oversupply Archives - The Automatic Earth

In the middle of a prolonged period of negative real interest rates and loose monetary policy aimed at managing inflation and helping economies, fears are rising that asset bubbles are being created. “We’ve lost our way so we look to central banks, who give us massively loose monetary policy and that’s the little bubble we’re living in,” David Bloom, head of currency strategy at HSBC, told CNBC. New records are constantly being set in the markets, with Thursday’s close of the S&P, up 0.47 percent at 2,185.79, yet another new top. This is happening despite low productivity and growth in the U.S. economy. Analysts at UBS see “scope for the markets to run further still over the near-term” because of central banks’ policies in the developed world.

And it’s not just their own economies which are being helped by these actions. Emerging markets are benefitting too, as investors search for better returns on their money than in the low-growth developed economies and safe havens like U.K. bonds (gilts) and U.S. bonds (Treasurys). “All markets are running – that’s what happens when you have ultra-loose monetary policy and the central banks are handing over money,” Bloom said. “QE distorts markets completely.” Asset classes which are usually closely correlated have lost their usual connections. Examples include cash and equities, both at record highs despite one usually being strong while the other is weak, and oil and gold, which usually move together as they are both pegged to the U.S. dollar, but have diverged as investors pile in to gold.

Falling land ‘value’ is one thing, falling income is another.

• US Farmland Bubble Bursts As Ag Credit Conditions Crumble (ZH)

Aside from a brief pause during the “great recession” of 2009, Midwest farmland prices have been bubbling up for over a decade with annual price increases of 15%-30% in many years. Private Equity and low interest rates no doubt played a role in creating the farmland bubble as “excess cash on the sidelines” sought out investments in hard assets. No matter the cause, data continues to indicate that the farmland bubble is bursting. 2Q 2016 agricultural updates from the Federal Reserve Banks of Chicago, Kansas City and St. Louis indicate continued income, credit and farmland price deterioration for Midwest farmers. Lender surveys also suggest that as many as 30% of Midwest farmers are having problems paying loan balances.

Declining asset values and incomes have also caused banks to tighten lending standards which has only served to accelerate the decline. In Kansas’ 10th District (which includes MO, OK, KS, NE), values of non-irrigated and irrigated cropland declined 3% and 5%, respectively, in 2Q 2016. In fact, 2Q 2016 marks the 6th consecutive quarter of YoY declines for irrigated cropland values. Between 2002 to 2014, the value of both irrigated and non-irrigated cropland declined in only one other time in 3Q 2009. Farmland prices in Chicago’s 7th District (IL, IN, IA, MI, WI) paint a similar picture. Before price declines in 2014 and 2015, farmland prices in the 7th District had only declined YoY in 4 other years since 1965.

Respondents to the Tenth District Survey of Agricultural Credit Conditions indicated farm income in the quarter continued to tighten. Nearly 75% of surveyed bankers reported farm income was less than a year ago, although the% of bankers that reported weaker farm income declined slightly from the first quarter (Chart 1). Respondents also noted that agricultural producers continued to reduce capital and household spending as profit margins generally remained weak. Bankers also indicated they expect farm income to remain weak in the third quarter. Similar to last year, a significant number of bankers in each District state expect farm income in the third quarter to be less than a year earlier.

Whack-a-mole Beijing-style.

• China Property Oversupply Dampens Growth Outlook (R.)

Growth in China’s property investment slowed over January to July, even as the government scrambled to balance an increasingly stratified sector, clouding the outlook for China’s economic expansion in the second half of the year. Property investment in January-July rose 5.3% from a year earlier, data from the National Bureau of Statistics (NBS) showed on Friday, slowing from an increase of 6.1% in January-June, while property sales by floor area grew 26.4%, down from 27.9%. Some analysts believe an oversupply problem still remains largely unresolved, especially in China’s smaller cities. “Today’s data shows that a nation-wide oversupply problem still exists, which will continue putting downward pressure on future growth,” Wendy Chen, macroeconomist at Nomura told Reuters.

China’s property sector had a hot start to the year after slowing in 2015, as monetary easing and stimulus measures took effect. However, the upward trend in investment and sales is proving to be unsustainable, as more first and second tier cities adopt stiffer measures to dampen fast-rising prices, while smaller Chinese cities struggle to clear overhanging housing inventory. Home price gains also have started to slow, as cities start to tighten policies amid signs of overheating in the largest cities. With property investment growth losing momentum and private investment growth remaining stubbornly sluggish, China’s economic growth outlook for the second half looks increasingly gloomy. “China’s property sector is extremely unbalanced, which leads to more control in overheated first and second tier cities while less developed third and fourth tier cities are struggling to clear inventory,” said Liao Qun, chief economist at CITIC Bank International.

“..non-financial state-owned enterprises accounted for half of bank credit but only a fifth of industrial output..”

• IMF Says China’s Credit Growth Is Unsustainable (R.)

The IMF on Friday said China needed to slow its unsustainable credit growth and stop financing weak firms. China’s corporate debt is still manageable, but at approximately 145% of GDP, it is high by any measure,” said James Daniel, IMF Mission Chief for China, in the fund’s annual review of the country. The IMF has urged China to tackle the root causes of its credit growth risk by easing back on unsustainably high growth targets and lax budget constraints, particularly on local governments and state-owned enterprises. “This in turn requires a comprehensive strategy and decisive measures to address the corporate debt problem,” the IMF’s Daniel said.

China’s non-financial state-owned enterprises accounted for half of bank credit but only a fifth of industrial output, the report said, suggesting non-viable SOEs be liquidated and viable ones restructured. Defaults and downgrades have increased and around 14% of debt was held by firms with profit levels below their interest payments, the report said, with credit growth growing twice as fast as nominal GDP. The report reflected views provided by Chinese policymakers who agreed with the IMF that corporate debt had increased “excessively”. However, they argued China’s large pool of domestic savings, banking system buffers, and continued equity market development would ensure a smooth adjustment, the report said.

Stuffed.

• Negative Rates Reduce Japan Big Banks’ Profits By $2.96 Billion (R.)

Japan’s financial watchdog estimates that negative interest rates under the Bank of Japan’s monetary easing policy will reduce profits for the country’s three big banks by at least 300 billion yen ($2.96 billion) for the year through March 2017, the Nikkei business daily reported on Saturday. The Financial Services Agency (FSA) expressed concern to the BOJ regarding the situation as it sees reduced profits weakening the banks’ ability to extend loans, the Nikkei said. If the BOJ was to take interest rates deeper into negative terrain, the agency reckoned that the banks would suffer substantial further drops in profit as their interest rate income would suffer.

Discussing IMF ‘mistakes’ without paying attention to the victims is dishonest.

• Airing The IMF’s Dirty European Laundry (Eichengreen)

[..] the report goes on to criticise the IMF for acquiescing to European resistance to debt restructuring by Greece in 2010; and for setting ambitious targets for fiscal consolidation – necessary if debt restructuring was to be avoided – but underestimating austerity’s damaging economic effects. More interestingly, the report then asks how the IMF should coordinate its operations with regional bodies such as the European commission and the ECB, the other members of the so-called troika of Greece’s official creditors. The report rejects claims that the IMF was effectively a junior member of the troika, insisting that all decisions were made by consensus.

That is difficult to square with everything we know about the fateful decision not to restructure Greece’s debt. IMF staff favoured restructuring, but the European commission and the ECB, which put up two-thirds of the money, ultimately had their way. He who has the largest wallet speaks with the loudest voice. In other words, there are different roads to “consensus”. The Fund encountered the same problem in 2008, when it insisted on currency devaluation as part of an IMF-EU program for Latvia. In the end, it felt compelled to defer to the EU’s opposition to devaluation, because it contributed only 20% of the funds.

The implication is that the IMF should not participate in a programme to which it contributes only a minority share of the finance, but expecting it to provide majority funding implies the need to expand its financial resources. This is something that the IEO report evidently regarded as beyond its mandate – or too sensitive – to discuss. Was the ECB even on the right side of the table in the European debt discussions? When negotiating with a country, the IMF ordinarily demands conditions of its government and central bank. In its programmes for Greece, Ireland and Portugal, however, it and the central bank demanded conditions of the government. This struck more than a few people as bizarre.

What you can do when you have your own currency.

• UK Treasury To Guarantee Post-Brexit Funding For EU-Backed Projects (G.)

Philip Hammond is to guarantee billions of pounds of UK government investment after Brexit for projects currently funded by the EU, including science grants and agricultural subsidies. The chancellor’s funding commitment is designed to give a boost to the economy in what he expects to be a difficult period after the surprise result of the EU referendum in June. The Treasury is expected to continue its funding beyond the UK’s departure from the EU for all structural and investment fund projects, as long as they are agreed before the autumn statement. If a project obtains EU funding after that, an assessment process by the Treasury will determine whether funding should be guaranteed by the UK government post-Brexit.

Current levels of agriculture funding will also be guaranteed until 2020, when the Treasury says there will be a “transition to new domestic arrangements”. Universities and researchers will have funds guaranteed for research bids made directly to the European commission, including bids to the EU’s Horizon 2020 programme, an €80bn (£69bn) pot for science and innovation. The Treasury says it will underwrite the funding awards, even when projects continue post-Brexit. Hammond said the government recognised the need to assuage fears in industry and in the science and research sectors that funding would be dramatically reduced post-Brexit.

“We recognise that many organisations across the UK which are in receipt of EU funding, or expect to start receiving funding, want reassurance about the flow of funding they will receive,” he said. “The government will also match the current level of agricultural funding until 2020, providing certainty to our agricultural community, who play a vital role in our country.” The chancellor added: “We are determined to ensure that people have stability and certainty in the period leading up to our departure from the EU and that we use the opportunities that departure presents to determine our own priorities.”

You cannot taper a Ponzi scheme.

• The Scandalous Changes To Company Pension Schemes (G.)

A man in his 40s receives a pension projection that tells him his retirement income is going to collapse from the £38,000 he was expecting to £18,000. His company is having to find a sum equal to 45% of his salary to keep the pension scheme going, a crucifying amount for any employer, and the costs will keep on spiralling. It says it has no choice but to slash the scheme to ribbons. This is the sort of dilemma facing the workers, and bosses, of Royal Mail and the Post Office. Strike action is looming – and quite rightly too, because the cuts are equivalent to someone losing £200,000 or even £300,000 over the course of their retirement.

