reform Archives - The Automatic Earth

Los Angeles, California, 5 December “You got a choice to make, man. You could go straight on to heaven. Or you could turn right, into that.” We are in Los Angeles, in the heart of one of America’s wealthiest cities, and General Dogon, dressed in black, is our tour guide. Alongside him strolls another tall man, grey-haired and sprucely decked out in jeans and suit jacket. Professor Philip Alston is an Australian academic with a formal title: UN special rapporteur on extreme poverty and human rights. General Dogon, himself a veteran of these Skid Row streets, strides along, stepping over a dead rat without comment and skirting round a body wrapped in a worn orange blanket lying on the sidewalk. The two men carry on for block after block after block of tatty tents and improvised tarpaulin shelters. Men and women are gathered outside the structures, squatting or sleeping, some in groups, most alone like extras in a low-budget dystopian movie.

We come to an intersection, which is when General Dogon stops and presents his guest with the choice. He points straight ahead to the end of the street, where the glistening skyscrapers of downtown LA rise up in a promise of divine riches. Heaven. Then he turns to the right, revealing the “black power” tattoo on his neck, and leads our gaze back into Skid Row bang in the center of LA’s downtown. That way lies 50 blocks of concentrated human humiliation. A nightmare in plain view, in the city of dreams. Alston turns right. So begins a two-week journey into the dark side of the American Dream. The spotlight of the UN monitor, an independent arbiter of human rights standards across the globe, has fallen on this occasion on the US, culminating on Friday with the release of his initial report in Washington. His fact-finding mission into the richest nation the world has ever known has led him to investigate the tragedy at its core: the 41 million people who officially live in poverty. Of those, nine million have zero cash income – they do not receive a cent in sustenance.

History is a poet.

• The Chart That Jeffrey Gundlach Calls “Must Watch” For 2018 (ZH)

Having shown us his favorite trade of the year for 2018, DoubleLine CEO Jeffrey Gundlach tweeted last night his “must watch” chart for 2018. “Since Jan SPX up big & way above MA’s all year…” “…yet JNK unchanged and below 50, 100 & 200 MA’s with a death cross even… As Gundlach concludes: This is “unusual… Must Watch”

So, what happens next?

“80% of Americans continue to live paycheck-to-paycheck” That’s an economy that doesn’t have much of a foundation left. It’s wobbly at best, prone to collapse.

• Ignorance Is No Excuse (Roberts)

On Thursday, the retail sales report for November clicked up 0.8%. Good news, right? Not so fast. First, sales of gasoline, which directly impacts consumers ability to spend money on other stuff, rose sharply due to higher oil prices and comprised 1/3rd of the increase. Secondly, building products also rose sharply from the ongoing impact of rebuilding from recent hurricanes and fires. Again, this isn’t healthy longer-term either as replacing lost possessions drags forward future consumptive capacity. But what the headlines miss is the growth in the population. The chart below shows retails sales divided by those actually counted as part of the labor force. (You’ve got to have a job to buy stuff, right?)

As you can see, retail sales per labor force participant was on a 5% annualized growth trend beginning in 1992. However, after the financial crisis, the gap below that long-term trend has yet to be filled as there is a 22.7% deficit from the long-term trend. (If we included the entirety of the population, given the number of people outside of the labor force that are still consuming, the trajectory would be worse.) But wait, retail sales were really strong in November? Again, not so fast. The chart below shows the annual % change of retail sales per labor force participant. The trend has been weakening since the beginning of 2017 and shows little sign of increasing currently.

While tax cuts may provide a temporary boost to after-tax incomes, that income will simply be absorbed by higher energy, gasoline, health care and borrowing costs. This is why, 80% of Americans continue to live paycheck-to-paycheck and have little saved in the bank. It is also why, as wages have continued to stagnate, that the cost of living now exceeds what incomes and debt increases can sustain. Yes, corporations will do well under the “tax reform” plan, and while the average American may well see an increase in take-home pay, it will unlikely change their financial situation much. As a result, economic growth will likely remain weak as the deficit expands to $1 Trillion over the next couple of years and Federal debt marches toward $32 trillion.

Anyone surprised?

• Uber Stole Trade Secrets, Bribed Foreign Officials And Spied On Rivals (G._

Uber allegedly engaged in a range of “unethical and unlawful intelligence collections”, including the theft of competitive trade secrets, bribery of foreign officials and spying on competitors and politicians, according to an explosive legal document published on Friday. It’s the latest chapter in the discovery process for the company’s messy legal squabble with Waymo, Google’s driverless car spin-off, which has accused Uber of stealing trade secrets. The details were outlined in a 37-page demand letter filed by the ex-Uber security manager Richard Jacobs, who left the company earlier this year. The document paints a picture of a team of employees dedicated to spying on rivals and “impeding” legal investigations into the company.

Jacobs alleges that when he raised concerns over the techniques being used, he was given a poor performance review and demoted as “pure retaliation” for refusing to buy into the culture of “achieving business goals through illegal conduct even though equally aggressive legal means were available”. He had sent the letter to Uber’s in-house counsel with his allegations about possible criminal activity carried out by the special group in May this year, threatening to sue the company. Uber did not provide the letter to Waymo as part of legal discovery before the trial started. An Uber spokeswoman said in a statement: “While we haven’t substantiated all the claims in this letter – and, importantly, any related to Waymo – our new leadership has made clear that going forward we will compete honestly and fairly, on the strength of our ideas and technology.”

MSM destroying its credibility more every day.

• While Truth Puts On Its Shoes (W.Standard)

Covering the Trump presidency has not always been the media’s finest hour, but even grading on that curve, the month of December has brought astonishing screwups. Professor and venerable political observer Walter Russell Mead tweeted on December 8, “I remember Watergate pretty well, and I don’t remember anything like this level of journalistic carelessness back then. The constant stream of ‘bombshells’ that turn into duds is doing much more to damage the media than anything Trump could manage.” [..] Since October of last year, when Franklin Foer at Slate filed an erroneous report on a computer server in Trump Tower communicating with a Russian bank, there have been an unprecedented number of media faceplants, most of them directly related to the Russia-collusion theory. The errors always run in the same direction—they report or imply that the Trump campaign was in league with Moscow.

For a politicized and overwhelmingly liberal press corps, the wish that this story be true is obviously the father to the errors. Just as obviously, there are precedents for such high-profile embarrassments in the past. Editors at top news organizations once treated anonymous sourcing as a necessary evil, a tool to be used sparingly. Now anonymous sources dominate Trump coverage. It’s not just a problem for readers, who should rightly be skeptical of information someone isn’t willing to vouch for by name. It’s a problem for reporters, too, because anonymous sources are less likely to be cautious and diligent in providing information. According to CNN, the sources behind the busted report on Trump Jr.’s contact with WikiLeaks didn’t intend to deceive and had been reliable in the past. Maybe so, but given the network’s repeated errors it’s difficult to just take CNN’s word for it.

But it’s one thing to use anonymous sources; it’s quite another to be entirely trusting of them. CNN decided to report the contents of an email to Donald Trump Jr. based only on the say-so of two anonymous sources and without seeing the emails. [..] For their part, the media don’t seem to be coming to grips with the damage they’re doing to their own credibility. CNN, which calls itself “the most trusted name in news,” didn’t retract their WikiLeaks report but rewrote it in such a way as to render the story meaningless. They also came to the defense of Raju and Herb, saying the reporters acted in accordance with the network’s editorial policies. And of course they didn’t out their sources—the ultimate punishment news organizations can mete out to anonymous tipsters who steer them wrong.

It understandably infuriates the media that President Trump remains unwilling to own up to his own glaring errors and untruths, while news organizations run correction after correction. And it also understandably upsets the media to watch the president actively attack and seek to undermine their work, which remains vital to ensuring accountability in American governance. What they haven’t grasped is how perversely helpful to him they are being: On a very basic level, President Trump’s repeated salvos against “fake news” have resonance because, well, there does indeed appear to be a lot of fake news.

“The desperation to get rid of Trump by the Democratic Party and its handmaidens in the media has an odor of reckless dishonesty..”

• Taking Liberty (Jim Kunstler)

I’m not a Trump admirer, didn’t vote for the guy (nor Hillary, either), am not invested emotionally in his political survival, but I do have a pretty firm idea of what he represents: primitive maleness in all its lumbering vulgarity. I can see why he has a certain symbolic appeal in a society that increasingly shouts “men need not apply here.” He also represents the widespread disappointment with the poor job that the remaining men in charge of things have done in recent decades caretaking this polity. They’ve managed to dodge the repair of every broken institution and duck engagement with any of the really scary problems facing citizens of this republic, from the gross disparities of wealth, to pervasive racketeering in health care and education, to our rotting infrastructure, to the quandaries of race, immigration, climate change — you name it and they have done squat.

Men mostly in charge of the FBI are currently busy demonstrating that they can completely botch the wished-for Trump-ending investigation of Russian “meddling and collusion” — whatever that is as a legal matter — under special prosecutor Robert Mueller. The agency begins to look like the brotherhood depicted on The Sopranos TV show some years back. The congressional committees (mostly men) with oversight on the FBI (and its umbrella agency, the Department of Justice) can’t even get a few deputy Attorneys General to answer a subpoena. If ever there was a display of feckless impotence, this is it. The desperation to get rid of Trump by the Democratic Party and its handmaidens in the media has an odor of reckless dishonesty from a faction that succumbs more and more each day to the dangerous idea that the ends justify the means.

Despite the momentary jubilation over the defeat of Roy Moore in the Alabama special election for senator, the party is close to committing suicide via the collective fantasy that all romantic gambits by men are always and everywhere a prelude to rape. But then, the Republican Party ought to be on suicide watch, too, as it debates a stupendously mendacious tax reform bill that will only shove the country closer to financial meltdown.

2018 is set to become a very divisive year for the EU.

• France, Germany To Unveil Eurozone Reforms In March (AFP)

Germany and France will offer their joint vision for reforming the eurozone by March, German Chancellor Angela Merkel said on Friday, in an effort to bridge divisions over the future of the single currency. Meeting without departure-bound Britain, the bloc’s 27 leaders were tasked by EU President Donald Tusk to speak freely about their often clashing visions for the single currency’s future at a summit widely expected to be dominated by Brexit. Overhauling the eurozone and making it more resilient to economic shocks has been a top priority of French President Emmanuel Macron, as well as for European Commission head Jean-Claude Juncker.

But these ambitions have been stymied by political uncertainty in Germany, where Macron ally Merkel is still trying to form a government after the pro-business FDP party abandoned talks amid doubts about eurozone reform. “We will find a common position because it is necessary for Europe,” Merkel said at a news briefing, speaking alongside Macron after a summit focused mostly on Brexit. Merkel’s overture to France will rankle her conservative CDU party which toes an austerity-minded line on economic matters, but appeals to Social Democrats, with whom she must now build a coalition. Reform of the eurozone is often blocked by political divisions, with rich countries – such as Germany and the Netherlands – reticent to adopt policies that share risks with their heavily-indebted eurozone partners, such as France, Spain, Italy or Greece.

EU needs to open up about Luxembourg, Netherlands et al as tax havens.

• EU To Force Firms To Reveal True Owners In Wake Of Panama Papers (G.)

Companies across the EU will be forced to disclose their true owners under new legislation prompted by the release of the Panama Papers. Anti-corruption campaigners applauded the agreement as a major step in the fight against tax evasion and money laundering, but expressed disappointment that trusts will mostly escape scrutiny. The revised terms of the EU’s fourth anti-money laundering directive include: • A requirement for companies to disclose their beneficial, or true, owners in a publicly available register. • Data on the beneficial owners of trusts to be available to tax and law enforcement authorities, as well as sectors with an obligation to follow anti-money laundering rules, such as lawyers. • A requirement for member states to verify beneficial ownership information submitted to their registers. • Extending anti-money laundering and counter-terrorism regulations to apply to virtual currencies, provision of tax services and those dealing in works of art.

EU member states will have 18 months to transpose the new directive into domestic legislation. As a current member of the EU, the UK will implement the legislation. “This is a big breakthrough and confirms that full transparency of corporate ownership is now the global standard against which other countries will be judged,” said Laure Brillaud, the anti-money laundering policy officer at Transparency International EU. “The EU deserves credit for taking this bold leap to end the secrecy that facilitates corruption, tax evasion and other crimes.” Global Witness applauded the move “in the face of opposition from countries like the UK, Luxembourg, Ireland, Malta and Cyprus,” but criticised the failure to introduce the same requirements for trusts.

All the time in the world. Who cares about the misery?

• EU Gives Itself June Deadline On Refugees (K.)

EU leaders appealed for unity in a last-ditch effort to break their deadlock on sharing out refugees by June, telling reluctant eastern states they could otherwise be outvoted on a dispute that has shaken the bloc’s foundations. Coming out from a fraught discussion among 28 EU leaders that went into the small hours on Friday morning in Brussels, rivals in the two-year-old dispute all stuck to their guns, hemmed in by expectations they have raised with their own voters. The Mediterranean frontline states Italy and Greece, and the rich destination countries including Germany, Sweden, Belgium, France, Luxembourg and the Netherlands are demanding that all countries host some refugees as a way to demonstrate solidarity.

