami of ‘news’ overkill. Though that’s a big one: the media once upon a time reported the news, an outdated business model; today they don’t report the news, they manufacture it.

It’s more profitable because people are more gullible and/or they’re drowning in the giant overkill waves. I like that tsunami metaphor for news dissemination: people think social media will work to their advantage, like when the waters recede after a quake, that they have more control over their news. But then it all comes back in one big go and they’re completely lost.

The main upcoming event in media and politics won’t be the Great Political Discontent, it will be the economic one. Those who can’t pay their bills today will be the first victims of the massaged economic numbers finding themselves subject to gravity once again. Central banks won’t be able to prop up the zombies anymore, or the facade. The media will turn against the prevailing order when they deem it profitable. Or, rather, in a desperate attempt at survival.

What once was the middle class will join the various Yellow Vest groups around the world. So will whatever it is you call what took the place of the middle class. Certainly after their housing bubble mortgages become eligible for margin calls. Then all that’s left will be the very rich and the very poor. It’ll be back to the Middle Ages. Just with 20 times as many people. And with over half the wildlife gone, and the arable land, and 80% of insects gone since 1980 alone.

But yeah, we can also pretend that any problem we encounter can only possibly be a temporary blip, and there’s sunshine on the way around the corner, not pitchforks. Still, I’m pretty sure it’s precisely because we do nothing but pretend, that we gather all the problems in the first place that make one think of pitchforks, if even so briefly.

And I’m also pretty sure that we’re a lot less smart than we tell ourselves we are considering we kill off that without which we have zero chance of survival, and considering we let people starve in the richest human society the world has ever seen (make that: will ever see), but we still have trouble seeing our own noses, let alone following them.

We’re such blind masters of pretence that we hardly ever noticed the Great Discontent entering our nations, our communities and our homes. What then are the odds we will perceive the arrival of the Great Unraveling?

Debt Rattle October 17 2018

Oct 172018

October 17, 2018 Posted by Raúl Ilargi Meijer at 9:28 am Finance Tagged with: Australia, censor, extinction, Fed, Khashoggi, neoliberalism, Saudi, Sears, shadows, Trump, Venezuela 6 Responses »

Georgia O’Keeffe Autumn leaves, Lake George 1924

• Fed Minutes May Unlock Details About Jerome Powell’s Ultimate Plan (Y!)

• China May Have $6 Trillion Of Unreported Local Government Debt – S&P (CNBC)

• Jamal Khashoggi’s Killing Took Seven Minutes – Turkish Source (MEE)

• Sears Didn’t ‘Die.’ Vulture Capitalists Killed It. (Kuttner)

• On Theresa May, Danny DeVito and ‘Other People’s Money’ (Pettifor)

• Britain Fell For A Neoliberal Con Trick – Even The IMF Says So (G.)

• Venezuela Drops US Dollar, Will Use Euro For International Transactions (RT)

• The World Will Soon Start Talking Like Trump (FP)

• Supreme Court To Hear Case Linked To Who Social Media Can Censor (CNBC)

• Record Number of Older Australians are in Financial Trouble. (ABC.au)

• UK Restaurants And Cafes Throw Out 320 Million Fresh Meals A Year (G.)

• Nature Will Need Up To 5 Million Years To Fill The Gaps Caused By Man (Ind.)

Trump’s discomfort is still understandable.

• Fed Minutes May Unlock Details About Jerome Powell’s Ultimate Plan (Y!)

Wednesday’s minutes of the Federal Reserve’s September meeting, released at 2 p.m. ET, may reveal more details about the pacing of the central bank’s rate hikes, which have rattled investors and President Trump over the past week. Trump has repeatedly criticized the Fed in recent days, calling it “crazy” and “too cute” in various media interviews. Investors seemed to largely agree with this characterization — and sent the Dow Jones Industrial Average down over 1,300 points over a few trading sessions last week, as higher interest rates make stocks less attractive. The Fed has raised interest rates three times this year and has telegraphed a fourth hike as soon as December.

But Danielle DiMartino Booth, a former Federal Reserve advisor and CEO of Quill Intelligence, doesn’t expect Wednesday’s minutes to reflect the market’s recent worry over interest rates. “With Jay Powell, we have seen clean minutes,” she told Yahoo Finance, describing the minutes as a summation of the Fed’s thinking at the time of the September meeting. She said former Fed chairs Ben Bernanke and Janet Yellen used to massage the minutes if they needed to update their outlook in the weeks following the Fed’s last statement. [..] A lot has occurred since the September 25-26 meeting, including a steep rise in bond yields and last week’s aforementioned market turmoil. “[Last week’s market] declines won’t cause Powell to push the panic button,” Booth said. “If you look at the past few trading sessions, much of the declines have reversed.”

The shadows. Not under Xi’s control.

• China May Have $6 Trillion Of Unreported Local Government Debt – S&P (CNBC)

Unreported Chinese local government debt may amount to trillions of U.S. dollars, meaning the country’s debt-to-GDP ratio has hit “alarming” levels, S&P Global Ratings said in a report released Tuesday. The analysts noted a large gap between reported investment in local infrastructure and funding, as permitted by central authorities. As a result, the actual level of off-balance sheet debt could be several times more than what is publicly disclosed and range as high as 30 trillion yuan to 40 trillion yuan, or about $4.34 trillion to $5.78 trillion, credit analysts Gloria Lu, Laura Li and their team said in the report.

“And that’s a debt iceberg with titanic credit risks,” they added, estimating that the ratio of all government debt to GDP was 60 percent last year. To encourage economic growth in the region, local governments in China have invested heavily in infrastructure, often using financing structures known as “local government financing vehicles,” or LGFVs. Details about their size or nature tend to be unclear, and the S&P analysts said much of the hidden debt is in those vehicles. Beijing has been trying to move financing away from off-balance sheet sources, but has had limited success so far. In the future, S&P Global Ratings expects authorities will allow more defaults in local government financing vehicles, the report said.

Very graphic. There was no botched kidnapping, and no rogue elements. Find a new line. It doesn’t look like this story can be stopped anymore. Turkey keeps leaking details.

• Jamal Khashoggi’s Killing Took Seven Minutes – Turkish Source (MEE)

It took seven minutes for Jamal Khashoggi to die, a Turkish source who has listened in full to an audio recording of the Saudi journalist’s last moments told Middle East Eye. Khashoggi was dragged from the Consul General’s office at the Saudi consulate in Istanbul and onto the table of his study next door, the Turkish source said. Horrendous screams were then heard by a witness downstairs, the source said. “The consul himself was taken out of the room. There was no attempt to interrogate him. They had come to kill him,” the source told MEE. The screaming stopped when Khashoggi – who was last seen entering the Saudi consulate on 2 October – was injected with an as yet unknown substance.

Salah Muhammad al-Tubaigy, who has been identified as the head of forensic evidence in the Saudi general security department, was one of the 15-member squad who arrived in Ankara earlier that day on a private jet. Tubaigy began to cut Khashoggi’s body up on a table in the study while he was still alive, the Turkish source said. The killing took seven minutes, the source said. As he started to dismember the body, Tubaigy put on earphones and listened to music. He advised other members of the squad to do the same. “When I do this job, I listen to music. You should do [that] too,” Tubaigy was recorded as saying, the source told MEE. A three-minute version of the audio tape has been given to Turkish newspaper Sabah, but they have yet to release it.

Killing companies and cutting 100s of 1000s of jobs is perfectly legal.

• Sears Didn’t ‘Die.’ Vulture Capitalists Killed It. (Kuttner)

If you’ve been following the impending bankruptcy of America’s iconic retailer as covered by print, broadcast and digital media, you’ve probably encountered lots of nostalgia and sad clucking about how dinosaurs like Sears can’t compete in the age of Amazon and specialty retail. But most of the coverage has failed to stress the deeper story. Namely, Sears is a prime example of how hedge funds and private equity companies take over retailers, encumber them with debt in order to pay themselves massive windfall profits, and then leave the retailer without adequate operating capital to compete. Part of the strategy is to sell off valuable real estate, the better to enrich the hedge fund, and stick the retail company with costly rental payments to occupy the space that it once owned.

In the case of Sears, the culprit is a hedge-fund operator named Edward Lampert, once a senior merger guy at Goldman Sachs. In 2005, Lampert merged Sears with Kmart, loaded both up with debt, and used some of the debt on stock buybacks to pump up the share price and enrich shareholders, notably himself and his hedge fund. In a decade, 175,000 people at Sears/Kmart lost their jobs and revenue was cut in half. Various pieces of Sears were sold off. Lampert did just fine. Lampert’s hedge fund also became a prime a lender to Sears, making money off of commissions and interest charges as well as being a prime shareholder. The strategy ensures that the fund and its beneficiaries (including Lampert himself) get rich, even if they run Sears into the ground.

“..at a time of private economic failure, it is vital for government to borrow and spend..”

• On Theresa May, Danny DeVito and ‘Other People’s Money’ (Pettifor)

PEF Council member Ann Pettifor explains how all governments finance their spending (and its not from taxation). She deconstructs Theresa May’s address to the Conservative Party Conference with its deliberate framing of Labour governments as tax raiders. The use of the phrase “other people’s money” was not accidental. It was first used in the title of a famous work (1973) by Donald R. Cressy about the social psychology of embezzlement. The book was later made into a movie about a corrupt corporate raider, and starred Danny de Vito and Gregory Peck. Mrs May’s speech writer wanted to imply that Labour governments are tax raiders.

That is both a calumny, but also a lie – twice over. First because no Labour government has ever run out of money – not even Clement Attlee’s which started life with public debt at 250% of national income, and then spent enormous sums creating the NHS, affordable housing, a public education system etc. As a result of that spending, public debt as a share of GDP fell precipitously, because the Labour government increased the nation’s income, through well-paid employment. Good, well-paid employment in turn generated tax revenues – to pay for the borrowing, and pay down the public debt.

Second, no government – including today’s Conservative government – finances spending from taxation. Instead governments finance spending by borrowing from their own Bank, the Bank of England, or from capital markets. If that borrowing creates employment and increases income, then tax revenues accrue to HMRC, and is used to pay for the borrowing. To keep the public finances balanced at a time of private economic failure, it is vital for government to borrow and spend, to expand the nation’s income and thereby to generate the tax revenues needed to repay the borrowing, and keep the public finances in order.

Most of the world has.

• Britain Fell For A Neoliberal Con Trick – Even The IMF Says So (G.)

I want to address the most stubborn belief of all: that running a small state is the soundest financial arrangement for governments and voters alike. Because 40 years on from the Thatcher revolution, more and more evidence is coming in to the contrary. Let’s start with the IMF itself. Last week it published a report that barely got a mention from the BBC or in Westminster, yet helps reframe the entire debate over austerity. The fund totted up both the public debt and the publicly owned assets of 31 countries, from the US to Australia, Finland to France, and found that the UK had among the weakest public finances of the lot. With less than £3 trillion of assets against £5tn in pensions and other liabilities, the UK is more than £2tn in the red. Of all the other countries examined by researchers, including the Gambia and Kenya, only Portugal’s finances look worse over the long run. So much for fixing the roof.

Almost as startling are the IMF’s reasons for why Britain is in such a state: one way or another they all come back to neoliberalism. Thatcher loosed finance from its shackles and used our North Sea oil money to pay for swingeing tax cuts. The result is an overfinancialised economy and a government that is £1tn worse off since the banking crash. Norway has similar North Sea wealth and a far smaller population, but also a sovereign wealth fund. Its net worth has soared over the past decade. The other big reason for the UK’s financial precarity is its privatisation programme, described by the IMF as no less than a “fiscal illusion”. British governments have flogged nearly everything in the cupboard, from airports to the Royal Mail – often at giveaway prices – to friends in the City. Such privatisations, judge the fund, “increase revenues and lower deficits but also reduce the government’s asset holdings”.

If they are successful others may follow.

• Venezuela Drops US Dollar, Will Use Euro For International Transactions (RT)

Venezuela is abandoning the US dollar, with all future transactions on the Venezuelan exchange market to be made in euro, Tareck El Aissami, the country’s Vice President for Economy, announced. The sanctions, recently introduced by Washington against Caracas, “block the possibility of continuing to trade using the US dollar on the Venezuelan exchange market,” El Aissami said, adding that the American restrictions were “illegal and against international law.” The American “financial blockade” of Venezuela affects both the country’s public and private sectors, including pharmacy and agriculture, and shows “just how far the imperialism can go in its madness,” the vice president said.

Venezuela’s floating exchange rate system, Dicom, “will be operating in euro, yuan or any other convertible currency and will allow the foreign exchange market to use any other convertible currency,” El Aissami said. The vice president added that all private banks in Venezuela are obliged to participate in the Dicom bidding system. The government is going to sell 2 billion euros between November and December to allow the public to purchase the European currency “at a real, non-speculative rate,” he said.

The price of success?!

• The World Will Soon Start Talking Like Trump (FP)

[..] no one doubts that Trump, through his surprise election victory and unprecedented approach to governance, has redefined political communication. For better or worse, every future president and presidential candidate will seek to learn from, and at least partially emulate, Trump’s unique and successful methods in this. Because America often sets trends in political communication, we should also expect to see such Trumpian techniques adopted abroad as well. Of course, there is considerable disagreement about precisely what those techniques are and which aspects of them will endure and transfer into other campaigns. It is early days, but at least three aspects of Trumpian political communication are likely to endure.

The most obvious and most commented upon aspect of Trumpian communication is the president’s use of Twitter. Trump is quite simply addicted to the medium—and he has stuck to it despite warnings from his political advisors that it is unwise for a president to make unfiltered use of social media. [..] Trump [..] clearly values Twitter precisely because it provides him with direct access to voters, unencumbered by the press, advisors, the government bureaucracy, or even personal reflection. He provides breaking news on his feed not available elsewhere and provides insight into his thinking through tweets.

Trump should do this.

• Supreme Court To Hear Case Linked To Who Social Media Can Censor (CNBC)

The Supreme Court has agreed to hear a case that could determine whether users can challenge social media companies on free speech grounds. The case, Manhattan Community Access Corp. v. Halleck, No. 17-702, centers on whether a private operator of a public access television network is considered a state actor, which can be sued for First Amendment violations. The case could have broader implications for social media and other media outlets. In particular, a broad ruling from the high court could open the country’s largest technology companies up to First Amendment lawsuits.

That could shape the ability of companies like Facebook, Twitter and Alphabet’s Google to control the content on their platforms as lawmakers clamor for more regulation and activists on the left and right spar over issues related to censorship and harassment. The Supreme Court accepted the case on Friday. It is the first case taken by a reconstituted high court after Justice Brett Kavanaugh’s confirmation earlier this month. [..] On its face, the case has nothing to do with social media at all. Rather, the facts of the case concern public access television, and two producers who claim they were punished for expressing their political views.

The producers, DeeDee Halleck and Jesus Melendez, say that Manhattan Neighborhood Network suspended them for expressing views that were critical of the network. In making the argument to the justices that the case was worthy of review, attorneys for MNN said the court could use the case to resolve a lingering dispute over the power of social media companies to regulate the content on their platforms. [..] While the First Amendment is meant to protect citizens against government attempts to limit speech, there are certain situations in which private companies can be subject to First Amendment liability. Attorneys for MNN have made the case that social media companies are clearly not government actors. But in raising the question, they have provided the Supreme Court an opportunity to weigh in.

Interest-only mortgages.

• Record Number of Older Australians are in Financial Trouble. (ABC.au)

Financial helpline counsellors are at “capacity” with record numbers of older Australians struggling in poverty, but they still urge those experiencing debt distress to not hesitate to call. The National Debt Helpline — a federal government-run financial counselling service — said it’s on track to receive a record number of cases through its call centres this year — many from older Australians who can’t meet their mortgage or rent payments. “The phones just never stop now,” financial counsellor Greg said. “They’re just going day after day, after day. “You put the phone down, you pick the phone up again.”

[..] For the first time, the National Debt Helpline has started fielding calls from Australians struggling to switch from interest, to principal and interest mortgage payments. “We are seeing an increasing number of older Australians calling us,” Ms Cox said. “Very occasionally we’re still seeing people who have just been granted a very large mortgage, even though they’re in their 50s or 60s, and one that’s set to go for a 25 or 30-year term.” Those sorts of lending practices can lead older Australians down a financial rabbit hole. That is when sickness can creep in and marriages break down.

Our economies run on waste.

• UK Restaurants And Cafes Throw Out 320 Million Fresh Meals A Year (G.)

Almost 900,000 perfectly edible, freshly prepared meals end up in the bin in the UK every day, new figures reveal, because they haven’t been sold in time by restaurants and cafes. This means that more than 320m meals are thrown away by British food establishments every year – enough meals for everyone in the UK five times over, according to food waste app Too Good To Go. While consumers are increasingly aware of the food wasted in their homes and by supermarkets, waste by restaurants is still largely overlooked. Figures from the government’s food waste advisory body Wrap state that the problem costs UK businesses over £2.5m every week.

The app – which allows users to “rescue” surplus meals at a discounted price – is calling on more food businesses and consumers to join forces to help cut waste. “No one leaves the lights on when they leave the house,” said Hayley Conick, UK managing director at Too Good To Go. “Yet, whether it’s in restaurants, food shops or our own homes, we don’t think twice about throwing away perfectly good food.” Separately, Britons are being urged to help cut their food waste at home by setting their fridges to a colder temperature to make fresh milk and other chilled foods last longer. The advice from campaign group Love Food Hate Waste comes as a new survey revealed that half the UK population do not realise that their fridge should be set at below 5C to maximise its efficiency.

Not a timeframe we can oversee. So not a call to action.

• Nature Will Need Up To 5 Million Years To Fill The Gaps Caused By Man (Ind.)

Mankind has taken the world to the brink of a mass extinction that could wipe out vast swathes life on Earth for millions of years, scientists have warned in a new study. Humans are killing off animal and plant species so rapidly that evolution is unable to keep up to fill the gaps left behind, the work suggests. Unless conservation efforts are stepped up, nature will require between three and five million years to recover the levels of biodiversity expected to be lost over the next 50 years, predicted researchers. There have been five previous mass extinctions in the past 450 million years, and scientists have warned climate change, poaching, pollution and habitat destruction are bringing about a sixth.

More than 300 mammal species have been eradicated by human activity, according to researchers at Aarhus University in Denmark and the University of Gothenburg. More are likely to follow them into extinction in the next few decades. [..] Instead of simply counting lost or threatened species, the study considered the amount of time each had spent evolving to reflect. The extinction of species with distinct lineages and few close relatives meant the loss of “unique ecological functions and the millions of years of evolutionary history they represented”, researchers said.

“Large mammals, or megafauna, such as giant sloths and sabre-toothed tigers, which became extinct about 10,000 years ago, were highly evolutionarily distinct,” said Aarhus University palaeontologist Matt Davis, who led the study. “Since they had few close relatives, their extinctions meant that entire branches of Earth’s evolutionary tree were chopped off.” Researchers suggested threatened mammals with long evolutionary histories should be prioritised for conversation. They highlighted Asian elephants, one of only two existing species of a once mighty mammalian order that included mammoths and mastodon, and which are said to have just a 33-per-cent chance of surviving the century.

Jeffrey Sachs Still Promotes Disaster

Nov 302017

November 30, 2017 Posted by Raúl Ilargi Meijer at 2:07 pm Finance Tagged with: centralization, DiEM25, disaster, EU, Jeffrey Sachs, Merkel, Naomi Klein, neoliberalism, shock therapy, Varoufakis 5 Responses »

Amedeo Modigliani Elvira Resting at a Table 1919

Many of you are undoubtedly familiar with Naomi Klein’s 2007 book “The Shock Doctrine: The Rise of Disaster Capitalism”, in which she describes how neoliberalism, as developed by Milton Friedman and his Chicago School, wreaks often very brutal and bloody havoc upon societies under the guise of ‘crisis as an opportunity for change’, first in Latin America and later also in Eastern Europe.

One of the most prominent actors in the book, the man behind the term ‘shock therapy’ for economies, is Jeffrey Sachs, a Harvard prodigy. In an interview at the time, Klein had this to say:

Q: You mention the shift from shock therapy to shock-and-awe, but there are also attempts to soften the image of neoliberalism. Jeffrey Sachs, the economist who pioneered shock therapy, wrote his latest book on The End of Poverty. Is there any more to this than a rebranding exercise?

A: A lot of people are under the impression that Jeffrey Sachs has renounced his past as a shock therapist and is doing penance now. But if you read The End of Poverty more closely he continues to defend these policies, but simply says there should be a greater cushion for the people at the bottom. The real legacy of neoliberalism is the story of the income gap. It destroyed the tools that narrowed the gap between rich and poor.

The very people who opened up this violent divide might now be saying that we have to do something for the people at the very bottom, but they still have nothing to say for the people in the middle who’ve lost everything. This is really just a charity model. Jeffrey Sachs says he defines poverty as those whose lives are at risk, the people living on a dollar a day, the same people discussed in the Millennium Development Goals. Of course that needs to be addressed, but let us be clear that we’re talking here about noblesse oblige, that’s all.