We are about to enter a new era of trench warfare over pensions. The early battles were easy victories for the employers. They decided to close their final-salary schemes to new entrants, but existing workers were protected and were able to carry on chalking up their entitlement to, let’s face it, rather generous retirement payouts. Nobody seemed to care too much about the millennials who were missing out on what their parents took for granted. Next came the more thorny shift from paying out pensions based on final salaries at age 60 or 65 to cheaper ones based on a “career average” salary. Again the employers won, but it was more bruising.

But now we’re moving into far more dangerous territory. The employers have begun to target existing workers, many in their 40s and 50s, who are in these career average schemes, saying: “You can keep what you’ve built up so far, but nothing beyond that.” In pensions terminology it’s called stopping “future accruals”; Royal Mail, the Post Office and Marks & Spencer are all considering it. To these companies it’s a foregone conclusion. They can’t possibly afford 45% of salary as a pension contribution, or in M&S’s case 34%. The snarky retort is that they’ll always find the money to pay silly sums into their chief executive’s pension, but not for the workers.

This is just the last paragraph of another long and detailed piece by Kevin Dowd on Deutsche.

• Is Deutsche Bank Kaputt? (Dowd)

So what’s next for the world’s most systemically dangerous bank? At the risk of having to eat my words, I can’t see Deutsche continuing to operate for much longer without some intervention: chronic has become acute. Besides its balance sheet problems, there is a cost of funding that exceeds its return on assets, its poor risk management, its antiquated IT legacy infrastructure, its inability to manage its own complexity and its collapsing profits — and thepeak pain is still to hit. Deutsche reminds me of nothing more than a boxer on the ropes: one more blow could knock him out. If am I correct, there are only three policy possibilities. #1 Deutsche will be allowed to fail, #2 it will be bailed-in and #3 it will be bailed-out.

We can rule out #1: the German/ECB authorities allowing Deutsche to go into bankruptcy. They would be worried that that would trigger a collapse of the European financial system and they can’t afford to take the risk. Deutsche is too-big-to-fail. Their preferred option would be #2, a bail-in, the only resolution procedure allowed under EU rules, but this won’t work. Authorities would be afraid to upset bail-in-able investors and there isn’t enough bail-in-able capital anyway. Which consideration leads to the policy option of last resort — a good-old bad-old taxpayer-financed bail-out. Never mind that EU rules don’t allow it and never mind that we were promised never again. Never mind, whatever it takes.

“.. it also aims to boost the youth vote by persuading the company developing Pokémon Go in Iceland to turn polling stations into Pokéstops.”

• Polls Suggest Iceland’s Pirate Party May Form Next Government (G.)

One of Europe’s most radical political parties is expected to gain its first taste of power after Iceland’s ruling coalition and opposition agreed to hold early elections caused by the Panama Papers scandal in October. The Pirate party, whose platform includes direct democracy, greater government transparency, a new national constitution and asylum for US whistleblower Edward Snowden, will field candidates in every constituency and has been at or near the top of every opinion poll for over a year. As befits a movement dedicated to reinventing democracy through new technology, it also aims to boost the youth vote by persuading the company developing Pokémon Go in Iceland to turn polling stations into Pokéstops.

“It’s gradually dawning on us, what’s happening,” Birgitta Jonsdottir, leader of the Pirates’ parliamentary group, told the Guardian. “It’s strange and very exciting. But we are well prepared now. This is about change driven not by fear but by courage and hope. We are popular, not populist.” The election, likely to be held on 29 October, follows the resignation of Iceland’s former prime minister, Sigmundur David Gunnlaugsson, who became the first major victim of the Panama Papers in April after the leaked legal documents revealed he had millions of pounds of family money offshore. In the face of some of the largest protests the small North Atlantic island had ever seen, the ruling Progressive and Independence parties replaced Gunnlaugsson with the agriculture and fisheries minister, Sigurdur Johansson, and promised elections before the end of the year.

Founded four years ago by a group of activists and hackers as part of an international anti-copyright movement, Iceland’s Pirates captured five per cent of the vote in 2013 elections, winning three seats in the country’s 63-member parliament, the Althingi. “Then, they were clearly a protest vote against the establishment,” said Eva Heida Önnudóttir, a political scientist at the University of Iceland who compares the party’s appeal to Icelandic voters to that of Spain’s Podemos, or Syriza in Greece. “Three years later, they’ve distinguished themselves more clearly; it’s not just about protest. Even if they don’t have clear policies in many areas, people are genuinely drawn to their principles of transforming democracy and improving transparency.”

Propelled by public outrage at what is widely perceived as endemic cronyism in Icelandic politics and the seeming impunity of the country’s wealthy few, support for the party – which hangs a skull-and-crossbones flag in its parliamentary office – has rocketed. A poll of polls for the online news outlet Kjarninn in late June had the Pirates comfortably the country’s largest party on 28.3%, four points clear of their closest rival, Gunnlaugsson’s conservative Independence party. That lead has since narrowed slightly but most analysts are confident the Pirates will return between 18 and 20 MPs to the Althingi in October, putting them in a strong position to form Iceland’s next government.

“One man told him no one had said a kind word to him in 25 years.”

• An Incredibly Simple Idea To Help The Homeless (WaPo)

Republican Mayor Richard Berry was driving around Albuquerque last year when he saw a man on a street corner holding a sign that read: “Want a Job. Anything Helps.” Throughout his administration, as part of a push to connect the homeless population to services, Berry had taken to driving through the city to talk to panhandlers about their lives. His city’s poorest residents told him they didn’t want to be on the streets begging for money, but they didn’t know where else to go. Seeing that sign gave Berry an idea. Instead of asking them, many of whom feel dispirited, to go out looking for work, the city could bring the work to them.

Next month will be the first anniversary of Albuquerque’s There’s a Better Way program, which hires panhandlers for day jobs beautifying the city. In partnership with a local nonprofit that serves the homeless population, a van is dispatched around the city to pick up panhandlers who are interested in working. The job pays $9 an hour, which is above minimum wage, and provides a lunch. At the end of the shift, the participants are offered overnight shelter as needed. In less than a year since its start, the program has given out 932 jobs clearing 69,601 pounds of litter and weeds from 196 city blocks. And more than 100 people have been connected to permanent employment. “You can just see the spiral they’ve been on to end up on the corner. Sometimes it takes a little catalyst in their lives to stop the downward spiral, to let them catch their breath, and it’s remarkable,” Berry said in an interview.

”They’ve had the dignity of work for a day; someone believed in them today.” Berry’s effort is a shift from the movement across the country to criminalize panhandling. A recent National Law Center on Homelessness & Poverty report found a noticeable increase, with 24% of cities banning it altogether and 76% banning it in particular areas. There is a persisting stigma that people begging for money are either drug addicts or too lazy to work and are looking for an easy handout. But that’s not necessarily the reality. Panhandling is not especially lucrative and it’s demoralizing, but for some people it can seem as if it’s the only option. When panhandlers have been approached in Albuquerque with the offer of work, most have been eager for the opportunity to earn money, Berry said. They just needed a lift. One man told him no one had said a kind word to him in 25 years.

Debt Rattle January 25 2016

Jan 252016

January 25, 2016 Posted by Raúl Ilargi Meijer at 10:48 am Finance Tagged with: Alibaba, China, commodities, Greece, oil, oversupply, plastics, racism, refugees, steel 4 Responses »

Harris&Ewing “Pennsylvania Avenue with snow, Washington, DC” 1918

• Oil Falls 4% On Swelling Oversupply

• Commodities Stocks Sink As Oil Resumes Downward Slide (FT)

• Oil Price Crash Is Completely Changing The Industry’s Landscape (BIA)

• US Short Sellers Target China’s Alibaba (BBG)

• China Pledges Steel, Coal Capacity Cuts in Supply-Side Reforms (BBG)

• China’s Migrants Go Home – And Stay There (BBG)

• China’s Central Bank Prioritizes Strong Yuan (WSJ)

• The East Knows The West Is Bankrupt (Holter)

• Don’t Forget the Irish When Looking at New Risks in Euro Region (BBG)

• There’s a Giant Elephant at the Bank of England (BBG)

• The End Of Economic Growth (Robert Gordon)

• One Year On, Syriza Has Sold Its Soul For Power (Lapavitsas)

• Greece On The Brink Of ‘Education Tragedy’ (EurActiv)

• We Produced Enough Plastics Since WWII To Cover The Entire Earth (Guardian)

• Racism ‘Is At The Heart Of The Australian Dream’ (Guardian)

• Merkel’s Party, Sliding In Polls, Weighs German ‘Border Centres’ (Reuters)

• Greek Islanders To Be Nominated For Nobel Peace Prize (Observer)

• Sealing Greek Sea Border Is Impossible (AP)

Recovery, anyone? The new slump has smoothed a bit as of now.

• Oil Falls 4% On Swelling Oversupply

Oil prices fell 4% on Monday as Iraq announced record-high oil production feeding into a heavily oversupplied market, wiping out much of the gain made in one of the biggest-ever daily rallies last week. Brent crude, the global benchmark, was down $1.35 at $30.83 a barrel at 0851 GMT, losing more than 4% from Friday’s closing price, when Brent surged 10%. U.S. crude traded $1.15 lower at $31.04 a barrel, regaining its unusual premium to Brent prices. Iraq’s oil ministry told Reuters on Monday oil output had reached a record high in December. Its fields in the central and southern region produced as much as 4.13 million barrels a day, the government said.

“The news that Iraq has probably hit another record builds on the oversupply sentiment,” said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam. “The oversupply will keep markets depressed and prices low, and on the other hand short positions are in excessive territory,” he said. Indonesia’s OPEC governor said that support among OPEC for taking steps to prop up crude prices is slim, with only one OPEC country supporting an emergency meeting over the matter.

Bad Hair Groundhog Day.

• Commodities Stocks Sink As Oil Resumes Downward Slide (FT)

Oil prices are sinking again, fast, and miners and commodities stocks are once again finding themselves in that all-too familiar position at the bottom of the FTSE 100. As fastFT reported earlier, oil prices are once again heading south after a short-lived rally last week. Brent crude is falling 3.7% at publication time to $30.99 a barrel while WTI, the US benchmark, is down 3.91% at $30.93 a barrel. There had been hopes that the worst may be over for oil prices but clearly the market didn’t get the memo today. Miners and commodities stocks are once again having another bad today.

At publication time:
Anglo American is 3.4% lower at 219p
BHP Billiton is down 2.6% at 632.1p
Rio Tinto is losing 2.6% to £16.10
Copper miner Antofagasta is off 2.4% at 362.5p.
BP is dropping 2.4% to 344.2p.