Their four ex-communist peers Poland, Slovakia, Hungary and the Czech Republic refuse to accept people from the mostly-Muslim Middle East and North Africa, saying that would threaten their security after a raft of Islamic attacks in Europe. “There are areas where there is no solidarity and this is something I find unacceptable,” German Chancellor Angela Merkel told reporters. At one point during the two days of talks in Brussels, cameras caught Merkel, the bloc’s paramount national leader, as she appeared to become agitated when talking with the leaders’ chairman, Donald Tusk, making her displeasure with him clear. That came after Tusk, a former prime minister of Poland, came out strongly against “ineffective” and “highly divisive” obligatory refugee quotas, ruffling the feathers of those states that back them as well as the executive European Commission.

“The manner in which the principle of solidarity was being questioned does not only undermine the discussion on the refugee issue, but the future of Europe,” Greek Prime Minister Alexis Tsipras told reporters after what he called “intense” talks. Tusk said the ineffectiveness of relocation schemes was demonstrated by the fact that only 35,000 asylum seekers had been transferred from Greece and Italy under a 2015 plan meant to move 160,000 people. “Mandatory quotas remain a contentious issue,” Tusk told a joint news conference with the Commission’s head Jean-Claude Juncker, the disagreement between the two playing out visibly despite their usually friendly rapport. “Relocation is not a solution to the issue of illegal migration.”

Oh well, that only took a year and a half. Were they hoping his suicide attempts would be successful?

• First Vulnerable Child Refugee Arrives In UK From Greece (G.)

The first vulnerable child refugee stranded in Greece who qualifies for sanctuary under the Dubs amendment has arrived in the UK, more than a year after the government pledged to bring over hundreds of children. The Home Office had accepted that the boy was vulnerable and eligible for transfer 16 months ago. The Dubs amendment, part of the 2016 Immigration Act, was passed after a campaign to transfer 3,000 unaccompanied child refugees stuck in camps to Britain. There are more than 3,300 unaccompanied children in Greece, 11,186 in France and 13,867 in Italy. The Home Office agreed to resettle 480 under the Dubs scheme. Conditions for lone children in Greece have been condemned by Human Rights Watch, which found filthy cells infested with bugs and vermin, sometimes without mattresses or access to showers.

Hammersmith and Fulham council in west London has stepped in to offer the boy a home and one of its social workers travelled to Greece to assess the child, who has lost contact with his family in Syria. The boy, who is said to be deeply traumatised, was detained until last month in a police cell with no access to medical professionals, and forced to sleep on an inch-thick mattress on the ground. Police said the boy had repeatedly self-harmed, tried to kill himself and was at “imminent risk” of doing this. According to Antonia Moustaka, a lawyer for the humanitarian agency Praksis, he spent more than 380 days in psychiatric clinics, 124 days in shelters for unaccompanied minors and six weeks in police detention.

[..] George Gabriel, the project lead at the charity Safe Passage, said: “There are more than 3,300 unaccompanied children in Greece and only 1,130 spaces in shelters. The winter is bitterly cold and conditions are getting worse. “Over a year and a half ago, the Dubs amendment brought hope that hundreds of these kids would be brought to safety. It has been appalling to watch these minors wait, month after month, on bureaucratic delays.”

Only took 2,000 years. What were all other mayors of Rome during that time thinking?

• Ovid’s Exile To The Remotest Margins Of The Roman Empire Revoked (G.)

More than 2,000 years after Augustus banished him to deepest Romania, the poet Ovid has been rehabilitated. Rome city council on Thursday unanimously approved a motion tabled by the populist M5S party to “repair the serious wrong” suffered by Ovid, thought of as one of the three canonical poets of Latin literature along with Virgil and Horace. Best known for his 15-book epic narrative poem Metamorphoses and the elegy Ars Amatoria, or the Art of Love, Publius Ovidius Naso was exiled in 8 AD to Tomis, the ancient but remote Black Sea settlement now known as the Romanian port city of Constanta. He remained there until his death a decade later. Although ordered directly by the emperor, scholars have long speculated over the motive for Ovid’s exile; the poet himself attributed it to “carmen et error”, a poem and a mistake.

Experts believe the cause was probably a combination of three factors: that Ovid’s erotic poetry was considered offensive, his attitude to Augustus was too disrespectful, and that he may have been involved in an unspecified plot or scandal. La Republicca reported that M5S, which holds a majority of the seats on the council, demanded that “necessary measures” be adopted to revoke the order in what the capital’s deputy mayor, Luca Bergamo, described as an important symbol. “It is about the fundamental right of artists to express themselves freely in societies in which, around the world, the freedom of artistic expression is increasingly constrained,” Bergamo told councillors.

Ovid was indisputably “one of the greatest poets in the history of humanity,” the deputy mayor said, and moreover the real reasons for his mysterious banishment by the emperor “were never placed on the historical record”. Sulmona, the Abruzzo town where the poet was born (then Sulmo), formally acquitted him of any wrongdoing. Dante, the great Renaissance poet, was similarly pardoned in 2008 by Florence – from where he was exiled on pain of death in 1302.

Debt Rattle March 6 2016

Mar 062016

March 6, 2016 Posted by Raúl Ilargi Meijer at 9:55 am Finance Tagged with: cash, China, DNA, earnings, EU, Fukushima, Growth, reform, refugees, Turkey 1 Response »

Harris&Ewing War-bond rally on Penn. Avenue, Washington DC 1918

• China Picks Growth Over Reform At Annual Congress (AFR)

• Hard Landing Fallacy “No Way” In China: Regulator (Xinhua)

• China Says Cuts In Overcapacity Won’t Cause Massive Layoffs (Reuters)

• China PM Predicts ‘Battle’ For Growth (BBC)

• US Weekly Earnings Drop Most On Record (ZH)

• Sunshine, Lollipops and… (Bill Gross)

• Sweden Begins 5 Year Countdown Until It Eliminates Cash (ZH)

• Confused By The Economic Modelling? That’s The Whole Idea (SMH)

• Mutations, DNA Damage Seen In Fukushima Forests (AFP)

• Zaman Newspaper: Defiant Last Edition As Turkey Police Raid (BBC)

• “EU ’Must’ Hand Turkey €7 Billion Per Year To Keep Out Refugees” (Reuters)

• Merkel Pressures Greece to Step Up Refugee Aid (BBG)

• Open Letter To Vienna From Austrian Expatriates In Greece (Observer)

• EU Refugee Crisis Leaves 10,000 Children Missing, Europol Says (BBG)

But wasn’t reform supposed to be crucial to growth itself? Pretty sure it still is. They should be careful not to start contradicting themselves.

• China Picks Growth Over Reform At Annual Congress (AFR)

China will put development above structural reform over the next five years, as it outlined an ambitious economic growth target higher than economists and international agencies are forecasting. While announcing only modest tax cuts and a smaller than expected increase in fiscal spending, the government indicated it stands ready to roll out out other stimulus measures to meet targeted growth of 6.5% between 2016 and 2020. “We must remain committed to economic development as our central task … and respond effectively to challenges so as to ensure that China’s economy, like a gigantic ship, breaks the waves and goes the distance,” said Premier Li Keqiang during his opening address to the National People’s Congress on Saturday.

In outlining the three main priorities for its 13th Five Year Plan, Mr Li said development ranked ahead of structural reform and efforts to recalibrate China’s economy to be more reliant on consumption rather than investment. “Development is of primary importance to China and is the key to solving every problem we face,” he said. Mr Li’s determination for China to grow its way out of trouble will see a budgeted fiscal deficit of 3% of GDP in 2016, up from 2.3% last year. While this was lower than many had expected, it does not account for off-budget items, which are likely to see China post an actual fiscal deficit of 3.5% in 2015 and could see that figure top 4% this year. “The majority of the increase in the fiscal deficit will be used for a cut in taxes and charges in order to reduce the burden on enterprises,” Mr Li said.

This will result in 500 billion yuan ($103 billion) of tax cuts this year, as China replaces sales tax with a Value Added Tax. China set an economic growth target of between 6.5% and 7% for 2016. While this is well down on the double-digit growth rates of last decade, Mr Li put it in context by saying each 1 percentage point of growth today was the same as 2.5 percentage points 10 years ago, as the economy was now significantly larger. He also said each 1 percentage point of growth created 1.9 million new jobs. However, he conceded the country would face “more and tougher challenges” for economic development this year and must be prepared to “fight a battle” as international trade was weak and geopolitical risks were rising. But he said the economy was resilient and there was ample room for growth.

[..] On structural reform, Mr Li said the issue of so called “zombie enterprises” – companies that are effectively bankrupt but still operating – would be addressed “proactively yet prudently”. Beijing has outlined plans for 1.8 million steel and coal workers to lose their jobs over the next five years and has set up a 100 billion yuan ($20 billion) fund for compensating employees and restructuring companies. However, Mr Li outlined few details on how this would be achieved, suggesting it would be more gentle than the brutal restructure of State Owned Enterprises in the late 1990s, which saw an estimated 25 million workers lose their jobs.

“China accounted for a quarter of the world’s economic growth in 2014, Xy said..” Tyler Durden wryly observes: “And accounted for 40% of all global new debt issuance since 2008..”

• Hard Landing Fallacy “No Way” In China: Regulator (Xinhua)

The hard landing fallacy on China’s economy will “no way” occur in China, a senior economic official said Sunday. The Chinese economy is so resilient with relatively strong abilities to resist risks, Xu Shaoshi, who heads the National Development and Reform Commission, said on the sidelines of the annual parliamentary session. “We are capable of keeping economic growth at rates within a reasonable range,” Xu said. “We are confident of achieving that end.” China set the growth target at a range of 6.5% to 7% this year, and an average annual growth of above 6.5% for the next five years.

It had seen, for a quarter of a century, the slowest expansion of 6.9% in 2015, amid its structural adjustment and a fragile global recovery. China’s economic growth remains relatively fast among world major economies. The 6.9% growth was hard won given the sluggish global recovery, Xu said. China accounted for a quarter of the world’s economic growth in 2014, Xu said, citing data from the World Bank and China’s National Bureau of Statistics.

We respectfully disagree.

• China Says Cuts In Overcapacity Won’t Cause Massive Layoffs (Reuters)

China’s plans to reduce industrial overcapacity are unlikely to result in large-scale layoffs, the country’s top economic planner said on Sunday. Xu Shaoshi, head of the National Development and Reform Commission (NDRC), told reporters at a briefing that economic growth will create more jobs and help offset the impact of capacity cuts. China aims to keep its economy growing by at least 6.5% over the next five years while pushing hard to create more jobs and restructure inefficient industries, Premier Li Keqiang said on Saturday.

“There was plenty of talk about “painful rebalancing”, the need to reform inefficient state owned enterprises and to cut overcapacity – but for many, this speech will look a lot like business as usual: a commitment to growth at all costs..”

• China PM Predicts ‘Battle’ For Growth (BBC)

China’s National People’s Congress has set the country’s growth target for 2016 at a lower range of 6.5%-7%. Premier Li Keqiang made the announcement in his opening speech, warning of a “difficult battle” ahead. The annual meeting in Beijing sets out to determine both the economic and political agenda for the country. It comes at a time when China struggles with slowing economic growth and a shift away from overreliance on manufacturing and heavy industry. The congress is also expected to approve a new five-year plan, a legacy of the communist command economy. “China will face more and tougher problems and challenges in its development this year, so we must be fully prepared to fight a difficult battle,” Mr Li told delegates on Saturday.

Last year, China’s goal was “about 7%”. The economy actually grew by 6.9% – the lowest expansion in 25 years. Mr Li also said that China was targeting consumer inflation at “around 3%” and unemployment “within 4.5%”. Meanwhile, the country’s defence spending will be raised by 7.6%, the state-run Xinhua news agency reports, citing a budget report. China’s congress is a highly choreographed, largely rubber stamp affair, but Premier Li’s opening address can at least be gleaned for clues about the overall direction of policy, the BBC’s John Sudworth in Beijing reports. There was plenty of talk about “painful rebalancing”, the need to reform inefficient state owned enterprises and to cut overcapacity – but for many, this speech will look a lot like business as usual: a commitment to growth at all costs, our correspondent adds.

Ugly.

• US Weekly Earnings Drop Most On Record (ZH)

The headline jobs number was certainly good, beating expectations and well higher than last month’s disappointing (and upward revised) 182K print. However, a quick look below the headline reveals an amazing statistic: while we already noted that average hourly earnings posted only their first decline since December 2014, and just the 6th in the past decade, declining by -0.1%, what is the real surprise is that average weekly hours worked also dropped substantially by 0.2 from 34.6 to 34.4. This, naturally, is the denominator in the average hourly earnings calculation, and for it drop drop with the average also sliding, means that weekly earnings must have dropped.

And drop they did: as the chart below clearly shows, based on the data which showed a whopping tumble in average weekly earnings from 878.15 to just 872.04, at -0.7%, this was the biggest monthly drop in the entire series history!

The drop confirms that the jump in earnings observed in January, and which led many to prematurely conclude that wage growth has finally arrived, was nothing but a headfake driven by the increase in minimum wages across various states, which has now been fully digested, and as a result wage growth is once again what it was before: non-existent. Finally, it goes without saying that in the middle of a ‘recovery’ this is not really supposed to happen.

Long article by Gross, worth a read.

• Sunshine, Lollipops and… (Bill Gross)

Our Sun – a rather tiny star in the galaxial scheme of things – seems inexhaustible. But 5 billion years from now, it will swallow, instead of nurture the Earth as it burns itself out – first contracting, then expanding like a flaming candle turned firecracker. Not to worry though. We won’t be around. It’s not that we are beyond worrying; it’s that our lives are much shorter and we needn’t think much about it. In the nearer term, there is global warming/climate change, and other such down to Earth problems as paying the bills and getting kids into the right colleges. Still – there are presumably inexhaustible things that deserve our attention in the here and now. One of them is finance-based capitalism and our assumption that the risk/ reward historically inherent in it will be sufficient to drive economic growth forward.