[..] Leszek Balcerowicz, the former finance minister who worked with Jeffrey Sachs to impose shock therapy in Poland in 1989, said that the ideology advances in moments of extraordinary politics. He listed these moments of extraordinary politics as ends of war and moments of extreme political transition.

Around the same time, Alexander Cockburn said in a review of the book:

“Shock therapy” neoliberalism really isn’t most closely associated with Milton Friedman, but rather with Jeffrey Sachs, to whom Klein does certainly give many useful pages, even though Friedman remains the dark star of her story. Sachs first introduced shock therapy in Bolivia in the early 1990s. Then he went into Poland, Russia, etc, with the same shock therapy model. Sachs’ catchy phrase then was that “you can’t leap over an abyss step-by-step,” or words to that effect. This is really where contemporary neoliberalism took shape.

I’ve thought for all these years that Jeffrey Sachs, when out there campaigning for the end of poverty and other ostensibly grandiose goals with the likes of Angeline Jolie, should have at least provided a very public and detailed apology for his past endeavors. I’ve never seen one.

Which meant I was very surprised to see his name pop up as a prominent adviser to Yanis Varoufakis during the latter’s time as Greek finance minister, as Yanis describes it in his 2017 book Adults in the Room. Even more surprising than to see Larry Summers in a similar role in the same book.

The mother of all surprises in this regard, however, was to see Varoufakis’ DiEM25 movement announce Naomi Klein as a member of its Advisory Panel yesterday, a panel which also includes the likes of Julian Assange. Because while he’s not on that panel, Jeffrey Sachs has done public presentations for DiEM25. Bien étonné de se trouver ensemble, as the French put it. Strange bedfellows. Maybe Naomi should explain.

I have said multiple times that I am a fan of Yanis, and his departure as finance minister has been a huge loss to Greece, because he was their best, and perhaps their only, chance at salvation from economic disaster, but I’m still not at all convinced about DiEM25 and its intentions (and I don’t mean to say they don’t mean well).

For one, because I think the EU is so throughly rotten to the core it cannot be reformed; its fatal flaws have been continually baked into the cake for decades. Whereas DiEM25 think they can get people elected in various countries across Europe and get Brussels to change direction and become democratic. It was never built to be democratic.

But all this before was merely a build-up to an article Sachs penned for Project Syndicate this week in which he claims to know precisely what Germany and Europe need. He doesn’t.

A New Grand Coalition for Germany – and Europe

With America AWOL and China ascendant, this is a critical time for Germany and the European Union to provide the world with vision, stability, and global leadership. And that imperative extends to Germany’s Christian Democrats.

Friends of Germany and Europe around the world have been breathing a sigh of relief at the newfound willingness of Germany’s Christian Democrats and Social Democrats (SPD) to discuss reprising their grand coalition government. The world needs a strong and forward-looking Germany in a dynamic European Union. A new grand coalition working alongside French President Emmanuel Macron’s government would make that possible.

We have all seen, in Greece, in Italy, in Libya, what leadership Germany has provided. In economics and with regards to the refugee crisis. It has been an unmitigated economic disaster everywhere but in Germany itself (and Holland). And that is no coincidence. It illustrates exactly what is so wrong with the EU. Germany has the power to squeeze the poorer and smaller countries into submission with impunity, and it does just that.

The last thing the EU needs is more such German ‘leadership’. In fact, it needs a whole lot less of that. It needs to find a way to diminish German influence. But to get there, it would require for Berlin to voluntarily step back, and that is not going to happen. Merkel can veto anything she likes, and there’s nothing anyone can do about it.

[..] The world and Europe need an outward-looking Germany that offers more institutional and financial innovation, so that Europe can be a true counterpart to the US and China on global affairs. I say this as someone who believes firmly in Europe’s commitment and pioneering statecraft when it comes to sustainable development, the core requirement of our time.

Not only does Sachs not understand that making Germany some superior power in Europe is the exact wrong way to go, he doesn’t understand sustainable development either. It’s as exasperating as it is predictable.

Economic growth that is socially inclusive and environmentally sustainable is a very European idea, one that has now been embraced globally in the United Nations’ 2030 Agenda and its 17 Sustainable Development Goals, as well as in the 2015 Paris climate agreement. Europe’s experience with social democracy and Christian democracy made this global vision possible. But now that its agenda has been adopted worldwide, Europe’s leadership in fulfilling it has become essential.

A grand coalition government in Germany must help put Europe in a position to lead. French President Emmanuel Macron has offered some important ideas: a European finance minister; Eurobonds to finance a new European investment program; more emphasis on innovation; a financial transactions tax to fund increased aid to Africa, where Europe has a strategic interest in long-term development; and tax harmonization more generally, before the US triggers a global race to the bottom on taxing corporations and the rich.

There is so much wrong in those few lines we could write a book about it. First of all, and let’s bold this once again, there is no such thing as sustainable growth. It’s a lie.

If we want to do something that can actually save our planet, we have to decouple economic growth from environmental sustainability. We can and will not grow our way out of the disaster we have created with -our blind focus on- growth. This is the most dangerous nonsense story there is out there. We have to pick one of the two, we can’t have both. It’s EITHER growth OR a livable planet. Here’s what I wrote on December 16 2016:

Heal the Planet for Profit

If you ever wondered what the odds are of mankind surviving, let alone ‘defeating’, climate change, look no further than the essay the Guardian published this week, written by Michael Bloomberg and Mark Carney. It proves beyond a moonlight shadow of a doubt that the odds are infinitesimally close to absolute zero (Kelvin, no Hobbes).

Yes, Bloomberg is the media tycoon and former mayor of New York (which he famously turned into a 100% clean and recyclable city). And since central bankers are as we all know without exception experts on climate change, as much as they are on full-contact crochet, it makes perfect sense that Bank of England governor Carney adds his two -trillion- cents.

Conveniently, you don’t even have to read the piece, the headline tells you all you need and then some: “How To Make A Profit From Defeating Climate Change” really nails it. The entire mindset on display in just a few words. If that’s what they went for, kudo’s are due.

That these problems originated in the same relentless quest for profit that they now claim will help us get rid of them, is likely a step too far for them; must have been a class they missed. “We destroyed it for profit” apparently does not in their eyes contradict “we’ll fix it for profit too”. Not one bit. It does, though. It’s indeed the very core of what is going wrong.

Jeffrey Sachs can now be added to the list of deluded ‘experts’ on the topic. The COP21 Paris agreement, which I re-dubbed CON21, is full of, and directed by, such people. I always think Trump was very right to withdraw from it, even if it was for all the wrong reasons.

CON21 is a CON. The recent CON23 in Bonn is too. It’s a scheme meant to get to your money under the guise of going green. If they can convince you that you can prosper of off saving the planet, you’ll give them anything, because it’ll make you feel good about yourself.

This is me from December 12 2015:

CON21

Protesters and other well-intended folk, from what I can see, are falling into the trap set for them: they are the frame to the picture in a political photo-op. They allow the ‘leaders’ to emanate the image that yes, there are protests and disagreements as everyone would expect, but that’s just a sign that people’s interests are properly presented, so all’s well. COP21 is not a major event, that’s only what politicians and media make of it. In reality, it’s a mere showcase in which the protesters have been co-opted.

They’re not in the director’s chair, they’re not even actors, they’re just extras. I fully agree, and more than fully sympathize, with the notion of saving this planet before it’s too late. But I wouldn’t want to rely on a bunch of sociopaths to make it happen. There are children drowning every single day in the sea between Turkey and Greece, and the very same world leaders who are gathered in Paris are letting that happen. They have for a long time, without lifting a finger. And they’ve done worse -if that is possible-.

[..] you guys are targeting a conference in Paris on climate change that features the exact same leaders that let babies drown with impunity. Drowned babies, climate change and warfare, these things all come from the same source. And you’re appealing to that very same source to stop climate change.

What on earth makes you think the leaders you appeal to would care about the climate when they can’t be bothered for a minute with people, and the conditions they live in, if they’re lucky enough to live at all? Why are you not instead protesting the preventable drownings of innocent children? Or is it that you think the climate is more important than human life? That perhaps one is a bigger issue than the other?

[..] The current economic model depends on our profligate use of energy. A new economic model, then, you say? Good luck with that. The current one has left all political power with those who profit most from it. And besides, that’s a whole other problem, and a whole other issue to protest.

If you’re serious about wanting to save the planet, and I have no doubt you are, then I think you need to refocus. COP21 is not your thing, it’s not your stage. It’s your leaders’ stage, and your leaders are not your friends. They don’t even represent you either. The decisions that you want made will not be made there.

But let’s return to Sachs and his -other- lofty goals: “..a European finance minister; Eurobonds to finance a new European investment program; more emphasis on innovation; a financial transactions tax to fund increased aid to Africa, where Europe has a strategic interest in long-term development; and tax harmonization more generally..”

We all know Europeans don’t want things that infringe even further on their country’s sovereignty. If they were offered the opportunity to vote on them they would defeat them in massive numbers. Which is precisely why they are not offered that opportunity. The only way to push through such measures is by stealth and against the will of the people.

Which already has, and will much further and worse, divide the EU. It’s not even the plans themselves, it’s the notion of the ever increasing erosion of what people have to say about their own lives. The Czech Republic, Hungary, Poland and Slovakia are flaring off bright red warning signs about sovereignty, and they are completely ignored.

If the EU insists on continuing that way, it will be the cause of chaos and violence and right wing resurgence, not the solution to all that. Europe needs to take a step back and reflect upon itself before taking even one single step forward towards more centralization. But centralization is what Brussels is all about, it’s what it was built on.

The EU will never be viable if Germany in the end calls all the important shots. So a new Grand Coalition in Berlin, and its sympathetic stance towards Macron’s grandiosity, is not ‘needed’, it’s Europe’s biggest danger. But yeah, you’re right, it fits right in with Jeffrey Sachs’ neoliberalist dreams.

And there’s more centralization, globalism, neoliberalism and ‘green growth’ where that came from:

Contrary to the Germans who oppose such ideas, a European finance minister and Eurobonds would not and should not lead to fiscal profligacy, but rather to a revival of investment-led green growth in Europe. China has proposed the Belt and Road Initiative to build green infrastructure linking Southeast Asia and Central Asia with Europe.

This is the time for Europe to offer the same bold vision, creating a partnership with China to renovate Eurasia’s infrastructure for a low-carbon future. If Europe plays its cards right, Europe’s (and China’s) scientific and technical excellence would flourish under such a vision. If not, we will all be driving Chinese electric vehicles charged by Chinese photovoltaic cells in the future, while Germany’s automotive industry will become a historical footnote.

We don’t need more vehicles, whatever they run on, we need less, because we need to use less energy. Of any kind. We must not drive differently, in different cars using a different energy source, we must drive less. Much less. This shouldn’t be that hard, because our cities and societies are designed to be as wasteful as possible.

What we need is not green growth, but green shrinkage. We cannot grow our way into a sustainable planet or economic system. It is a fallacy. And it is time people like Jeffrey Sachs and Mike Bloomberg and Mark Carney (and Merkel and Macron etc. etc.) stop spreading such nonsense. If even Lloyd Blankfein supports the Paris Agreement, we should be suspicious, not feel grateful or validated in our warped views.

A European finance minister would, moreover, finally end Europe’s self-inflicted agony in the aftermath of the 2008 financial crisis. As difficult as it is to believe, Greece’s crisis continues to this day, at Great Depression scale, ten years after the onset of the crisis. This is because Europe has been unable, and Germany unwilling, to clean up the financial mess (including Greece’s unpayable debts) in a fair and forward-looking manner (akin to the 1953 London Agreement on German External Debts, as Germany’s friends have repeatedly reminded it).

If Germany won’t help to lead on this issue, Europe as a whole will face a prolonged crisis with severe social, economic, and political repercussions. In three weeks, Macron will convene world leaders in Paris on the second anniversary of the climate accord. France should certainly take a bow here, but so should Germany. During Germany’s G20 Presidency, Merkel kept 19 of the 20 members of the G20 firmly committed to the Paris agreement, despite US President Donald Trump’s disgraceful attempt to wreck it.

Yes, the corruption of US politics (especially campaign funding by the oil and gas industry) threatened the global consensus on climate change. But Germany stood firm. The new coalition should also ensure that the country’s Energiewende (“energy transition”) delivers on the 2020 targets set by previous governments. These achievable and important commitments should not be a bargaining chip in coalition talks.

Oh, c’mon, Jeffrey. You really want anyone to believe that European politics is less corrupt than American? What do you think handed Monsanto its 5-year glyphosate extension this week? Why do you think the entire Volkswagen board is still at liberty? Thing is, all this is about money.

It’s just that Merkel thinks there’s more of it to be made supporting CON21, while Trump, who’s 180º wrong on on the entire topic, thinks otherwise. But they’re both equally focused on money, not polar bears or penguins or elephants. Trump is right for believing green growth is a load of humbug, he’s just right for all the wrong reasons. While Merkel is trying to sell you a CON. Take your pick.

A CDU/CSU-SPD alliance, working with France and the rest of Europe, could and should do much more on climate change. Most important, Europe needs a comprehensive energy plan to decarbonize fully by 2050. This will require a zero-carbon smart power grid that extends across the continent and taps into the wind and solar power not only of southern Europe but also of North Africa and the eastern Mediterranean.

Once again, Eurobonds, a green partnership with China, and unity within Europe could make all the difference. Such an alliance would also enable a new foreign policy for Europe, one that promotes peace and sustainable development, underpinned by new security arrangements that do not depend so heavily on the US.

“Decarbonize fully by 2050”. Our entire societies have been built on carbon. Every single bit of it. Sachs simply doesn’t understand the world he lives in. He envisions bigger where only smaller could possibly help. We can decarbonize, but it will mean the end of our way of life. No amount of solar panels or wind turbines can change that. That are made with and from carbon.

It’s all just snake oil. We want to save the planet, and the life upon it, but we’re not willing to pay the price and bear the consequences. So we make up a narrative that feels good and run with it.

I have a tonic here that will cure all your ills, ladies and gentlemen. Only ten dollars. I know it sounds expensive, and it’s a full month’s wages, but just you think of the benefits. Think of your children!

Europe, a magnet for hundreds of millions of would-be economic migrants, could, should, and I believe would regain control of its borders, allowing it to strengthen and enforce necessary limits on migration. The political terms of a new grand coalition government, it would seem, are clear. The SPD should hold out for ministerial leadership on economic and financial policy, while the CDU/CSU holds the chancellorship.

That would be a true coalition, not one that could bury the SPD politically or deny it the means to push for a truly green, inclusive, EU-wide, sustainable development agenda. With Merkel and SPD leader Martin Schulz in the lead, the German government would be in excellent, responsible, and experienced hands. Germany’s friends and admirers, and all supporters of global sustainable development, are hoping for this breakthrough.

Long story short, Jeffrey Sachs still promotes disaster.

Debt Rattle November 14 2017

Nov 142017

November 14, 2017 Posted by Raúl Ilargi Meijer at 10:15 am Finance Tagged with: American Dream, austerity, cod, Fed, mega army, neoliberalism, petrodollar, Saudi, UAE 11 Responses »

Vincent van Gogh Laboureur dans un champ 1889

• The Largest Transfer Of Wealth In Living Memory (OD)

• How The American Dream Turned Into Greed And Inequality (WEF)

• The Fed Destroyed Functioning American Democracy and Bankrupted the Nation (CH)

• The Fatal Flaw Of Neoliberalism: It’s Bad Economics (Rodrik)

• China Home Sales Fall by Most in Almost Three Years on Curbs (BBG)

• Australia’s Whole Economy Is Built On China Buying Our Stuff (News.com.au)

• Austerity, Not Brexit, Has Doomed The Tory Party (G.)

• Saudi Retreat From U.S. Oil Market Cuts Exports to 30-Year Low (BBG)

• Arab States Spent $130 Billion To Destroy Syria, Libya, Yemen (PressTV)

• EU Countries Agree To Create A European Mega-Army (R.)

• Fisheries Collapse On US West Coast: “It’s The Worst We’ve Seen” (SHTF)

Or, as yours truly phrased it 2 weeks ago: The Biggest Ponzi in Human History. But the writer makes a big mistake when she says “this will be passed on to the next generation via inheritance or transfer”. It won’t, because prices will plunge. What will be passed on is the debt.

• The Largest Transfer Of Wealth In Living Memory (OD)

Last week, the Office for National Statistics (ONS) released new data tracking how wealth has evolved over time. On paper, the UK has indeed become much wealthier in recent decades. Net wealth has more than tripled since 1995, increasing by over £7 trillion. This is equivalent to an average increase of nearly £100,000 per person. Impressive stuff. But where has all this wealth come from, and who has it benefitted? Just over £5 trillion, or three quarters of the total increase, is accounted for by increase in the value of dwellings – another name for the UK housing stock. The Office for National Statistics explains that this is “largely due to increases in house prices rather than a change in the volume of dwellings.” This alone is not particularly surprising. We are forever told about the importance of ‘getting a foot on the property ladder’.

The housing market has long been viewed as a perennial source of wealth. But the price of a property is made up of two distinct components: the price of the building itself, and the price of the land that the structure is built upon. This year the ONS has separated out these two components for the first time, and the results are quite astounding. In just two decades the market value of land has quadrupled, increasing recorded wealth by over £4 trillion. The driving force behind rising house prices — and the UK’s growing wealth — has been rapidly escalating land prices. For those who own property, this has provided enormous benefits. According to the Resolution Foundation, homeowners born in the 1940s and 1950s gained an unearned windfall of £80,000 between 1993 and 2014 alone.

In the early 2000s, house price growth was so great that 17% of working-age adults earned more from their house than from their job. Last week The Times reported that during the past three months alone, baby boomers converted £850 million of housing wealth into cash using equity release products – the highest number since records began. A third used the money to buy cars, while more than a quarter used it to fund holidays. Others are choosing to buy more property: the Chartered Institute of Housing has described how the buy-to-let market is being fuelled by older households using their housing wealth to buy more property, renting it out to those who are unable to get a foot on the property ladder. And it is here that we find the dark side of the housing boom.

House prices are now on average nearly eight times that of incomes, more than double the figure of 20 years ago. It’s unlikely that house prices will be able to outpace incomes at the same rate for the next 20 years. The past few decades have spawned a one-off transfer of wealth that is unlikely to be repeated. While the main beneficiaries of this have been the older generations, eventually this will be passed on to the next generation via inheritance or transfer. Already the ‘Bank of Mum and Dad’ has become the ninth biggest mortgage lender. The ultimate result is not just a growing intergenerational divide, but an entrenched class divide between those who own property (or have a claim to it), and those who do not.

The dream is dead.

• How The American Dream Turned Into Greed And Inequality (WEF)

[..] the idea that every American has an equal opportunity to move up in life is false. Social mobility has declined over the past decades, median wages have stagnated and today’s young generation is the first in modern history expected to be poorer than their parents. The lottery of life – the postcode where you were born – can account for up to two thirds of the wealth an individual generates.The growing gap between the rich and the poor, the old and the young, has been largely ignored by policymakers and investors until the recent rise of anti-establishment votes, including those for Brexit in the UK and for President Trump in the US. This is a mistake. Inequality is much more than a side-effect of free market capitalism.

It is a symptom of policy negligence, where for decades, credit and monetary stimulus shortcuts too easily substituted for structural reform, investment and economic strategy. Capitalism has been incredibly successful at boosting wealth, but it has failed at redistributing it. Today, without a push to redistribute wealth and opportunity, our model of capitalism and democracy may face self-destruction. The widening of inequality has deep historical roots. Keynes’ interventionist policies worked well during the post-war recovery, as fiscal stimulus for the reconstruction boosted demand for US goods from Europe and Japan. But soon the stimulus faded. The U.S. found itself with declining growth and rising inflation at a time when it was mired in the Cold War and Vietnam conflicts. The baby boomer generation demanded higher living standards.

The response was the Nixon shock in 1971: a set of policies which moved away from the gold standard, initiating the era of fiat money and free credit. Credit was the answer to declining growth and rising inequality: if you couldn’t afford university, a new house or a new car, Uncle Sam would lend you the key to the American Dream in the form of that extra loan you needed. Over the following decades, state subsidies to private credit became popular, spreading to the U.K. and Europe. It was the start of debt-based democracies. Private debt outgrew GDP four times in the US and Europe over the following decades up to the 2008 financial crisis, accompanied by the deregulation of financial markets and of banks. The rest is history: nine long years after the crisis, our economies are still healing from excess debt, and regulators are still working on strengthening our financial system. Inequality, however, has deepened even further. Has capitalism failed?

Very good from Chris Hamilton.

• The Fed Destroyed Functioning American Democracy and Bankrupted the Nation (CH)

Against the adamant wishes of the constitutions framers, in 1913 the Federal Reserve System was Congressionally created. According to the Fed’s website, “it was created to provide the nation with a safer, more flexible, and more stable monetary and financial system.” Although parts of the Federal Reserve System share some characteristics with private-sector entities, the Federal Reserve was supposedly established to serve the public interest. A quick overview; monetary policy is the Federal Reserves actions, as a central bank, to achieve three goals specified by Congress: maximum employment, stable prices, and moderate long-term interest rates in the United States. The Federal Reserve conducts the nation’s monetary policy by managing the level of short-term interest rates and influencing the availability and cost of credit in the economy.