A worldwide event.

• Oil Price Crash Is Completely Changing The Industry’s Landscape (BIA)

The crash in oil, which has seen the price of crude fall by more than 75% in the last 18 months, is fundamentally changing the landscape of the resources industry in the UK as big numbers of oil firms go into insolvency, or look to take advantage of rivals’ weaknesses and increase their M&A activity. A survey released by accountancy firm Moore Stephens this week showed that the number of UK-based oil and gas companies folding jumped by more than 55% in 2015, with 28 firms entering insolvency, compared to 18 over the course of 2014. In its report, Moore Stephens called the rise in failing oil and gas firms “an almost inevitable result” of the crash in the price of oil, and said that upwards of £140 billion ($200 billion) worth of projects are likely to have been cancelled thanks to the crash.

Moore Stephens’ head of restructuring and insolvency, Jeremy Willmont said: “Oil and gas service companies expanded their businesses over the last decade based on an oil price well above the current one.” “The pain caused by the oil price fall has translated into a rising tide of financial distress across the sector,” he added. The contrast between 2015, and 2010, when oil was on its way up from its last crash in 2008, is pretty stark. According to the research, just four oil and gas companies went under that year. Essentially, the number of oil companies going bust has increased by 600% in just five years. A separate survey, released by law firm Pinsent Mason, said that 90% of those who responded expect the number of M&A deals to rise in 2016, while 30% think that there’ll be a “major surge” and around two thirds believe that Britain’s oil and gas sector is a good area for acquisitions.

In the last year or so, the number of new oil projects has slowed significantly as fewer and fewer can be profitable thanks to the rock bottom price of the commodity. This is particularly true in Britain, where producing a barrel of oil now costs more than double its market price. 2015 was a record breaking year for mergers and acquisitions, with more than $5 trillion worth of deals taking place last year, largely driven by big healthcare deals, like the join up of pharma firms Pfizer and Allergan. One of the most prominent deals, which is set to be completed pretty soon, is the merger between BG Group and Shell, both FTSE100 listed oil and gas giants.

A very strong indicator of just how badly China is doing. Alibaba was supposed to be bigger than Apple, Amazon.

• US Short Sellers Target China’s Alibaba (BBG)

U.S. short sellers have pushed bets against Alibaba to the highest in more than 14 months on concern that China’s deepest economic slowdown since 1990 will only get worse. Short interest in China’s biggest online retailer surged to 7.5% of shares outstanding on Jan. 21, the highest since November 2014, according to data compiled by Markit and Bloomberg. That is more than double from a Dec. 1 low. Bearish bets on rival JD.com have hovered around 2% since last month. Pessimists are once again taking aim at Alibaba – a bellwether for U.S. investor sentiment on China – as mainland stocks entered a bear market last week. Those wagers are already starting to pay off as a selloff since the start of the year sent the American depositary receipts of Alibaba down more than 13%.

Investors see Alibaba as a stock that reflects the state of the Chinese economy, said Henry Guo at Summit Research, who has a buy rating on the stock. “With China’s economic outlook worsening, that’s just an easy way for people to have short China exposure,”
China’s top leadership has signaled it may accommodate more economic slackness as officials tackle delicate tasks such as reducing excess capacity. The world’s second-largest economy will slow to 6.5% this year and 6.3% next year, according to the median of economist estimates. At a corporate level, counterfeit products and accounting frauds of Alibaba are also on the mind of investors since the company’s record 2014 debut on the New York Stock Exchange. Kynikos Associates LP founder Jim Chanoswarned against the stock in November, according to a CNBC report. In December, Russian billionaire Alisher Usmanov said he has started to sell his stake in the e-commerce giant.

How to make trouble sound like ‘I meant to do that’.

• China Pledges Steel, Coal Capacity Cuts in Supply-Side Reforms (BBG)

China is targeting further cuts in crude steel production capacity by as much as 150 million tons and “large scale” reductions in coal output as part of supply-side measures aimed at curbing overcapacity and excess labor in state-owned industries. The country has lowered steel production by about 90 million tons “in recent years” and will push to cut a further 100 million to 150 million tons, while “strictly controlling” steel capacity increases and halting new coal mine approvals, according to a Sunday statement on the Chinese government’s website, citing a State Council meeting on Jan. 22 chaired by Premier Li Keqiang. No time line was mentioned.

China has vowed in the past to curb capacity in industries such as coal and steel as the world’s second-largest economy slows amid a shift towards consumer-led growth. Still, it has struggled to meet stated coal capacity limits spelled out in the 12th Five-Year plan that ended last year, according to Bloomberg Intelligence. Coal demand in the country is also declining with the government keen to curb pollution. The government plans to set up a fund to help coal miners and steelmakers reduce their workforce and dispose of bad assets, Li said during a meeting in Shanxi province, according to a Jan. 7 China Central Television report. The financial help is dependent on the companies cutting capacity, he said.

As part of re-balancing the economy towards domestic consumption, the country’s cabinet also pledged to ease conditions for rural-to-urban migration and expand “new urbanization” trials to more regions, the government said in Sunday’s statement. China will “more aggressively develop” small- and medium-sized cities and give more administrative authority to areas with populations of more than 100,000, the government said. China will also expand shantytown development in major cities, while reducing the barriers to entry to attract private capital investment in transportation, underground pipe networks and other forms of construction, according to the statement.

Manufacturing jobs are going going gone.

• China’s Migrants Go Home – And Stay There (BBG)

Every year, tens of millions of China’s 246 million migrants return home to celebrate the Chinese New Year. It’s the world’s biggest annual migration, and it typically goes off smoothly. This year, however, something’s amiss. Although the holiday doesn’t start until Feb. 8, millions of workers – especially in the construction and electrical-appliance industries – have already returned home due to the country’s slowing economy. For local governments across China, this is raising a tough question: What happens if these laborers don’t go back to work after the holiday? The concern isn’t a new one. In early 2009, 20 million unemployed migrants returned home for the holidays in the wake of the global financial crisis, raising fears of social unrest. Labor riots did, in fact, take place.

But most of the unemployed appear to have gotten back to work when China’s monster stimulus kicked in later that year. This time is notably different. Prospects for a 2009-style stimulus are slim. More important, China is on the cusp of a long-term trend of reverse migration back to the countryside. This week, the National Bureau of Statistics reported that the migrant population dropped by 5.68 million in 2015 – its first decline in about three decades. Some of that decline is simple demographics, and parallels China’s rapidly shrinking labor force. But much of it is attributable to a slump in the labor-intensive manufacturing sector, and a steady improvement in rural economies.

These trends haven’t caught authorities completely off-guard: Despite a long-term commitment to urbanization (in 1980, China was 19.6% urbanized; today the figure is more than 50%), the government has recently directed more attention and money to rural development projects, ranging from infrastructure improvement to credit support for the country’s hundreds of millions of farmers. This year, rural per-capita income is expected to exceed 10,000 yuan for the first time, surpassing urban income growth for the fifth straight year. But just as economics were never the sole reason for moving to the city, many migrants also have non-economic motives for moving back home, including a desire to care for aging parents left behind and a hunger for uncontaminated food.

“The migrant workers are rooted in the countryside,” said Yang Tuan, a prominent sociologist at the China Academy of Social Science, in a September interview. “They have feelings for the land.” She predicted that reverse migration might peak in the next five to 10 years.

It makes no difference what Beijing wants.

• China’s Central Bank Prioritizes Strong Yuan (WSJ)

China’s central bank faces a tough balancing act, trying to ease credit in the financial system without adding to pressures weakening the Chinese currency. Concerns about the yuan and the annual cash crunch ahead of next month’s Lunar New Year holiday dominated a meeting held by the People’s Bank of China on Tuesday, according to minutes of the meeting reviewed by the WSJ and to accounts from banking executives close to the PBOC. Central bank officials delayed using a traditional credit-easing tool for fear that it could add more downward pressure on the yuan, according to the minutes and the executives. Instead, to meet the rising cash needs from banks, the central bank turned to short-term and medium-term loan facilities to pump about 1.6 trillion yuan ($243 billion) of temporary liquidity into the banking system in the past week.

The decision highlights the bank’s deepening dilemma in helping to cushion the slowing Chinese economy. Just a year ago, the PBOC addressed preholiday cash demands by resorting to a more typical method—cutting the amount banks are required to keep in reserve. Since then, the economic slowdown and volatility in the stock markets have led to a flood of capital leaving China, as Chinese investors seek better returns abroad. The yuan, also known as the renminbi, has been battered harder than the central bank would like, even as it faces calls to keep easing credit and rekindle growth. “Currently, we need to put a high emphasis on maintaining the renminbi’s stability when managing liquidity,” Zhang Xiaohui, an assistant governor at the central bank, said at the Tuesday meeting, according to the minutes.

Ms. Zhang said cutting the reserve requirement would send “too strong an easing signal,” so the bank should turn to other tools. A reduction in so-called reserve-requirement ratio frees up funds for banks to lend on a permanent basis, while injecting liquidity through short-term and medium-term tools means the money can be taken back by the central bank when those loans expire. Ms. Zhang told officials at the meeting that the combination of cuts to interest rates and reserve requirements made by the central bank in late October contributed to the pressure on the yuan. “Because of the double reductions, there was too much liquidity and depreciation pressure on the renminbi,” she said.

Ahead of Tuesday’s meeting, China’s big banks called on the central bank to cut the reserve requirement in the lead-up to the holiday. But the central bank balked at doing that because of worries over the stability of the yuan, the banking executives close to the PBOC said. “They decided to put off the reserve-requirement cut until later,” one of the executives said. The executive said the central bank would have to make the cut “at some point” because the surge in money leaving China, as well as the PBOC’s efforts to buy yuan to prop up its value, are squeezing liquidity.

The west knows the east is bankrupt, too.

• The East Knows The West Is Bankrupt (Holter)

[..] what would the world look like the day following a “truth bomb” dropped by Mr. Putin and the Chinese. Would Americans even notice if he documented several false flags or frauds embedded in U.S. finance such as outright monetization of U.S Treasuries? No, most certainly not. Americans would however notice if financial markets collapsed or were shut down. Russia and China know full well the situation in the West. It is a bankruptcy waiting to happen as everything is fractional reserve and running on maximum margin while the underlying system is shrinking and no longer supplying enough liquidity. The way I see it, the stage is truly set for a financial attack on anything and everything American. Is it implausible for the Saudis to announce they will sell oil in yuan to China?