Unlike the Sun, whose fate and lifespan can be scientifically determined, there is little evidence that anything could ever change what has been until now a flawed, yet the best economic system conceivable. Capitalistic initiative married to an ever expanding supply of available credit has facilitated economic prosperity much like the Sun has been the supply center for energy/ food and life’s sustenance. But now with quantitative easing and negative interest rates, the concept of nurturing credit seems to have morphed into something destructive as opposed to growth enhancing. Our global, credit based economic system appears to be in the process of devolving from a production oriented model to one which recycles finance for the benefit of financiers. Making money on money seems to be the system’s flickering objective.

Our global financed-based economy is becoming increasingly dormant, not because people don’t want to work or technology isn’t producing better things, but because finance itself is burning out like our future Sun. What readers should know is that the global economy has been powered by credit – its expansion in the U.S. alone since the early 1970’s has been 58 fold – that is, we now have $58 trillion of official credit outstanding whereas in 1970 we only had $1 trillion. Staggering, is it not? But now, this expansion appears to be reaching an ending of sorts, at least in its current form. Private sector savers are growing leery of debt piled upon debt and government regulators have begun to build fences against further rampant creation.

In addition, the return offered on savings/investment whether it be on deposit at a bank, in Treasuries/Bunds, or at extremely low equity risk premiums, is inadequate relative to historical as well as mathematically defined durational risk. The negative interest rates dominating 40% of the Euroland bond market and now migrating to Japan like a Zika like contagion, are an enigma to almost all global investors. Why would someone lend money to a borrower with the certainty of getting less money back at a future date? Several years ago even the most Einsteinian-like economists would not have imagined such a state but now it seems an everyday occurrence, as central banks plumb deeper and deeper depths like drilling rigs expecting to strike oil, if only yields could be lowered another 10, 20, 50 basis points.

Some kind of currency will appear. Maybe the Swedes will start using dollars.

• Sweden Begins 5 Year Countdown Until It Eliminates Cash (ZH)

How much louder can the “ban cash” calls get? Recall it was just last year when we catalogued the growing cacophony of crazies for whom banning physical currency is the only way to ensure that depositors can’t simply reassert their economic autonomy under a low or zero rate regime.. Put simply, if interest rates get too low, depositors will simply take their money out the bank and put it in the mattress or the safe where, to quote WSJ from last week, “interest rates are always low no matter what central bankers do. Most recently, Larry Summers called for the abolition of the $100 bill in the US and in Europe the €500 note is to go the way of the dinosaurs. Perhaps the most telling sign that citizens are starting to panic is that in Japan, they’re selling out of safes. Literally.

“It shows a vague sense of unease,” one Japanese lawmaker who brought up the soaring safe sales in parliament on Monday remarked. Now, the excuse given for banning big bills is that it combats crime. And maybe it does. But in the end the rationale is simple: if there are no more physical banknotes, people have no economic autonomy. Let’s say consumer spending is stagnating. No problem, take rates to -20%. We bet they’ll start spending then – either that or see their deposits haircut by 20%. In short, no cash means no effective lower bound and with no lower bound, the economy can be completely centrally planned – for all intents and purposes. Consumers not spending? No problem. Just tax their excess account balance. Economy overheating? Again, no problem. Raise the interest paid on account holdings to encourage people to stop spending.

So with Citi, Harvard, Denmark and Peter Bofinger, member of the German Council Of Economic Experts, all onboard, we’re surprised to hear that Sweden (already one of the leaders in the cashless society movement) is looking to phase out a series of new bank notes it just introduced last year and moved ever closer to the cashless utopia. “Last year Sweden introduced a series of new banknotes replacing its old kronor notes. But figures suggest these too could be gone from circulation in half a decade if the development towards a cashless society continues,” The Local reports,” continuing that “cash transactions today represent no more than 2% of the value of all payments made in Sweden, [and that estimate] will drop to below 0.5% within the next five years. Some welcome the trend – credit card providers, for instances – others have reservations.

“It is happening at a furious rate. And it’s important to many older people to be able to use cash. I mean, today it is legal tender and you have to be able to use it until parliament decides otherwise,” Christina Tallberg, chairwoman of Swedish pensioners’ organization PRO, told Swedish Radio on Friday. Well, until parliament or perhaps more appropriately, until The Riksbank and Stefan Ingves decides it. Because at -0.55, it’s a “how much lower can you go type scenario.” Well, if you go kronor-less, that question ceases to make sense. The “problem” simply goes away. “Sometimes you have to learn new things. It’s a little awkward for a transitional period, but I think it’s going to be so simple that you pretty soon realize that this is a lot easier and better than having cash,” said working environment ombudsman Krister Colde of the Commercial Employees’ Union (Handels). Famous last words Krister.

Fun in Oz.

• Confused By The Economic Modelling? That’s The Whole Idea (SMH)

Politics is about trust. Prime Minister Malcolm Turnbull has been claiming for weeks that Labor’s plans for negative gearing would smash house prices. “The 70% of Australians who own houses will see the value of their single most important asset smashed to fulfil an ideological crusade,” he told parliament. His Attorney-General George Brandis has made it sound even worse. “There is one thing we know about the negative-gearing debate,” he told us. “If the Labor Party were to implement its policy, the value of most Australians’ homes would collapse”. His assistant treasurer Kelly O’Dwyer briefly said the opposite. Labor’s policy would “increase the cost of housing for all Australians; for those people who currently own a home and for those people who would like to get into the housing market”.

And then his treasurer Scott Morrison latched on to a “credible report” that said Labor’s policy would have “a significant impact on property values”. He latched on too quickly. The report, by BIS Shrapnel, said no such thing. Prices would continue to rise in all but two of the next 10 years under the scenario it modelled, just as they would if negative gearing was maintained. After a decade, they would have climbed 15%. That’s less than with full negative gearing, but its still an increase. The report explained that house prices are typically “sticky in a downwards direction,” unable to fall lower than the cost of construction plus a markup. When new attempts at negative gearing were temporarily suspended between 1985 and 1987 real estate prices continued to climb.

While new investors would be less keen to buy if Labor’s policy stopped them negatively gearing, existing investors would be also less keen to sell, because they could only continue to negative gear if they hung on to the properties they had. Prices wouldn’t be smashed. It’s all there in the report Morrison lauded as credible (because it said rents would rise), but appeared not to properly read. Certainly his eyes appeared to glaze over the howling error on page one. The report said Australia’s national income would average $190 billion over the next ten years when it meant $1.9 trillion. And they appeared not to be troubled by its suggestion that a measure that raised around $2 billion per year would shrink the economy by $19 billion per year.

That’s $9 of economic damage for every $1 collected, a sum so big as to be way out of the ballpark of anything his department has ever modelled. When Treasury modelled a range of taxes for its tax discussion paper, it found the worst of them, stamp duty, did 70 cents of economic damage for each dollar collected. Yet first thing Thursday morning on AM Morrison described as “credible” a report that found removing negative gearing would create multiples of the biggest damage his department could find The Grattan Institute’s John Daley says the finding doesn’t even pass the giggle test. Try it for yourself. Attempt to say: “a tax that raises $2 billion will shrink the economy by $19 billion” without laughing.

5 years later.

• Mutations, DNA Damage Seen In Fukushima Forests (AFP)

Conservation group Greenpeace warned on Friday that the environmental impact of the Fukushima nuclear crisis five years ago on nearby forests is just beginning to be seen and will remain a source of contamination for years to come. The March 11, 2011 magnitude 9.0 undersea earthquake off Japan’s northeastern coast sparked a massive tsunami that swamped cooling systems and triggered reactor meltdowns at the Fukushima Daiichi nuclear plant. Radiation spread over a wide area and forced tens of thousands of people from their homes – many of whom will likely never return – in the worst nuclear accident since Chernobyl in 1986. As the fifth anniversary of the disaster approaches, Greenpeace said signs of mutations in trees and DNA-damaged worms were beginning to appear, while “vast stocks of radiation” mean that forests cannot be decontaminated.

In a report, Greenpeace cited “apparent increases in growth mutations of fir trees… heritable mutations in pale blue grass butterfly populations” as well as “DNA-damaged worms in highly contaminated areas”, it said. The report came as the government intends to lift many evacuation orders in villages around the Fukushima plant by March 2017, if its massive decontamination effort progresses as it hopes. For now, only residential areas are being cleaned in the short-term, and the worst-hit parts of the countryside are being omitted, a recommendation made by the International Atomic Energy Agency. But such selective efforts will confine returnees to a relatively small area of their old hometowns, while the strategy could lead to re-contamination as woodlands will act as a radiation reservoir, with pollutants washed out by rains, Greenpeace warned.

Shame on Europe and the US.

• Zaman Newspaper: Defiant Last Edition As Turkey Police Raid (BBC)

Turkey’s biggest newspaper, Zaman, has condemned its takeover by the authorities in a defiant last edition published just before police raided it. Saturday’s edition said Turkey’s press had experienced “one of the darkest days in its history”.
Police raided Zaman’s Istanbul offices hours after a court ruling placed it under state control, but managers were still able to get the edition to print. Police later fired tear gas to disperse Zaman supporters. Water cannon was also used as about 500 people gathered in front of Zaman’s headquarters on Saturday. They chanted “Free press cannot be silenced!” A number of the journalists returned to work, but some of them tweeted that:
• they had lost access to internal servers and were not able to file articles
• they were not able to access their email accounts
• the newspaper’s editor-in-chief Abdulhamit Bilici and a leading columnist had been fired

One reporter, Abdullah Bozturk, said attempts were also under way to wipe the newspaper’s entire online archive. The European Union’s response has been to issue weak statements of concern, the BBC’s Mark Lowen says. It is accused of acting softly on Turkey as it needs the country’s support in managing the refugee crisis. The paper is closely linked to the Hizmet movement of influential US-based cleric Fethullah Gulen, which Turkey says is a “terrorist” group aiming to overthrow President Recep Tayyip Erdogan’s government. Mr Gulen was once an ally of Mr Erdogan but the two fell out. Many Hizmet supporters have been arrested.

The court ruled on Friday that Zaman, which has a circulation of some 650,000, should now be run by administrators. No explanation was given. Turkish Prime Minister Ahmet Davutoglu said the move was “legal, not political”. “It is out of the question for neither me nor any of my colleagues to interfere in this process,” he said in a television interview. The government in Ankara has come under increasing international criticism over its treatment of journalists. The EU’s diplomatic service said that Turkey “needs to respect and promote high democratic standards and practices, including freedom of the media”, while the US described the move as “troubling”.

They should find other allies, this is nuts. Erdogan is (mass-)murdering Kurds and closing down the press. And we’re helping him do it?!

• “EU ’Must’ Hand Turkey €7 Billion Per Year To Keep Out Refugees” (Reuters)

The EU may need to more than double financial aid already pledged to Turkey to help it keep millions of Syrian refugees on its soil, Germany’s EU Commissioner Guenther Oettinger was quoted as saying on Saturday. The European Commission on Friday announced the first payouts from a €3 billion ($3.3 billion) fund to help Turkey pay for the needs of some 2.5 million refugees. “Europe should hold out the prospect of further financial support to Turkey also beyond 2017,” Oettinger told German magazine Der Spiegel. “Taking over full costs of the services that Turkey is providing by accommodating and caring for the refugees, the bill could easily add up to six or seven billion euros per year,” said Oettinger, a senior member of Chancellor Angela Merkel’s center-right party Christian Democratic Union (CDU).

Austrian Chancellor Werner Faymann proposed a new EU fund to finance the additional costs. “In the migrant crisis, we need joint European solutions,” Faymann told the magazine. “Therefore I suggest a fund in which each EU member state pays in, similar to the bank bailout. The money should be used to cover the costs of providing for the asylum seekers.” European Council President Donald Tusk, who on Friday held talks with Turkish President Tayyip Erdogan, will chair an emergency EU summit with Turkey on Monday aimed at strengthening cooperation to stem the flow of migrants to Europe.

Emptier words were never spoken.

• Merkel Pressures Greece to Step Up Refugee Aid (BBG)

German Chancellor Angela Merkel boosted pressure on the Greek government to step up its capacity for sheltering refugees, pledging that the European Union will assist the country with the task. Greece fell short of its aim of setting up shelter for 50,000 asylum seekers fleeing Syria and the Middle East by the end of 2015, Merkel said in an interview with Bild am Sonntag. “The backlog needs to be made up posthaste,” Merkel told the German newspaper. “I know from my talks with Greek Prime Minister Alexis Tsipras that he wants that too, but that that he needs our help to do it.”

Thousands of refugees are stranded in Greece. Merkel in the Bild interview blamed the humanitarian crisis on other European states that tightened their borders against the influx, blocking passage north, where most asylum seekers have sought shelter in more accommodating countries such as Germany. The chancellor has said the blocked borders endanger Europe’s system of passport-free travel, known as Schengen. “Today we have a different situation, because Austria and the Balkan nations made unilateral decisions at their national borders that have unfortunately placed a burden on our partner and Schengen member Greece,” Merkel told Bild. The EU’s 28 leaders and the Turkish government will discuss the refugee crisis in Brussels on Monday.

Well put.