Monetary policy directly affects interest rates; it indirectly affects stock prices, wealth, and currency exchange rates. Through these channels, monetary policy influences spending, investment, production, employment, and inflation in the United States. I suggest what truly happened in 1913 was that Congress willingly abdicated a portion of its responsibilities, and through the Federal Reserve, began a process that would undermine the functioning American democracy. How, you ask? The Fed, believing the free-market to be “imperfect” (aka; wrong) believed it should control and set interest rates, determine full employment, determine asset prices; not the “free market”. And here’s what happened:

• From 1913 to 1971, an increase of $400 billion in federal debt cost $35 billion in additional annual interest payments.
• From 1971 to 1981, an increase of $600 billion in federal debt cost $108 billion in additional annual interest payments.
• From 1981 to 1997, an increase of $4.4 trillion cost $224 billion in additional annual interest payments.
• From 1997 to 2017, an increase of $15.2 trillion cost “just” $132 billion in additional annual interest payments.

[..] As the chart below highlights, since the creation of the Federal Reserve the growth of debt (relative to growth of economic activity) has gone to levels never dreamed of by the founding fathers. In particular, the systemic surges in debt since 1981 are unlike anything ever seen prior in American history. Although the peak of debt to GDP seen in WWII may have been higher (changes in GDP calculations mean current GDP levels are likely significantly overstating economic activity), the duration and reliance upon debt was entirely tied to the war. Upon the end of the war, the economy did not rely on debt for further growth and total debt fell.

Perhaps the biggest mystery is why the (formerly) left got so involved with it.

• The Fatal Flaw Of Neoliberalism: It’s Bad Economics (Rodrik)

We live in the age of neoliberalism, apparently. But who are neoliberalism’s adherents and disseminators – the neoliberals themselves? Oddly, you have to go back a long time to find anyone explicitly embracing neoliberalism. In 1982, Charles Peters, the longtime editor of the political magazine Washington Monthly, published an essay titled A Neo-Liberal’s Manifesto. It makes for interesting reading 35 years later, since the neoliberalism it describes bears little resemblance to today’s target of derision. The politicians Peters names as exemplifying the movement are not the likes of Thatcher and Reagan, but rather liberals – in the US sense of the word – who have become disillusioned with unions and big government and dropped their prejudices against markets and the military.

The use of the term “neoliberal” exploded in the 1990s, when it became closely associated with two developments, neither of which Peters’s article had mentioned. One of these was financial deregulation, which would culminate in the 2008 financial crash and in the still-lingering euro debacle. The second was economic globalisation, which accelerated thanks to free flows of finance and to a new, more ambitious type of trade agreement. Financialisation and globalisation have become the most overt manifestations of neoliberalism in today’s world.

That neoliberalism is a slippery, shifting concept, with no explicit lobby of defenders, does not mean that it is irrelevant or unreal. Who can deny that the world has experienced a decisive shift toward markets from the 1980s on? Or that centre-left politicians – Democrats in the US, socialists and social democrats in Europe – enthusiastically adopted some of the central creeds of Thatcherism and Reaganism, such as deregulation, privatisation, financial liberalisation and individual enterprise? Much of our contemporary policy discussion remains infused with principles supposedly grounded in the concept of homo economicus, the perfectly rational human being, found in many economic theories, who always pursues his own self-interest.

Wonder what Xi is thinking.

• China Home Sales Fall by Most in Almost Three Years on Curbs (BBG)

China’s new home sales fell by the most in almost three years last month, adding to signs of cooling as local governments keep rolling out curbs to limit price increases. Sales by value dropped 3.4% from a year earlier to 909 billion yuan ($137 billion), according to Bloomberg calculations based on data released Tuesday by the National Bureau of Statistics. That was the biggest year-on-year decline since November 2014. Signs of a property slowdown, including price rises in fewer cities in September, may concern policy makers who want to avoid any sharp economic deceleration. The government is grappling with fueling growth while containing runaway home prices.

President Xi Jinping last month renewed a yearlong call that homes are built “to be inhabited’’ and not for speculation, in his speech at the twice-a-decade Communist Party Congress, inking the language in one of the nation’s top policy frameworks. Investment in real estate development slowed, growing 5.6% last month from a year earlier, down from a 9.2% increase in September, according to Bloomberg calculations. A Bloomberg Intelligence index of Chinese real-estate owners and developers slipped 0.3%. It’s up 89% this year. The data came amid signs of the government easing financing for property developers and as economic releases for October pointed to a moderating economy.

Excellent takedown of Australia’s dying economic model.

Australia’s Whole Economy Is Built On China Buying Our Stuff

• Australia’s Whole Economy Is Built On China Buying Our Stuff (News.com.au)

I recently watched the federal Treasurer Scott Morrison proudly proclaim that Australia was in “surprisingly good shape”. Indeed, Australia has just snatched the world record from the Netherlands, achieving its 104th quarter of growth without a recession, making this achievement the longest streak for any OECD country since 1970. I was pretty shocked at the complacency, because after 26 years of economic expansion, the country has very little to show for it. For over a quarter of a century our economy mostly grew because of dumb luck. Luck because our country is relatively large and abundant in natural resources, resources that have been in huge demand from a close neighbour — China. Out of all OECD nations, Australia is the most dependent on China by a huge margin, according to the IMF.

Over one-third of all merchandise exports from this country go to China including all physical products and things we dig out of the ground. Outside of the OECD, Australia ranks just after the Democratic Republic of the Congo, Gambia and the Lao People’s Democratic Republic and just before the Central African Republic, Iran and Liberia. Does anything sound a bit funny about that? As a whole, the Australian economy has grown through a property bubble inflating on top of a mining bubble, built on top of a commodities bubble, driven by a China bubble. Unfortunately for Australia, that “lucky” free ride is just about to end. Societe Generale’s China economist Wei Yao recently said: “Chinese banks are looking down the barrel of a staggering $1.7 trillion worth of losses”. Hayman Capital’s Kyle Bass calls China a “$34 trillion experiment” which is “exploding”, where Chinese bank losses “could exceed 400% of the US banking losses incurred during the subprime crisis”.

A hard landing for China is a catastrophic landing for Australia, with horrific consequences to this country’s delusions of economic grandeur. The initial rally in commodities at the beginning of 2016 was caused by a bet that more economic stimulus and industrial reform in China would lead to a spike in demand for commodities used in construction. That bet rapidly turned into full-blown mania as Chinese investors, starved of opportunity and restricted by government clamp downs in equities, piled into commodities markets. This saw, in April of 2016, enough cotton trading in a single day to make a pair of jeans for everyone on the planet, and enough soybeans for 56 billion servings of tofu. Market turnover on the three Chinese exchanges jumped from a daily average of about $78 billion in February to a peak of $261 billion on April 22, 2016 — exceeding the GDP of Ireland.

It’s the people.

• Austerity, Not Brexit, Has Doomed The Tory Party (G.)

What is destroying the Conservatives is not outside forces, nor the cack-handed pricking of a gusher of ministerial ineptitude. No, the fundamental cause is their own economic strategy of austerity. Of cutting taxes for the wealthy, while cutting public services and social security for the rest. Of rewarding the owners of capital, while punishing those who rely on their labour. Of claiming to have fixed the economy, while tanking voters’ living standards. Austerity is now the thudding drumbeat behind every ministerial misstep, from a family holiday with the Netanyahus to a fauxpology over Nazanin Zaghari-Ratcliffe. It is what unites these individual Westminster outrages into an outline of a ruling party no longer fit for office. By forcing an arbitrary limit on already severely constrained Whitehall and town hall budgets, it renders meaningful government close to impossible.

This is what makes next week’s autumn budget from Philip Hammond so crucial. If the Tories wish to regain any credibility, they will have to ditch the very strategy that defines them. In the days immediately following this summer’s general election, I asked a number of leading figures in Labour how they managed to pull off one of the biggest surprises in postwar political history and rob May of her majority. Their answers all circled back to one thing: austerity fatigue. After seven straight years of seeing their kids’ school classes get bigger and their parents’ hospital waits grow longer, voters were ready for an anti-austerity party leader such as Jeremy Corbyn. Austerity has done more than tear up the public realm; it has imposed private misery on millions of households.

The age of austerity has been the era of the foodbank, the zero-hours contract, the privately rented slum. Unless there is a miracle, the economists at the Resolution Foundation project that the 2010s will be the worst decade for wage growth since the Napoleonic wars of the early 1800s.

But but.. the petrodollar!

• Saudi Retreat From U.S. Oil Market Cuts Exports to 30-Year Low (BBG)

For a generation, the huge, whitewashed storage tanks at America’s largest oil refinery in Port Arthur, Texas, have stored almost nothing but Saudi crude. The plant is owned the Saudi Arabia’s state-run oil company, Aramco, and since it first bought a stake in 1988, the Motiva refinery guaranteed the kingdom a strategic foothold in the world’s largest energy market. The tankers carrying millions of barrels a month of Arab Light crude from the Saudi export terminals to Port Arthur were testament to the strength of the energy and political ties binding Riyadh and Washington. All of a sudden, there are very few Saudi ships arriving in Texas. Since July, Aramco has constricted supply, attempting to drain the crude storage tanks at Motiva – and many others across America -part of a plan to lift oil prices, even at the cost of sacrificing its once prized U.S.

While Motiva is most affected, the rest of the U.S. oil refining system, from El Segundo in California to Lake Lake Charles in Louisiana, has also taken a hit. The result: Saudi crude exports into America fell to a 30-year low last month. “The drop is huge,” said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. in London. “It’s not just that Saudi exports are low, but they have been low for several months.” At a stroke, the freedom from Saudi oil that’s been a rhetorical aspiration for generations of American politicians, from Jimmy Carter to George W. Bush, is within reach – even if it’s largely the choice of supplier rather than the customer. The U.S. imported just 525,000 barrels a day of Saudi crude in October, the lowest since May 1987 and down from 1.5 million barrels a day a decade ago, according to Bloomberg News calculations based on custom data.

The combination of falling Saudi oil exports into the U.S. last year, cheap crude and higher exports of American weapons had already turned upside-down the trade relationship between the two countries. Last year, the U.S. enjoyed its first trade surplus with Saudi Arabia since 1998 — only the third in 30 years, according to data from the U.S. Census Bureau. The sharper cuts in oil exports since the summer will likely amplify that trend.

“..the United Arab Emirates had planned a military invasion of Qatar with thousands of US-trained mercenaries [..] but it was never carried out as Washington did not give the green light to it..”

• Arab States Spent $130 Billion To Destroy Syria, Libya, Yemen (PressTV)

Algerian Prime Minister Ahmed Ouyahia says some regional Arab states have spent $130 billion to obliterate Syria, Libya and Yemen. Ouyahia made the remarks on Saturday at a time when much of the Middle East and North Africa is in turmoil, grappling with different crises, ranging from terrorism and insecurity to political uncertainty and foreign interference. Algeria maintains that regional states should settle their differences through dialog and that foreign meddling is to their detriment. Syria has been gripped by foreign-sponsored militancy since 2011. Takfirism, which is a trademark of many terrorist groups operating in Syria, is largely influenced by Wahhabism, the radical ideology dominating Saudi Arabia.

Libya has further been struggling with violence and political uncertainty since the country’s former ruler Muammar Gaddafi was deposed in 2011 and later killed in the wake of a US-led NATO military intervention. Daesh has been taking advantage of the chaos in Libya to increase its presence there. Yemen has also witnessed a deadly Saudi war since March 2015 which has led to a humanitarian crisis. Last Month, Qatar’s former deputy prime minister Abdullah bin Hamad al-Attiyah said the United Arab Emirates had planned a military invasion of Qatar with thousands of US-trained mercenaries. The UAE plan for the military action was prepared before the ongoing Qatar rift, but it was never carried out as Washington did not give the green light to it, he noted. In late April, reports said the UAE was quietly expanding its military presence into Africa and the Middle East, namely in Eritrea and Yemen.

As I wrote yesterday, insanity.

• EU Countries Agree To Create A European Mega-Army (R.)

France and Germany edged toward achieving a 70-year-old ambition to integrate European defenses on Monday, signing a pact with 21 other EU governments to fund, develop and deploy armed forces after Britain’s decision to quit the bloc. First proposed in the 1950s and long resisted by Britain, European defense planning, operations and weapons development now stands its best chance in years as London steps aside and the United States pushes Europe to pay more for its security. Foreign and defense ministers gathered at a signing ceremony in Brussels to represent 23 EU governments joining the pact, paving the way for EU leaders to sign it in December. Those governments will for the first time legally bind themselves into joint projects as well as pledging to increase defense spending and contribute to rapid deployments.

“Today we are taking a historic step,” Germany’s Foreign Minister Sigmar Gabriel told reporters. “We are agreeing on the future cooperation on security and defense issues … it’s really a milestone in European development,” he said. The pact includes all EU governments except Britain, which is leaving the bloc, Denmark, which has opted out of defense matters, Ireland, Portugal and Malta. Traditionally neutral Austria was a late addition to the pact. Paris originally wanted a vanguard of EU countries to bring money and assets to French-led military missions and projects, while Berlin has sought to be more inclusive, which could reduce effectiveness. Its backers say that if successful, the formal club of 23 members will give the European Union a more coherent role in tackling international crises and end the kind of shortcomings seen in Libya in 2011, when European allies relied on the United States for air power and munitions.

There are a few things we need to stop doing, urgently.

• Fisheries Collapse On US West Coast: “It’s The Worst We’ve Seen” (SHTF)

The Gulf of Alaska cod populations appears to have taken a nose-dive. Scientists are shocked at the collapse and starving fish, making this the “worst they’ve ever seen.” “They [Alaskan cod] get weak and die or get eaten by something else,” said NOAA’s Steve Barbeaux. The 2017 trawl net survey found the lowest numbers of cod on record forcing scientists to try to unravel what happened. A lot of the cod hatched in 2012 appeared to survive, but by 2017, those fish were largely gone for the surveys, which also found scant evidence of fish born in subsequent years. Many of the cod that have come on board trawlers are “long skinny fish” according to Brent Paine, executive director of United Catcher Boats. “This is a big deal,” Paine said. “We just don’t see these (cod) year classes disappear from one year to the next.”

The decline is expected to substantially reduce the gulf cod harvests that in recent years have been worth — before processing — more than $50 million to Northwest and Alaska fishermen who catch them with nets, pot traps, and baited hooks set along the sea bottom. Barbeaux says the warm water, which has spread to depths of more than 1,000 feet, hit the cod like a kind of a double-whammy. Higher temperatures sped up the rate at which young cod burned calories while reducing the food available for the cod to consume. And many are blaming “climate change” for the effects on the fish, although scientists aren’t directly correlating the two events. “They get weak and die or get eaten by something else,” said Barbeaux, who in October presented preliminary survey findings to scientists and industry officials at an Anchorage meeting of the North Pacific Fishery Management Council.

Debt Rattle August 18 2017

Aug 182017

August 18, 2017 Posted by Raúl Ilargi Meijer at 8:53 am Finance Tagged with: bubble, China, corruption, Deutsche, Ice-Nine, neoliberalism, Pence, regression, Spain, Warren 6 Responses »

Edward S. Curtis Slow Bull Dakota Sioux Medicine Man In Prayer 1907

• Never Doubt Regression To The Mean (Rosso)

• The Stock Market Bubble is So Big Even the Fed’s Talking About It (Phoenix)

• Ice-Nine: The Plan To Freeze The Financial System (Rickards)

• Neoliberalism: The Idea That Changed The World (G.)

• So When Will China’s Debt Bubble Finally Blow Up? (WS)

• Charlene Chu Lays Out China’s “Doomsday” Scenario (ZH)

• China’s New Problem: Frenzy Of Consumer Lending Creates Debt Explosion (CNBC)

• ‘Simply Doesn’t Cut It’: Elizabeth Warren Slams Wells Fargo Board Changes (BI)

• Deutsche Bank, Bank of America Settle Agency Bond Rigging Lawsuits (R.)

• Who Is Lobbying Mike Pence And Why? (IBT)

• Mr. President: Close Down More “Advisory Councils” (Rossini)

• Spain Lacks Capacity To Handle Migration Surge – UNHCR (G.)

After a week of senseless violence and rhetoric, we could sure do with a medicine man praying for peace. I know, they say this is what the Fourth Turning looks like. But I don’t have to like it. Seeing some of the pictures of traumatized people in Barcelona I couldn’t help thinking how much they looked like those I’ve seen from Syria and Libya. Senseless violence.

Part of a longer piece on retirement distributions. Very strong graph.

• Never Doubt Regression To The Mean (Rosso)

Since 1877, secular bull years have totaled 80 vs. 52 for bears, which is a 60/40 ratio. Surprised? Bear markets happen more often than investors are led to believe. They usually occur at times of overvaluation which makes recent retirees or those close to retirement at greater risk of experiencing negative or poor future returns. Bad luck or rotten timing. Either way, it’s going to be important to remain cognizant of portfolio distribution rates, place renewed priority on risk management, and adjust spending accordingly perhaps over the next ten years. Those who were proactive to minimize stock and high-yield bond portfolio risk (like several of the writers for Real Investment Advice), and redeployed capital into stocks at 13x earnings in the summer of 2009, helped new retirees at that time meet their retirement objectives. In addition, they have experienced a cyclical tailwind in stocks that has allowed greater distribution rates. Great luck!

Stock market cycles are vast and span decades. Don’t stumble into a Recency Bias trap where you believe current complacent market conditions lay the path to a smooth, high-return future. Markets are mean reverting mechanisms. Cycles indeed change. Usually, markets are more volatile with periods of 5% pullbacks occurring every 3-4 months. As investors, this year we’ve witnessed shallow retracements followed up by buys on the dips. An environment like this fosters overconfidence. Volatility may excite traders and be helpful to those who are seeking lower prices to purchase risk assets. For those in retirement distribution mode, volatility and corrections have potential to place portfolio longevity in jeopardy.

“Remember, we’re talking about the Fed here… a group of people who go above and beyond to ignore risks in order to maintain the status quo…”

• The Stock Market Bubble is So Big Even the Fed’s Talking About It (Phoenix)

The Fed confirmed yesterday that stocks are in a bubble. Lost amidst the usual Fed-speak about inflation and other items were the following nuggets. 1) “Equities” (read: stocks) were the primary reason the Fed discussed financial stability risks. 2) The Fed raised its assessment of financial stability from “notable” to “elevated.” 3) The Fed discussed “stock valuations.” This is simply incredible. Remember, we’re talking about the Fed here… a group of people who go above and beyond to ignore risks in order to maintain the status quo. Put another way, the stock market bubble is now so massive that even THE FED is talking about it. Indeed, the Fed is even openly states that the bubble might cause financial instability (read: a CRASH). It’s not difficult to see what the Fed is talking about. Based on their cyclical adjusted price to earnings ratio (CAPE) stocks are in CLEAR bubble territory.

As you can see, stocks are currently as overpriced as they were at the 1929 peak. Indeed, the only time stocks were MORE expensive was the Tech Bubble: the single largest stock market bubble in history. They say you don’t ring a bell at the top. But what the Fed did yesterday is DARN close. So what happens when the markets wake up to the fact that yet another massive bubble is beginning to burst?

Freeze it before the collapse.

• Ice-Nine: The Plan To Freeze The Financial System (Rickards)

In my book The Road to Ruin, I discuss a phenomenon called “ice-nine.” The name is taken from a novel, Cat’s Cradle, by Kurt Vonnegut. In the novel, a scientist invents a molecule he calls ice-nine, which is like water but with two differences. The melting temperature is 114.4 degrees Fahrenheit (meaning it’s frozen at room temperature), and whenever ice-nine comes in contact with water, the water turns to ice-nine and freezes. The ice-nine is kept in three vials. The plot revolves around the potential release of ice-nine into water, which would eventually freeze the rivers and oceans and end all life on Earth. Cat’s Cradle is darkly comedic, and I highly recommend it. I used ice-nine in my book as a metaphor for financial contagion.

If regulators freeze money market funds in a crisis, depositors will take money from banks. The regulators will then close the banks, but investors will sell stocks and force the exchanges to close and so on. Eventually, the entire financial system will be frozen solid and investors will have no access to their money. Some of my readers were skeptical of this scenario. But I researched it carefully and provided solid evidence that this plan is already in place — it’s just not well understood. But the ice-nine plan is now being put into practice. Consider a recent Reuters article that admitted elites would likely shut down the entire system when the next financial crisis strikes. The article claimed that the EU is considering actions that would temporarily prevent people from withdrawing money from banks to prevent bank runs.

“The desire is to prevent a bank run, so that when a bank is in a critical situation it is not pushed over the edge,” said one source. Very few people are aware of these developments. They get a brief mention in the media, if they get mentioned at all. But people could be in for a shock when they try to get their money out of the bank during the next financial crisis. Think of it as a war on currency or a war on money. Even the skeptics can see how the entire financial system will be frozen solid in the next crisis. The only solution is to have physical gold, silver and bank notes in private storage. The sooner you put your personal ice-nine protection plan in place, the safer you’ll be.