Or Iran to withdraw their funds from U.S. institutions and then bid for gold with these funds? If the East does in fact have jamming or hacking capability of Western technology, is it far fetched for them to show it very publicly in one or several situations? How would the “bookies” react if they saw a prize fighter enter one of the later rounds with his hands tied behind his back? You can laugh at the above speculation if you choose but it is all quite plausible and actually probable if you look at where things are and what posturing has already been done leading up to this. Western markets, ALL markets are a fraud. Our Treasury market is one where the biggest buyer is “our self” …the Fed and the ESF.

We have already seen $1 trillion of foreign reserves offloaded with no effect on yield nor the dollar itself and NO ACCOUNTING ANYWHERE as to “who” bought these offloaded central bank reserves. Accounting fraud and no rule of law here, nothing to see …please move along! You can laugh if you want and say Saudi Arabia will never move toward the East … Saudi Arabia is now in very dire straits financially, who do you think they will side with when Western markets melt down? Do you really believe they will go down trying to support our dollar?

The stage has already been set. The East knows the West has bankrupted. They know we have no gold left because they have it! They can see the finances of the various cities, states and federal government. They know the situation in derivatives is one giant mountain of dynamite waiting for a spark. They know our rule of law is gone and bail ins of depositor funds is next. We are monetizing their sales of Treasury securities. “We” are fooling no one except ourselves. And by “ourselves” I am talking about the vast majority of the population who have grown to rely on the government for everything. Everyone knows we are broke, yet ask anyone and the odds highly favor you will hear “the government will never let it happen”. Even if you are silly enough to believe this you must ask yourself, what are the ramifications when markets become “make believe”?

They’ll be picking them off one by one again. Bye, Draghi.

• Don’t Forget the Irish When Looking at New Risks in Euro Region (BBG)

Ireland gets to decide on its next government as early as next month, and if elections in other countries once at the heart of the European debt crisis are anything to go by, investors should be wary. Portugal’s vote on Oct. 4 produced an inconclusive result, leading to weeks of brokering before Socialist leader Antonio Costatook power with promises to put the brakes on austerity measures. Bond yields have jumped to the highest in six months since then. In Spain, Prime Minister Mariano Rajoy lost his majority last month after years of belt-tightening and the country still doesn’t have a new government.

Ireland is another European electorate jaded by budget cuts. Polls indicate that Prime Minister Enda Kenny’s ruling coalition will struggle to win a majority, though there’s no clear alternative. The country, European Central Bank President Mario Draghi’s model for economic recovery, saw its 10-year bond yields sink below 1% this month. But banks and brokers are already sounding warnings. “The ballot is the most important potential flash-point of the year,” said Dermot O’Leary, economist at Goodbody Stockbrokers in Dublin. “Investors got caught out by the inconclusive result in Spain, and so there is more focus now on Ireland.”

EU.

• There’s a Giant Elephant at the Bank of England (BBG)

It’s a new year and Bank of England officials have been sharing their views on the outlook for the U.K. and the risks. Well, some of the risks. So far in January, policy makers have spouted more than 20,000 words in three speeches and the minutes of their monthly meeting. They’ve cited a global slowdown, weak wage growth and a slump in oil as key issues for 2016. However, their official communications offer no guidance on what economists say is the top risk facing the U.K.: the forthcoming referendum on its membership in the European Union. Lawmakers could try to change that Tuesday – Governor Mark Carney appears in Parliament to talk about financial-stability risks, and they may well ask him about the elephant in the room.

“It’s such a hot issue, I’d be surprised if it didn’t come up,” said Chris Hare at Investec in London. “Carney would probably try to continue to tread a fine line on potential implications of “Brexit.” You might think they’d want to put some kind of downside skew in to their forecast, but if they really pile into those debates, they’d be criticized. They’ll probably try and stay coy.” It’s certainly on the mind of U.K. economists. They cited the buildup to the vote on EU membership and the potential for Britain to exit as the biggest risks in 2016, according to a Bloomberg News survey. Prime Minister David Cameron has yet to call a date, but it could happen as soon as June.

The absence of “Brexit” analysis from the BOE is getting conspicuous. Last October, Carney skirted the tense political battle with a speech that addressed the U.K.’s relationship with Europe, but offered no final conclusion on its merits. His remarks were accompanied by a 100-page report that assessed the issue but offered no judgment on the impact on the U.K. economy of a British exit. Carney went a step further last week, insisting that not only has he said nothing on “Brexit,” he’s not planning to, either. He told the Wall Street Journal: “We have said all we are going to say about that. We deal with the facts on the ground and the facts on the ground are the status quo. Our job is to make the status quo work as effectively as possible.”

Lapavitsas is one of the guys who left Syrixa, for the left.

• One Year On, Syriza Has Sold Its Soul For Power (Lapavitsas)

Today marks a year since a radical left government was elected in Greece; its dynamic young prime minster, Alexis Tsipras, promising a decisive blow against austerity. Yanis Varoufakis, his unconventional finance minister, arrived in London soon after and caused a media sensation. Here was a government that disregarded stuffy bourgeois conventions and was spoiling for a fight. Expectations were high. A year on, the Syriza party is faithfully implementing the austerity policies that it once decried. It has been purged of its left wing and Tsipras has jettisoned his radicalism to stay in power at all costs. Greece is despondent. Why did it end like this? An urban myth propagated in some media circles suggests that the radicals were stopped by a coup engineered by conservative politicians and EU officials, determined to eliminate any risk of contagion.

Syriza was overcome by the monsters of neoliberalism and privilege. Still, it fought the good fight, perhaps even sowed the seeds of rebellion. The reality is very different. A year ago the Syriza leadership was convinced that if it rejected a new bailout, European lenders would buckle in the face of generalised financial and political unrest. The risks to the eurozone were, they presumed, greater than the risks to Greece. If Syriza negotiated hard, it would be offered an “honourable compromise” relaxing austerity and lightening the national debt. The mastermind of this strategy was Varoufakis, but it was avidly adopted by Tsipras and most of Syriza’s leadership.

Well-meaning critics repeatedly pointed out that the euro had a rigid set of institutions with their own internal logic that would simply reject demands to abandon austerity and write off debt. Moreover, the European Central Bank stood ready to restrict the provision of liquidity to the Greek banks, throttling the economy – and the Syriza government with it. Greece could not negotiate effectively without an alternative plan, including the possibility of exiting the monetary union, since creating its own liquidity was the only way to avoid the headlock of the ECB. That would be far from easy, of course, but at least it would have offered the option of standing up to the catastrophic bailout strategies of the lenders. Unfortunately, the Syriza leadership would have none of it.

Dijsselbloem and Schäuble making sure Greece will never recover as long as it’s in the EU.

• Greece On The Brink Of ‘Education Tragedy’ (EurActiv)

The economic crisis has dramatically impacted the already struggling Greek education system, according to a trade union report published last week (19 January). EurActiv Greece reports. The report by the General Confederation of Labour in the area of Education and Lifelong learning ( KANEP-GSEE), examined the state of the Greek primary and secondary education system in the 2002-2014 period. “We are on the brink of an unprecedented education tragedy in recent decades,” the authors of the report warn, underlining that the issue is mainly “political”. “The image of the Greek primary and secondary education, compared to the European mainstream, causes deep concerns for the future of younger generations and for the future of Greece itself.”

The alarming report warned that Athens was a champion in underfunding and inequalities in its education system, as well as a laggard in innovation and learning results at the EU level. The report stressed that actual expenses did not reflect the amount of money earmarked in the annual budget of Greece. Eurostat, the EU’s statistics office, said that public expenditure on education accounted for 4.5% of GDP in 2013. However, it was just 3.2% of GDP, according to official statistics by the State General Accounting Office. “A 1.3% difference is excessively high […] and it cannot be accepted,” the report reads. The underfunding, in combination with the “ineffective study programmes”, resulted in low educational performance. Greek students are amongst the worst performers in basic subjects (mathematics, language, natural sciences).

And production is soaring.

• We Produced Enough Plastics Since WWII To Cover The Entire Earth (Guardian)

Humans have made enough plastic since the second world war to coat the Earth entirely in clingfilm, an international study has revealed. This ability to plaster the planet in plastic is alarming, say scientists – for it confirms that human activities are now having a pernicious impact on our world. The research, published in the journal Anthropocene, shows that no part of the planet is free of the scourge of plastic waste. Everywhere is polluted with the remains of water containers, supermarket bags, polystyrene lumps, compact discs, cigarette filter tips, nylons and other plastics. Some are in the form of microscopic grains, others in lumps. The impact is often highly damaging. “The results came as a real surprise,” said the study’s lead author, Professor Jan Zalasiewicz, of Leicester University.

“We were aware that humans have been making increasing amounts of different kinds of plastic – from Bakelite to polyethylene bags to PVC – over the last 70 years, but we had no idea how far it had travelled round the planet. It turns out not just to have floated across the oceans, but has sunk to the deepest parts of the sea floor. This is not a sign that our planet is in a healthy condition either.” The crucial point about the study’s findings is that the appearance of plastic should now be considered as a marker for a new epoch. Zalasiewicz is the chairman of a group of geologists assessing whether or not humanity’s activities have tipped the planet into a new geological epoch, called the Anthropocene, which ended the Holocene that began around 12,000 years ago.

Most members of Zalasiewicz’s committee believe the Anthropocene has begun and this month published a paper in Science in which they argued that several postwar human activities show our species is altering geology. In particular, radioactive isotopes released by atom bombs left a powerful signal in the ground that will tell future civilisations that something strange was going on. In addition, increasing carbon dioxide in the oceans, the massive manufacture of concrete and the widespread use of aluminium were also highlighted as factors that indicate the birth of the Anthropocene. Lesser environmental impacts, including the rising use of plastics, were also mentioned in passing.

But Zalasiewicz argues that the humble plastic bag and plastic drink container play a far greater role in changing the planet than has been realised. “Just consider the fish in the sea,” he said. “A vast proportion of them now have plastic in them. They think it is food and eat it, just as seabirds feed plastic to their chicks. Then some of it is released as excrement and ends up sinking on to the seabed. The planet is slowly being covered in plastic.”

“An Indigenous child is more likely to be locked up in prison than they are to finish high school.”