• Open Letter To Vienna From Austrian Expatriates In Greece (Observer)

This is the full text of a letter written by prominent émigrés to ministers in protest over the country’s role in border closures against refugees

Open letter to the Austrian government Austrians living and working in Greece, who feel deeply connected with this country, appeal to the Austrian government to take a more responsible position in dealing with the refugee crisis. Instead of putting on blinkers, pretending that by closing the borders the problem will go away, the situation has to be tackled head-on at a European level. The Austrian government needs to understand that individual, national approaches fail to produce results, also because solitary advances contradict the basic tenets of the European programme, which is meant to serve as the foundation for a new generation. Despite the temporary ceasefire, the war in Syria continues unabated, forcing the frightened civilian population, trapped between the fighting fronts, to keep seeking refuge by fleeing their country.

While the neighbours of Syria bear the brunt of the pressure, the callous reaction of the Austrian government, one of the richest countries in the world (ranked 11), puts us to shame. Austrian politicians have claimed that our country has accepted more refugees than most others. But a glance at the facts from Europe’s south proves this statement to be fatally wrong, misrepresenting the data. Pushing solutions to the refugee crisis that rely on increasing the pressure on Greece is counterproductive, unrealistic and irresponsible. The Austrian Minister of the Interior maintains that “that will put an end to perilous journeys across the Mediterranean.” No, Mrs Minister, it won’t!

Dozens of boats continue to arrive on Greece’s shores on a daily basis, often carrying over three thousand desperate people a day. The unspeakable horror of the war, hopelessness in the adjacent countries and the desire to reunite with family members are a strong motivation for those who have nothing to lose to risk the journey towards European destinations. What could stop them? Coast guards? Warships? Walls? Barbed wire fences? None of these measures will have any effect, unless the acts of war are put to an end. Otherwise, traumatised, terrorised people will continue to do anything to escape their misery.

The Europeans, who cannot see eye to eye among each other and do not even seem to share the most basic values, are busying themselves reinforcing their ominous fortress. As much as they try, it is not going to prevent war refugees from attempting to save their lives. Many more will come, hoping to make it somehow, at all cost, as hope dies last. Europe has no choice but to face the catastrophic situation in the war-torn countries of the near and Middle East responsibly and make every effort to help these people rebuild their lives. This will require foresight, wisdom and the will to convince the doubters (and the constituencies). Otherwise, we will be faced with a generation growing up in war-torn nations in who cannot but feel deepest frustration and animosity towards Europe and its “values”.

Nobody cares. All they care about is that refugees stop coming.

• EU Refugee Crisis Leaves 10,000 Children Missing, Europol Says (BBG)

More than 10,000 child refugees have disappeared after arriving in Europe, according to crime-fighting agency Europol, as the region faces its worst migrant crisis since World War II. “This is something European police services and governments should be worried about,” Europol Chief Rob Wainwright said in an interview Saturday with French newspaper Le Figaro. “Not all are exploited for criminal purposes – illegal labor or sexual slavery. Some have left shelters to reunite with their families, but we have no proof of that.” Of the 1.2 million refugees who arrived in the European Union last year, a quarter were minors, and 85,000 were unaccompanied by an adult, Wainwright said.

More than 135,000 asylum seekers have made their way to Europe this year, compared with about 376,000 in October and November, according to UNHCR, the United Nations refugee agency. European leaders are struggling to develop an alternative for the patchwork of unilateral border controls imposed by national governments to stem the flow of migrants fleeing war and poverty. The European Commission, the EU’s executive arm, proposed on Friday to lift internal border border checks and restore passport-free travel by the end of the year.

Debt Rattle February 28 2016

Feb 282016

February 28, 2016 Posted by Raúl Ilargi Meijer at 9:07 am Finance Tagged with: crisis, Fraud, G20, Greece, oil, private debt, recession, reform, refugees, Xi 4 Responses »

Harris&Ewing US Weather Bureau kiosque, Pennsylvania Avenue, Washington, DC 1921

• Markets At Risk As G20 Proves Investor Hopes Were “Pure Fantasy” (ZH)

• Currency Wars Coming In Leaderless World: Citi’s Buiter (CNBC)

• G-20 Wants Governments Doing More, and Central Banks Less (BBG)

• We’re In Recession And It’s Getting Worse: Ron Paul (CNBC)

• PBoC Defends Halting Publication Of Sensitive Financial Data (SCMP)

• How Xi Jinping Is Bringing China’s Media To Heel (Guardian)

• Mervyn King: New Financial Crisis Is ‘Certain’ Without Reform Of Banks (PA)

• Hidden Debt That No One Is Talking About -And It Involves You- (SMH)

• North Sea Firms Are ‘Sleepwalking Into Disaster’ As Insolvencies Loom (Tel.)

• European Oil Majors Tally $19 Billion In Losses (MW)

• Citigroup Faces Fraud Suit Claiming $1.1 Billion in Losses (BBG)

• How Land Barons, Industrialists And Bankers Corrupted Economics (Kent)

• Alabama Lawmakers To Cities: We Won’t Let You Raise The Minimum Wage (CSM)

• The Donald – The Good And Bad Of It (David Stockman)

• Switzerland Votes On Expelling Foreigners For Minor Offences (Guardian)

• Double Crisis Deepens Despair In Greece’s ‘Warehouse Of Souls’ (Guardian)

As I said yesterday before the communique was out.

• Markets At Risk As G20 Proves Investor Hopes Were “Pure Fantasy” (ZH)

Anyone hoping this week’s G-20 meeting would yield some manner of “Shanghai Accord” to revive sluggish global growth, pull the global economy out of the deflationary doldrums and calm jittery markets that have seen harrowing bouts of volatility in the first two months of the year are disappointed on Saturday. The joint communique issued by policymakers at the end of the two-day summit is bland and generic, with officials parroting vacuous promises to avoid competitive currency devaluations and maintain monetary policies aimed at supporting economic activity and price stability. Officials pledged to “consult closely” on FX markets, a reference presumably to China’s “surprise” August 11 deval and the PBoC’s move in December to adopt a trade weighted basket as a reference point for the RMB, a move that telegraphed lots of downside for the currency.

The statement also “acknowledges” the fact that geopolitical risks abound and as Bloomberg noted this morning, “officials added a potential ‘Brexit’ to its long worry list in the communique.” “That’s a win for Chancellor of the Exchequer George Osborne, who had sought to rally international finance chiefs behind the campaign to keep Britain in the European Union,” Bloomberg goes on to point out. “Downside risks and vulnerabilities have risen,” due to volatile capital flows and slumping commodities but – and this was a critical passage – “monetary policy alone cannot lead to balanced growth.” What?! We thought counter-cyclical Keynesian tinkering was the magic elixir. A cure-all that smooths business cycles and creates demand out of thin air.

Now you’re telling us it “can’t lead to balanced growth” and implicitly that Paul Krugman is a snake oil salesman? This can’t be. “The global recovery continues, but it remains uneven and falls short of our ambition for strong, sustainable and balanced growth,” the statment continues, in a rather dour assessment of the economic landscape. “While recognising these challenges, we nevertheless judge that the magnitude of recent market volatility has not reflected the underlying fundamentals of the global economy,” officials added. Right. If markets were “reflecting the underlying fundamentals” of this global deflationary trainwreck, things would probably be even more volatile.

Predictably, everyone called on fiscal policy to save the day, in what amounts to a tacit admission that central banks have failed. “Countries will use fiscal policy flexibly to strengthen growth, job creation and confidence, while enhancing resilience and ensuring debt as a share of GDP is on a sustainable path,” the statement reads. So countries will somehow adopt expansionary fiscal policies without resorting to deficit financing via debt sales. So, magic. Got it. Long story short, there is no “Shanghai Accord” akin to the 1985 Plaza Accord between the United States, France, West Germany, Japan, and the United Kingdom, which agreed to weaken the USD to shore up America’s trade deficit and boost economic growth. All we have here is a generic statement and empty promises.

Even Buiter agrees.

• Currency Wars Coming In Leaderless World: Citi’s Buiter (CNBC)

The global economy is bound to remain leaderless, as G-20 countries meeting in Shanghai on Friday are unlikely to produce anything more than a rhetorical statement, Citigroup’s chief economist Willem Buiter said. Buiter said Friday the global economy truly needs an agreement on exchange rates that will be defended through intervention, as well as expansion of supportive monetary policy, fiscal stimulus modulated according to countries’ needs, and “supply side reforms that sustain animal spirits in the corporate sector.” “You’re not going to get any of that in substance. There is no leadership in the global economy. And there is no willingness to forgo the short-run benefits of beggar-thy-neighbor exchange rate depreciation. Currency wars will be the reality of what we’ll see over the next few years,” he told CNBC’s “Squawk on the Street”.

Buiter and Citigroup analysts said in a note Wednesday the risk of the global economy falling into a recession is rising as fundamentals remain poor. “We are currently in a highly precarious environment for global growth and asset markets after two to three years of relative calm,” Citigroup said, noting that global growth was “unusually weak” in the fourth quarter at around 2 percent. Buiter said central banks are nearly out of ammo when it comes to using conventional and unconventional monetary policy as a means of stimulating demand. “If we have a further slowdown, it will have to be combined more with the fiscal policy, and the world just isn’t ready for that, institutionally, politically and any other way,” he said.

At the same time, the private and public sectors in most advanced economies have become highly leveraged, he noted. Citi is not expecting a U.S. recession, provided no surprises from abroad send the dollar sharply higher. But it does anticipate a further incremental slowing in the absence of a supportive Federal Reserve and as corporations ratchet up debt following a period of “unspectacular, mediocre” growth, he said. Markets have appropriately priced in the risk of recession following last year’s “excessive optimism,” he said. “Markets are ahead of the policymakers here for once,” he said. “People have now rediscovered that, yes, future earnings growth projections on which the stock valuations were based were unrealistic.”

While knowing that governments won’t.

• G-20 Wants Governments Doing More, and Central Banks Less (BBG)

Finance chiefs from the world’s top economies committed their governments to doing more to boost global growth amid mounting concerns over the potency of monetary policy. In a pledge that will prove easier to write than deliver and may disappoint investors looking for a coordinated stimulus plan, the Group of 20 said “we will use fiscal policy flexibly to strengthen growth, job creation and confidence.” After a two-day meeting in Shanghai, finance ministers and central bank governors also doubled down on a line from their last gathering that “monetary policy alone cannot lead to balanced growth.” For those few analysts calling for a 1985 Plaza Accord-type agreement to address exchange-rate tensions, there was no such luck: IMF Managing Director Christine Lagarde said there were no discussions about anything like that.

The G-20 members did reaffirm they will refrain from competitive devaluations, and – in new language – agreed to consult closely on currencies. An increasing sense monetary policy is reaching its limit permeated officials’ briefings during the meetings that ended Saturday. While central banks proved critical in avoiding a global slide into depression last decade, there is now no consensus among the world’s top economic guardians backing stepped-up monetary stimulus. That leaves focus on fiscal polices that are subject to domestic political constraints, and a structural-reform agenda the G-20 said will be gauged through a new indicator system. “Central bankers have done their bit in recent years to stabilize the world economy,” said Frederic Neumann at HSBC in Hong Kong.

“But as their tools are losing their effectiveness, only more aggressive fiscal policy and structural reforms will help to lift growth.” Among those publicly indicating a potentially reduced role for central banks was Lagarde, who said Friday the effects of monetary policies, even innovative ones, are diminishing. Bank of England Governor Mark Carney used a Shanghai speech ahead of the G-20 to voice skepticism over negative interest rates – now in place in continental Europe and Japan – and their ability to boost domestic demand.

“They’re paid to spin it in a positive manner..” “You can’t expect them to say anything else.”

• We’re In Recession And It’s Getting Worse: Ron Paul (CNBC)

Ron Paul wants to deliver a message to the market that he claims the Federal Reserve refuses to do itself. The former U.S. Republican congressman said this week that the Fed has been propping up markets, and the U.S. economy has already entered a recession despite what central bankers might say. “They’re paid to spin it in a positive manner,” the libertarian firebrand told CNBC’s “Futures Now” in an interview. He added: “You can’t expect them to say anything else.” Paul’s warning comes as a growing number on Wall Street have turned pessimistic on the economy. This week, Citigroup analysts cautioned in a note that the risk of the global economy sinking into a full-fledged recession is on the rise, amid a “tightening in financial conditions everywhere.”

Dragging down the economy is a massive load of personal and sovereign debt, Paul said. A 2015 analysis by the McKinsey Global Institute said that global debt had grown by $57 trillion in the last several years, while no major economy has successfully de-leveraged since 2007. According to Paul, the Fed has played a large role in that accumulation of debt by implementing artificially low interest rates for years. This has pushed individuals and companies to spend beyond their means, he added.

“When things get out of kilter from artificially low interest rates…the only correction is the liquidation of the debt, but that is not permissible,” Paul said. Now, Paul warned that the government may be losing control of markets, which will lead to more volatility in stocks. “Everything is designed to keep the stock market alive. At the same time, the employment numbers when you look at them closely aren’t all that great,” he said. In January, the U.S. economy added 151,000 jobs, missing economist expectations and falling well short from the previous month. From here, Paul said growth will continue to deteriorate. “I think that the conditions will get a lot worse,” he said. “The slope is going to be down, for economic growth and prosperity.”

Lame defense that breaks down confidence instead of building it up.

• PBoC Defends Halting Publication Of Sensitive Financial Data (SCMP)

China’s central bank has defended the removal of sensitive data from a regular financial report used by the market to assess the flow of capital in and out of the country. The People’s Bank of China said in a statement that the figures were no longer published as they were misleading and not an accurate reflection of capital flows. The removal of the data comes as huge amounts of cash is flowing out of China as the nation’s economy slows and its currency weakens. China’s foreign exchange reserves fell by a record US$108 billion in December and US$99.4 billion in January. The absence of the regular figures in the report was first reported by the South China Morning Post last week. Analysts had complained that sudden lack of clear information made it hard for markets to draw a clear picture of the financial positions in China’s banking system.