“..the ideal of society as a kind of universal market (and not, for example, a polis, a civil sphere or a kind of family) and of human beings as profit-and-loss calculators (and not bearers of grace, or of inalienable rights and duties)..”

• Neoliberalism: The Idea That Changed The World (G.)

Last summer, researchers at the IMF settled a long and bitter debate over “neoliberalism”: they admitted it exists. Three senior economists at the IMF, an organisation not known for its incaution, published a paper questioning the benefits of neoliberalism. In so doing, they helped put to rest the idea that the word is nothing more than a political slur, or a term without any analytic power. The paper gently called out a “neoliberal agenda” for pushing deregulation on economies around the world, for forcing open national markets to trade and capital, and for demanding that governments shrink themselves via austerity or privatisation. The authors cited statistical evidence for the spread of neoliberal policies since 1980, and their correlation with anaemic growth, boom-and-bust cycles and inequality.

Neoliberalism is an old term, dating back to the 1930s, but it has been revived as a way of describing our current politics – or more precisely, the range of thought allowed by our politics. In the aftermath of the 2008 financial crisis, it was a way of assigning responsibility for the debacle, not to a political party per se, but to an establishment that had conceded its authority to the market. For the Democrats in the US and Labour in the UK, this concession was depicted as a grotesque betrayal of principle. Bill Clinton and Tony Blair, it was said, had abandoned the left’s traditional commitments, especially to workers, in favour of a global financial elite and the self-serving policies that enriched them; and in doing so, had enabled a sickening rise in inequality. Over the past few years, as debates have turned uglier, the word has become a rhetorical weapon, a way for anyone left of centre to incriminate those even an inch to their right. (No wonder centrists say it’s a meaningless insult: they’re the ones most meaningfully insulted by it.)

But “neoliberalism” is more than a gratifyingly righteous jibe. It is also, in its way, a pair of eyeglasses. Peer through the lens of neoliberalism and you see more clearly how the political thinkers most admired by Thatcher and Reagan helped shape the ideal of society as a kind of universal market (and not, for example, a polis, a civil sphere or a kind of family) and of human beings as profit-and-loss calculators (and not bearers of grace, or of inalienable rights and duties). Of course the goal was to weaken the welfare state and any commitment to full employment, and – always – to cut taxes and deregulate. But “neoliberalism” indicates something more than a standard rightwing wish list. It was a way of reordering social reality, and of rethinking our status as individuals.

Still peering through the lens, you see how, no less than the welfare state, the free market is a human invention. You see how pervasively we are now urged to think of ourselves as proprietors of our own talents and initiative, how glibly we are told to compete and adapt. You see the extent to which a language formerly confined to chalkboard simplifications describing commodity markets (competition, perfect information, rational behaviour) has been applied to all of society, until it has invaded the grit of our personal lives, and how the attitude of the salesman has become enmeshed in all modes of self-expression. In short, “neoliberalism” is not simply a name for pro-market policies, or for the compromises with finance capitalism made by failing social democratic parties. It is a name for a premise that, quietly, has come to regulate all we practise and believe: that competition is the only legitimate organising principle for human activity.

I’m still convinced that people will react shocked if China is the first domino. But though Charlene Chu is right that China controls most of its system, its control over Chinese obligations abroad isn’t nearly that strong. Xi knows this, and that’s why Chinese purchases abroad are shrinking. China has become part of the global financial system with monopoly money. And sure, it has dollars and Treasuries, but they’re neither limitless nor limitlessly fungible. Weakest point? Local governments who have borrowed from foreign sources. Or from domestic ones that get their credit from foreigners. Shadow banks.

• So When Will China’s Debt Bubble Finally Blow Up? (WS)

Corporate debt in China has soared to $18 trillion, or 169% of GDP, the largest pile of corporate debt in the world, according to the worried BIS. The OECD has warned about it earlier this year. The New York Fed warned about this debt boom in February and that it could lead to a “financial crisis,” but that authorities have many tools to control it. The IMF regularly warns about China’s corporate debt, broken-record-like, and did so again a few days ago, lambasting the authorities for their reluctance to tamp down on the growth of debt. The “current trajectory,” it said, “could eventually lead to a sharp adjustment.” The Chinese authorities – the government and the central bank, supported by the state-owned megabanks – have allowed some bonds to default, rather than bail them out, to make some kind of theoretical point, and they have been working furiously on a balancing act, tamping down on the credit growth that fuels the economy and simultaneously stimulating the economy with more credit to keep the debt bubble from imploding.

A misstep could create a global mess. “Everyone knows there’s a credit problem in China, but I find that people often forget about the scale; it’s important in global terms,” Charlene Chu told the FT. Back in 2011, when she was still a China banking analyst at Fitch Ratings, she went out on a limb with her radical estimates that there was much more debt than disclosed by the central bank, particularly in the shadow banking system, that banks were concealing risky loans in off-balance-sheet vehicles, and that this soaring opaque debt could have nasty consequences. Her outlandish views at the time have since then become the consensus. And this pile of debt is in much worse shape than officially acknowledged, she says in her latest report, cited by the FT. She’s now with Autonomous Research.

She figured that by the end of 2017, bad debt in China could hit 51 trillion yuan, or $7.6 trillion. Or about 68% of GDP! It would take the bad-debt ratio to an astronomical 34% of all loans, and way above the 5.3% that the authorities are proffering. And the authorities – the government, the central bank, supported by the state-owned banks – are now pulling all levers to keep this under control. “What I’ve gotten a greater appreciation for is how everything is so orchestrated by the authorities,” she said. “The upside is that it creates stability. The downside is that it can create a problem of proportions that people would think is never possible. We’re moving into that territory.”

More Chu. Remarkable how she says “.. the ability to avoid recognizing losses only delays the inevitable day of reckoning as problems fester for longer, and grow larger than in an economy where actors respond purely to market incentives.” Remarkable because that describes America as much as it does China.

• Charlene Chu Lays Out China’s “Doomsday” Scenario (ZH)

The first time we laid out the dire calculations about what is perhaps the biggest mystery inside China’s financial system, namely the total amount of its non-performing loans, by former Fitch analyst Charlene Chu we called it a “neutron bomb” scenario, because unlike virtually every other rosy forecast the most dire of which topped out at around 8%, Chu argued that the amount of bad debt in China was no less than a whopping 21% of total loans. While traditional bank loans are not Chu’s prime focus – she looks at the wider picture, including shadow banking – she says her work suggests that nonperforming loans may be at 20% to 21%, or even higher. The chart below shows just how much of an outlier Chu’s stark forecast was in comparison to her peers, and especially the grotesquely low and completely fabricated official number released by the banks and the government.

Recall that one of the biggest scandals in China in 2014 was the realization (as many had warned previously) that millions of tons of commodities were rehypothecated countless times, and thus “pledged” as collateral to numerous counterparties, and that as a result these same counterparties were unable to make sense of who owns what at one of China’s largest ports, Qingdao. In this context, it is safe to assume that loss given default rates in China are if not 100% (or more, which is impossible in theoretical terms but in practice is quite possible, as another curious side effect of unlimited collateral rehypothecation), then as close to it as possible.

Fast forward to today, when Charlene Chu, described by the FT as “one of the most influential analysts of China’s financial system” is back with a revised estimate that the bad debt in China has now reached a stunning $6.8 trillion above official figures and warns that the government’s ability to enforce stability has allowed underlying problems to go unchecked. [..] So if Chu held the wildly outlier view nearly two years ago that China’s NPLs amount to 21% of total, what is her latest estimate? The number is a doozy: in her latest report, Chu estimates that bad debt in China’s financial system will reach as much as Rmb51 trillion , or $7.6 trillion, by the end of this year, more than five times the value of bank loans officially classified as either non-performing or one notch above.” That estimate implies a bad-debt ratio of 34%, orders of magnitude above the official 5.3% ratio for those two categories at the end of June.

One factor that has foiled countless shorts over the years is that Beijing can simply order state-owned banks to keep lending to a lossmaking zombie company or to a smaller lender that relies on short-term interbank funding to stay liquid, and that’s precisely what has been happening, when looking at the various non-conventional credit pathways in China in recent years, which include Wealth Management Products, Bank Loans to Non-Bank Institutions, Shadow Banking, Repos and Certificates of Deposit.

But Chu said the ability to avoid recognizing losses only delays the inevitable day of reckoning as problems fester for longer, and grow larger than in an economy where actors respond purely to market incentives. That said, the recent spike in corporate bankruptcies indicates that even Beijing is slowly shifting to a more “market” driven stance. “What I’ve gotten a greater appreciation for is how everything is so orchestrated by the authorities,” she said. “The upside is that it creates stability. The downside is that it can create a problem of proportions that people would think is never possible. We’re moving into that territory.” Finally, putting it all in context is the following chart showing the total size of China’s financial sector, which as of the latest quarter has grown to $35 trillion, double the size of the US.

Subtle tactics from Xi. Shift the debt but keep it high. What do you think the odds are that after the Party Congress China will withdraw into itself?

• China’s New Problem: Frenzy Of Consumer Lending Creates Debt Explosion (CNBC)

The Chinese government is moving to tackle high debt levels, but the country is still borrowing more, Deutsche Bank said in a report released Thursday. That’s because short-term consumer debt in China has begun to surge as authorities try to alleviate the high levels of corporate indebtedness. The redistribution comes as Beijing is trying to strike a balance between stability and strength in its economy. Household debt in China is growing “very fast” and has accelerated in the last three to four months, according to Deutsche Bank: “If we focus purely on the consumer lending … then China has been undergoing something akin to a consumer lending frenzy.” According to Deutsche Bank, corporate credit has fallen to 45% of net new credit, down from 65% in the last 10 years. Instead, Beijing is allowing households and governments to borrow more to fund growth, which is targeted for around 6.5% in 2017, said the analysts.

Now, short-term consumer credit is growing 35% year-over-year, and may hit about 40% year-over-year by the end of December at the current trend, Deutsche Bank said. The bank said it isn’t yet clear where exactly the short-term consumer credit is being deployed, although 70 to 80% of that debt has historically been credit card-related. Overall household credit growth in China, the analysts noted, is growing around 24% year-over-year. At the end of the first half of 2017, corporate the debt-to-GDP ratio fell to 165% from the peak of 169% in the first quarter of 2016. That was “more of a ‘stabilization’ than a significant reduction,” Deutsche Bank said, calling it an “explosion” of growth. Meanwhile, household and government debt however rose by 8 to 9% of GDP. “So when viewed in aggregate China is still leveraging up apace,” the Deutsche Bank report concluded.

Maybe somoneone should explain to Warren what the Fed is and does. Or Washington for that matter.

• ‘Simply Doesn’t Cut It’: Elizabeth Warren Slams Wells Fargo Board Changes (BI)

Wells Fargo’s effort to turn the page on consumer fraud scandals is falling short. That’s according to Massachusetts senator Elizabeth Warren, who has requested the Federal Reserve remove the bank’s board members who served between May 2011 and July 2015 in response to a series of vast consumer fraud scandals. The bank, already in hot water for creating millions of unauthorized accounts, recently admitted to also selling auto insurance without customers’ knowledge. Wells Fargo’s response? It has promoted an ex-Fed board governor, Elizabeth Duke, to chairwoman of the board. Duke, a champion of community banks while at the Fed, became a Wells Fargo director in 2015 and was named vice chair last year after the first round of scandals broke and led to the resignation of then-CEO John Stumpf.

Business Insider contacted Senator Warren to get her reaction. “Letting a few board members retire early and shuffling around current board members simply doesn’t cut it,” Warren said in an email. “The Fed should remove all remaining board members who served during the fake-accounts scandal.” Warren also renewed her call for board members’ removal with a new letter to Fed chairman Janet Yellen dated August 16, and voicing her dissatisfaction at what she sees as central bank inaction. “Instead of taking steps to remove the responsible Wells Fargo Board members, the Federal Reserve has actually sought to reduce their obligations and the obligations of other directors at the country’s biggest banks,” the letter said. In July, Warren repeatedly pressed Fed Chair Janet Yellen on the issue during recent Congressional testimony but Yellen would only say the central bank had the power to remove the directors — not that it had any inclination to do so.

More free rides for bankers. Warren! Oh wait, your own party takes their contributions.

• Deutsche Bank, Bank of America Settle Agency Bond Rigging Lawsuits (R.)

Deutsche Bank and Bank of America agreed to pay a combined $65.5 million to settle investor litigation accusing large banks of rigging the roughly $9 trillion government agency bond market over a decade. Preliminary settlements totaling $48.5 million for Deutsche Bank and $17 million for Bank of America were filed on Thursday with the U.S. District Court in Manhattan, and require a judge’s approval. Both banks denied wrongdoing. The settlements were the first in litigation accusing 10 banks of engaging in a “brazen conspiracy” to rig the market for U.S. dollar-denominated supranational, sub-sovereign and agency (SSA) bonds, court papers show. The investors are led by the Iron Workers Pension Plan of Western Pennsylvania, KBC Asset Management, and the Sheet Metal Workers Pension Plan of Northern California.

They accused banks of communicating by phone, chatrooms and instant messaging to share pricing data and function as a collective “super-desk,” while letting traders coordinate their strategies, to boost profit. This collusion allegedly ran from 2005 to 2015, and forced customers to accept unfair prices on bonds they bought and sold, court papers show. BNP Paribas, Citigroup, Credit Agricole, Credit Suisse, HSBC, Nomura, Royal Bank of Canada and Toronto-Dominion Bank were also sued, and all sought dismissals. U.S. regulators have also examined possible manipulation in the SSA bond market. The Manhattan court is home to a slew of private litigation accusing big banks of conspiring to rig various financial markets, interest rate benchmarks and commodities. Late Wednesday night, another group of investors sued six banks, claiming they rigged the more than $1 trillion stock lending market.

Simply how all of Washington works.

• Who Is Lobbying Mike Pence And Why? (IBT)

Mike Pence has been among the Trump administration’s most prominent voices pressing to replace the Affordable Care Act, repeal post-crisis financial regulations, privatize American infrastructure and promote fossil fuels. Those positions would benefit the industries that have been directly lobbying Pence since he was elected vice president, according to federal documents reviewed by International Business Times. Amid speculation that Pence could mount his own presidential bid — or replace Trump if he leaves office early — the former Indiana governor and U.S. congressman has been directly lobbied by major health care and drug companies, Wall Street firms, oil and gas interests and industry groups interested in shaping a federal infrastructure privatization initiative.

Pence’s office has also been lobbied by his former congressional chief of staff on behalf of insurance, defense contracting and telecommunications companies — and that lobbying revolved around health care policy, defense spending and net neutrality. Pence has enthusiastically backed the policies by the lobbying firms. While other vice presidents have been the target of lobbying in the past, Pence has been viewed as one of the most powerful vice presidents in recent history. He is a longtime politician serving a president with no experience in elected office, and during his vice-presidential selection process, Trump was reportedly offering potential running mates a vast policy portfolio to oversee. Pence also oversaw Trump’s White House transition, which shaped the administration’s personnel decisions and many of its policy proposals.

Companies that have lobbied the vice president have spent tens of millions of dollars in total federal lobbying so far this year. Here is a deeper look at the major industries lobbying him — and what exactly they have been pushing for in their efforts to influence the vice president. Despite his onetime support for expanding Obamacare subsidies in his home state, Pence has reversed course and led the Trump administration’s legislative bid to repeal the Affordable Care Act — just as health insurers have been lobbying him in 2017.

“If you’re one of those Americans who want to see Obamacare repealed and replaced, we literally are days, or maybe just weeks, away from being able to accomplish that historic objective,” he told conservative talk radio host Rush Limbaugh last month. “We believe if they can’t pass this carefully crafted repeal and replace bill — we do those two things simultaneously — we ought to just repeal only and then have enough time built into that legislation to craft replacement legislation.” The Pence-led repeal effort could be a financial boon to health insurers like Blue Cross and Blue Shield, as well as UnitedHealthcare Group — both which have been in direct contact with Pence, according to records reviewed by IBT.

Libertarian view.

• Mr. President: Close Down More “Advisory Councils” (Rossini)

So President Trump closed down his “Manufacturing Council” and no one cheered? What a shame. Why was there a “Manufacturing Council” to begin with? It’s not the job of the president to meddle with our economy. His job description says nothing about benefitting “manufactures” or “scientists” or “Silicon Valley” or anyone else. These “Councils” are breeding grounds for the cronyism that has virtually destroyed the American Dream. If a CEO has the ear of the president, do you think he’s going to “advise” the president to do anything that will hurt his own business? On the other hand, would the CEO be tempted to advise the president to hurt his competitors, both foreign and domestic? Would the CEO advise the president to make it hard for start-ups and entrepreneurs to compete?

Would he advise for subsidies? Strict licensing laws? The president doesn’t need Advisory Councils, Czars, or any other destroyer of our economic liberties. Let the CEO’s be “counciled” themselves by free market prices. Let them deal with economic reality as it is, not massage the president for unconstitutional interventions. Let them stand on their own. Either satisfy consumers profitably, or fold up so that other people can. The president, at the same time, should stop pretending that he can push buttons and pull levers to make the economy run. Nothing could be further from the truth. Government intervention only stifles the economy.

The economy continues to function despite the political intrusions that exist. Fortunately, entrepreneurs are creative enough to always find ways around so-called government “regulations”. There’s always a loophole somewhere. But why make it hard on entrepreneurs to begin with? Just get the heck out of the way! But alas, the government and multi-national corporations are attached at the hip. One scratches the back of the other. Mr. President, close down all the “Advisory Councils,” and keep your hands off the economy.

Spain’s views on this may have changed last night.

• Spain Lacks Capacity To Handle Migration Surge – UNHCR (G.)

Spain lacks the resources and capacity to protect the rising number of refugees and migrants reaching it by sea, the UN refugee agency has said. The warning from UNHCR comes as the Spanish coastguard said it rescued 593 people in a day from 15 small paddle boats, including 35 children and a baby, after they attempted to cross the seven-mile Strait of Gibraltar. The number of refugees and migrants risking the sea journey between Morocco and Spain has been rising sharply, with the one-day figure the largest since August 2014, when about 1,300 people landed on the Spanish coast in a 24-hour period. About 9,300 migrants have arrived in Spain by sea so far this year, while a further 3,500 have made it to two Spanish enclaves in north Africa, Ceuta and Melilla, the EU’s only land borders with Africa.

María Jesús Vega, a spokeswoman for UNHCR Spain, said police were badly under-resourced and there was a lack of interpreters and a shortage of accommodation for the new arrivals. “The state isn’t prepared and there aren’t even the resources and the means to deal with the usual flow of people arriving by sea,” she said. “Given the current rise, we’re seeing an overflow situation when it comes to local authorities trying to cope at arrival points.” Vega said the agency was seeing a very high number of vulnerable people including women, victims of people-trafficking, and children. “What we’re asking is for there to be the right mechanisms in place to ensure people are treated with dignity when they come,” she said.

Debt Rattle February 25 2017

Feb 252017

February 25, 2017 Posted by Raúl Ilargi Meijer at 9:31 am Finance Tagged with: austerity, debt ceiling, DHS, Greece, housing, IMF, journalists, neoliberalism, surgeon, Trump 4 Responses »

Dorothea Lange Saturday afternoon, Pittsboro, North Carolina 1939

• Trump An ‘Idiot’ On China, ‘No Clue What Currency Manipulation Means’ (CNBC)

• The Fiscal Horror Show Playing Soon in Washington (Stockman)

• Homeland Security Report Disputes Threat From 7 Banned Nations (AP)

• Multiple News Outlets Denied Access To White House Press Briefing (G.)

• Tsipras Says The Era Of Austerity In Greece Is Over (AP)

• Transcript Of IMF Press Briefing Thursday, February 23, 2017 (IMF)

• Toronto Housing Market May Need Vancouver-Style Cooling (BBG)

• Just As Neoliberalism Is Finally On Its Knees, So Too Is The Left (G.)

• Documents Indicate Germany Spied on Foreign Journalists (Spiegel)

• Surgeons Should Not Look Like Surgeons (NN Taleb)

From one of Reagan’s main economic advisers.

• Trump An ‘Idiot’ On China, ‘No Clue What Currency Manipulation Means’ (CNBC)

President Donald Trump may think the Chinese are the “grand champions” of currency manipulation, but he’s wrong, expert John Rutledge told CNBC on Friday. “Trump is an idiot on this. He has no clue what currency manipulation means,” the chief investment officer of global investment firm Safanad said in an interview with “Closing Bell.” During the campaign, Trump accused China of keeping its yuan currency artificially low against the U.S. dollar to make Chinese exports cheaper, “stealing” American manufacturing jobs. On Thursday, the president told Reuters he has not “held back” in his assessment, despite not acting on a pledge to declare the country a currency manipulator on his first day in office. “Well they, I think they’re grand champions at manipulation of currency. So I haven’t held back,” Trump said. “We’ll see what happens.”