• Racism ‘Is At The Heart Of The Australian Dream’ (Guardian)

The veteran journalist and Wiradjuri man, Stan Grant, has told a Sydney audience that racism is “at the heart of the Australian dream,” as he delivered a sobering speech about the impact of colonisation and discrimination on Indigenous people and their ancestors. It has provoked a powerful reaction from Australians, going viral on Facebook with 850,000 views and 28,000 shares, and had been watched more than 50,000 times on YouTube by Sunday night. As part of the IQ2 debate series held by the Ethics Centre, Grant joined immigration lawyer Pallavi Sinha, Herald Sun columnist Rita Panahi and Australian actor Jack Thompson to argue for or against the topic “Racism is destroying the Australian dream”. The event was held last year, but the Ethics Centre only released the video online on Friday.

In his opening address, Grant, who is also Guardian Australia’s Indigenous affairs editor, argued that racism was at “the foundation of the Australian dream”. “The Australian dream,” Grant said. “We sing of it and we recite it in verse; ‘Australians all let us rejoice for we are young and free’. “My people die young in this country. We die 10 years younger than the average Australian, and we are far from free. We are fewer than 3% of the Australian population and yet we are 25% – one quarter – of those Australians locked up in our prisons. And if you’re a juvenile it is worse, it is 50%. An Indigenous child is more likely to be locked up in prison than they are to finish high school.”

He spoke of his Indigenous ancestors, including his grandmother and great-grandmother, who were among those institutionalised in missions, where Indigenous people were forced into unpaid labour and abused. He referenced the “war of extermination” against his ancestors. “I love a sunburned country, a land of sweeping plains, of rugged mountain ranges,” Grant said, referencing the famous poem, My Country, by the Australian writer Dorothea Mackellar. “It reminds me that my people were killed on those plains. We were shot on those plains, diseases ravaged us on those plains.

“Our rights were extinguished because we were not here according to British law, and when British people looked at us, they saw something subhuman. We were fly-blown, Stone-Age savages, and that was the language that was used. Captain Arthur Phillip, a man of enlightenment … was sending out raiding parties with the instruction; ‘bring back the severed heads of the black trouble-makers’.

What does this make me think of? Just because they don’t call them camps….

• Merkel’s Party, Sliding In Polls, Weighs German ‘Border Centres’ (Reuters)

A senior figure in Chancellor Angela Merkel’s conservative party has proposed setting up “border centres” along the frontier with Austria to speed up the repatriation of those asylum seekers deemed unqualified to stay. Julia Kloeckner, leader of Merkel’s Christian Democrats in the western state of Rhineland-Palatinate, was careful to style her proposal as a “Plan A2” rather than a “Plan B”, adding that the chancellor’s push for a European solution to a large influx of asylum seekers into the continent was still right. “We want to complement it,” she wrote in a paper setting out her position, a copy of which Reuters obtained. In the paper, Kloeckner proposed that: “On the German-Austrian border, border centres will be set up.”

The proposal, endorsed by the Christian Democrats’ (CDU) secretary general, highlights the frustration in Merkel’s party with the slow progress in achieving a European Union-wide solution to the refugee crisis, which is straining the infrastructure of many German municipalities. Germany attracted 1.1 million asylum seekers last year, leading to calls from across the political spectrum for a change in its handling of the number of refugees coming to Europe to escape war and poverty in Syria, Afghanistan and elsewhere. Growing concern about Germany’s ability to cope with the influx and worries about crime and security after assaults on women at New Year in Cologne are weighing on support for the CDU and its Bavarian sister party, the Christian Social Union (CSU). An Emnid poll for the newspaper Bild am Sonntag showed support for the CDU/CSU bloc down 2%age points at 36% from the previous week. The right-wing Alternative for Germany (AfD) gained 1 point to 10%. Merkel’s coalition partners, the Social Democrats (SPD), gained a point to 25%.

Should you really want an award that you share with Obama and Kissinger?

• Greek Islanders To Be Nominated For Nobel Peace Prize (Observer)

Greek islanders who have been on the frontline of the refugee crisis are to be nominated for the Nobel peace prize with the support of their national government. Of the 900,000 refugees who entered Europe last year most were received –scared, soaked and travelling in rickety boats – by those who live on the Greek islands in the Aegean Sea. The islanders, including fishermen who gave up their work to rescue people from the sea, are in line to be honoured with one of the world’s most esteemed awards. Eminent academics from the universities of Oxford, Princeton, Harvard, Cornell and Copenhagen are drafting a submission in favour of awarding the prize to the people of Lesbos, Kos, Chíos, Samos, Rhodes and Leros.

The nomination deadline is 1 February, but those behind the plan have already met the Greek minister for migration, Yiannis Mouzalas, who they say has offered his government’s full support. A petition on the website of the grassroots campaign group, Avaaz, in favour of the nomination has amassed 280,000 signatures. According to the petition: “On remote Greek islands, grandmothers have sung terrified little babies to sleep, while teachers, pensioners and students have spent months offering food, shelter, clothing and comfort to refugees who have risked their lives to flee war and terror.”

While the official nomination letter is yet to be finalised, it is understood the academics, whose identities will be revealed in the coming days, will implore the Nobel committee members to accept their nomination. They will say that it must be noted that a people of a country already dealing with its own economic crisis responded to the unfolding tragedy of the refugee crisis with “empathy and self-sacrifice”, opening their homes to the dispossessed, risking their lives to save others and taking care of the sick and injured. [..] One of the organisers of the Solidarity Networks, Matina Katsiveli, 61, a retired judge who lives on Leros, welcomed the move but said there was “reward enough in the smiles of the people we help”.

That was not clear?

• Sealing Greek Sea Border Is Impossible (AP)

Hour after hour, by night and by day, Greek coast guard patrols and lifeboats, reinforced by vessels from the European Union’s border agency Frontex, ply the waters of the eastern Aegean Sea along the frontier with Turkey. They are on the lookout for people being smuggled onto the shores of Greek islands – the front line of Europe’s massive refugee crisis. Although smugglers are often arrested, the task is mainly a search-and-rescue role. Hours spent on patrol shows the near-impossibility of sealing Europe’s sea borders as some have demanded of Greece, whose islands so near to Turkey are the most popular gateway into Europe. Some European countries – notably Hungary and Slovakia – have blasted Greece for being unable to secure its border, which also forms part of the external limits of Europe’s borderless Schengen area.

“We have been saying all along that if the Greeks are unable to protect the borders of their country, we should jointly go down south and protect them,” Hungarian Prime Minister Viktor Orban said in November, with his Slovak counterpart Robert Fico echoing the thought. But such calls ignore the realities at sea. No matter how many patrol boats are out in Greek waters, attempting to force a vessel of asylum-seekers back into Turkish waters is both illegal and dangerous, even in calm seas. So unless a Turkish patrol stops a migrant boat and returns it to Turkey, there is little Greek or Frontex patrols can do once it has entered Greek territorial waters but arrest the smugglers and pick up the passengers or escort the vessel safely to land.

“Greece is guarding the national and European borders,” Greek Alternate Foreign Minister Nikos Xydakis said in a statement Sunday. “What it cannot do and will not do … is to sink boats and drown women and children, because international and European treaties and the values of our culture forbid it.”

Debt Rattle November 17 2015

Nov 172015

November 17, 2015 Posted by Raúl Ilargi Meijer at 10:26 am Finance Tagged with: bombs, EU, Finland, ISIS, oil, oversupply, Paris, Putin, refugees, Saudi, steel, yuan 16 Responses »

DPC “Grant’s Tomb. Rubber-neck auto on Riverside Drive, New York” 1911

• Steel Is the Poster Child For Oversupplied Commodity Markets (Bloomberg)

• Oil Approaching $40 Deepens Investor Pessimism on Recovery (Bloomberg)

• The Saudis Are Stumbling – And May Take The Middle-East Down With Them (Hallina)

• US Approves Sale Of Smart Bombs To Saudi Arabia (Reuters)

• Yuan’s Offshore Discount Widens as IMF Nod May Curb Intervention (Bloomberg)

• India Exports Fall 17.5%, Imports Down 21.2% (LiveMint)

• France Swats Aside EU Budget Rules In Rearmament Blitz (AEP)

• Finnish Parliament Will Debate Next Year Leaving Euro Zone (Reuters)

• An Entirely Rigged Political-Financial System (Nomi Prins)

• Greece Reaches Deal With Lenders Unlocking Stalled Aid (Reuters)

• UK Inflation Stays Below Zero as Price Weakness Persists (Bloomberg)

• There Are No Safe Spaces (Jim Kunstler)

• A Most Convenient Massacre (Dmitry Orlov)

• ISIS Financed by 40 Countries, Including G20 Member States – Putin (Sputnik)

• Putin Confirms Egypt Plane Crash Due To Bomb, Offers $50 Million Reward (ZH)

• More Than Half of US State Governors Say Syrian Refugees Not Welcome (CNN)

• Paris Attacks Fuel Calls For Canada To Delay Taking In 25,000 Syrians (AFP)

• El Niño: Food Shortages, Floods, Disease And Droughts (Guardian)

• Greek Coast Guard Rescues 1,244 Refugees In Three Days (AP)

• Refugee Boat Overturns Near Greek Island, At Least Eight Dead (AP)

I’d say steel AND oil. And copper.

• Steel Is the Poster Child For Oversupplied Commodity Markets (Bloomberg)

The collapse in oil prices following the shale revolution has stolen the limelight for investors mulling the end of the commodities supercycle. But the real “poster child for problems in commodities markets is perhaps the global steel industry,” according to Macquarie analysts led by Colin Hamilton, the firm’s global head of commodities research. The front-month contract for U.S. hot-rolled coil steel futures traded on the New York Mercantile Exchange is down nearly 40% year-over-year/ Forecasts for a boom in Chinese consumption helped spur a rise in production that left the segment with a massive glut. The successful realization of economic rebalancing in China, meanwhile, necessarily entails a material slowdown in that nation’s demand for steel. Macquarie observes that global steel consumption has contracted on an annual basis throughout 2015.

“With 1.6 billion tonnes of consumption globally, steel remains the lynchpin of industrial growth,” wrote Hamilton. “However, the growth part of this equation is an increasing problem, and not only in China.” India, which has the potential to buoy demand for steel, is also contributing significantly to supply growth. Bloomberg Intelligence’s Yi Zhu notes that 37 million metric tons of production capacity in India are currently under construction or in planning to be added. “The only people who still seem to think there is significant upside in global steel consumption akin to the past decade are the major iron ore producers—for example BHP’s belief global steel consumption will hit 2.5 billion tonnes by 2030—just a further 50% upside required there!” Hamilton wrote in a separate note.