Figures on the “position for forex purchase” for all financial institutions, including the central bank, were regularly published in the PBOC’s monthly report on the “Sources and Uses of Credit Funds of Financial Institutions”. The December reading in yuan was 26.6 trillion yuan. But the data was missing in the central bank’s latest report. The central bank did publish figures for its own purchases of foreign exchange. A central bank statement issued before the start of a G20 finance ministers and central bank leaders meeting in Shanghai said the figures on “commercial banks foreign exchange transactions do not necessarily affect the central bank’s foreign exchange position, nor necessarily reflect capital flows”. The data has “little resemblance to its original meaning and cannot reflect the real condition of capital flows”, the statement said.

The indicator was useful to measure capital flows when almost all foreign exchange at commercial banks was purchased in yuan, but particularly after China joined the World Trade Organisation in 2001 the correlation between foreign exchange and yuan positions at commercial banks was no longer clear, the central bank said. The data removed from the report used to be closely monitored by analysts and the media as a guide to capital flows in and out of China. Chen Xingdong, chief economist at BNP Paribas in Beijing, said: “If China’s capital flows were not so closely watched, the tweak may not stir debate, but as China’s capital flow situation is such a hot issue the central bank’s adjustment is put under the spotlight. China’s central bank has to improve its communications” with the market, he said.

[..] Christopher Balding, an associate professor at Peking University HSBC Business School, said the change in published data was relatively small, but still made it more complicated to track China’s capital flows. “Rather than censoring or redacting, it is better to say obfuscating or making [it] more difficult to track,” said Balding. It showed the central bank was unaware “how sceptical people are of these types of surprises and Chinese data”, he said. The problems with central bank data were similar to figures released by other Chinese government agencies, according to Balding. “They are constantly redefining key data to mean different things, most of the time without telling anyone…you never know if you are making the correct comparison.”

Great way to create confidence.

• How Xi Jinping Is Bringing China’s Media To Heel (Guardian)

It was an astonishing admission from one of the Communist party’s key mouthpieces: with China’s economic star fading, its leaders now urgently needed to strengthen their hold on the media in order to maintain control. “It is necessary for the media to restore people’s trust in the Party,” an editorial in the China Daily argued this week in the wake of a high-profile presidential tour of the country’s top news outlets in which Xi Jinping demanded “absolute loyalty” from their journalists. “The nation’s media outlets are essential to political stability.” China’s government-run media has long been a propaganda tool of the Party with Chairman Mao once famously declaring: “Revolution relies on pens and guns.”

But as Xi Jinping enters his third year as president experts say he is seeking to cement that grip even further, doubling down on the Party’s control of organisations such as state broadcaster CCTV, official news agency Xinhua, and Beijing’s flagship newspaper, the People’s Daily. “They must love the party, protect the party, and closely align themselves with the party leadership in thought, politics and action,” Xi told newsroom staff during a highly choreographed tour of the three outlets last Friday after which he set out his blueprint for the media. In case Xi’s message had been missed, an editorial in the People’s Daily informed news reporters their key role was not as speakers of truth to power but “disseminators of the Party’s policies and propositions”. “Guiding public opinion for the Party is crucial to governance of the country,” the newspaper said.

‘Lord King’. How odd that sounds.

• Mervyn King: New Financial Crisis Is ‘Certain’ Without Reform Of Banks (PA)

Another financial crisis is “certain” and will come sooner rather than later, the former Bank of England governor has warned. Mervyn King, who headed the bank between 2003 and 2013, believes the world economy will soon face another crash as regulators have failed to reform banking. He has also claimed that the 2008 crisis was the fault of the financial system, not individual greedy bankers, in his new book, The End Of Alchemy: Money, Banking And The Future Of The Global Economy, serialised in The Telegraph. “Without reform of the financial system, another crisis is certain, and the failure … to tackle the disequilibrium in the world economy makes it likely that it will come sooner rather than later,” Lord King wrote.

He added that global central banks were caught in a “prisoner’s dilemma” – unable to raise interest rates for fear of stifling the economic recovery, the newspaper reported. A remark from a Chinese colleague who said the west had not got the hang of money and banking was the inspiration for his book. Lord King, 67, said without understanding what caused the crash, politicians and bankers would be unable to prevent another, and lays the blame at the door of a broken financial system. He said: “The crisis was a failure of a system, and the ideas that underpinned it, not of individual policymakers or bankers, incompetent and greedy though some of them undoubtedly were.” Spending imbalances both within and between countries led to the crisis in 2008 and he believes a current disequilibrium will lead to the next.

To solve the problem, Lord King suggests raising productivity and boldly reforming the banking system. He said: “Only a fundamental rethink of how we, as a society, organise our system of money and banking will prevent a repetition of the crisis that we experienced in 2008.” Lord King was in charge of the Bank of England when the credit crunch struck in 2007, leading to the collapse of Northern Rock and numerous other British lenders, including RBS, and has been criticised for failing to see the global financial crisis coming.

Private debt. Warrants far more attention than it gets. See Steve Keen.

• Hidden Debt That No One Is Talking About -And It Involves You- (SMH)

There’s a paradox when it comes to debt in Australia. We have endless debate about the magnitude of the government’s borrowings, even though they are comparatively low by global standards. Meanwhile, the level of household debt gets relatively little attention even though it’s among the highest in the world. In the past two decades the debt owed by households has risen from about 80% of combined income to more than 180%. A fresh surge in borrowing driven by the recent boom in house prices, coupled with slow wage growth, has pushed the debt-to-income ratio to new heights. When economist Kieran Davies last year compared countries using another measure – the ratio of household debt to gross domestic product – he found Australia’s to be the world’s highest, just above Denmark, Switzerland and the Netherlands.

Australians’ household debts may be manageable now, but higher interest rates would stretch many people. Even so, I think Australia’s household debt story gets less scrutiny than it deserves, considering the risks. About 85% of household borrowings – which include mortgages, credit cards, overdrafts and personal loans – are owed to Australian lenders, mostly banks. The Reserve Bank pointed out recently that a small but fast-growing proportion is owed to Australian governments – mostly university-related HECS/HELP debt – and to overseas banks and governments, which is mostly owed by recent migrants. Household surveys by research firm Digital Finance Analytics have found more than one in 10 owner-occupiers would have difficulty meeting their mortgage repayments if interest rates were to rise by just 1 percentage point from their current historic lows.

Martin North, the principal of Digital Finance Analytics, says it’s not just low-income households that are exposed. “My reading is that overall the market is OK but there are some significant pockets of stress even in this low-interest rate environment,” he said. “But those pockets are not necessarily where you would expect the risk to be, it’s not just western Sydney for example. Some quite affluent people who have taken out very large mortgages are more leveraged and therefore more exposed if interest rates were to rise.” One striking trend going largely under the radar is the dramatic shift in customers using short-term loans from so called “payday lenders” following regulatory changes in 2013 and advances in information technology. In the past, payday loans were typically used by those on very low incomes in financial crisis. But a growing share of these loans – now called “small amount credit contracts” – are being taken out by those in higher income groups.

High time to scrutinize the lenders.

• North Sea Firms Are ‘Sleepwalking Into Disaster’ As Insolvencies Loom (Tel.)

The North Sea industry is “sleepwalking” into a wave of insolvencies in the coming months as the full brunt of the collapse in the price of crude causes the finances of many companies to buckle, some of the City’s top restructuring lawyers have said. The majority of North Sea firms have so far endured a punishing 70pc oil price decline since 2014 by relying on loans which were approved based on market hedges secured one to two years before the market crash. But with hedge positions now unwinding firms will be exposed to the full brunt of the oil collapse and the increasingly stressed loan facilities keeping them afloat will be stretched to breaking point. Lenders may have offered firms a stay of execution last year in anticipation of a market recovery, but hopes for significantly higher crude prices are now dashed.

Within weeks, big North Sea lenders will begin a review of the loans that have propped up many Aim-listed explorers through the 18-month oil price rout, prompting a swath of insolvencies later this year.. Stephen Phillips, head of restructuring at Orrick, Herrington & Sutcliffe, said: “There’s a sense that the North Sea may be sleepwalking into a disaster zone.” Simon Tysoe a partner at Latham & Watkins, said half a dozen North Sea explorers were being actively discussed by banks and lenders as firms which will go into restructuring and possibly insolvency. North Sea bankruptcies have been rare in the past but the severity of the current downturn has already forced Iona Energy and First Oil Expro, two smaller oil companies, to call in administrators.

Now larger Aim-listed firms look at risk, which will also leave project partners and oilfield service firms vulnerable as the financial contagion spreads through the embattled sector. Mr Tysoe said: “Most oil companies have in fact not been selling their oil at $30 a barrel, they’ve been selling their oil at prices like $75 a barrel, notwithstanding the spot price of oil, because they’ve had financial hedges in place.” “The impact of this collapse is going to look very bad. In oilfield services, the position is significantly worse. The question is: when will lenders pull the trigger?”

How much did the banks lose?

• European Oil Majors Tally $19 Billion In Losses (MW)

How much has Big Oil in Europe lost in the last quarter? Try $19 billion — or slightly more than Iceland’s entire economy. The culprit is of course an unrelenting decline in crude and Brent prices through the period, when the contracts slid 18% and 24%, respectively. That sparked a round of significant impairment charges, project delays and reduced exploration among Europe’s major energy companies, with the majority of the Stoxx Europe 600’s oil and gas producers reporting losses in the one-billion dollar territory. “It’s been a mixed bag for oil company results — most have been pressured by weaker oil prices,” said Jason Kenney, head of pan-European oil equity research at Banco Santander, in emailed comments.

“Many have had to write down assets given the new oil price environment. The key to weathering the storm is disinvestment in our view — cutting costs, lowering capex, deferring spend, divesting peripheral businesses, offloading capital commitments, restructuring operations, and generally squeezing more from current operations for hopefully a lot less,” he added. Earnings from Europe’s oil majors have trickled out through February and were rounded off with a set of downbeat fourth-quarter numbers from Italian oil giant Eni on Friday. Eni said its quarterly loss more than tripled to 8.5 billion euros ($9.4 billion) in the final three months of the year, bringing the total tally of losses among the European oil majors to $19.3 billion..

Does Belgium jail people for fraud? How about bankers?

• Citigroup Faces Fraud Suit Claiming $1.1 Billion in Losses (BBG)

Citigroup Inc. was sued for fraud by investors and creditors of a bankrupt Mexican oil services firm over claims they were harmed by a loan scheme that also led the bank to cut 2013 profit by $235 million and fire at least a dozen people. Citigroup’s loans led to the 2014 collapse of the Mexican firm Oceanografia, and caused Dutch lender Rabobank, with investors and creditors, to lose at least $1.1 billion, according to the lawsuit filed Friday in Miami federal court. Rabobank and other investors separately filed a negligence suit in Delaware state court against auditor KPMG. Citigroup’s Mexican subsidiary, Banamex, made short-term loans to Oceanografia, which did work for state-run Petroleos Mexicanos, or Pemex. In turn, Pemex repaid the bank.

Citigroup CEO Michael Corbat said in February 2014 that $400 million of accounts receivable from Oceanografia were fraudulent. He said the bank was working with Mexican authorities and would find out “who perpetrated this despicable crime.” Rabobank and the investors claim Citigroup conspired with Oceanografia to accept falsified work estimates even as the oil services firm became increasingly dependent on cash advances to survive. Those Citigroup loans propped up Oceanografia, while Pemex repaid the bank with millions of dollars in interest, according to the complaint. “Intentional misconduct on the part of Wall Street banks – including Citigroup specifically – is far from unfamiliar,” according to the complaint. “Yet again, greed and dishonesty have victimized blameless businesses and investors.”

Things weren’t always like this.

• How Land Barons, Industrialists And Bankers Corrupted Economics (Kent)

The Corruption of Economics by Mason Gaffney and Fred Harrison, while free online, is hardly known; as of December 2015 only three New Zealand university libraries and the Auckland Public Library held copies. Yet in it is a very important story. Fred Harrison describes the phenomenon of Henry George, the San Francisco journalist who took the world by storm with his book Progress and Poverty in 1879, in which he argues that the benefits of land ownership must be shared by all and that a single tax is needed to fund government – a land tax. The factors of production are land, capital and labour. Untax labour and tax land was the cry. Poverty could be beaten. Social justice was possible! Of Henry George influential economic historian John Kenneth Galbraith writes,

“In his time and even into the 1920s and 1930s Henry George was the most widely read of American economic writers both at home and in Europe. He was, indeed, one of the most widely read of Americans. Progress and Poverty… in various editions and reprintings… had a circulation in the millions.” Unlike many writers, Henry George didn’t stop there. He took his message of hope everywhere he could travel – across America and to England, New Zealand, Australia, Scotland and Ireland. He turned political. Seven years after his book came out in remote California, in 1886 he narrowly missed out on being elected Mayor of New York, outpolling Teddy Roosevelt. During the 1890s George, Henry George was the third most famous American, after Mark Twain and Thomas Edison. Ten years after Progress and Poverty he was influencing a radical wing of the British Liberal Party.