However, earlier Thursday Treasury Secretary Steve Mnuchin told CNBC he wasn’t ready to pass judgment on China’s currency practices. “We have a process within Treasury where we go through and look at currency manipulation across the board. We’ll go through that process. We’ll do that as we have in the past. We’re not making any judgments until we continue that process,” he told “Squawk Box.” Rutledge, who was one of the principal architects of President Ronald Reagan’s economic plan, said China is actually trying to support its currency. “Chinese authorities have actually sold a trillion dollars’ worth of foreign reserves in the last year to support their currency that’s trying to fall because Chinese nationals are trying to get their money out of China,” he said. That is anti-manipulation.”

It’s all about the debt ceiling.

• The Fiscal Horror Show Playing Soon in Washington (Stockman)

The Deep State’s coup against Donald Trump is palpable. So count it as another element of reality to which Wall Street and its raging robo-machines and day traders are blind as bats. After all, they are essentially “pricing-in” the most successful presidency in modern times on the economic front. The Trump Stimulus was even supposed to be “in like Flynn” in time to boost corporate earnings materially in 2017. But it has already transpired that the Flynn in question was named Mike, not Errol; and the conquest was not that of a swashbuckling outsider who quickly had his way with the Imperial City, but the doings of resident swamp creatures bent on turning back the Donald’s unwelcome challenge.

So in a matter of weeks or months at most, Trump will be struggling to survive, while the giant fiscal stimulus that has Wall Street all bulled-up will amount to a heap of ruins scattered about a debilitating political war zone on Capitol Hill. I never thought the vaunted Trump tax cut and infrastructure boom would see the light of day in their own right, of course, because the Donald is caught in an inherited debt trap that he does not yet even dimly appreciate. Yet with each passing day, the magnitude of the trap materially enlarges. As of the Daily Treasury Statement for February 17, for example, the public debt was $19.895 trillion compared to $18.99 trillion on the same date a year ago. When you factor in a slight gain in the Treasury’s cash balance to $262 billion, the math speaks for itself.

During the past year Uncle Sam’s “cash burn rate” was nearly $75 billion per month. That means Washington actually consumed $885 billion of cash during the last 365 days — or far more than implied by the official budget deficit of $587 billion for the fiscal year just ended (FY 2016). It also means that once the tax collection season ends in April, it will be Katie-bar-the-door time on the debt ceiling front. When the latter becomes frozen into place on March 15 after the insidious Boehner-Obama debt ceiling “holiday” expires, there will not be enough cash to last the summer — even if the Treasury resorts to the usual gimmicks, such as temporarily divesting the trust funds. So let this part be crystal clear. What is coming down the track is the mother of all debt ceiling showdowns and the virtual certainty of government shutdowns and deferred payments to states, contractors and even some transfer payment beneficiaries.

Funny, but not new. They can always deflect criticism be saying it was an Obama list.

• Homeland Security Report Disputes Threat From 7 Banned Nations (AP)

Analysts at the Homeland Security Department’s intelligence arm found insufficient evidence that citizens of seven Muslim-majority countries included in President Donald Trump’s travel ban pose a terror threat to the United States. A draft document obtained by The Associated Press concludes that citizenship is an “unlikely indicator” of terrorism threats to the United States and that few people from the countries Trump listed in his travel ban have carried out attacks or been involved in terrorism-related activities in the U.S. since Syria’s civil war started in 2011. Trump cited terrorism concerns as the primary reason he signed the sweeping temporary travel ban in late January, which also halted the U.S. refugee program. A federal judge in Washington state blocked the government from carrying out the order earlier this month.

Trump said Friday a new edict would be announced soon. The administration has been working on a new version that could withstand legal challenges. Homeland Security spokeswoman Gillian Christensen on Friday did not dispute the report’s authenticity, but said it was not a final comprehensive review of the government’s intelligence. “While DHS was asked to draft a comprehensive report on this issue, the document you’re referencing was commentary from a single intelligence source versus an official, robust document with thorough interagency sourcing,” Christensen said. “The … report does not include data from other intelligence community sources. It is incomplete.”

The Homeland Security report is based on unclassified information from Justice Department press releases on terrorism-related convictions and attackers killed in the act, State Department visa statistics, the 2016 Worldwide Threat Assessment from the U.S. intelligence community and the State Department Country Reports on Terrorism 2015. The three-page report challenges Trump’s core claims. It said that of 82 people the government determined were inspired by a foreign terrorist group to carry out or try to carry out an attack in the United States, just over half were U.S. citizens born in the United States. The others were from 26 countries, led by Pakistan, Somalia, Bangladesh, Cuba, Ethiopia, Iraq and Uzbekistan. Of these, only Somalia and Iraq were among the seven nations included in the ban.

It’s one way to change the conversation. C’mon, guys, you’ll be let back in soon.

• Multiple News Outlets Denied Access To White House Press Briefing (G.)

The White House barred several news organizations from an off-camera press briefing on Friday, handpicking a select group of reporters that included a number of conservative outlets friendly toward Donald Trump. The “gaggle” with Sean Spicer, the White House press secretary, took place in lieu of his daily briefing and was originally scheduled as an on-camera event. But the White House press office announced later in the day that the Q&A session would take place off camera before only an “expanded pool” of journalists, and in Spicer’s West Wing office as opposed to the James S Brady press briefing room where it is typically held. Outlets seeking to gain entry whose requests were denied included the Guardian, the New York Times, Politico, CNN, BuzzFeed, the BBC, the Daily Mail and others.

Conservative publications such as Breitbart News, the One America News Network and the Washington Times were allowed into the meeting, as well as TV networks CBS, NBC, Fox and ABC. The Associated Press and Time were invited but boycotted the briefing. The decision to limit access to Spicer, hours after Trump once again declared that much of the media was “the enemy of the American people” while speaking at the annual Conservative Political Action Conference, marked a dramatic shift. While prior administrations have occasionally held background briefings with smaller groups of reporters, it is highly unusual for the White House to cherry-pick which media outlets can participate in what would have otherwise been the press secretary’s televised daily briefing.

The briefing has become indispensable viewing for journalists trying to interpret the often contradictory statements coming out of the Trump administration, and Spicer’s aggressive handling of the press and delivery of false or misleading statements have already been memorably mocked on NBC’s Saturday Night Live. “Gaggles” – more informal briefings – with the press secretary are traditionally only limited to the pool when they conflict with the president’s travel, in which case they often take place aboard Air Force One. At times, impromptu gaggles form with reporters who spend their days in the White House, but denying outlets wishing to participate is extremely uncommon.

Don’t believe it for a second.

• Tsipras Says The Era Of Austerity In Greece Is Over (AP)

Greek Prime Minister Alexis Tsipras says the era of austerity is over for his country, painting a positive picture Friday of reforms the country has agreed to take after its latest bailout program ends in 2018. Speaking in parliament, Tsipras described the deal reached Monday as an “exceptional success” and said it showed the country’s creditors accepted Greeces insistence that it could no longer bear any further budget austerity. “I am fully convinced we achieved an honorable compromise,” Tsipras said, adding that all sides at the eurozone finance ministers’ meeting in Brussels had agreed for the “first time after seven years … to leave the path of continued austerity behind us.”

On Monday, Greece agreed to legislate new reforms to come into effect in 2019, but said these will be fiscally neutral: for every euros worth of new burdens on the Greek taxpayer, an equal amount of relief will be granted. In return, Greeces creditors agreed to send their bailout inspectors back to Athens next week for further talks to complete a long overdue review of progress made in Greeces bailout. Tsipras said both creditor-requested new measures and government-proposed relief measures will be legislated at the same time, and that therefore there was no conditionality for the relief measures. The prime minister’s left-led coalition government, trailing in polls, has presented the deal as a decisive, positive step forward for austerity-weary Greeks hammered by seven years of a financial crisis that plunged the country into an economic depression.

I found this very interesting. Looks like the IMF has never truly looked at whether being part of the euro is best for Greece. Why not? It’s not as if they only do what countries want. Whose interests is the IMF really defending here?

Part of transcript of a press briefing with Gerry Rice, IMF Director of Communications, and reporters.

• Transcript Of IMF Press Briefing Thursday, February 23, 2017 (IMF)

QUESTIONER: Gerry, help me to understand how the IMF weighs a member country’s interests, economic interests when it is in a monetary union, when the interests may be that it be out of a monetary union. I haven’t seen any analysis by the IMF about the pros and cons, economic pros and cons of Greece exiting the euro. And it seems to me that Madame Lagarde has expressed herself as a pro euro and a pro EU advocate. So help me to understand, one, why we haven’t seen any economic analysis to defend the IMF’s position to not counsel Greece for exiting the euro or – and two, how it weighs this decision when obviously other member countries who are not in a program want Greece to stay in the euro. Do you understand where I’m getting at? I just haven’t seen any analysis from the IMF to defend or argue either case.

MR. RICE: You know, the amount of economic analysis that we’ve undertaken on Greece over the last seven years, you probably know as well as anyone, is voluminous. So, you know, I think there’s plenty out there to analyze and digest. [..] So, you know, on the question of Greece being a member of the eurozone and the monetary union, you know, it’s been Greece’s explicit objective to retain its membership of the eurozone. It’s been one of its priority objectives since the very beginning. It’s been also a priority objective of the other eurozone members. So, you know, in terms of how we weigh our service and support to a member country, you know, these are obviously important factors that we take into account, and we have taken those into account and are trying to support and service the member as best we can in that context.

QUESTIONER: But, if I may follow up, Gerry. There are cases in which a member country is explicitly – to use your language – has an explicit objective to do for economic policies that the IMF believes to not be in that member country’s economic interests or in the global economic interest. And it speaks truth to power, and yet there has been no analysis to argue why Greece should remain part of the euro or why it shouldn’t. And to me that’s a fundamental economic argument, since you’re talking about internal devaluation versus a nominal exchange rate devaluation. I mean, that’s at the heart of the problem. So can you tell me why the IMF hasn’t at least published its analysis or any analysis on why Greece should remain in the euro or should exit as a part of its truth-telling economic advice to a member country?

MR. RICE: Well, you know, again I think there’s been plenty of analysis of Greece’s economic situation and how the IMF assesses what is in Greece’s best interests. And, you know, I just think there’s voluminous information on that. And –

QUESTIONER: If you can point me to the – and respectfully, I appreciate your patience and me interrupting you – but if you can point me to the voluminous analysis of Greece – which I admit is voluminous, it will probably fill several volumes in fact, several history books, but I have seen in none of it that I am aware of any analysis of the pros and cons of Greece staying or exiting the eurozone.

MR. RICE: [..] I’ll come back to you, but I do believe there is actually a lot of analysis where you can clearly distill what the IMF’s view is as being in Greece’s best economic interest. I would include in that the many staff reports and, in particular, these ex post evaluation studies that we have done that, again, I can point you to some of this material afterwards. But I do think there’s plenty of material.

QUESTIONER: I just want to follow up on Ian’s question and maybe have another question if you don’t mind. Maybe you can clarify do you think – does the IMF think that it’s in Greece’s best interest to retain its membership in the eurozone? And the second question has to do with the timeline entry, because you mentioned the fact that the discussion on the debt will take place following the discussion on reforms. So should we assume that this discussion on the debt relief won’t start before the second review is completed?

MR. RICE: Yes, I don’t have the timing on the completion of the second review. Again, I want to revert to my formulation. Before we would be able – we, the IMF – would be able to, you know, make a commitment on our participation in the program, we would need to have the discussion of both policies and debt relief, and beyond the discussion, credible commitments in which we have confidence. So that’s the way I would like to formulate that.

Been saying that forever. But as we saw last week, Toronto’s entire budget is based on high and rising house prices.

• Toronto Housing Market May Need Vancouver-Style Cooling (BBG)

Toronto may require measures to cool its red-hot housing market similar to moves taken in Vancouver if interest rates don’t increase, said Royal Bank of Canada Chief Executive Officer David McKay. The head of Canada’s largest lender said Toronto housing is “running hot” and is fueled by a “concerning mix of drivers” that include lack of supply, continued low rates, rising foreign money and speculative activity. Similar circumstances in Vancouver prompted British Columbia’s government last year to impose a 15% tax on foreign buyers. “In the absence of being able to use higher rates to reduce that, I do think we’re going to at some point have to consider similar measures to slow down the housing price growth,” McKay said Friday in a telephone interview.

The comments from the bank CEO come as frustration grows over the unaffordability of properties in Canada’s biggest city. The average home price in Toronto jumped 22% in January from the previous year, the fifth straight month of gains topping 20%. Listings have dropped off, down by half from last year, squeezing prices further. The CEOs of Canada’s other big banks last year called on the government to increase housing regulation amid skyrocketing prices in Vancouver and Toronto. National Bank of Canada CEO Louis Vachon said that minimum downpayments should return to 10% from 5%, while Bank of Nova Scotia head Brian Porter suggested his company was pulling back on mortgage lending due to concern about high home prices in those two cities.

Vancouver, once Canada’s fastest-paced home market and now supplanted by Toronto, has seen slowing sales after several regulatory moves. In August, British Columbia added a 15% tax to home purchases by non-Canadians after they were found to have bought more than C$1 billion ($760 million) in property in a five-week period. The city of Vancouver in January began taxing empty homes and plans to further regulate short-term rentals. Since the tax was imposed in Vancouver, monthly transactions in the metro region fell on average by 36% compared to a year earlier, according to data from the Real Estate Board of Greater Vancouver. Prices for prized single-family detached homes had been rising in double digits last year. In the past six months, they’ve fallen 6.6% to an average C$1.47 million, according to board figures released earlier this month.

The left largely has itself become part of neoliberalism. Ergo: there is no left, left, other than in name.

• Just As Neoliberalism Is Finally On Its Knees, So Too Is The Left (G.)

The 10th anniversary of the global financial crisis looms this year, which means it’s almost a decade since neoliberal economics began to fall apart. The crisis spawned a global recession, the near collapse of global finance and the subsequent eurozone crisis as governments incurred huge debts amid efforts to rescue the hapless banking industry. The then Australian prime minister, Kevin Rudd, observed in the immediate aftermath: The current crisis is the culmination of a 30-year domination of economic policy by a free-market ideology that has been variously called neoliberalism, economic liberalism, economic fundamentalism, Thatcherism or the Washington consensus. The central thrust of this ideology has been that government activity should be constrained, and ultimately replaced, by market forces.

The global recession that followed was the worst in 70 years and its effects continue to be felt in many developed countries. Australia was one of the fortunate few to avoid a recession, thanks to enormous government-funded stimulus packages and the continuation of an unprecedented mining boom. Nevertheless, economic activity has been sluggish ever since, job growth has stalled, wage growth has collapsed and inequality is on the rise. And yet in 2017, just as neoliberalism is on its knees, so too is the left. It matters not whether we are describing social democrats, socialists, the hard left or the moderate left. A swath of populist extreme rightwing forces is sweeping through many developed countries. Europe now resembles a graveyard for social democracy. How did it come to this?

First and foremost, there is incompetence. Neoliberal economics, a creation of the right and embraced to varying degrees by social democrats, has dominated western politics for nigh on four decades. Its mantras of deregulation, privatisation and cutting tax for the wealthy and corporations have been exhausted, if not discredited. There are only so many assets that can be privatised and, as the head of the Australian Competition and Consumer Commission, Rod Sims, has noted, replacing a public-sector monopoly with a private-sector monopoly has simply driven up prices. The fetish for deregulation and tax cutting has caused immense harm – for consumers, for workers and for governments seeking to provide services demanded of them but hampered by inadequate revenue.

It is not just Pope Francis who has called for major reform of the economic system. The World Economic Forum, which met in January, advocated “fundamental reforms to market capitalism to tackle inequality”. In doing so, it echoed statements of the IMF and World Bank, formerly strong advocates of the neoliberal agenda.

Legal schmegal. If they can do it, they will. All of them. Question: is this worse than banning them?

• Documents Indicate Germany Spied on Foreign Journalists (Spiegel)

According to documents seen by SPIEGEL, the BND conducted surveillance on at least 50 additional telephone numbers, fax numbers and email addresses belonging to journalists or newsrooms around the world in the years following 1999. Included among them were more than a dozen connections belonging to the BBC, often to the offices of the international World Service. The documents indicate that the German intelligence agency didn’t just tap into the phones of BBC correspondents in Afghanistan, but also targeted telephone and fax numbers at BBC headquarters in London. A phone number belonging to the New York Times in Afghanistan was also on the BND list, as were several mobile and satellite numbers belonging to the news agency Reuters in Afghanistan, Pakistan and Nigeria.

The German spies also conducted surveillance on the independent Zimbabwean newspaper Daily News before dictator Robert Mugabe banned it for seven years in 2003. Other numbers on the list belonged to news agencies from Kuwait, Lebanon and India in addition to journalist associations in Nepal and Indonesia. Journalists in Germany enjoy far-reaching protection against state meddling. They enjoy similar legal protection to lawyers, doctors and priests: occupations that require secrecy. Journalists have the right to refuse to testify in court in order to protect their sources. German law forbids the country’s domestic intelligence agency from conducting surveillance on persons who have that right.

The German chapter of Reporters without Borders says that the BND’s systematic surveillance of journalists is an “egregious attack on press freedoms” and “a new dimension of constitutional violation.” Christian Mihr, head of the German chapter of Reporters without Borders, says that press freedom “is not a right granted by the graciousness of the German government, it is an inviolable human right that also applies to foreign journalists.” The allegations come as the German parliamentary investigative committee focusing on U.S. spying in Germany is completing its inquiry. Chancellor Angela Merkel, who appeared before the committee last Thursday, was the last witness called and now the committee members are working on their closing report. But even as the committee also addressed extensive BND spying, the surveillance of journalists was only a fringe issue.

Things are not what they seem.

• Surgeons Should Not Look Like Surgeons (NN Taleb)

Say you had the choice between two surgeons of similar rank in the same department in some hospital. The first is highly refined in appearance; he wears silver-rimmed glasses, has a thin built, delicate hands, a measured speech, and elegant gestures. His hair is silver and well combed. He is the person you would put in a movie if you needed to impersonate a surgeon. His office prominently boasts an Ivy League diploma, both for his undergraduate and medical schools. The second one looks like a butcher; he is overweight, with large hands, uncouth speech and an unkempt appearance. His shirt is dangling from the back. No known tailor in the East Coast of the U.S. is capable of making his shirt button at the neck. He speaks unapologetically with a strong New Yawk accent, as if he wasn’t aware of it. He even has a gold tooth showing when he opens his mouth.

The absence of diploma on the wall hints at the lack of pride in his education: he perhaps went to some local college. In a movie, you would expect him to impersonate a retired bodyguard for a junior congressman, or a third-generation cook in a New Jersey cafeteria. Now if I had to pick, I would overcome my suckerproneness and take the butcher any minute. Even more: I would seek the butcher as a third option if my choice was between two doctors who looked like doctors. Why? Simply the one who doesn’t look the part, conditional of having made a (sort of) successful career in his profession, had to have much to overcome in terms of perception. And if we are lucky enough to have people who do not look the part, it is thanks to the presence of some skin in the game, the contact with reality that filters out incompetence, as reality is blind to looks.

When the results come from dealing directly with reality rather than through the agency of commentators, image matters less, even if it correlates to skills. But image matters quite a bit when there is hierarchy and standardized “job evaluation”. Consider the chief executive officers of corporations: they not just look the part, but they even look the same. And, worse, when you listen to them talk, they will sound the same, down to the same vocabulary and metaphors. But that’s their jobs: as I keep reminding the reader, counter to the common belief, executives are different from entrepreneurs and are supposed to look like actors.

Now there may be some correlation between looks and skills; but conditional on having had some success in spite of not looking the part is potent, even crucial, information. So it becomes no wonder that the job of chief executive of the country, that is, the president, was once filled by a former actor, Ronald Reagan. Actually, the best actor is the one nobody realizes is an actor: a closer look at the record and the activity shows that Barack Obama was even more of an actor: a fancy Ivy-League education combined with a liberal reputation is compelling as an image builder. (In fact much as President Trump has going for him is that he doesn’t act as a president).

Debt Rattle May 31 2016

May 312016

May 31, 2016 Posted by Raúl Ilargi Meijer at 9:14 am Finance Tagged with: Abenomics, corrupt, debt relief, homeless, neoliberalism, Saudi, short, slavery 6 Responses »

Jack Delano Long stairway in mill district of Pittsburgh, Pennsylvania 1940

• Mizuho Chief: Tax Delay Means Abenomics Has Failed (WSJ)

• One-Minute Plunge Sends Chinese Stock Futures Down by 10% Limit (BBG)

• The Big Short Is Back in Chinese Stocks (BBG)

• You’re Witnessing The Death Of Neoliberalism – From Within (G.)

• Australia’s Big Four Banks Are Much More Vulnerable Than They Appear (Das)

• Ceta: The Trade Deal That’s Already Signed (G.)

• Britain Is ‘World’s Most Corrupt Country’, Says Italian Mafia Expert (ES)

• The Untold Story Behind Saudi Arabia’s 41-Year US Debt Secret (BBG)

• Eric Holder Says Edward Snowden Performed A ‘Public Service’ (CNN)

• Vague Promises of Debt Relief for Greece (NY Times Ed.)

• Glitch In Greek Bailout Talks Fuels Fears Of Delay (Kath.)

• German Unemployment Rate Falls to Record Low (BBG)

• Majority Of Athens Homeless Ended Up On Street In Past 5 Years (Kath.)