Arguably, overcapacity across the commodity complex is a perverse side effect of years of near-zero interest rates and asset purchases by the Federal Reserve. Lower input prices, however, can have a silver lining. For example, the collapse in oil prices, in simple terms, represents a transfer of wealth from major oil conglomerates to consumers. The largest positive effects accrue to lower-income households that spend a heftier portion of take-home pay on energy costs. “A world of cheap money not only sees new capacity built, it also means existing capacity doesn’t disappear,” explains Hamilton. “While most regions are well off their peak production levels over the last decade, permanent capacity closures have been few and far between.”

Speculator pessimism.

• Oil Approaching $40 Deepens Investor Pessimism on Recovery (Bloomberg)

Hedge funds have turned more pessimistic on oil as prices flirted with $40 a barrel for the first time since August. “The speculators keep trying to pick the bottom and keep getting burned,” Michael Lynch, president of Strategic Energy & Economic Research said. Money managers’ short bets in West Texas Intermediate crude surged 21% in the week ended Nov. 10, according to data from the Commodity Futures Trading Commission. The net-long position dropped 16%. The release of the figures was delayed because of Veterans Day on Nov. 11. Oil inventories in developed countries have expanded to a record of almost 3 billion barrels because of massive supplies from both OPEC and non-OPEC producers, the International Energy Agency said in a report on Nov. 13.

WTI slipped to the lowest level since August before the CFTC release Monday. Thirty-nine oil tankers are waiting near Galveston, Texas, up from 30 in May, according to vessel-tracking data compiled by Bloomberg. “There’s been concern about excess supply in the market for a while now and that’s been strengthened by the IEA report,” Lynch said. [..] Oil inventories surged because of increased global production, OPEC said on Nov. 12. U.S. crude supplies rose to 487 million barrels as of Nov. 6, the highest for this time of year since 1930, the Energy Information Administration reported on Nov. 12. “We think the next few months will be very weak,” Sarah Emerson, managing director of ESAI Energy said by phone. “The market is focused on inventories. Prices shouldn’t rally in the coming year unless we have a disruption.”

The regime puts itself in grave danger. This could blow up much faster than presumed.

• The Saudis Are Stumbling – And May Take The Middle-East Down With Them (Hallina)

When the Arab Spring broke out in 2011, Saudi Arabia headed it off by pumping $130 billion into the economy, raising wages, improving services, and providing jobs for its growing population. Saudi Arabia has one of the youngest populations in the Middle East, many of whom are unemployed and poorly educated. Some 25% of the population lives in poverty. Money keeps the lid on, but – even with the heavy-handed repression that characterizes Saudi political life – for how long? Meanwhile they’re racking up bills with ill-advised foreign interventions. In March, the kingdom intervened in Yemen’s civil conflict, launching an air war, a naval blockade, and partial ground campaign on the pretense that Iran was behind one of the war’s factions – a conclusion not even the Americans agree with.

Again, the Saudis miscalculated, even though one of their major allies, Pakistan, warned them they were headed for trouble. In part, the kingdom’s hubris was fed by the illusion that US support would make it a short war. The Americans are arming the Saudis, supplying them with bombing targets, backing up the naval blockade, and refueling their warplanes in midair. But six months down the line the conflict has turned into a stalemate. The war has killed 5,000 people (including over 500 children), flattened cities, and alienated much of the local population. It’s also generated a horrendous food and medical crisis and created opportunities for the Islamic State and al-Qaeda to seize territory in southern Yemen. Efforts by the UN to investigate the possibility of war crimes were blocked by Saudi Arabia and the US.

As the Saudis are finding out, war is a very expensive business – a burden they could meet under normal circumstances, but not when the price of the kingdom’s only commodity, oil, is plummeting. Nor is Yemen the only war that the Saudis are involved in. Riyadh, along with Qatar and the United Arab Emirates, are underwriting many of the groups trying to overthrow Syrian president Bashar al-Assad. When antigovernment demonstrations broke out there in 2011, the Saudis – along with the Americans and the Turks – calculated that Assad could be toppled in a few months. But that was magical thinking. As bad as Assad is, a lot of Syrians – particularly minorities like Shiites, Christians, and Druze – were far more afraid of the Islamists from al-Qaeda and the Islamic State than they were of their own government.

So the war has dragged on for four years and has now killed close to 250,000 people. Once again, the Saudis miscalculated, though in this case they were hardly alone. The Syrian government turned out to be more resilient than it appeared. And Riyadh’s bottom line that Assad had to go just ended up bringing Iran and Russia into the picture, checkmating any direct intervention by the anti-Assad coalition. Any attempt to establish a no-fly zone against Assad will now have to confront the Russian air force – not something that anyone other than certain US presidential aspirants are eager to do.

Smart move. There is more sympathy for ISIS in Saudi Arabia than in any other country. And a lot of -private- Saudi capital goes towards funding it. And we sell them smart bombs.

• US Approves Sale Of Smart Bombs To Saudi Arabia (Reuters)

The U.S. State Department has approved the sale of thousands of smart bombs worth a total of $1.29 billion to Saudi Arabia to help replenish supplies used in its battle against insurgents in Yemen and air strikes against Islamic State in Syria, U.S. officials familiar with the deal said on Monday. The Pentagon’s Defense Security Cooperation Agency (DSCA), which facilitates foreign arms sales, notified lawmakers on Friday that the sales had been approved, the sources said. The lawmakers now have 30 days to block the sale, although such action is rare since deals are carefully vetted before any formal notification.

The proposed sale includes thousands of Paveway II, BLU-117 and other smart bombs, as well as thousands of Joint Direct Attack Munitions kits to turn older bombs into precision-guided weapons using GPS signals. The sales reflect President Barack Obama’s pledge to bolster U.S. military support for Saudi Arabia and other Sunni allies in the Gulf Cooperation Council after his administration brokered a nuclear deal with their Shiite rival Iran. The weapons are made by Boeing and Raytheon, but the DSCA told lawmakers the prime contractors would be determined by a competition.

I brought this up the other day: how much control over the yuan does Beijing give up with its desired inclusion in the ‘SDR basket’? And how does that play out when things go downhill for China?

• Yuan’s Offshore Discount Widens as IMF Nod May Curb Intervention (Bloomberg)

The offshore yuan’s discount to the onshore spot rate widened to the most this month amid speculation the People’s Bank of China will rein in intervention now that the currency is on the cusp of winning reserve status. The difference between the yuan’s exchange rates in Hong Kong and Shanghai rose to as much as 417 pips on Monday, data compiled by Bloomberg show. It last exceeded 400 pips on Oct. 28, prompting suspected intervention by the PBOC the following day. [..] IMF Managing Director Christine Lagarde said late Friday that her staff have recommended the yuan be included in its Special Drawing Rights basked, as all operational issues including a sufficient gap between the onshore and offshore rates had been solved.

The Washington-based lender’s board will vote to approve inclusion on Nov. 30. “As the yuan’s inclusion is largely a done deal, we expect the PBOC to reduce foreign-exchange intervention and allow a wider spread between the onshore and offshore yuan,” said Ken Cheung, a Hong Kong-based currency strategist at Mizuho Bank Ltd. The central bank’s tolerance level may have widened to 500 pips from 400 pips before the IMF announcement and it will probably allow more depreciation via weaker fixings, he said.

Wasn’t India supposed to pick up global growth where China left off?

• India Exports Fall 17.5%, Imports Down 21.2% (LiveMint)

India’s merchandise exports contracted for the eleventh consecutive month in October, as shipments of petroleum products continued to decline on lower crude oil prices, and external demand remained weak amid tepid global economic recovery. Exports contracted 17.5% from a year ago to $21.3 billion while imports shrank 21.2% to $31.1 billion, leaving a trade deficit of $9.8 billion, data released by the commerce ministry showed on Monday. In comparison, China’s October exports fell 6.9% from a year ago, down for a fourth month, while imports slipped 18.8%, leaving the country with a record high trade surplus of $61.64 billion. India’s dip in exports was driven mainly by a 57.1% drop in shipments of petroleum products to $2.5 billion.

The ministry has sent a cabinet note on the long-pending interest subsidy scheme for providing rupee credit to exporters at a subsidized interest rate. However, the cabinet is yet to take a view on it. India aims to take exports of goods and services to $900 billion by 2020 and raise the country’s share in world exports to 3.5% from 2% now. Exports in the past four fiscal years have been hovering at around $300 billion. India’s current account deficit (CAD) further contracted in the first quarter of 2015-16, as lower global crude oil prices helped rein in India’s import bill.

Big deal: if budget rules are no longer applicable to France, they are to nobody. Schengen is gone, budget restrictions are gone; why still have an EU?

• France Swats Aside EU Budget Rules In Rearmament Blitz (AEP)

France has invoked emergency powers to sweep aside EU deficit rules and retake control over its economy after the terrorist atrocities in Paris, pledging a massive in increase and security and defence spending whatever the cost. President Francois Hollande said vital interests of the French nation are at stake and there can be no further justification for narrowly-legalistic deficit rules imposed by Brussels. “The security pact takes precedence over the stability pact. France is at war,” he told the French parliament. Defence cuts have been cancelled as far out as 2019 as the country prepares to step up its campaign to “eradicate” ISIS, from the Sahel in West Africa, across the Maghreb, to Syria and Iraq. At least 17,000 people will be recruited to beef up the security apparatus and the interior ministry, fast becoming the nerve centre of the country’s all-encompassing war against the ISIS network.

The new forces include 5,000 new police and gendarmes, 1,000 customs officials, and 2,500 prison guards. “I assume it will lead to an increase in expenses,” he said. The combined effect amounts to a fiscal stimulus and may ultimately cushion the economic damage of terrorist attacks for the tourist industry, but the “rearmament” drive spells the end of any attempt to meet deficit limit of 3pc of GDP enshrined in the Stability and Growth Pact. With France in open defiance, the reconstituted pact is now effectively dead. The European Commission expects the French deficit to be 3.4pc of GDP next year and 3.3pc in 2017, but the real figure is likely to be much higher and will last through to the end of the decade. The concern is that this could push the country’s debt yet higher from 96.5pc of GDP to nearer 100pc, made worse by the effects of deflation on debt dynamics.

Mr Hollande said France will invoke article 42.7 of the Lisbon Treaty, the solidarity clause obliging other member states to come to his country’s help by “all means in their power”. It would be beyond parody for Brussels to continue insisting on budget rules in such a political context. The French economy is slowly recovering as the triple effects of a weak euro, cheap oil, and quantitative easing by the ECB combine to create a short-term blast of stimulus, but it still remains remarkably depressed a full six years into the post-Lehman cycle of global expansion. Growth crept up to 0.3pc in the third quarter after stalling earlier in the year. Unemployment is still stuck at 10.7pc and has actually risen over recent months. “Momentum may fade in 2017 as tailwinds peter out,” said the Commission.