He was read by semi-literate workers from Birmingham, Alabama to Liverpool, England. His Single Tax was understood by peasants in the remotest crofts of Scotland and Ireland. Gaffney’s section of the book outlines how certain rich land barons, industrialists and bankers funded influential universities in America and proceeded to change the direction of their economics departments. He names names at every turn, wading through presidents and funders of many prestigious universities. In particular, Gaffney, an economist himself, names the economists bought to discredit his theories, their debates with George and their papers written over many decades.

“George’s ideas were carried worldwide by such towering figures as Lloyd George in England, Leo Tolstoy and Alexander Kerensky in Russia, Sun Yat-sen in China, hundreds of local and state and a few power national politicians in both Canada and the USA, Billy Hughes in Australia, Rolland O’Regan in New Zealand, Chaim Weizmann in Palestine, Francisco Madero in Mexico, and many others in Denmark, South Africa and around the world. In England Lloyd George’s budget speech of 1909 reads in part as though written by Henry George himself. Some of Winston Churchill’s speeches were written by Georgist ghosts.” When he died there were 100,000 at his funeral.

The wealthy and influential just couldn’t let the dangerous ideas spread. Their privileged position was gravely threatened. Henry George must be stopped. But the strategy had to be subtle. What better route than by using their money to influence the supposed fount of all knowledge, the universities? That would then indoctrinate journalists and the general public. Nice one! The story explains how, for their wealthy paymasters, academics corrupted the language to subsume it under capital. They redefined rent, and created a jargon to confuse public debate. Harrison says, ‘For a century they have taken people down blind alleys with abstract models and algebraic equations. Economics became detached from the real world in the course of the twentieth century.’ Yes, the wealthy paid money to buy scholars to pervert the science.

Gaffney’s rich, whimsical language is a joy to read. He writes to Harrison, ‘Systematic, universal brainwashing is the crime, tendentious mental conditioning calculated to mislead students, to impoverish their mental ability, to bend their minds to the service of a system that funnels power and wealth to a parasitic minority.’

“..we’re talking about a legislature … that says we don’t care about y’all.”

• Alabama Lawmakers To Cities: We Won’t Let You Raise The Minimum Wage (CSM)

While major demonstrations have led to a $15 minimum wage in San Francisco, Seattle, New York Los Angeles, and 10 other cities in the past year, Birmingham’s plans to boost local wages have been thwarted by state legislation. The city council of Birmingham, Ala., voted 7 to 0 (with one abstention) to become the first city in the deep South to enact a minimum wage above the current federal level of $7.25. The ordinance planned an increase to $8.50 per hour by July 2016, with a second increase to $10.10 set for July 2017. But the Alabama legislature this past week fired back, passing a bill that prevents cities and counties from mandating their own benefits, including minimum wage, vacation time, or set work schedules. The bill passed easily in both houses and Gov. Robert Bentley signed it into law on Thursday.

Supporters argued that a “patchwork” of varying wages would devastate businesses, cost jobs, and send the regional economy into a slump. “We want businesses to expand and create more jobs – not cut entry-level jobs because a patchwork of local minimum wages causes operating costs to rise,” said State Sen. Jabo Waggoner (R) after the bill’s passage. Critics of the new law countered that higher wages lift families out of poverty and inject new spending into the regional economy. “We’re talking about the bare survival of people,” said Sen. Rodger Smitherman (D), reported the Montgomery Advertiser. “And we’re talking about a legislature … that says we don’t care about y’all.” “When you lift a person on the bottom, everybody above them is lifted up,” he added.

No space here for the whole thing, but very much worth the time.

• The Donald – The Good And Bad Of It (David Stockman)

[..] Once upon a time, by contrast, the GOP actually stood for free markets, fiscal rectitude, hard money and minimalist government. Calvin Coolidge did a pretty good job of it. And even the unfairly besmirched Warren G. Harding got us out of the foreign intervention business—-a path that the great Dwight D. Eisenhower pretty consistently hewed to under the far more challenging conditions of the cold war. But these were sons of America’s old school interior – Massachusetts, Ohio and Kansas. As temporary sojourners in Washington, they remained incredulous and chary of grand state missions either at home or abroad. Harding called it returning to “normalcy”. Coolidge said Washington’s business was to get out of the way.

And Ike actually shrank the Warfare state by one-third, ended Truman’s wars and started no new ones, resisted much of the Dulles’ brother’s interventionist agenda, balanced the budget and froze the New Deal as hard in place at he had the votes to achieve. Today’s Republican crowd bears no resemblance. They live in the capital, fully embrace its projects and pretensions and visit the provinces as sparingly as possible. And that’s why The Donald has them so rattled, even petrified. To be sure, there is much that is ugly, superficial and stupid about Donald Trump’s campaign platform, if you can call it that, or loose cannon oratory to be more exact. More on that below, but at the heart of his appeal are two propositions which strike terror in the hearts of the Imperial City’s GOP operatives.

To wit, he is loudly self-funding his own campaign and bombastically insisting that America is getting a bad deal everywhere in the world. The first of these propositions explicitly tells the legions of K-Street lobbies to take a hike, thereby posing a mortal threat to the fund raising rackets which are the GOPs lifeblood. And while the “bad deal” abroad is superficially about NAFTA and our $500 billion trade deficit with China, it is really an attack on the American Imperium The American people are sick and tired of the Lindsay Graham/John McCain/George Bush/neocon wars of intervention and occupation; and they resent the massive fiscal burdens of our outmoded but still far-flung alliances, forward bases and apparatus of security assistance and economic aid. They especially have no patience for the continued huge cost of our commitments to cold war relics like NATO, the stationing of troops in South Korea and the defense treaty with the incorrigible Japanese, who still blatantly rig their trade rules against American exports.

In short, The Donald is tapping a nationalist/isolationist impulse that runs deep among a weary and economically precarious main street public. He is clever enough to articulate it in the bombast of what sounds like a crude trade protectionism. Yet if Pat Buchanan were to re-write his speech, it would be more erudite and explicit about the folly of the American Imperium, but the message would be the same. That’s why the War Party is so desperate, and why its last great hope is the bantam weight Senator from Florida. In truth, Marco Rubio is an obnoxious kid who wants to be President so he can play with guns, planes, ships and bombs. He is a pure creature of the Imperial City, even if at his young age he has idled there only since 2010.

Yet down to the last nuance of his insipid neocon worldview and monotonous recitation of the American Exceptionalism catechism, he might as well have been born in Washington of GS-16 parents, not Cuban refugees, raised as a Congressional page, and apprenticed to the Speaker of the US House rather than serving as the same in the backwaters of Tallahassee. What Marco Rubio is all about is Warfare State republicanism. When he talks about restoring American Greatness it is through the agency of Imperial Washington. He has no kinship with Harding, Coolidge or Eisenhower. None of them were intent on searching the earth for monsters to destroy, as does Rubio in every single speech.

Traffic violations?! Gives a whole new meaning to ‘two strikes you’re out’.

• Switzerland Votes On Expelling Foreigners For Minor Offences (Guardian)

Switzerland votes in a referendum Sunday on whether foreigner citizens who commit two minor offences, like traffic violations, in the space of 10 years should be automatically deported. The referendum asks whether any foreign national found guilty of two lower-level infractions, including fighting, money laundering, giving false testimony and indecent exposure, should be expelled. The vote comes at a time when many European countries are hardening their attitudes to migrants after more than a million arrived on the continent last year. A quarter of the people living in Switzerland have a foreign passport, the majority of them from European countries.

More than half of Swiss voters backed strengthening rules to automatically expel foreign nationals convicted of violent or sexual crimes in a referendum on the same topic six years ago. But the populist right-wing Swiss People’s Party (SVP), which won the biggest share of the vote in parliamentary elections last October, has accused parliament of dragging its feet on writing the text into law and watering it down when it did so last March. Known for its virulent campaigns against immigration, the European Union and Islam, the party has proposed tougher rules, calling for “a real deportation of criminal foreigners”. The initiative faces stiff opposition, including from the government, parliament and all the other major political parties, who have warned it circumvents the “fundamental rules” of democracy.

If passed, it would dramatically increase the number of offences that could get foreign nationals automatically kicked out of Switzerland, including misdemeanours usually punishable with fines or short prison sentences. It would also remove a judge’s right to refrain from deportation in cases where it would cause the foreign national “serious personal hardship”. More than 50,000 people including hundreds of celebrities have signed a petition against the proposals. [..] Opponents warn that if the text passes, people born to foreign parents in Switzerland risk being deported to countries they have never lived in, for petty offences.

Getting worse fast.

• Double Crisis Deepens Despair In Greece’s ‘Warehouse Of Souls’ (Guardian)

There are more than 25,000 refugees and migrants stuck in Greece, police sources have told the Observer. The borders leading out have closed down one by one, leaving the country in danger of becoming what the Greek prime minister, Alexis Tsipras, described last week as a “warehouse of souls”. Tsipras has threatened to block future EU agreements and has withdrawn the Greek ambassador to Austria from Vienna in protest at the lack of support being offered by other nations during the refugee crisis. Austria is accepting only 80 migrants a day. The Hungarian prime minister, Viktor Orbán, plans to hold a referendum on compulsory migrant quotas. Macedonia, Croatia, Serbia and Slovenia are refusing to accept Afghans and other refugees deemed not to be from conflict zones and are accepting a maximum of 580 migrants a day. The German chancellor, Angela Merkel, appears to be staking everything on a crucial EU-Turkey summit, scheduled to take place on 7 March.

[..] The convergence of two crises – the refugee influx and the debt drama that has plagued the country for the past six years – has caused the rhetoric of catastrophe to be ratcheted up in Athens and abroad. After the announcement by the European commission on Friday that, in the wake of border closures, it had been forced to put together a humanitarian aid plan for Greece, there is an inescapable sense of impending doom. “It was difficult for the government to manage Greece’s own domestic economic crisis,” said Dirk Reinermann, project manager for southern Europe at the World Bank. “The new exogenous challenge of having to deal with refugees and migrants is such that the overall task at hand borders on the impossible.” While EU diplomats spoke of the nightmare scenario of seeing hundreds of thousands of people trapped in the country by May, analysts predicted that Europe’s southern flank could soon become embroiled in scenes of chaos and immense social hardship.

“It’s going to get a lot worse before it gets better,” said Thanos Dokos, who heads Eliamep, a leading Greek thinktank. He told the Observer: “We are at risk of seeing an economy without any hope of recovery, and the country being flooded by people who have no intention of staying in camps but instead [will be] making their way to borders where there will be no shelter or facilities to host them.” Anger at the influx has mounted on Aegean islands close to the Turkish coast, where tourism has been hard hit. In an interview, Constantine Michalos, president of the Athens chamber of commerce and industry, said pre-bookings in Kos, Rhodes and Lesbos, the islands that have borne the brunt of the refugee and migrant arrivals, were down by 60%.

[..] Dimitra Koutsavli is working for Doctors of the World – Greece. The organisation is having constantly to move its operations to follow the ever-changing makeshift camps opening and closing on political orders across the country. She said she had never seen the situation as bad in Athens as over the past few days. “The situation here is worsening. Refugees are all over the city, in squares, in the port. According to our emergency mission in Piraeus port on Friday, we saw thousands of refugees there, among them many children.” To say that Greeks think the rest of Europe could do more is an understatement. There were peaceful protests in Athens and Piraeus last week by Greeks and refugees, and on Saturday there was a protest by 300 people outside the Austrian embassy in Athens. Not many of those in Victoria Square went to the demonstration. “It’s for Europe to decide if it can help us. We just say, ‘Please open the borders.’ We don’t want to sit here,” said Sharzai..

Debt Rattle January 3 2016

Jan 032016

January 3, 2016 Posted by Raúl Ilargi Meijer at 10:32 am Finance Tagged with: China, earnings, floods, recession, reform, refugees, Saudi, Shia 2 Responses »

Russell Lee Bike rack in Idaho Falls, Idaho 1942

• “This Is The Worst Global Dollar GDP Recession In 50 Years” (ZH)

• New Year’s Hangover For Wall Street: Earnings Season Misery (MarketWatch)

• China’s Factories In The Grip Of Longest Contraction In Six Years (Ind.)

• How a Turbulent Year Derailed China’s Reform (WSJ)

• Chinese State-Owned Finance Firm Goes Global To Raise Funds (SCMP)

• 2015: Peak Cognitive Dissonance (Noland)

• Bank of Greece Governor Warns on Measures as Tsipras Defiant on Pensions (BBG)

• UK Homeowners Count The Cost As Floods Force Prices To Plummet (Observer)

• US Midwest Calls In National Guard As Flood Disaster Unfolds

• Iran’s Leader Vows ‘Divine Vengeance’ Over Cleric’s Execution In Saudi (R/AFP)

• Expect More Weasel Words Over Saudi Arabia’s Grotesque Butchery (Robert Fisk)

• Cuba Santeria Priests See Explosive Migration, Social Unrest In 2016 (Reuters)

• Refugees At UK Military Base In Cyprus Trapped In Asylum ‘Limbo’ (Guardian)

• Drowned Toddler Becomes Europe’s First Refugee Casualty Of 2016 (AFP)

Burning down the house.

• “This Is The Worst Global Dollar GDP Recession In 50 Years” (ZH)

The following brief summary of the global economic situation should, once and for all, end all debate about whether the world is “recovering” or is now mired deep in a recession. From DB’s 2016 Credit Outlook:

“Debt has continued to climb since the crisis with Global Debt/GDP still on the rise, with no obvious sign of when this rise stops for many major countries. Indeed much of the post GFC increase in debt has been raised on the back of the commodity super-cycle which is currently unraveling in EM and the US HY market. Outside of this, the US overall has de-levered to some degree but even there debt levels remain very high relative to all of history excluding the GFC period. With limited tolerance from the authorities to see defaults erode the huge debt burden, the best hope for a more normal financial system is for activity levels to increase so we can slowly grow the economy into the debt burden. However this requires strong nominal GDP growth and we continue to see the opposite.