• More Than 45 Million Trapped In Modern Slavery (AFP)

Damned if you do, doomed if you don’t.

• Mizuho Chief: Tax Delay Means Abenomics Has Failed (WSJ)

The chief of Mizuho Financial Group said Japan risks a credit-rating downgrade if Prime Minister Shinzo Abe delays a scheduled sales-tax increase without explaining how the government plans to cut its deficit. Yasuhiro Sato, president of Japan’s second-largest bank by assets, said Mr. Abe’s framing of such a decision would determine whether it sparked concerns about the government’s credibility regarding its plans for fiscal consolidation. “The worst scenario is [the government] will just announce a delay in the tax increase. That could send a message that Abenomics has failed or Japan is heading for a fiscal danger zone and then it will harm Japanese government bonds’ credit ratings,” Mr. Sato said in an interview, referring to the prime minister’s growth program.

Mr. Abe acknowledged for the first time Friday that he was considering delaying an increase in the sales tax to 10% from 8% scheduled to take effect in April next year. He said he would decide before an upper house election to be held in July, but Japanese media have reported that a decision could come this week. Mr. Abe has delayed the tax increase once, after the rise to 8% in April 2014 derailed an economic recovery. Consumer spending has yet to fully rebound, and some economists say the prospect of another tax increase next year is already weighing on spending. Mr. Sato acknowledged that raising the tax again would pose a risk to Japan’s economy. “There will be a risk in either case of raising the tax or not, so as long as the government demonstrates a clear road map for fiscal reconstruction, Japanese credibility likely won’t be hurt so much,” he said.

Some bankers say Japan could damage its international credibility if it fails to raise taxes on schedule. The tax increases are part of long-standing efforts to reach a primary government surplus by 2020. A primary surplus is a balanced budget excluding interest payments on government debt. Japan’s government debt is among the largest in the world relative to the size of its economy. Moody’s Investors Service said in a March report, “Postponing the next [sales-tax] increase regardless of the reason would pose a big fiscal burden for Japan.”

Last year, “Volumes shrank by more than 90% from their peak”. But there’s simply money in shorting China; you can’t stop that.

• One-Minute Plunge Sends Chinese Stock Futures Down by 10% Limit (BBG)

Chinese stock-index futures plunged by the daily limit before snapping back in less than a minute, the second sudden swing to rattle traders this month. Contracts on the CSI 300 Index dropped as much as 10% at 10:42 a.m. local time, recovering almost all of the losses in the same minute. More than 1,500 June contracts changed hands in that period, the most all day, according to data compiled by Bloomberg. The China Financial Futures Exchange is investigating the tumble, said people familiar with the matter, who asked not to be named because they aren’t authorized to speak publicly. The swing follows a similarly unexplained drop in Hang Seng China Enterprises Index futures in Hong Kong on May 16, a move that heightened anxiety among investors facing slower Chinese economic growth and a weakening yuan.

Volume in China’s stock-index futures market, which was the world’s most active as recently as July, has all but dried up after authorities clamped down on what they deemed excessive speculation during the nation’s $5 trillion equity crash last summer. Tuesday’s volatility had little impact on the underlying CSI 300, which rose 3%. “Liquidity in the market is really thin at the moment,” Fang Shisheng at Orient Securities said by phone. “So the market will very likely see big swings if a big order comes in. The order looks like it’s from a hedger.” Chinese policy makers restricted activity in the futures market last summer because selling the contracts is one of the easiest ways for investors to make large wagers against stocks. Volumes shrank by more than 90% from their peak after officials raised margin requirements, tightened position limits and started a police probe into bearish wagers.

Xi Jinping is one nervous man right now.

• The Big Short Is Back in Chinese Stocks (BBG)

Chinese equities are once again in the cross hairs of short sellers. Short interest in one of the largest Hong Kong exchange-traded funds tracking domestic Chinese stocks has surged fivefold this month to its highest level in a year, according to data compiled by Markit and Bloomberg. The last time bearish bets were so elevated, such pessimism proved well-founded as China’s bull market turned into a $5 trillion rout. While trading in the Shanghai Composite has become subdued this month amid suspected state intervention, pessimists are betting that equities face renewed selling amid a slumping yuan. The Chinese currency is heading for its biggest monthly loss since last year’s devaluation as the nation’s economic outlook worsens and the Fed prepares to raise borrowing costs, driving a rally in the dollar.

“Some macro funds are seeking opportunities to short index futures to play the currency movement,” said Wenjie Lu at UBS. “A higher chance of a Fed rate hike means there’s pressure for the yuan to soften.” Short interest in the CSOP FTSE China A50 ETF climbed to 6.1% on May 25, the highest level since April 2015, two months before Chinese equities peaked, and up from 1.3% at the end of last month. Bearish bets in the U.S. traded iShares China Large-Cap ETF jumped to a two-year high of 18% of shares outstanding on the same day, up from 3% a month ago. Even as Chinese equities rallied on Tuesday, traders were rattled by a sudden plunge in index futures. Contracts on the CSI 300 Index dropped as much as 10% at around 10:42 a.m. local time, recovering almost all of the losses in the same minute. The move had little effect on the underlying stock gauge, which rose 2.6% at the break.

I think there’s more to it than that.

• You’re Witnessing The Death Of Neoliberalism – From Within (G.)

You hear it when the Bank of England’s Mark Carney sounds the alarm about “a low-growth, low-inflation, low-interest-rate equilibrium”. Or when the Bank of International Settlements, the central bank’s central bank, warns that “the global economy seems unable to return to sustainable and balanced growth”. And you saw it most clearly last Thursday from the IMF. What makes the fund’s intervention so remarkable is not what is being said – but who is saying it and just how bluntly. In the IMF’s flagship publication, three of its top economists have written an essay titled “Neoliberalism: Oversold?”. The very headline delivers a jolt. For so long mainstream economists and policymakers have denied the very existence of such a thing as neoliberalism, dismissing it as an insult invented by gap-toothed malcontents who understand neither economics nor capitalism.

Now here comes the IMF, describing how a “neoliberal agenda” has spread across the globe in the past 30 years. What they mean is that more and more states have remade their social and political institutions into pale copies of the market. Two British examples, suggests Will Davies – author of the Limits of Neoliberalism – would be the NHS and universities “where classrooms are being transformed into supermarkets”. In this way, the public sector is replaced by private companies, and democracy is supplanted by mere competition. The results, the IMF researchers concede, have been terrible. Neoliberalism hasn’t delivered economic growth – it has only made a few people a lot better off. It causes epic crashes that leave behind human wreckage and cost billions to clean up, a finding with which most residents of food bank Britain would agree.

And while George Osborne might justify austerity as “fixing the roof while the sun is shining”, the fund team defines it as “curbing the size of the state … another aspect of the neoliberal agenda”. And, they say, its costs “could be large – much larger than the benefit”. Two things need to be borne in mind here. First, this study comes from the IMF’s research division – not from those staffers who fly into bankrupt countries, haggle over loan terms with cash-strapped governments and administer the fiscal waterboarding. Since 2008, a big gap has opened up between what the IMF thinks and what it does. Second, while the researchers go much further than fund watchers might have believed, they leave in some all-important get-out clauses.

You kidding me? They’re overloaded to their necks in overvalued property loans.

• Australia’s Big Four Banks Are Much More Vulnerable Than They Appear (Das)

Today they face little competition in their home market and have benefited tremendously from Australia’s strong growth, underpinned by China’s seemingly insatiable demand for the country’s gas, coal, iron ore and other raw materials. During the 2012 European debt crisis, Australia’s banks were worth more than all of Europe’s. But Australian financial institutions have made the same fundamental mistake the rest of the country has, assuming that growth based on “houses and holes” – rising property prices and resources buried underground – can continue indefinitely. In fact, despite a recent rebound in Chinese demand, commodities prices look set to remain weak for the foreseeable future. Banks’ exposure to the slowing natural resources sector has reached nearly $70 billion in loans outstanding – worryingly large relative to their capital resources.

If anything, their exposure to the property sector is even more dangerous. Mortgages make up a much bigger proportion of bank portfolios than before – more than half, double the level in the 1990s. And they’re riskier than they used to be: many loans are interest-only, while around 80% have variable rates. With a downturn likely – everything from price-to-income to price-to-rent ratios suggests houses are massively overvalued – losses are likely to rise, especially if economy activity weakens. Australian banks are also more vulnerable to outside shocks than they may first appear. Their loan-to-deposit ratio is about 110%. Domestic deposits fund only around 60% of bank assets; the rest of their financing has to come from overseas. While that hasn’t been a problem recently, Australia’s external position is deteriorating.

The current account deficit is expected to climb to 4.75% in the year ending June 30. Weak terms of trade, a rising budget deficit, slower growth and a falling currency are likely to drive up the cost of funds. If Australia’s economy or the financial sector’s performance falters, or international markets are disrupted, banks’ access to external funds could be threatened.

“..only 18% of Americans and 17% of Germans support TTIP..”

• Ceta: The Trade Deal That’s Already Signed (G.)

The US-Europe deal TTIP (the Transatlantic Trade and Investment Partnership) is the best known of these so-called “new generation” trade deals and has inspired a movement. More than 3 million Europeans have signed Europe’s biggest petition to oppose TTIP, while 250,000 Germans took to the streets of Berlin last autumn to try to bring this deal down. A new opinion poll shows only 18% of Americans and 17% of Germans support TTIP, down from 53% and 55% just two years ago. But TTIP is not alone. Its smaller sister deal between the EU and Canada is called Ceta (the Comprehensive Economic and Trade Agreement). Ceta is just as dangerous as TTIP; indeed it’s in the vanguard of TTIP-style deals, because it’s already been signed by the European commission and the Canadian government. It now awaits ratification over the next 12 months.

The one positive thing about Ceta is that it has already been signed and that means that we’re allowed to see it. Its 1,500 pages show us that it’s a threat to not only our food standards, but also the battle against climate change, our ability to regulate big banks to prevent another crash and our power to renationalise industries. Like the US deal, Ceta contains a new legal system, open only to foreign corporations and investors. Should the British government make a decision, say, to outlaw dangerous chemicals, improve food safety or put cigarettes in plain packaging, a Canadian company can sue the British government for “unfairness”. And by unfairness this simply means they can’t make as much profit as they expected. The “trial” would be held as a special tribunal, overseen by corporate lawyers.

Would anyone doubt it?

• Britain Is ‘World’s Most Corrupt Country’, Says Italian Mafia Expert (ES)

Britain has been described as the most corrupt country in the world, according to a journalist and expert on the Italian Mafia. Roberto Saviano, who wrote best-selling exposés Gomorrah and ZeroZeroZero, made the claim at the Hay Literary Festival. The 36-year-old has been living under police protection for 10 years since revelations were published about members of the Camorra, a Neapolitan branch of the mafia. Mr Saviano told the audience at Hay-on-Wye: “If I asked you what is the most corrupt place on Earth you might tell me well it’s Afghanistan, maybe Greece, Nigeria, the South of Italy and I will tell you it’s the UK. “It’s not the bureaucracy, it’s not the police, it’s not the politics but what is corrupt is the financial capital. 90% of the owners of capital in London have their headquarters offshore.

“Jersey and the Cayman’s are the access gates to criminal capital in Europe and the UK is the country that allows it. “That is why it is important why it is so crucial for me to be here today and to talk to you because I want to tell you, this is about you, this is about your life, this is about your government.” David Cameron came under pressure for the UK to reform offshore tax havens operating on British overseas territories at an anti-corruption summit earlier this month. Mr Saviano also weighed in on the EU referendum debate, warning a vote to leave the union would see Britain even more exposed to organised crime. He added: “Leaving the EU means allowing this to take place. It means allowing the Qatari societies, the Mexican cartels, the Russian Mafia to gain even more power and HSBC has paid £2 billion in fines to the US government, because it confessed that it had laundered money coming from the cartels and the Iranian companies. “We have proof, we have evidence.”

How power rules.

• The Untold Story Behind Saudi Arabia’s 41-Year US Debt Secret (BBG)

Failure was not an option. It was July 1974. A steady predawn drizzle had given way to overcast skies when William Simon, newly appointed U.S. Treasury secretary, and his deputy, Gerry Parsky, stepped onto an 8 a.m. flight from Andrews Air Force Base. On board, the mood was tense. That year, the oil crisis had hit home. An embargo by OPEC’s Arab nations—payback for U.S. military aid to the Israelis during the Yom Kippur War—quadrupled oil prices. Inflation soared, the stock market crashed, and the U.S. economy was in a tailspin. Officially, Simon’s two-week trip was billed as a tour of economic diplomacy across Europe and the Middle East, full of the customary meet-and-greets and evening banquets.

But the real mission, kept in strict confidence within President Richard Nixon’s inner circle, would take place during a four-day layover in the coastal city of Jeddah, Saudi Arabia. The goal: neutralize crude oil as an economic weapon and find a way to persuade a hostile kingdom to finance America’s widening deficit with its newfound petrodollar wealth. And according to Parsky, Nixon made clear there was simply no coming back empty-handed. Failure would not only jeopardize America’s financial health but could also give the Soviet Union an opening to make further inroads into the Arab world. It “wasn’t a question of whether it could be done or it couldn’t be done,” said Parsky, 73, one of the few officials with Simon during the Saudi talks.

At first blush, Simon, who had just done a stint as Nixon’s energy czar, seemed ill-suited for such delicate diplomacy. Before being tapped by Nixon, the chain-smoking New Jersey native ran the vaunted Treasuries desk at Salomon Brothers. To career bureaucrats, the brash Wall Street bond trader—who once compared himself to Genghis Khan—had a temper and an outsize ego that was painfully out of step in Washington. Just a week before setting foot in Saudi Arabia, Simon publicly lambasted the Shah of Iran, a close regional ally at the time, calling him a “nut.” But Simon, better than anyone else, understood the appeal of U.S. government debt and how to sell the Saudis on the idea that America was the safest place to park their petrodollars.

Inappropriate, illegal, and a public service, all at the same time.

• Eric Holder Says Edward Snowden Performed A ‘Public Service’ (CNN)

Former U.S. Attorney General Eric Holder says Edward Snowden performed a “public service” by triggering a debate over surveillance techniques, but still must pay a penalty for illegally leaking a trove of classified intelligence documents. “We can certainly argue about the way in which Snowden did what he did, but I think that he actually performed a public service by raising the debate that we engaged in and by the changes that we made,” Holder told David Axelrod on “The Axe Files,” a podcast produced by CNN and the University of Chicago Institute of Politics. “Now I would say that doing what he did – and the way he did it – was inappropriate and illegal,” Holder added. Holder said Snowden jeopardized America’s security interests by leaking classified information while working as a contractor for the National Security Agency in 2013.

“He harmed American interests,” said Holder, who was at the helm of the Justice Department when Snowden leaked U.S. surveillance secrets. “I know there are ways in which certain of our agents were put at risk, relationships with other countries were harmed, our ability to keep the American people safe was compromised. There were all kinds of re-dos that had to be put in place as a result of what he did, and while those things were being done we were blind in certain really critical areas. So what he did was not without consequence.” Snowden, who has spent the last few years in exile in Russia, should return to the U.S. to deal with the consequences, Holder noted. “I think that he’s got to make a decision. He’s broken the law in my view. He needs to get lawyers, come on back, and decide, see what he wants to do: Go to trial, try to cut a deal. I think there has to be a consequence for what he has done.”

Times editors’ curious timing.

• Vague Promises of Debt Relief for Greece (NY Times Ed.)

European leaders congratulated themselves last week for reaching an agreement to provide more loans to Greece and eventually ease the terms of the country’s huge debt. But there is little to celebrate. Greece is bankrupt in all but name. The country has a debt of more than €300 billion, or about 180% of its GDP, a sum it cannot hope to repay in full. Most of that money is owed to Germany, France, Italy and other countries in the eurozone. After an 11-hour meeting last week, the eurozone finance ministers said that they would lend another €7.5 billion to Greece next month to help it pay off debt and grant it some relief, possibly including lower interest rates and extended payment periods, but not until mid-2018.

The reality is that Greece can’t be squeezed any harder. But the finance ministers are seeking still more spending cuts and increased taxes. They want to see a budget surplus of 3.5% of GDP before interest payments by 2018. A stable and fast-growing country might be able to hit that target, but it is preposterous to expect that from Greece. The IMF wants to see a more realistic surplus of 1.5%. Delaying meaningful debt relief until 2018 will further harm the struggling Greek economy. The Greek unemployment rate was 24.4% in January, and Greece’s economy shrunk in the first three months of the year. The I.M.F., which has also lent Greece money, recently estimated that at its current trajectory, the country’s debt would eventually grow to 250% of GDP.

Forcing Greece into foolish measures: “..Schaeuble described the decision to raise value-added tax in Greece as “economic foolishness” but noted that Athens was obliged to take that route due to a revenue shortfall.”

• Glitch In Greek Bailout Talks Fuels Fears Of Delay (Kath.)

There was fresh concern on Monday that there could be further delays in the disbursement of much-need bailout money to Greece owing to a disagreement between Athens and its creditors, who have demanded changes to prior actions passed in Parliament earlier this month. EU officials on Monday appeared to dismiss Greece’s refusal to implement some of these changes, saying that these are issues that have already been agreed with the Greek government. The country’s lenders had given the green light for the disbursement of a tranche of 10.3 billion euros last week, on the condition the government made amendments to recent legislation it passed on pension, bad loans and privatizations.

However, Finance Minister Euclid Tsakalotos had informed the European Commission representative and the IMF in a letter last week that their demands could not be met, neither could Athens fulfill the demands enshrined in the bailout deal signed last summer to privatize ADMIE, the country’s grid operator, and to freeze the wages of essential services, like those of the coast guard and police. Greece desperately needs the new bailout money to pay state arrears as well as debt repayments to the IMF and European Central Bank in the coming weeks. There were reports on Monday that the government is planning to submit its own amendments on Wednesday to Parliament. If the disagreement between Greece and its creditors persists, then it is likely it will be discussed at the Euro Working Group on Thursday.

In comments on Monday, German Finance Minister Wolfgang Schaeuble described the decision to raise value-added tax in Greece as “economic foolishness” but noted that Athens was obliged to take that route due to a revenue shortfall. “This is why Greece needs an effective public administration,” Schaeuble told a conference on fiscal sustainability, observing that Greek tax collection must be improved to bring in the higher revenues that are being targeted.

Germany has exported its unemployment to Greece and Spain.

• German Unemployment Rate Falls to Record Low (BBG)

German unemployment declined more than economists estimated, pushing the jobless rate to the lowest level since reunification. The number of people out of work fell by a seasonally adjusted 11,000 to 2.695 million in May, data from the Federal Labor Agency in Nuremberg showed on Tuesday. The median estimate in a Bloomberg survey was for a decline of 5,000. The jobless rate dropped to 6.1 percent. The report comes two days before ECB officials convene in Vienna to set monetary policy and assess whether they’ve done enough to sustain an economic recovery in the 19-nation euro region.

The ECB is expected to keep its stimulus plan unchanged after President Mario Draghi announced an expansion of quantitative easing by a third to €80 billion in March and cut the deposit rate further below zero. Unemployment dropped by 8,000 in western Germany and declined by 3,000 in the eastern part of the country, the report showed. Growth momentum in Europe’s largest economy remains strong after gross domestic product expanded at the fastest pace in two years in the first quarter. German business sentiment rose to the highest level in five months in May and consumer prices unexpectedly halted their decline. The Bundesbank predicts the economy will retain its underlying strength, even though expansion will probably slow somewhat this quarter.

Obviously not a surprise for me, or Automatic Earth readers. And lest we forget: Norway does a lot of good in silence. But more austerity is definitely not going to fix anything at all.

• Majority Of Athens Homeless Ended Up On Street In Past 5 Years (Kath.)

71% of the Greek capital’s homeless population has ended up on the streets in the last five years and 21.7% in the last year alone, a study by the City of Athens’s Homeless Shelter (KYADA), funded by the Norwegian government and other European countries, has found. According to the study, which was conducted as part of the “Fighting Poverty and Social Exclusion” program and whose findings were presented by Athens Mayor Giorgos Kaminis on Monday evening, 62% of the capital’s homeless are Greeks, the overwhelming majority (85.4%) are men and most (57%) are aged between 35-55. Of the 451 respondents questioned by KYADA workers from March 2015 until the same month this year, 47% said they ended up on the street after losing their job and 29% said they do not want to move to a shelter or other organized facility.

Less than half of the respondents (41.2%) admitted to using drugs, 7.3% to alcohol and 2% to both. Kaminis also said that in the one-year period, the solidarity program helped distribute 46,156 supermarket food coupons worth around 1.85 million euros to nearly 9,000 beneficiaries in over 3,700 families. “Through its social structures and strong alliances with agencies, partners and simple citizens, the City of Athens help give support to more than 25,000 residents,” Kaminis said at the presentation, which was also attended by Norwegian Ambassador to Athens Jorn Eugene Gjelstad.

Who we are. Not including debt slaves.