France’s move opens whole new avenues for Finland, too, to finance debts.

• Finnish Parliament Will Debate Next Year Leaving Euro Zone (Reuters)

Finland’s parliament will debate next year whether to quit the euro, a senior parliamentary official said on Monday, in a move unlikely to end membership of the single currency but which highlights Finns’ dissatisfaction with their country’s economic performance. The decision follows a citizens’ petition which has raised the necessary 50,000 signatures under Finnish rules to force such a debate, probably the first such initiative in any country of the 19-member euro zone. “There will be signature checks early next year and a parliamentary debate will be held in the following months,” said Maija-Leena Paavola, who helps guide legislation through parliament. The petition – which will continue to gather signatures until mid-January – demands a referendum on euro membership, but this would only go ahead if parliament backed the idea.

Despite the initiative, a Eurobarometer poll this month showed 64% of Finns backed the common currency, though that is down from 69% a year ago. But the Nordic country has suffered three years of economic contraction and is currently performing worse than any other country in the euro zone. Some Finns say the country’s prospects would improve if it returned to the markka currency and regained the ability to set its own interest rates, pointing to the example of neighboring Sweden, which is outside the euro. The markka could then devalue against the euro, making Finnish exports less expensive. “Since 2008 the Swedish economy has grown by 8%, while ours has shrunk by 6%,” said Paavo Vayrynen, a Finnish member of the European Parliament who launched the initiative.

Nomi is a fan of the Automatic Earth and our Debt Rattles, which she calls: “the most comprehensive daily rundown of main stream and alternative press articles out there!” Makes her an even smarter cookie.

• An Entirely Rigged Political-Financial System (Nomi Prins)

Too big to fail is a seven-year phenomenon created by the most powerful central banks to bolster the largest, most politically connected US and European banks. More than that, it’s a global concern predicated on that handful of private banks controlling too much market share and elite central banks infusing them with boatloads of cheap capital and other aid. Synthetic bank and market subsidization disguised as ‘monetary policy’ has spawned artificial asset and debt bubbles – everywhere. The most rapacious speculative capital and associated risk flows from these power-players to the least protected, or least regulated, locales. There is no such thing as isolated ‘Big Bank’ problems. Rather, complex products, risky practices, leverage and co-dependent transactions have contagion ramifications, particularly in emerging markets whose histories are already lined with disproportionate shares of debt, interest rate and currency related travails.

The notion of free markets, mechanisms where buyers and sellers can meet to exchange securities or various kinds of goods, in which each participant has access to the same information, is a fallacy. Transparency in trading across global financial markets is a fallacy. Not only are markets rigged by, and for, the biggest players, so is the entire political-financial system. The connection between democracy and free markets is interesting though. Democracy is predicated on the idea that every vote counts equally, and in the utopian perspective, the government adopts policies that benefit or adhere to the majority of those votes. In fact, it’s the minority of elite families and private individuals that exercise the most control over America’s policies and actions.

The myth of a free market is that every trader or participant is equal, when in fact the biggest players with access to the most information and technology are the ones that have a disproportionate advantage over the smaller players. What we have is a plutocracy of government and markets. The privileged few don’t care, or need to care, about democracy any more than they would ever want to have truly “free” markets, though what they do want are markets liberated from as many regulations as possible. In practice, that leads to huge inherent risk. Michael Lewis’ latest book on high frequency trading seems to have struck some sort of a national chord. Yet what he writes about is the mere tip of the iceberg covered in my book. He’s talking about rigged markets – which have been a problem since small investors began investing with the big boys, believing they had an equal shot. I’m talking about an entirely rigged political-financial system.

Have they given in on foreclosures? Will tens of thousands more Greeks be thrown into the streets?

• Greece Reaches Deal With Lenders Unlocking Stalled Aid (Reuters)

Greece reached an agreement with its lenders on financial reforms early on Tuesday, its finance minister said, removing a major obstacle holding up fresh bailout loans for the cash-starved country. Athens signed up to a new aid program worth up to €86 billion earlier this year, but payment of part of an initial tranche had been held up over disagreement on regulations on home foreclosures and handling tax arrears to the state. “There was an agreement on all the milestones … whatever was required,” Finance Minister Euclid Tsakalotos told reporters after meeting representatives of European institutions and the IMF on aid disbursement.

Tsakalotos said the deal meant Parliament could now ratify the set of reforms to law, and that deputy eurozone finance ministers, known as the Euro Working Group, would on Friday endorse the deal. That would allow a €2 billion aid disbursement and about €10 billion in recapitalization aid to the country’s four main banks, he said. Greece has been keen to complete its first assessment under the new bailout package, its third since 2010, so it can start talks with lenders on debt relief.

The levels of nonsense in the expert comments is priceless. Would that have a negative effect on prices too?

• UK Inflation Stays Below Zero as Price Weakness Persists (Bloomberg)

U.K. consumer prices fell for a second month in October, extending the weakest bout of inflation in more than half a century. The Office for National Statistics said prices declined 0.1% from a year earlier, matching the median forecast of economists in a Bloomberg survey. That’s the third negative reading this year and largely reflects weaker global commodity costs. Core inflation, which excludes volatile food and energy prices, accelerated to 1.1% from 1%. The Bank of England expects inflation to remain low into 2016 before picking up toward its 2% target. BOE Governor Mark Carney has highlighted core inflation as an important measure for policy makers as they weigh when to begin interest rate increases after keeping them at a record low for more than six years.

Consumer-price inflation has been below 1% all this year and less than 2% since the end of 2013. Britain last saw a sustained period of price declines in 1960, according to a historic series constructed by the statistics office. In forecasts published this month, the BOE said inflation is likely to reach its goal in late 2017 and accelerate to 2.2% a year later. Services inflation, a proxy for domestic price growth, was at 2.2% in October. “In the absence of sharp movements in global commodity prices, inflation is likely to accelerate quickly beyond October as the direct impact of past falls in oil drops out,” said Dan Hanson, an economist at Bloomberg Intelligence in London. “Evidence that this is happening is likely to be enough for the BOE to begin monetary tightening in May.”

“The long emergency is showing signs of morphing into something like civil war.”

• There Are No Safe Spaces (Jim Kunstler)

One thing seems assured: hard-line governments are coming soon. Politically, the West had boundary problems that go way beyond the question of national borders to the core psychology of modern liberalism. When is enough of anything enough? And then, what are you really willing to do about it? The answer lately among the Western societies is to do little and do it slowly. The behavior of college administrators and faculties in the USA these days is emblematic of this cowardly dithering. Intellectual despotism reigns on campus and the university presidents roll over like possums. They don’t have the moral strength to defend free speech as the campus witch-hunts ramp up.

The result will be first the intellectual death of their institutions (brain death), and then the actual death of college per se as a plausible route to personal socioeconomic development. The financial racketeering that has infected higher education — the engineering of the gargantuan college loan scam in tandem with the multiplication of “diversity” deanships and tuition inflation — pretty much guarantees an implosion of that system. The cowardice in the college executive suites is mirrored in our national politics, where no persons of real standing will dare step forward to oppose the juggernaut of Hillary-the-Grifter, or take on the clowning Donald Trump on the grounds of his sheer mental unfittedness to lead a government. In case you haven’t noticed, the center not only isn’t holding, it gave way some time ago.

The long emergency is showing signs of morphing into something like civil war. The Maoists on campus apparently want to turn it into race war, too. So many forces are in motion now and they are all tending toward criticality. The European Union may not survive the reestablishment of boundaries, since it was largely based on the elimination of them. Spain and Portugal are back to breaking down politically again. The Paris bloodbath has discredited Angela Merkel’s plea for “tolerance” — of what is proving to be an intolerable alien invasion. The only political figure on the scene who doesn’t appear to be talking out of his ass is Vlad Putin, who correctly stated at the UN that undermining basic institutions around the world was not a good idea.

“In order to qualify as a victim of a tragedy, you have to be each of these three things: 1. a US-puppet, 2. rich and 3. dead.”

• A Most Convenient Massacre (Dmitry Orlov)

What a difference a single massacre can make! • Just a week ago the EU couldn’t possibly figure out anything to do to stop the influx of “refugees” from all those countries the US and NATO had bombed into oblivion. But now, because “Paris changed everything,” EU’s borders are being locked down and refugees are being turned back. • Just a week ago it seemed that the EU was going to be swamped by resurgent nationalism, with incumbent political parties poised to get voted out of power. But now, thanks to the Paris massacre, they have obtained a new lease on life, because they can now safely embrace the same policies that a week ago they branded as “fascist.”

• Just a week ago the EU and the US couldn’t possibly bring themselves admit that they are utterly incompetent when it comes to combating their own creation—ISIS, that is—and need Russian help. But now, at the après-Paris G-20 summit, everybody is ready to line up and let Putin take charge of the war against terrorism. Look—the Americans finally found those convoys of tanker trucks stretching beyond the horizon that ISIS has been using to smuggle out stolen Syrian crude oil—after Putin showed them the satellite photos! Am I being crass and insensitive? Not at all—I deplore all the deaths from terrorist attacks in Iraq, in Syria, in Lebanon, and in all the other countries whose populations did absolutely nothing to deserve such treatment. I only feel half as bad about the French, who stood by quietly as their military helped destroy Libya (which did nothing to deserve it).

Note that after the Russian jet crashed in the Sinai there weren’t all that many Facebook avatars with the Russian flag pasted over them, and hardly any candlelight vigils or piles of wreaths and flowers in various Western capitals. I even detected a whiff of smug satisfaction that the Russians got their comeuppance for stepping out of line in Syria. Why the difference in reaction? Simple: you were told to grieve for the French, so you did. You were not told to grieve for the Russians, and so you didn’t. Don’t feel bad; you are just following orders.

The reasoning behind these orders is transparent: the French, along with the rest of the EU, are Washington’s willing puppets; therefore, they are innocent, and when they get killed, it’s a tragedy. But the Russians are not Washington’s willing puppet, and are not innocent, and so when they get killed by terrorists, it’s punishment. And when Iraqis, or Syrians, or Nigerians get killed by terrorists, that’s not a tragedy either, for a different reason: they are too poor to matter. In order to qualify as a victim of a tragedy, you have to be each of these three things: 1. a US-puppet, 2. rich and 3. dead.

Can’t wait for Russia to publish the details.