The left hand graph of Figure 6 looks at a global weighted average of Nominal GDP growth in the G7. On this measure we are still seeing historically weak activity. In dollar terms the situation is even worse. The right hand chart of Figure 6 shows a much more volatile global NGDP series which converts the size of each economy in dollar terms and then looks at the growth rate YoY. With the recent strength in the USD we are seeing a huge global dollar nominal GDP recession – the worst since the 1960s. Whilst this might not be a series that is followed, it does show the sharp contraction of dollar activity levels in the global economy over the last year or so which has to have ramifications given it’s the most important global financial market currency.”

What DB did not point out but is obvious, is that the synthetic dollar squeeze of the past year has made the global collapse now even worse than what was experienced during the great financial crisis, and it is getting worse by the day. And so, with the world trapped in the worst USD-based GDP recession in 50 years, here is the question for Yellen: with every other central bank easing and the Fed tightening, what happens to i) the USD in the future and ii) to future world growth in USD.

“..of the 25 consumer discretionary companies that have issued earnings outlooks for the fourth quarter, none of them met or exceeded the Wall Street consensus at the time.”

• New Year’s Hangover For Wall Street: Earnings Season Misery (MarketWatch)

Investors didn’t have a lot to celebrate on New Year’s Eve, but that doesn’t mean Wall Street’s start to 2016 won’t suffer a hangover thanks to the upcoming earnings season. U.S. stocks finished last year on a somber note with both the Dow Jones and the S&P 500 snapping multiyear winning streaks. Only the Nasdaq escaped the year unscathed, turning in a 5.7% gain on the year. After a dreary 2015 for stocks, it appears the upcoming earnings season is only going to prolong that misery. Once again weighed down by the energy and materials sectors, the S&P 500 is expected to see a decline in earnings of 4.7% from the year-ago period, according to John Butters at FactSet.

The only sectors expected to see any gain in fourth-quarter earnings are telecom, financials, consumer discretionary and health care. That expected decline in S&P 500 earnings looks to eat into gains made in the previous year’s fourth quarter. In 2014, fourth-quarter earnings rose just less than 4% from the year-ago period, according to FactSet. Quarterly earnings per share for the S&P 500 peaked at $30.33 in the fourth quarter of 2014. Now, that’s expected to drop to $29.38 a share for the fourth quarter of 2015. Additionally, of the 25 consumer discretionary companies that have issued earnings outlooks for the fourth quarter, none of them met or exceeded the Wall Street consensus at the time.

What jobs? “Beijing instructed state-owned business to offer jobs to around 300,000 soldiers that it is making redundant..”

• China’s Factories In The Grip Of Longest Contraction In Six Years (Ind.)

China gave global investors a miserable welcome to 2016 when the world’s second-largest economy revealed yesterday that its industrial output contracted yet again in December – marking the longest losing streak for Chinese factories since 2009. The official purchasing managers’ index (PMI) survey of Chinese manufacturers came in at 49.7, up slightly on the previous month. But any reading below 50 signals contraction and this was the fifth month in a row of decline for China’s factories. Fears about the rapid slowing in the Chinese economy, the main motor for international GDP growth since the global financial crisis, dragged down global stock markets in 2015. And China’s waning demand for commodity imports hammered emerging market economies from Brazil to South Africa.

But analysts said continued industrial production contraction would prompt more stimulus from the Beijing authorities to avert a “hard landing”. “Monetary policy will stay accommodative and the fiscal policy will be more proactive,” argued Zhou Hao of Commerzbank in Singapore. The Chinese central bank has already cut interest rates six times since November 2014 to support growth. It has also reduced banks’ reserve requirements, freeing them up to lend more to businesses. Analysts at Nomura said there was a “medium to high” likelihood of more monetary easing later this month. The PMI index of industrial employment fell slightly in December, and Liu Liu, an economist at China International Capital Corporation, said concerns over jobs would force the hand of the authorities: “As steel, coal and other over-capacity industries close more factories, the employment situation will likely remain grim, calling for a greater role of fiscal policy.”

Earlier this week Beijing instructed state-owned business to offer jobs to around 300,000 soldiers that it is making redundant as part of its restructuring of the People’s Liberation Army. Industrial export orders shrank for the 15th month in a row, with the index in December coming in at 47.5. Exports have made a negligible contribution to China’s GDP growth since the financial crisis, with almost all the expansion being driven by investment spending and household consumption. But some interpreted Beijing’s slight loosening of the yuan’s peg with the dollar last year as an attempt to bolster Chinese exports.

Reform has become just a word. Xi will not let go. Before you know it we’ll be looking at Xibenomics.

• How a Turbulent Year Derailed China’s Reform (WSJ)

China had one of the best-performing stock markets in the world in 2015. Yet it was a dismal year for Chinese markets. Chinese stocks suffered an unprecedented summer crash that wiped out 43%, or $5 trillion, of their value at one point. That was followed by an abrupt 2% currency devaluation in August that sent shock waves through global markets. Bold reforms seen as crucial to Beijing’s efforts to turn around a slowing economy, such as a modern stock-listing system and lighter capital controls, stalled as the market turmoil unnerved authorities. The episodes demonstrate the stresses China is experiencing as it tries to shift its economy from one fed by debt and heavy industry into one driven by consumption.

For investors, the events of 2015 jolted their faith in China’s capacity to continue driving global growth. Authorities have backtracked on financial liberalization and roiled the country’s finance industry with investigations into brokers, traders and regulators in an effort to apportion blame for the stock market’s sharp pullback. “Recent volatility in the stock market and currency markets has eroded political support for market-oriented reforms and shaken confidence in the leadership’s economic-management skills,” said Eswar Prasad, a Cornell University professor and former China head of the IMF. The year doesn’t look so bad when measured from beginning to end: The Shanghai Composite Index was up 9.4% in 2015. The small-cap Shenzhen market was up more than 63%.

But the middle of the year was a mess. China’s top leaders began 2015 with high hopes for reform and for the stock market, which was then rallying, fueled by margin lending and monetary easing from the central bank. Now, Beijing enters the new year in a cautious mood, making it harder to carry out the overhauls that the government and analysts believe are necessary to keep the Chinese economy growing. “Without bold reforms, the economy will slow further, capital flight will intensify and the yuan will weaken more, which will erode confidence further,” said Chaoping Zhu, economist at UOB-Kay Hian Holdings, a Singapore-based brokerage.

Beijing needs cash.

• Chinese State-Owned Finance Firm Goes Global To Raise Funds (SCMP)

One of China’s state-owned finance firms is looking global amid the country’s economic slowdown, planning to raise funds abroad and engage foreign partners as it improves corporate governance and beefs up risk control. Changchun Urban Development Investment Holding (Group) was given a BBA1 rating by Moody’s and a BBB+ by Fitch Ratings. Both credit rating agencies saw the company as having a stable outlook. The company was set up by combining state assets in Changchun, capital city of northeastern Jilin province. Changchun Urban Development is one of thousands of local-government-backed financing vehicles – state-owned entities that raise funds for local governments to finance costly infrastructure and public facility works.

While the firm will be China’s fourth such vehicle to issue debt overseas – after the Qingdao City Construction Investment Group, Beijing Infrastructure Investment and Zhuhai Da Hengqin Investment – it will be the first in the northeast region to do so. “Changchun Urban Development will extend business coverage overseas. We are prepared against the impact of the United States Federal Reserve’s interest rate hike, while we don’t rule out the possibility of issuing foreign debt in the short term,” its CEO Gao Feng said. Chinese companies tend to choose Hong Kong, Singapore and Europe as their destinations in issuing debt, but Changchun Urban Development said markets in South Korea and Japan were also options as both countries were keen to invest in China’s northeast region.

Being rated by foreign credit rating agencies was one way to improve corporate governance, the company said. It has opened investment companies in Changchun and Beijing and is setting up a brokerage unit in Hong Kong. The Hong Kong unit was preparing a roadshow to promote its debt issue plans, Gao said. “We will make big moves in both the domestic and overseas markets to lower costs and will launch an initial public offering to optimise corporate governance,” Gao said. “We’re not short of money, but we lack good partners. We need to know investors and they need to have qualified resources in overseas markets, which would help the company go abroad and participate in China’s ‘One Belt, One Road’ initiative.”

Bullishness prevails based on perceived continuing central bank largesse.

• 2015: Peak Cognitive Dissonance (Noland)

The year 2015 was extraordinary. Incredibly, despite powerful confirmation of the bursting global Bubble thesis, market optimism remained deeply entrenched. All leading strategists surveyed in December by Barron’s remained bullish – some were borderline crazy optimistic. Optimism withstood a commodity price collapse. Crude, the world’s most important commodity, crashed almost 35% to an eleven-year low, much to the peril of scores of highly leveraged companies and countries. The Bloomberg Commodities Index dropped 25%, its fifth straight year of declines. Copper fell 24%, with platinum and palladium down about 30%. In agriculture commodities, wheat fell 20%, with soybeans and corn down about 10%. Coffee sank 25%.

Bullishness persevered through deepening EM turmoil and a crisis of confidence. The Brazilian real dropped about a third (worst year since 2002), and Brazil’s sovereign debt suffered major losses. Brazil’s corporate debt market was pummeled (Petrobras, Vale, BTG, Samarco, etc.) while confidence in the nation’s major banks and government waned. Russia and Turkey showed further deterioration. Fragility surfaced in EM linchpin Mexico. Currencies suffered generally throughout EM – Latin America, Asia, the Middle East, Eastern Europe, etc. Collapsing currency peg regimes saw almost 50% devaluations for the Azerbaijani manat and Kazakh tenge. Argentina devalued the peso 30% versus the dollar. Throughout EM, dollar-denominated debt became a market concern.

Optimism survived the major financial tumult that unfolded in China. Early 2015 stimulus efforts stoked “Terminal Phase” excess in Chinese equities, a Bubble that came crashing down in a 40% summer drubbing. An August yuan devaluation destabilized markets across the globe. Aggressive (invasive) monetary, fiscal and regulatory measures somewhat stabilized equities and the yuan, at the heavy cost of extending “Terminal Phase” excess throughout the Credit system (i.e. corporate debt and “shadow banking”). The yuan posted a 4.5% 2015 decline against the dollar, the worst performance since 1994. The “offshore yuan” trading in Hong Kong dropped 5.3%.

Bullishness endured despite the August global market “flash crash.” And while the summer market dislocation provided important confirmation of mounting fragilities throughout the markets on a global basis, the bulls interpreted the event as further validating their view of unwavering central bank support and liquidity backstops. The Fed’s September flip-flop emboldened speculative excess, with U.S. equities back within striking distance of record highs by early-November.

Tensions between Stournaras and Tsipras have never abated.

• Bank of Greece Governor Warns on Measures as Tsipras Defiant on Pensions (BBG)

Bank of Greece governor Yannis Stournaras gave a stark warning about the risk of Greece failing to reach an agreement with its creditors on a set of measures attached to the country’s bailout as Prime Minister Alexis Tsipras reiterated his government won’t succumb to “unreasonable” demands for additional pension cuts. The EU is now much less prepared to deal with another Greek crisis, Stournaras wrote in an article published in Kathimerini newspaper, in an unusually strong public intervention, as Europe’s most indebted state braces for negotiations with creditor institutions on a set of tough economic steps, including pension and income tax reform. A repeat of the 2015 standoff which pushed Greece to the verge of leaving the euro area would entail risks that the country’s economy may not be able to withstand, the central banker said.

After months of brinkmanship which resulted in the imposition of capital controls last summer, the government of Alexis Tsipras signed a new bailout agreement with the euro area committing Greece to economic overhauls and additional belt-tightening in exchange for emergency loans of as much as €86 billion. Greece will implement the agreement, Tsipras said in an interview with Real News newspaper published Saturday, adding though, that creditors should be aware that the country “won’t succumb to unreasonable and unfair demands” for more pension cuts. Greece will reform its pension system, which is on the “brink of collapse” through “equivalent” measures targeting proceeds equal to 1% of the country’s GDP in 2016, Tsipras said.

The proposals include raising mandatory employer contributions, according to the country’s Labor Minister, George Katrougalos. Creditors oppose an increase in compulsory contributions, as they argue these create a disincentive for hiring workers and declaring incomes.
Negotiations with the troika will be “tough,” and the government is redoubling its efforts to find “diplomatic” support, Katrougalos said in an interview with To Ethnos newspaper, also published Saturday.

Expect no help.

• UK Homeowners Count The Cost As Floods Force Prices To Plummet (Observer)

People trying to sell their properties in flood-hit parts of north-west England have begun dramatically dropping their prices amid fears that houses in some roads have become virtually unsellable. Large homes in and around the Warwick Road area of Carlisle, which in December 2015 experienced its second major flooding episode in a decade, have started to appear on the market for only 60% of their November values – leaving some people wondering whether they will ever be able to move house. After serious flooding elsewhere, house prices have generally recovered within a few years, according to estate agents in affected areas. This is particularly the case in national parks or other locations where there is strong demand for second and holiday homes. Tewkesbury in Gloucestershire was hit by severe floods in 2007 but while prices took an initial dip, average property values in the town soon returned.