• More Than 45 Million Trapped In Modern Slavery (AFP)

More than 45 million men, women and children globally are trapped in modern slavery, far more than previously thought, with two-thirds in the Asia-Pacific, a study showed Tuesday. The details were revealed in the 2016 Global Slavery Index, a research report by the Walk Free Foundation, an initiative set up by Australian billionaire mining magnate and philanthropist Andrew Forrest in 2012 to draw attention to the issue. It compiled information from 167 countries with 42,000 interviews in 53 languages to determine the prevalence of the issue and government responses. It suggested that there were 28% more slaves than estimated two years ago, a revision reached through better data collection and research methods.

The report said India had the highest number of people trapped in slavery at 18.35 million, while North Korea had the highest incidence (4.37% of the population) and the weakest government response. Modern slavery refers to situations of exploitation that a person cannot leave because of threats, violence, coercion, abuse of power or deception. They may be held in debt bondage on fishing boats, against their will as domestic servants or trapped in brothels. Some 124 countries have criminalised human trafficking in line with the UN Trafficking Protocol and 96 have developed national action plans to coordinate the government response.

In terms of absolute numbers, Asian countries occupy the top five for people trapped in slavery. Behind India was China (3.39 million), Pakistan (2.13 million), Bangladesh (1.53 million) and Uzbekistan (1.23 million). As a %age of the population, Uzbekistan (3.97%) and Cambodia (1.65%) trailed North Korea, which the study said was the only nation in the world that has not explicitly criminalised any form of modern slavery.

Debt Rattle May 28 2016

May 282016

May 28, 2016 Posted by Raúl Ilargi Meijer at 8:26 am Finance Tagged with: Abenomics, avarice, bonds, Brexit, farm belt, neoliberalism, refugees, shadow banks, Trump, war, Yellen 5 Responses »

Jack Delano Row houses, Baltimore 1940

• Yellen Leans Toward Near-Term Rate Rise Without Detailing Timing (BBG)

• Trump: Only ‘Dummies’ Believe Fed’s Unemployment Figure (Crudele)

• Japan’s Abe Plans Up to $90.7 Billion Stimulus (BBG)

• US Farm Belt Banks Tighten the Buckle (WSJ)

• Companies Go on Worldwide Bond Bender With $236 Billion of Sales (BBG)

• Clinton Lurks in Shadows When Sparring With Sanders on Banks (BBG)

• Toronto’s Red-Hot Market Sends Property Values Soaring (Star)

• UK House Prices Compared With Earnings ‘Close To Pre-Crisis Levels’ (G.)

• Paris and Berlin Ready ‘Plan B’ For Life After Brexit (FT)

• Neoliberalism Increases Inequality and Stunts Economic Growth: IMF (Ind.)

• How the Deadly Sin of Avarice Was Rehabilitated as Self Interest (Evon.)

• Silencing the United States as It Prepares for War (Pilger)

• ISIS Advance Traps 165,000 Syrians at Closed Turkish Border (HRW)

“The economy is continuing to improve..” Nuff said.

• Yellen Leans Toward Near-Term Rate Rise Without Detailing Timing (BBG)

Federal Reserve Chair Janet Yellen threw her support behind a growing consensus at the central bank in favor of another interest rate increase soon, while steering clear of specifying the timing of such a move. “It’s appropriate – and I’ve said this in the past – for the Fed to gradually and cautiously increase our overnight interest rate over time,” Yellen said Friday during remarks at Harvard University in Cambridge, Massachusetts. “Probably in the coming months such a move would be appropriate.” Yellen will host her colleagues on the Federal Open Market Committee in Washington June 14-15, when they will contemplate a second interest-rate increase following seven years of near-zero borrowing costs that ended when they hiked in December.

A series of speeches by Fed officials and the release of the minutes to their April policy meeting have heightened investor expectations for another tightening move either next month or in July. “The economy is continuing to improve,” she said in a discussion with Harvard economics professor Gregory Mankiw. She added that she expects “inflation will move up over the next couple of years to our 2% objective,” provided headwinds holding down price pressures, including energy prices and a stronger dollar, stabilize alongside an improving labor market.

Several regional Fed presidents, ranging from Boston Fed President Eric Rosengren to San Francisco’s John Williams, have in recent weeks urged financial market participants to take more seriously the chances of a rate hike in the next two months, pointing to continued signs of steady if unspectacular growth in the U.S. economy and the waning of risks posed by global economic and financial conditions. Yellen suggested that a rate rise would be appropriate if economic growth picks up and the labor market continues to improve – two developments that she said she expects to happen.

Trump sees a whole other world than Yellen does. Take your pick.

• Trump: Only ‘Dummies’ Believe Fed’s Unemployment Figure (Crudele)

Donald Trump, if elected president, will investigate the veracity of US economic statistics produced by Washington — including “the way they are reported.” I caught up with Trump, the presumptive Republican nominee, by phone Tuesday morning, and we had a frank talk about the economy and what is making his campaign tick. “When you look at some of these [economic] numbers they give out and then you go out and see people dying to get a job all over the country, I mean, it’s not jibing with what’s really going on,” Trump said. “The economy is not doing well,” Trump said. “You know, John, I’m getting 20,000 to 25,000 people every time I make a speech, and they are not there just because of the border,” he added, referring to his vow to build a wall between the US and Mexico.

“They are there because — and you know — if you put out a job notice, you’ll get thousands of people showing up to pick up a job,” Trump said. As I’ve mentioned before, I first met Trump decades ago and we used to talk once in a while, but haven’t for many years. Trump says he thinks the US unemployment rate is close to 20% and not the 5% reported by the Labor Department. Anyone who believes the 5% is a “dummy,” he said. The Federal Reserve, of course, always quotes the 5% figure and may raise interest rates based on that belief in the coming months. But even the Fed must not be too certain since it produces its own version of the jobless number, something I’ve already written about. Trump has said in the past that the Fed is also in his cross hairs for an audit. (I would recommend he look into how the Fed interferes with the markets.)

As I’ve been reporting for years, the official unemployment rate is conveniently reduced by a number of factors — each in place during both Democratic and Republican administrations. One of these factors, for example, is out-of-work people who have stopped looking for work for more than a year because they may have grown frustrated by the lack of jobs. They are not counted in the unemployment rate. A less popular unemployment stat, called the U-6, which measures some of these idled souls plus others who are forced to work part-time because they can’t find a 40-hour-a-week gig, stands at 9.7%. The truly frustrated aren’t counted at all.

It’s stunning, really, that this man still gets to dig his country ever deeper in. He hasn’t delivered on f**k all.

• Japan’s Abe Plans Up to $90.7 Billion Stimulus (BBG)

Japan Prime Minister Shinzo Abe plans to propose a fiscal stimulus package of as much as 10 trillion yen ($90.7 billion) after warning Group of Seven leaders that the global economy faces significant risk of another crisis, according to the Nikkei newspaper. Abe will seek a second supplementary budget worth 5 trillion yen to 10 trillion yen after July’s upper-house election, the Nikkei reported Saturday without attribution. Proposals will include accelerating the construction of a magnetic-levitation train line from Nagoya to Osaka, issuing vouchers to boost consumer spending, increasing pay for child-care workers and setting up a scholarship fund, the Nikkei said. “When you want to get the economy going, as long as demand in Asia is weak, you need additional public spending,” Martin Schulz at Fujitsu Research Institute in Tokyo, said by phone.

“Since private spending is still not picking up, the government is simply taking up the slack.” Abe is getting closer to delaying an increase in Japan’s sales tax, saying Friday he’ll make a decision before an upper-house election this summer on whether to go ahead with a planned hike in the levy next April to 10%, from 8%. A formal announcement of a two-year delay is expected Wednesday at the close of the parliamentary session, the Nikkei reported. This would be the second postponement by Abe, as the tax was initially scheduled to be raised in October 2015. An increase in the levy in 2014 pushed Japan into a recession. Abe had previously said the tax hike would be delayed only if there was a shock on the scale of a major earthquake or a corporate collapse like that of Lehman Brothers.

Since the previous tax hike, the economy has swung between contraction and growth, with consumer spending remaining weak. Bank of Japan Governor Haruhiko Kuroda has struggled to spur inflation despite record asset purchases and negative interest rates. Consumer prices excluding fresh food fell 0.3% in April from a year earlier, after dropping by the same amount in March, data released Friday showed. Meanwhile, the yen has surged about 9% versus the dollar this year, threatening profits for exporters including Toyota and weighing on the nation’s stock market. The benchmark Topix index has fallen 13% in 2016.

Compliments of the globalized and chemicalized food industry.

• US Farm Belt Banks Tighten the Buckle (WSJ)

Banks are tightening credit for U.S. farmers amid a rise in delinquencies, forcing some growers to turn to alternative sources of loans. When U.S. agriculture was booming this decade, banks doled out ample credit to strong performers and weaker growers alike, said Michael Swanson, an agricultural economist at Wells Fargo. But with the farm slump moving into its third year, banks have become pickier, requiring some growers to cough up more collateral and denying financing outright to some customers who need it to pay for seeds, crop chemicals and rent. Farmers this year have been grappling with low commodity prices, mounting debt and weaker incomes.

Claude Sem, chief executive of Farm Credit Services of North Dakota, said he asked some farmers to put up more land or machinery to back loans this spring. Collateral requirements could increase for more farmers if crop prices remain low, he said, noting that the cash price for wheat in northern North Dakota recently was about $4.50 a bushel, roughly a dollar below what it costs many farmers to raise the crop. “Below break-even, everything tightens up,” Mr. Sem said, adding that falling land values also have spurred lenders to boost collateral requirements, with cropland prices down as much as 20% in some parts of North Dakota.

With traditional bank loans harder to come by, farmers are turning to sources like CHS Inc., a large farmer-owned cooperative in the U.S., which operates grain elevators and retail stores across the Midwest. CHS said its loans to farmers increased 48% in both number and volume in the 12 months to March and have more than doubled since 2014. It “suggests there are many farmers struggling to obtain financing,” said Randy Nelson, president of the co-op’s financing subsidiary, CHS Capital.

Lemmings ‘R’ Us.

• Companies Go on Worldwide Bond Bender With $236 Billion of Sales (BBG)

A borrowing binge by companies globally is poised to make May one of the the busiest months ever, thanks to investors who continue to devour the relatively juicy yields on corporate debt in a negative-rate world.\ Global issuance of non-financial company debt will be in excess of $236 billion by month-end, according to data compiled by Bloomberg, led by computer maker Dell, which sold $20 billion of bonds to back its takeover of EMC in the year’s second-biggest corporate offering. In Europe, companies sold €48.5 billion ($54.2 billion) making it the busiest May on record. U.S. borrowers including Johnson & Johnson and Kraft Heinz did deals of more than €1 billion.

The surge in issuance is unlikely to satisfy investors who hoped to boost their income by buying company debt when easy-money monetary policies push yields on more than $9 trillion of bonds worldwide below zero. The extra yield investors demand to hold company debt globally relative to safer government bonds remains near year-to-date lows, while concessions on newly issued notes have fallen over the course of the month. “Deals continue to be very much oversubscribed,” said Travis King, head of investment-grade credit at Voya Investment Management, which oversees $203 billion. “It is very difficult to get bonds, especially in the hotter deals.” For investors who placed more than $80 billion of orders for Dell’s bond sale, the problem may get worse next month.

Seasonal declines in issuance, combined with decisions by some companies to accelerate debt sales to May, indicate June volumes in the U.S. will be in the $75 billion to $85 billion range, about half of this month’s supply, according to Bank of America. Vincent Murray, who heads U.S. fixed-income syndicate at Mizuho in New York, said the flow of new deals kept his team kept busy all month. While bond issuance will be less than $100 billion in June, some opportunistic companies may take advantage of low rates in the weeks ahead to issue debt, he said. “The market has remarkably weathered the storm of all this supply,” Murray said. “The fact that supply hasn’t affected the spreads in the marketplace may attract some more issuers that were thinking of passing.”

“..until the mid-1990s, the sum of runnable liabilities was steady at about 40% of U.S. GDP. That number peaked in early 2008 at 80%, but remains above historical levels, at about 60% of GDP.” And that does not include derivatives.

• Clinton Lurks in Shadows When Sparring With Sanders on Banks (BBG)

There is no universal definition for “shadow bank.” At its broadest, it’s any institution that borrows money and invests in financial assets, but is neither a bank, nor regulated like one. This can include insurance companies, hedge funds, private equity firms, and government-sponsored entities such as Fannie Mae and Freddie Mac. In debates, Clinton brings up hedge funds and insurance companies. But her published plan hints at a more precise definition: if it’s runnable, it’s a shadow bank. A research note last year from economists at the Federal Reserve Board in Washington describes “runnables” – short-term funds at financial institutions that can evaporate in a panic. Bank deposits over $250,000 are uninsured, and therefore runnable.

So are shares in money-market mutual funds; they should be considered investments, but in practice are not expected to lose principal. Repurchase agreements, also on the list, allow a borrower to sell a stock or bond, along with a promise to buy it back, often in a day or two. Short-term corporate debt, called “paper,” is similarly runnable. According to the Fed economists’ research, until the mid-1990s, the sum of runnable liabilities was steady at about 40% of U.S. GDP. That number peaked in early 2008 at 80%, but remains above historical levels, at about 60% of GDP. The definitions differ slightly, but this is consistent with patterns measured by Morgan Ricks at the Vanderbilt University Law School in Nashville, and by the the Financial Stability Oversight Council, a group of representatives from several regulators.

Runnables, said Ricks, are the “central unsolved problem of financial reform.” Ricks, who was a senior policy adviser at the Treasury Department in 2009 and 2010, takes a historical view of financial runs. Before the U.S. began insuring bank deposits in 1933, bank runs happened about once a decade. Since then, even during the financial crisis, they’ve been rare. But the risk moved outside the banks. Paul McCulley coined the term “shadow bank” during the Kansas City Fed’s 2007 Jackson Hole conference on economic policy. Then the chief economist of Pimco, McCulley laid out the systemic danger hidden in bank-like firms that relied on uninsured short-term funding. By the end of the next year, Bear Stearns, Lehman Brothers, and Merrill Lynch all collapsed. None of these were banks, but all had seen runs on short-term funding. “These are all species of the same genus,” said Ricks.

The wholesale destruction of cities and communities is not done.

• Toronto’s Red-Hot Market Sends Property Values Soaring (Star)

Toronto’s blistering housing market has prompted a 30% jump in residential property values over the last four years, according to the company that assesses real estate in the province. City homeowners will receive assessment notices — their first since 2012 — from the Municipal Property Assessment Corp. (MPAC) beginning next week showing a 7.5% annual increase in their property values. That’s well above the 4.5% provincial average, but lower than the double-digit increases in some 905-area communities such as Richmond Hill and Markham. The average assessed value for a single-family detached home in Toronto is $770,000, up about $200,000 on average from the last assessment in 2012. Toronto condo values increased 2.9% on average to $363,000, about $35,000 higher than four years ago.

Although assessments are linked to property taxes, homeowners should not panic about a steep rise in taxes, says MPAC. “Just because the assessment does increase doesn’t necessarily mean that this is going to have an impact on their taxes,” said Greg Martino, director of valuation and customer relations MPAC. Municipalities, not MPAC, determine property tax rates. How much an individual owner pays depends on where their assessment ranks compared to the city average. Owners whose properties are assessed above the 7.5% average will pay more. Those with below-average assessments pay less. In Toronto, virtually every property will be assessed at a higher rate than it was in 2012. If two properties were assessed at $500,000 in 2012, each would share an equal portion of the city’s tax burden. But if they are reassessed and one home remains at $500,000 but the other is now valued at $600,000, the higher valued property now carries a bigger tax responsibility.

Force interest rates up by just 1% and you have mayhem.

• UK House Prices Compared With Earnings ‘Close To Pre-Crisis Levels’ (G.)

House prices as a multiple of average earnings are “within a whisker” of record levels set before the financial crisis, a City consultancy has warned. The average UK house price is now 6.1 times average earnings, close to the peak of 6.4 it hit before the downturn, Fathom Consulting said. A rise in interest rates from their current low of 0.5% would lead to a correction, it said, although a return to “normal” rates was some way off. Prices have been pushed up by the availability of cheap home loans, and would need to fall by 40% to bring the ratio back to the pre-2000 average of 3.5 times earnings, it added. During the financial crisis, banks and building societies withdrew from lending, particularly to borrowers with small deposits.

But since then, the government’s funding for lending scheme made loans cheaper for borrowers with substantial equity, and then help to buy brought back 95% mortgages. Lenders are now cutting ratesand easing lending criteria. Fathom said this cheap borrowing had been the biggest driver for demand for homes. “Since 2013, the demand for housing has been turbocharged by chancellor [George] Osborne’s help-to-buy policy and the search for yield – which has resulted in the accumulation of housing wealth as an investment alternative for low-yielding financial assets,” it said. “As a consequence, house prices are now close to an all-time high of more than six times disposable income.”

The firm said couples buying together were increasingly taking on large loans relative to their income. Before the crisis fewer than 30% of joint mortgages were taken at more than 2.75 times income , but now that proportion has risen to more than a third. Fear of destabilising the “fragile arithmetic” that underpinned the housing market meant the Bank of England was unlikely to increase the base rate from its current record low of 0.5% until at least 2018, it said, regardless of the EU referendum result. “If it were to tighten Bank rate, it could trigger a rapid correction in the UK housing market and compound the slowdown in economic growth,” it said.

“Making Brexit a success will be the end of the EU. It cannot happen.” Brexit, period, will be the end.

• Paris and Berlin Ready ‘Plan B’ For Life After Brexit (FT)

European leaders have stepped-up secret discussions about a future union without Britain, drawing-up a “plan-B” focused on closer security and defence co-operation in the event of a UK vote to leave the EU. At several overlapping meetings in recent weeks — in Hanover, Rome and Brussels — EU leaders and their most trusted aides have discussed how to mount a common response to Brexit, which would be the bloc’s biggest setback in its 60-year history. More than a dozen politicians and officials involved at various levels have sketched out to the Financial Times the ideas for concerted action to “double down on the irreversibility of our union” — as well as the many internal divisions that stand in their way.

Rather than attempt a sudden lurch to integrate the eurozone, Chancellor Angela Merkel and President François Hollande are instead eyeing a push to deepen security and defence co-operation, a less contentious initiative that has appeal beyond the 19-member euro area. Foremost is the challenge of managing expected financial and political turmoil in the aftermath of a Brexit vote. Beyond the first statements to reassure markets, officials expect a special gathering of EU leaders — without Britain — to discuss the bloc’s response. A summit of all 28 leaders is already scheduled for June 28-29. “Everybody will say: ‘We’re sorry, this is a historical disaster but now we have to move on.’ And then they will say ‘OK, David [Cameron], goodbye, because now we have to meet as 27 leaders,’” said one senior diplomat intimately involved in the planning.

“That will be rather a decisive moment: will the 27 find the energy, the convergence of views to define a common agenda or whether it will be only the 19?” French officials are wary of Brexit contagion spreading to other member states and the lift it would provide to anti-EU insurgents like the National Front’s Marine Le Pen. They are determined to send a tough and punitive message to show divorce will be costly for Britain. “Playing down or minimising the consequences would put Europe at risk,” said one senior French official. “The principle of consequences is very important — to protect Europe.” Another leading European politician central to the Plan B process said: “Making Brexit a success will be the end of the EU. It cannot happen.”

There are a few smart people working at the IMF. But they don’t make policy. Neoliberals do.

• Neoliberalism Increases Inequality and Stunts Economic Growth: IMF (Ind.)

Key parts of neoliberal economic policy have increased inequality and risk stunting economic growth across the globe, economists at the IMF have warned. Neoliberalism – the dominant economic ideology since the 1980s – tends to advocate a free market approach to policymaking: promoting measures such as privatisation, public spending cuts, and deregulation. It is generally antipathetic to the public sector and believes the private sector should play a greater role in the economy. The ideology was initially championed by Margaret Thatcher and Ronald Reagan in Britain and America, but was ultimately also adopted by centre-left parties worldwide, under “third way” figures like Tony Blair.

The approach has long been the target of criticism from the radical left and parts of the reactionary right – but has been endorsed as common sense by centrist parties across the world for decades. Now a paper published in June 2016’s issue of the IMF’s Finance and Development journal warns that, after nearly forty years of neoliberalism, the approach is jeopardising the future of the world economy. “Instead of delivering growth, some neoliberal policies have increased inequality, in turn jeopardising durable expansion,” the senior IMF economists who drew up the paper said. The authors say that while the liberalisation of trade has helped lift people out of poverty in the developed world and some privatisations have raised efficiency, other aspects of the policy platform had seriously misfired.

“There are aspects of the neoliberal agenda that have not delivered as expected,” they said, focusing specifically on austerity and the freedom of capital to move across borders. “The benefits in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries. “The costs in terms of increased inequality are prominent. Such costs epitomize the trade-off between the growth and equity effects of some aspects of the neoliberal agenda. “Increased inequality in turn hurts the level and sustainability of growth. Even if growth is the sole or main purpose of the neoliberal agenda, advocates of that agenda still need to pay attention to the distributional effects.”