• ISIS Financed by 40 Countries, Including G20 Member States – Putin (Sputnik)

Putin said at the G20 summit that Russia has presented examples of terrorism financing by individual businessmen from 40 countries, including from member states of the G20. “I provided examples related to our data on the financing of Islamic State units by natural persons in various countries. The financing comes from 40 countries, as we established, including some G20 members,” Putin told reporters following the summit. The fight against terrorism was a key topic at the summit, according to the Russian leader. “This topic (the war on the terror) was crucial. Especially after the Paris tragedy, we all understand that the means of financing terrorism should be severed,” the Russian president said. Russia has also presented satellite images and aerial photos showing the true scale of the Islamic State oil trade.

“I’ve demonstrated the pictures from space to our colleagues, which clearly show the true size of the illegal trade of oil and petroleum products market. Car convoys stretching for dozens of kilometers, going beyond the horizon when seen from a height of four-five thousand meters,” Putin told reporters after the G20 summit. The Russian president also said that Syrian opposition is ready to launch an anti-ISIL operation if Russia provides air support. “A part of the Syrian opposition considers it possible to begin military actions against ISIL with the assistance of the Russian air forces, and we are ready to provide that assistance,” the Russian president said. If this happens, the army of Syrian President Bashar Assad, on the one hand, and the opposition, on the other hand, will fight a common enemy, he outlined.

Russian President Vladimir Putin said Monday that the United States has shown a certain willingness to resume cooperation with Russia in several areas. “It seemed to me that, at least at an expert level, at the level of discussing problems, there was, indeed, a clear interest in resuming work in many areas, including the economy, politics, and the security sphere,” Putin told reporters. Vladimir Putin said that Russia needs support from the US, Saudi Arabia and Iran in the fight against terrorism. “It’s not the time to debate who is more effective in the fight against ISIL, what we need to do is consolidate our efforts,” president Putin added.

“Assuming there were higher powers behind the Russian plane bombing than just a bunch of cave-dwelling a la carte terrorists, those arrested may just be tempted enough by the $50 million award to reveal who the mastermind behind this particular terrorist attack was.”

• Putin Confirms Egypt Plane Crash Due To Bomb, Offers $50 Million Reward (ZH)

The world may have moved on from the tragic terrorist attack that took place just three weeks ago above Egypt’s Sinai peninsula, which killed all 224, but for some inexplicable reason Russia refused to admit what was obvious to most from the first minutes since ISIS released a video clip of the midair explosion: that the crash was the result of a bomb set to go off shortly after take off. But no longer. Moments ago the Kremlin confirmed for the first time on Tuesday that a bomb did bring down a Russian passenger plane that crashed over the Sinai Peninsula in Egypt on Oct. 31, killing all 224 people on board. “One can unequivocally say that it was a terrorist act,” Alexander Bortnikov, the head of Russia’s FSB security service, told a meeting chaired by President Vladimir Putin.

Bortnikov added that during the flight, a homemade device with the power of 1.5 kilograms of TNT was detonated. “As a result, the plane fell apart in the air, which can be explained by the huge scattering of the fuselage parts of the plane.” This not the first time that Russia has faced “barbarous terrorist crimes, more often without apparent causes, outside or domestic, as it was with the explosion at the railway station in Volgograd at the end of 2013.” Bortnikov added: “We haven’t forgotten anything or anyone. The murder of our nationals in Sinai is among the bloodiest crimes in [terms of] the number of casualties.” Putin also spoke, vowing to find and punish the culprits behind the Sinai plane attack. “Our military work in Syria must not only continue. It must be strengthened in such a way so that the terrorists will understand that retribution is inevitable.”

“The murder of our people in Sinai is among the bloodiest crimes in terms of the number of victims. We won’t wipe the tears out of our souls and hearts. This will remain with us forever. But it won’t stop us from finding and punishing the perpetrators.” According to RT, Russia will act in accordance with Article 51 of the UN Charter, which provides for countries’ right to self-defense, Putin said. “Those who attempt to assist criminals should be aware that the consequences of such attempts will be entirely their responsibility,” he added. Finally, just to make sure Russia gets its blood debt repaid, The Russian Federal Security Service director also announced a reward of $50 million for information on those behind the terror attack on the A321.

Obama can push this through, but would that be wise?

• More Than Half of US State Governors Say Syrian Refugees Not Welcome (CNN)

More than half the nation’s governors – 27 states – say they oppose letting Syrian refugees into their states, although the final say on this contentious immigration issue will fall to the federal government. States protesting the admission of refugees range from Alabama and Georgia, to Texas and Arizona, to Michigan and Illinois, to Maine and New Hampshire. Among these 27 states, all but one have Republican governors. The announcements came after authorities revealed that at least one of the suspects believed to be involved in the Paris terrorist attacks entered Europe among the current wave of Syrian refugees. He had falsely identified himself as a Syrian named Ahmad al Muhammad and was allowed to enter Greece in early October.

Some leaders say they either oppose taking in any Syrian refugees being relocated as part of a national program or asked that they be particularly scrutinized as potential security threats. Only 1,500 Syrian refugees have been accepted into the United States since 2011, but the Obama administration announced in September that 10,000 Syrians will be allowed entry next year. The Council on American-Islamic Relations said Monday, “Defeating ISIS involves projecting American ideals to the world. Governors who reject those fleeing war and persecution abandon our ideals and instead project our fears to the world.”

Authority over admitting refugees to the country, though, rests with the federal government – not with the states – though individual states can make the acceptance process much more difficult, experts said. American University law professor Stephen I. Vladeck put it this way: “Legally, states have no authority to do anything because the question of who should be allowed in this country is one that the Constitution commits to the federal government.” But Vladeck noted that without the state’s participation, the federal government would have a much more arduous task. “So a state can’t say it is legally objecting, but it can refuse to cooperate, which makes thing much more difficult.”

Right wing Canada sees an opportunity, too, for political gain over the backs of people fleeing the very terror they’re now supposedly suspected of.

• Paris Attacks Fuel Calls For Canada To Delay Taking In 25,000 Syrians (AFP)

Canada’s prime minister Justin Trudeau has faced calls to delay bringing in 25,000 Syrian refugees by the end of the year due to security concerns prompted by the Paris terror attacks. While an online petition against fast-tracking Syrian asylum seekers’ bids to relocate to Canada gained steam, the premier of Saskatchewan province, Brad Wall, urged the prime minister to “suspend” the move. “I understand that the overwhelming majority of refugees are fleeing violence and bloodshed and pose no threat to anyone,” Wall wrote in an open letter. “However, if even a small number of individuals who wish to do harm to our country are able to enter Canada as a result of a rushed refugee resettlement process, the results could be devastating,” he added.

The Islamic State group has claimed responsibility for the bomb and gun attacks that killed at least 129 people in Paris on Friday. In another part of Canada, Quebec Immigration Minister Kathleen Weil said it was still ramping up to welcome the refugees, adding she is confident security will not be compromised. “I did get assurances from [Immigration Minister John] McCallum and [Public Safety Minister] Ralph Goodale that all the measures are being taken to ensure that the newcomers have been properly vetted.” Dueling online petitions for and against a delay, meanwhile, had amassed more than 55,000 and 25,000 signatures, respectively by midday Monday. One cited “national security” concerns in asking for a postponement, while the other blasted the first for stoking “despicable and inhumane xenophobic” attitudes.

This won’t become a big story until and unless it hits a rich part of the world.

• El Niño: Food Shortages, Floods, Disease And Droughts (Guardian)

The UN has warned of months of extreme weather in many of the world’s most vulnerable countries with intense storms, droughts and floods triggered by one of the strongest El Niño weather events recorded in 50 years, which is expected to continue until spring 2016. El Niño is a natural climatic phenomenon that sees equatorial waters in the eastern Pacific ocean warm every few years. This disrupts regular weather patterns such as monsoons and trade winds, and increases the risk of food shortages, floods, disease and forest fires. This year, a strong El Niño has been building since March and its effects are already being seen in Ethiopia, Somalia, Kenya, Malawi, Indonesia and across Central America, according to the World Meteorological Organisation. The phenomenon is also being held responsible for uncontrolled fires in forests in Indonesia and in the Amazon rainforest.

The UN’s World Meteorological Organization warned in a report on Monday that the current strong El Niño is expected to strengthen further and peak around the end of the 2015. “Severe droughts and devastating flooding being experienced throughout the tropics and sub-tropical zones bear the hallmarks of this El Niño, which is the strongest in more than 15 years,” said WMO secretary-general Michel Jarraud. Jarraud said the impact of the naturally occurring El Niño event was being exacerbated by global warming, which had already led to record temperatures this year. “This event is playing out in uncharted territory. Our planet has altered dramatically because of climate change,” he said. “So this El Niño event and human-induced climate change may interact and modify each other in ways which we have never before experienced. El Niño is turning up the heat even further.”

In 1997, the phenomenon led to severe droughts in the Sahel and the Indian subcontinent, followed by devastating floods and storms, which killed thousands of people and caused billions of dollars of damage across Asia, Latin America and and Africa. The WMO said countries are expected to be much better prepared for a strong El Niño now than they were in 1997, but governments and charities are warning of serious food shortages and floods. “While difficult to predict, the El Niño this year looks set to be the strongest on record. This is a real threat to people’s lives, health and livelihoods across the world, which will see increased calls for humanitarian assistance as people struggle to grow crops, face water shortages and disease,” said a spokeswoman at Britain’s Department for International Development.

And the beat goes on.

• Greek Coast Guard Rescues 1,244 Refugees In Three Days (AP)

Greek authorities say 1,244 refugees and economic migrants have been rescued from frail craft in danger over the past three days in the Aegean Sea, as thousands continue to arrive on the Greek islands. A coast guard statement Monday said rescuers responded to a total 34 incidents since Friday morning, near the islands of Lesbos — where most migrants head — Chios, Samos, Kos, Kalolimnos and Megisti. The count does not include thousands more people who safely made the short but often deadly crossing from nearby Turkey’s western coast.

Four children, four women and one man. Can we mourn them the way we mourn the Paris victims?

• Refugee Boat Overturns Near Greek Island, At Least Eight Dead (AP)

Greece’s coast guard says a plastic boat carrying refugees or migrants has overturned near the coast of the eastern Aegean island of Kos, killing at least eight people. The coast guard said Tuesday it had rescued seven people and had located eight bodies, two of which were still trapped inside the overturned vessel. Crews were searching for between three and five more people listed as missing. It was not immediately clear how the boat overturned, or what the passengers’ nationality was.