They go on to say that throwing open national borders to multinational corporations has had “uncertain” growth benefits but quite clear costs – due to “increased economic volatility and crisis frequency” which they say is more evident under neoliberalism. On the issue of austerity, the authors say there is strong evidence that there is no reason for countries like Britain to inflict austerity on themselves. “Austerity policies not only generate substantial welfare costs due to supply-side channels, they also hurt demand – and thus worsen employment and unemployment,” they say. “In sum, the benefits of some policies that are an important part of the neoliberal agenda appear to have been somewhat overplayed.”

“During the Middle Ages, avarice had been considered to be among the most mortal of the seven deadly sins..”

• How the Deadly Sin of Avarice Was Rehabilitated as Self Interest (Evon.)

In the aftermath of the stock market crash of 1987, the New York Times headlined an editorial “Ban Greed? No: Harness It,” It continued: “Perhaps the most important idea here is the need to distinguish between motive and consequence. Derivative securities attract the greedy the way raw meat attracts piranhas. But so what? Private greed can lead to public good. The sensible goal for securities regulation is to channel selfish behavior, not thwart it.” The Times, surely unwittingly, was channeling the 18th century philosopher David Hume: “Political writers have established it as a maxim, that in contriving any system of government . . . every man ought to be supposed to be a knave and to have no other end, in all his actions, than his private interest. By this interest we must govern him, and, by means of it, make him, notwithstanding his insatiable avarice and ambition, cooperate to public good.”

The idea that base motives could be harnessed for the public good is what I term economic alchemy. And in Hume’s time it was definitely a new way of thinking about how society could be governed. During the Middle Ages, avarice had been considered to be among the most mortal of the seven deadly sins, a view that became more widespread with the expansion of commercial activity after the twelfth century. So it is surprising that self-interest would eventually be accepted a respectable motive, and even more surprising that this change owed little to the rise of economics, at least at first. How this came about, you will see, is a remarkable story, one that is finally running its course in light of mounting evidence not only that people are not really all that knavish, but also that treating citizens as if they were knaves may lead them to act is if they really were knaves! But I am getting ahead of the story.

It all began in the sixteenth century with Niccolò Machiavelli. “Anyone who would found a republic and order its laws” he wrote in his Discourses, “must assume that all men are wicked [and] . . . never act well except through necessity . . . It is said that hunger and poverty make them industrious, laws make them good.” Hume, it seems was channeling Machiavelli! It was the shadow of war and disorder that made self-interest an acceptable basis of good government. During the seventeenth century, wars accounted for a larger share of European mortality than in any century for which we have records, including what Raymond Aron called “the century of total war,” which happily is now finished.

Writing after a decade of warfare between English parliamentarians and royalists, Hobbes (in 1651) sought to determine “the Passions that encline men to Peace” and found them in “Feare of Death; Desire of such things as are necessary to commodious living; and a Hope by their Industry to obtain them.” Knaves might be preferable to saints or at least likely to be more harmless. The year before Adam Smith wrote in his Wealth of Nations (1776) about how the self-interest of the butcher, the brewer, and the baker would put our dinner on the table, James Boswell’s Dr. Johnson gave Homo economicus a different endorsement: “There are few ways in which a man can be more innocently employed than in getting money.”

“[One] great myth we’re seeing play out is that of Obama as some kind of peaceful guy who’s trying to get rid of nuclear weapons. He’s the biggest nuclear warrior there is. He’s committed us to a ruinous course of spending a trillion dollars on more nuclear weapons. Somehow, people live in this fantasy that because he gives vague news conferences and speeches and feel-good photo-ops that somehow that’s attached to actual policy. It isn’t.”

• Silencing the United States as It Prepares for War (Pilger)

Returning to the United States in an election year, I am struck by the silence. I have covered four presidential campaigns, starting with 1968; I was with Robert Kennedy when he was shot and I saw his assassin, preparing to kill him. It was a baptism in the American way, along with the salivating violence of the Chicago police at the Democratic Party’s rigged convention. The great counter revolution had begun. The first to be assassinated that year, Martin Luther King, had dared link the suffering of African-Americans and the people of Vietnam. When Janis Joplin sang, “Freedom’s just another word for nothing left to lose”, she spoke perhaps unconsciously for millions of America’s victims in faraway places.

“We lost 58,000 young soldiers in Vietnam, and they died defending your freedom. Now don’t you forget it.” So said a National Parks Service guide as I filmed last week at the Lincoln Memorial in Washington. He was addressing a school party of young teenagers in bright orange T-shirts. As if by rote, he inverted the truth about Vietnam into an unchallenged lie. The millions of Vietnamese who died and were maimed and poisoned and dispossessed by the American invasion have no historical place in young minds, not to mention the estimated 60,000 veterans who took their own lives. A friend of mine, a marine who became a paraplegic in Vietnam, was often asked, “Which side did you fight on?” A few years ago, I attended a popular exhibition called “The Price of Freedom” at the venerable Smithsonian Institution in Washington.

The lines of ordinary people, mostly children shuffling through a Santa’s grotto of revisionism, were dispensed a variety of lies: the atomic bombing of Hiroshima and Nagasaki saved “a million lives”; Iraq was “liberated [by] air strikes of unprecedented precision”. The theme was unerringly heroic: only Americans pay the price of freedom. The 2016 election campaign is remarkable not only for the rise of Donald Trump and Bernie Sanders but also for the resilience of an enduring silence about a murderous self-bestowed divinity. A third of the members of the United Nations have felt Washington’s boot, overturning governments, subverting democracy, imposing blockades and boycotts. Most of the presidents responsible have been liberal – Truman, Kennedy, Johnson, Carter, Clinton, Obama.

The breathtaking record of perfidy is so mutated in the public mind, wrote the late Harold Pinter, that it “never happened …Nothing ever happened. Even while it was happening it wasn’t happening. It didn’t matter. It was of no interest. It didn’t matter … “. Pinter expressed a mock admiration for what he called “a quite clinical manipulation of power worldwide while masquerading as a force for universal good. It’s a brilliant, even witty, highly successful act of hypnosis.”

Is Russia the only party to turn to?

• ISIS Advance Traps 165,000 Syrians at Closed Turkish Border (HRW)

There are two walls on the Turkey-Syria border. One is manned by Turkish border guards enforcing Turkey’s 15 month-old border closure who, according to witnesses, have at times shot at and assaulted Syrian asylum seekers as they try to reach safety in Turkey – abuses strongly denied by the Turkish government. The other is a wall of silence by the rest of the world, including the United Nations, which has chosen to turn a blind eye to Turkey’s breach of international law which prohibits forcing people back to places, including by rejecting them at the border, where their lives or freedom would be threatened. Both walls are trapping 165,000 displaced Syrians now scattered in overcrowded informal settlements and fields just south of Turkey’s Öncupınar/Bab al-Salameh border crossing and in and around the nearby Syrian town of Azaz.

In April, 30,000 of them fled ISIS advances on about 10 informal displacement camps to the east of Azaz, which came under ISIS attack, and one of which has since been hit by an airstrike that killed at least 20 people and injured at least 37 more. Turkish border guards shot at civilians fleeing ISIS and approaching the border. Now aid agencies operating in the area say that between May 24 and 27, another 45,000 fled a new ISIS assault on the area east of Azaz and are now stuck in and around Azaz too. Aid agencies say there is no question all 165,000 would seek asylum in Turkey if the border were open to them.

It’s Not The Greeks Who Failed, It’s The EU

Jan 262015

January 26, 2015 Posted by Raúl Ilargi Meijer at 11:35 pm Finance Tagged with: Chicago School, EU, neoliberalism, Steve Keen, Syriza 9 Responses »

Matson Aircraft refueling at Semakh, British Mandate Palestine 1931

In what universe is it a good thing to have over half of the young people in entire countries without work, without prospects, without a future? And then when they stand up and complain, threaten them with worse? How can that possibly be the best we can do? And how much worse would you like to make it? If a flood of suicides and miscarriages, plummeting birth rates and doctors turning tricks is not bad enough yet, what would be?

If you live in Germany or Finland, and it were indeed true that maintaining your present lifestyle depends on squeezing the population of Greece into utter misery, what would your response be? F##k ’em? You know what, even if that were so, your nations have entered into a union with Greece (and Spain, and Portugal et al), and that means you can’t only reap the riches on your side and leave them with the bitter fruit. That would make that union pointless, even toxic. You understand that, right?

Greece is still an utterly corrupt country. Brussels knows this, but it has kept supporting a government that supports the corrupt elite, tried to steer the Greeks away from voting SYRIZA. Why? How much does Brussels like corrupt elites, exactly? The EU, and its richer member nations, want Greece to cut even more, given the suicides, miscarriages, plummeting birth rates and doctors turning tricks. How blind is that? Again, how much worse does it have to get?

Does the EU have any moral values at all? And if not, why are you, if you live in the EU, part of it? Because you don’t have any, either? And if you do, where’s your voice? There are people suffering and dying who are part of a union that you are part of. That makes you an accomplice. You can’t hide from that just because your media choose to ignore your reality from you.

And it doesn’t stop there. It’s not just a lack of morals. The powers that be within the EU deliberately unleashed shock therapy on Greece – helped along by Goldman Sachs and the IMF, granted -. All supra-national organizations tend towards zero moral values. It’s inherent in their structures. We have NATO, IMF, World Bank, EU, and there’s many more. It’s about the lack of accountability, and the attraction that very lack has for certain characters. Flies and honey.

So that’s where I would tend to differ from people like Alexis Tsipras and Yanis Varoufakis, the man seen as SYRIZA’s new finance minister, and also the man who last night very graciously, in the midst of what must have been a wild festive night in Athens, responded to my congratulations email, saying he knows what Dr Evil Brussels is capable of. I don’t see trying to appease Brussels as a successful long term move, and I think Athens should simply say thanks, but no, thanks. But I’m a writer in a glass tower, and they have to face the music, I know.

But let’s get a proper perspective on this. And for that, first let’s get back to Steve Keen (you now he’s a personal friend of The Automatic Earth). Here’s what I think is important. His piece last week lays the foundation for SYRIZA’s negotiations with the EU better than anything could. Steve blames the EU outright for the situation Greece is in. Let’s see them break down the case he makes. And then talk.

It’s All The Greeks’ Fault

Politically paralyzed Washington talked austerity, but never actually imposed it. So who was more successful: the deliberate, policy-driven EU attempt to reduce government debt, or the “muddle through” USA? [..]muddle through was a hands-down winner: the USA’s government debt to GDP ratio has stabilized at 90% of GDP, while Spain’s has sailed past 100%. The USA’s macroeconomic performance has also been far better than Spain’s under the EU’s policy of austerity.

[..] simply on the data, the prima facie case is that all of Spain’s problems – and by inference, most of Greece’s – are due to austerity, rather than Spain’s (or Greece’s) own failings. On the data alone, the EU should “Cry Uncle”, concede Greece’s point, stop imposing austerity, and talk debt-writeoffs – especially since the Greeks can argue that at least part of its excessive public debt ratio is due to the failure of the EU’s austerity policies to reduce it.

[..] why did austerity in Europe fail to reduce the government debt ratio, while muddle-through has stabilized it in the USA? .. the key factor that I consider and mainstream economists ignore—the level and rate of change of private debt. The first clue this gives us is that the EU’s pre-crisis poster-boy, Spain, had the greatest growth in private debt of the three—far exceeding the USA’s. Its peak debt level was also much higher—225% of GDP in mid-2010 versus 170% of GDP for the USA in 2009

[..] the factor that Greece and Spain have in common is that the private sector is reducing its debt level drastically – in Spain’s case by over 20% per year. The USA, on the other hand, ended its private sector deleveraging way back in 2012. Today, Americans are increasing their private debt levels at a rate of about 5% of GDP per year—well below the peak levels prior to the crisis, but roughly in line with the rate of growth of nominal GDP.

[..] the conclusion is that Greece’s crisis is the EU’s fault, and the EU should “pay” via the debt write-offs that Syriza wants – and then some.

That’s not the attitude Berlin and Brussels go into the talks with Tsipras and Varoufakis with. They instead claim Greece owes them €240 billion, and nobody ever talks about what EU crap cost the PIIGS. But Steve is not a push-over. He made Paul Krugman look like a little girl a few years ago, when the latter chose to volunteer, and attack Steve on the issue, that – in a few words – banks have no role in credit creation.

Back to Yanis. The right wing Daily Telegraph, of all places, ran a piece today just about fully – and somewhat strangely – endorsing our left wing Greek economist. Ain’t life a party?

Yanis Varoufakis: Greece’s Future Finance Minister Is No Extremist

Syriza, a hard left party, that outrightly rejects EU-imposed austerity, has given Greek politics its greatest electoral shake-up in at least 40 years.

Hold, wait, don’t let’s ignore that 40 years ago is when Greece ended a military dictatorship. Which had been endorsed by, you know, NATO, US … So “greatest electoral shake-up” is a bit of a stretch. To say the least. There was nothing electoral about Greece pre-1975.

You might expect the frontrunner for the role of finance minister to be a radical zealot, who could throw Greece into the fire He is not. Yanis Varoufakis, the man tipped to be at the core of whatever coalition Syriza forges, is obviously a man of the left. Yet through his career, he has drawn on some of the most passionate advocates of free markets. While consulting at computer games company Valve, Mr Varoufakis cited nobel-prize winner Friedrich Hayek and classical liberal Adam Smith, in order to bring capitalism to places it had never touched.

[..] while Greece’s future minister is a fan of markets in many contexts, it is apparent that he remains a leftist, and one committed to the euro project. Speaking to the BBC on Monday, he said that it would “take an eight or nine year old” to understand the constraints which had bound Greece up since it “tragically” went bankrupt in 2010. “Europe in its infinite wisdom decided to deal with this bankruptcy by loading the largest loan in human history on the weakest of shoulders, the Greek taxpayer,” he said.

“What we’ve been having ever since is a kind of fiscal waterboarding that have turned this nation into a debt colony,” he added. Greece’s public debt to GDP now stands at an eye watering 175%, largely the result of output having fallen off a cliff in the past few years. Stringent austerity measures have not helped, but instead likely contributed.

That last line, from a right wing paper? That’s the same thing Steve Keen said. Even the Telegraph says Brussels is to blame.

It will likely be Mr Varoufakis’ job to make the best of an impossible situation. The first thing he will seek to tackle is Greece’s humanitarian crisis. “It is preposterous that in 2015 we have people that had jobs, and homes, and some of them had shops until a couple of years ago, that are now sleeping rough”, he told Channel 4. The party may now go after multinationals and wealthy individuals that it believes do not pay their way.

[..]The single currency project has fallen under heavy criticism. The economies that formed it were poorly harmonised, and no amount of cobbling together could make the end result appear coherent. Michael Cembalest, of JP Morgan, calculated in 2012 that a union made up of all countries beginning with the letter “M” would have been more workable. The same would be true of all former countries of the Ottoman Empire circa 1800, or of a reconstituted Union of Soviet Socialist Republics, he found.

That’s just brilliant, great comparisons. Got to love that. And again, it reinforces my idea that the EU should simply be demolished, and Greece should not try and stay within eurozone parameters. It may look useful now, but down the line the euro has no future. There’s too much debt to go around. But for SYRIZA, I know, that is not the most practical stance to take right now. The demise of the euro will come in and of itself, and their immediate attention needs to go to Greece, not to some toxic politics game. Good on ’em. But the fact remains. The euro’s done. And SYRIZA, whether it likes it or not, is very much an early warning sign of that.

[..] A disorderly break up would almost certainly result in a merciless devaluation of whatever currency Greece launched, and in turn a default on debt obligations. The country would likely be locked out of the capital markets, unable to raise new funds. As an economy, Greece has only just begun to see output growth return. GDP still remains more than 26% below the country’s pre-crisis peak. A fresh default is not the lifeline that Greece needs.

Instead, it will be up to a Syriza-led government to negotiate some sort of debt relief, whether that be in the form of a restructuring, a deal to provide leeway on repayment timings, or all out forgiveness. It will be up to Mr Varoufakis – if he is selected as finance minister – and newly sworn in Prime Minister Alex Tspiras to ensure that this can be achieved without Greece getting pushed out of the currency bloc in the process.

And whaddaya know, Steve Keen finishes it off too. Complete with history lessons, a take-and-shake down of failed economic policies, and a condemnation of the neo-liberal politics that wrecked Greek society so much they voted SYRIZA. It’s not rocket politics…

Dawn Of A New Politics In Europe?

About 40 years ago, one of Maggie Thatcher’s chief advisors remarked that he wouldn’t be satisfied when the Conservative Party was in government: he would only be happy when there were two conservative parties vying for office. He got his wish of course. The UK Labour Party of the 1950s that espoused socialism gave way to Tony Blair’s New Labour, and the same shift occurred worldwide, as justified disillusionment about socialism as it was actually practiced—as opposed to the fantasies about socialism dreamed up by 19th century revolutionaries—set in.

Parties to the left of the political centre—the Democrats in the USA, Labour in the UK, even the Socialist Party that currently governs France—followed essentially the same economic theories and policies as their conservative rivals.

Differences in economic policy, which were once sharp Left-anti-market/Right-pro-market divides, became shades of grey on the pro-market side. Both sides of politics accepted the empirical fact that market systems worked better than state-run systems. The differences came down to assertions over who was better at conducting a pro-market economic agenda, plus disputes over the extent of the government’s role in the cases where a market failure could be identified.

So how do we interpret the success of Syriza in the Greek elections on Sunday, when this avowedly anti-austerity, left-wing party toppled the left-Neoliberal Pasok and right-Neoliberal New Democracy parties that, between them, had ruled Greece for the previous 4 decades? Is it a return to the pro-market/anti-market divides of the 1950s? No—or rather, it doesn’t have to be.

It can instead be a realisation that, though an actual market economy is indeed superior to an actual centrally planned one, the model of the market that both sides of politics accepted was wrong. That model—known as Neoliberalism in political circles, and Neoclassical Economics in the economic ones in which I move—exalts capitalism for a range of characteristics it doesn’t actually have, while ignoring characteristics that it does have which are the real sources of both capitalism’s vitality and its problems.

Capitalism’s paramount virtues, as espoused by the Neoliberal model of capitalism, are stability and efficiency. But ironically, the real virtue of capitalism is its creative instability—and that necessarily involves waste rather than efficiency. This creative instability is the real reason it defeated socialism, while simultaneously one of the key reasons socialism failed was because of its emphasis upon stability and efficiency.

[..] real-world capitalism trounced real-world socialism because of its real-world strength—the creative instability of the market that means to survive, firms must innovate—and not because of the Neoliberal model that politicians of both the Left and the Right fell for after the collapse of socialism.

Neoliberalism prospered in politics for the next 40 years, not because of what it got right about the economy (which is very little), but because of what it ignored—the capacity of the finance sector to blow a bubble that expanded for almost 40 years, until it burst in 2007. The Neoliberal model’s emphasis on making the government sector as small as possible could work while an expanding finance sector generated the money needed to fuel economic prosperity. When that bubble burst, leaving a huge overhang of private debt in its wake, Neoliberalism led not to prosperity but to a second Great Depression.

The Greeks rejected that false model of capitalism on Sunday—not capitalism itself. The new Syriza-led Government will have to contend with countries where politicians are still beholden to that false model, which will make their task more difficult than it is already. But Syriza’s victory may show that the days of Neoliberalism are numbered. Until Sunday, any party espousing anything other than Neoliberalism as its core economic policy could be slaughtered in campaigning by pointing out that its policies were rejected by economic authorities like the IMF and the OECD.

Syriza’s opponents did precisely that in Greece—and Syriza’s lead over them increased. This is the real takeaway from the Greek elections: a new politics that supports capitalism but rejects Neoliberalism is possible.

All Europeans, and Americans too, must now support SYRIZA. It’s not only the only hope for Greece, it is that for the entire EU. SYRIZA breaks the mold. Greeks themselves would be terribly stupid to start taking their money out of their accounts and precipitating bank runs. That’s what the EU wants you to do, create mayhem and discredit the younger generation that took over this weekend.

It’s going to be a bitter fight. The entrenched powers, guaranteed, won’t give up without bloodshed. SYRIZA stands for defeating a model, not just a government. Most of Europe today is in the hands of technocrats and their ilk, it’s all technocrats and their little helpers. And it’s no just that, it’s that the neo-liberal Brussels crowd used Athens as a test case, in the exact same way Milton Friedman and his Chicago School used the likes of Videla and Pinochet to make their point, and tens of thousands got murdered in the process.

It’s important that we all, European or not, grasp how lacking in morality the entire system prevalent in the west, including the EU, has become. This shows in East Ukraine, where sheer propaganda has shaped opinions for at least a full year now. It’s not about what is real, it’s about what ‘leaders’ would like you to think and believe. And this same immorality has conquered Greece too; there may be no guns, but there are plenty victims.

The EU is a disgrace, a predatory beast unleashed upon all corners of Europe that resist central control and, well, debt slavery really, if you live on the wrong side of the tracks.

SYRIZA may be the last chance Europe has to right its wrongs, before fighting in the streets becomes an everyday reality. Before we get there, and I don’t know that we can prevent it, hear Steve Keen: it’s not the Greeks that screwed up, it’s the EU. But they would never ever admit to that.