It was a similar story in Cockermouth, Cumbria, which was devastated by floods in November 2009. The deluge brought by Storm Desmond flooded 5,000 homes in Cumbria and Lancashire – but this time the effect on house prices could be much longer lasting, say some agents. Simon Brown, a valuer at one of Carlisle’s oldest estate agents, Tiffen & Co, said he did not expect any houses in the affected roads to sell soon unless they were offered at a large discount. “It had been a decade since the last big floods and prices had pretty much recovered. I’m not saying people had been hoodwinked, but they believed the flood defence work had been carried out and that the properties were safe. Now that it has happened again, I can’t see people being keen to buy in these roads again for a good long time, if ever,” he said.

Brown described how a large Victorian house that would have sold for more than £270,000 a month ago had just been put on the market for £170,000 in its flood-damaged state by an owner who could not face going through the drying for a second time. “Most outsiders to the city would be amazed at the resilience that the residents have shown, and the way that the community has rallied round to help each other,” he said. “However, the people in the worst affected roads look completely snookered. You can always sell a home if the price is cheap enough, but there must be a growing fear that those in the affected streets will never see their pre-flood values ever again.”

“It’s almost as if you’re living on some other planet..”

• US Midwest Calls In National Guard As Flood Disaster Unfolds

Floods have submerged towns, roads, casinos and shopping malls around the south and midwest for more than three days, prompting governors in Illinois and Iowa to call in the national guard. Sixteen states issued flood warnings covering some eight million people. By Saturday floodwaters had begun to subside in many areas, reopening several important highways, after topping levees in the region late on Friday. But swollen rivers have yet to crest in southern states, alarming governors in Tennessee, Louisiana and Mississippi. At Dardanelle, Arkansas, the National Weather Service recorded the Arkansas river at 41ft, nine feet above flood stage.

Missouri governor Jay Nixon said the overflow off the Mississippi would overtake the records set by “the great flood of 1993”, which killed 50 people, broke hundreds of levees and caused thousands to flee their homes. Nixon visited Eureka and Cape Girardeau in eastern Missouri, where floodwaters caused widespread damage, and announced the federal government had approved his request to declare an emergency to help with the massive cleanup and recovery operation. The governor described the scale of the flood damage as other worldly. “It’s almost as if you’re living on some other planet,” he said, standing near a growing pile of debris in a park in Eureka, about an hour’s drive west of St Louis on the banks of the Meramec river, which flows into the Mississippi. “This is just a tiny fraction of the trail of destruction,” the governor told reporters.

Missouri Flood 2016 – Cape Girardeau – Jan 1st – Aerial Drone 4K Footage

Saudis are trying to provoke warfare, attempting to draw in Iran and Russia.

• Iran’s Leader Vows ‘Divine Vengeance’ Over Cleric’s Execution In Saudi (R/AFP)

Iran’s supreme leader, Ayatollah Ali Khamenei, has renewed his attack on Saudi Arabia over its execution of a leading Shia cleric, saying that politicians in the Sunni kingdom would face divine retribution for his death. “The unjustly spilled blood of this oppressed martyr will no doubt soon show its effect and divine vengeance will befall Saudi politicians,” state TV reported Khamenei as saying on Sunday. It said he described the execution of Sheikh Nimr al-Nimr as a “political error”. “God will not forgive… it will haunt the politicians of this regime,” he said. Saudi Arabia executed Nimr and three other Shia alongside dozens of alleged al-Qaida members on Saturday, signalling it would not tolerate attacks by either Sunni jihadists or members of the Shia minority seeking equality.

Khamenei added: “This oppressed cleric did not encourage people to join an armed movement, nor did he engage in secret plotting, and he only voiced public criticism … based on religious fervour.” In an apparent swipe at Saudi Arabia’s western allies, Khamenei criticised “the silence of the supposed backers of freedom, democracy and human rights” over the execution. “Why are those who claim to support human rights quiet? Why do those who claim to back freedom and democracy support this (Saudi) government?” Khamenei was quoted as saying. The executions sparked protests around the region with a mob storming the Saudi embassy in Tehran and setting fire to part of the building before they were dospersed by the police. In Bahrain, police tear gas to control a crowd of protesters and there were also demonstrations in India and in London. More protests are expected in Iran and Lebanon on Sunday.

“..Iran’s own clerics have already claimed that the beheading will cause the overthrow of the Saudi royal family.”

• Expect More Weasel Words Over Saudi Arabia’s Grotesque Butchery (Robert Fisk)

Saudi Arabia’s binge of head-choppings – 47 in all, including the learned Shia cleric Sheikh Nimr Baqr al-Nimr, followed by a Koranic justification for the executions – was worthy of Isis. Perhaps that was the point. For this extraordinary bloodbath in the land of the Sunni Muslim al-Saud monarchy – clearly intended to infuriate the Iranians and the entire Shia world – re-sectarianised a religious conflict which Isis has itself done so much to promote. All that was missing was the video of the decapitations – although the Kingdom’s 158 beheadings last year were perfectly in tune with the Wahabi teachings of the ‘Islamic State’. Macbeth’s ‘blood will have blood’ certainly applies to the Saudis, whose ‘war on terror’, it seems, now justifies any amount of blood, both Sunni and Shia.

But how often do the angels of God the Most Merciful appear to the present Saudi interior minister, Crown Prince Mohamed bin Nayef? For Sheikh Nimr was not just any old divine. He spent years as a scholar in Tehran and Syria, was a revered Shia leader of Friday prayers in the Saudi Eastern Province, and a man who stayed clear of political parties but demanded free elections, and was regularly detained and tortured – by his own account – for opposing the Sunni Wahabi Saudi government. Sheikh Nimr said that words were more powerful than violence. The authorities’ whimsical suggestion that there was nothing sectarian about this most recent bloodbath – on the grounds that they beheaded Sunnis as well as Shias – was classic Isis rhetoric. After all, Isis cuts the heads of Sunni ‘apostates’ and Sunni Syrian and Iraqi soldiers just as readily as it slaughters Shias.

Sheikh Nimr would have got precisely the same treatment from the thugs of the ‘Islamic State’ as he got from the Saudis – though without the mockery of a pseudo-legal trial which Sheikh Nimr was afforded and of which Amnesty complained. But the killings represent far more than just Saudi hatred for a cleric who rejoiced at the death of the former Saudi interior minister – Mohamed bin Nayef’s father, Crown Prince Nayef Abdul-Aziz al-Saud – with the hope that he would be “eaten by worms and will suffer the torments of hell in his grave”. Nimr’s execution will reinvigorate the Houthi rebellion in Yemen, which the Saudis invaded and bombed this year in an attempt to destroy Shia power there. It has enraged the Shia majority in Sunni-rules Bahrain. And Iran’s own clerics have already claimed that the beheading will cause the overthrow of the Saudi royal family.

What will America do if millions want to move?

• Cuba Santeria Priests See Explosive Migration, Social Unrest In 2016 (Reuters)

Priests offering New Year’s prophecies from Cuba’s Afro-Cuban religion forecast an explosion in migration and social unrest worldwide in 2016. Many on the Caribbean island eagerly wait for guidance from the Santeria religion’s annual forecast. Santeria, with roots in West African tradition brought to Cuba by slaves, is practiced by millions of Cubans. This year, the island’s official association of priests, known as babalawos, predicted an “explosion” of migration and “social unrest provoked by desperation.” The yearly reading is for Cuba and the world at large, but the babalawos did not state which predictions, if any, apply to Cuba specifically.

“The predictions of Ifa (divination system) warn world leaders that if no action is taken, we may lead our people to a massive migration provoked by different things, desperation among them,” priest Lazaro Cuesta told a news conference in Havana. The flow of migrants from the Communist-ruled island jumped by about 80 percent last year as the process of detente between Washington and Havana, announced in December 2014, stirred fears that preferential U.S. asylum rights for Cubans may soon end. Cuesta said war, economic hardship, political conflict and terrorism are sparking worldwide migration. He did not give specifics about the priests’ social unrest prediction, but offered a metaphor: “When you are in your room and it’s really hot, desperation makes you run out of the room. If we give you an air conditioner, you stay put.”

“I can be living in a hot room and I don’t leave running because it’s my room,” Cuesta said. “I’m living alongside everyone else in Cuba, and I’m not leaving.” Based on this year’s forecast, the babalawos recommend “establishing favorable accords with respect to migration policy,” and “reaching a balance between salaries and the high cost of basic necessities.” Earlier this week, Cuban President Raul Castro told the National Assembly, the country’s single-chamber parliament, that an economic slowdown is expected in 2016. Food prices have increased more than 50 percent on the island over the last four years, according to official media. The average salary throughout the island is less than $30 a month. “A person who economically considers himself incapable of living in the place where he is is going to look for a better future somewhere else,” said Cuesta.

More shame on Britain.

• Refugees At UK Military Base In Cyprus Trapped In Asylum ‘Limbo’ (Guardian)

The British government has been accused of being “deceitful” and dodging its legal responsibilities to a group of refugees whose failing boats washed ashore in a British military zone on Cyprus late last year. The Ministry of Defence has stated that the 114 people who came ashore are the responsibility of Cyprus and, according to the refugees, has said they will be sent to Lebanon, from where their boats set sail, if they do not seek asylum with Cypriot authorities. However, human rights groups say Britain is shirking its legal responsibilities – fearful that the route could be seen as a “back door” to Britain – and coercing people into staying put while paying Cyprus to house and feed them. The Office of the UN High Commissioner for Refugees said a 2003 UK-Cyprus memorandum made it clear that “asylum seekers arriving directly on to the SBA [sovereign base area] are the responsibility of the UK”.

Ibrahim Maarouf, a Palestinian English teacher who fled first from Syria and then from a refugee camp in Lebanon with his wife and two children, said he felt utter despair about his future. “We are being fed and we have a room with a common toilet we share with 15 families,” he told the Observer. “It’s very humiliating to be stuck here and the days are passing and no one will say anything to us. We are without hope. We had had enough of suffering, we wanted to go to Greece, and my aim was to go to Belgium to find work and a new life, but the boat couldn’t handle this trip, so we landed here by mistake. “Cyprus is a poor country, with no work already for people here. We are told we have to apply for asylum here or be sent back. One sick woman was told she could see a doctor, but only if she first agreed that she would seek asylum in Cyprus.

“If I had died under Isis bombs, that was my fate. If I had died in Lebanon, that was my fate. But I would like a chance to have a life. I would ask David Cameron, ‘Don’t make a lesson of me’.” The foreign secretary, Philip Hammond, said in November that the situation had been resolved, as Cyprus had agreed to take the refugees, but that has been denied by lawyers working for the families. Tessa Gregory of the firm Leigh Day, who is acting for several of the families and individuals involved, said there was a “clear breach” of British obligations towards the migrants, who had made land on what was technically British soil, and it was wrong to delegate their fate to Cyprus.

The year starts off with the same indescribable sadness that the previous one ended with. Europe will NOT be able to shake this off or live it down.

• Drowned Toddler Becomes Europe’s First Refugee Casualty Of 2016 (AFP)

A drowned two-year-old boy has became the first known refugee casualty of the year after the crowded dinghy he was travelling in slammed into rocks off Greece’s Agathonisi island. The other 39 passengers, including a woman who had fallen overboard, were rescued after local fishermen raised the alarm. Ten of the survivors were taken to hospital to be treated for hypothermia. The rubber vessel had set off from Turkey in the early morning in windy weather. The charity Migrant Offshore Aid Station (MOAS), which helps save migrants and refugees at sea, deployed its fast-rescue Responder boat to help bring the stranded passengers to safety in a joint operation with the Hellenic coastguard. The toddler’s body was pulled out of the water by fishermen, according to the coastguard.

The refugees, including the child’s mother, were taken to the port of Pythagorio on Samos, the nearest island, which is 50km away. There was no immediate information about their nationalities. “Nothing can prepare you for the horrific reality of what is going on. Today we came face to face with one of the youngest victims of this ongoing refugee crisis. It is a tragic reminder of the thousands of people who have died trying to reach safety in miserable conditions,” said MOAS founder Christopher Catrambone in a statement. Despite the cold and choppy winter waters, large numbers of migrants and refugees are still setting sail from Turkey to make the hazardous journey across the Aegean in the hope of reaching Greece.

Debt Rattle June 16 2015

Jun 162015

June 16, 2015 Posted by Raúl Ilargi Meijer at 10:28 am Finance Tagged with: bonds, contagion, eurozone, Greece, inequality, pillaging, pope, reform, regime change, Snowden, starvation 7 Responses »

Dorothea Lange Crossroads grocery store and filling station, Yakima, Washington, Sumac Park 1939

• Greece Accuses Europe Of Plotting Regime Change (AEP)

• Starvation Is The Price Greeks Will Pay For Remaining In The EU (PC Roberts)

• Not Just Greece, Everyone Should Leave The Euro -There’s No Point (Worstall)

• Why Greece Should Choose Eurozone Exit Rather Than Dependence (Irish Times)

• Contagion From Greek Crisis Engulfs Eurozone Bonds (Reuters)

• Defiant Tsipras Accuses Creditors Of ‘Pillaging’ Greece (FT)

• Why Can’t Greece Just Declare Bankruptcy? (Stiglitz/Guzman)

• Greece Isn’t Any Old Troubled Debtor (BBC)

• Ex-IMF Official Says ‘Errors’ By Lenders Worsened Greek Crisis (Kathimerini)

• What Is Reform? The Strange Case Of Greece And Europe (James Galbraith)

• 3% of the World’s Top Scientists are Greek (Greek Reporter)

• Sunday Times ‘Reporter’ ‘Defends’ Snowden ‘Article’ (CNN)

• IMF: Inequality Hurts Economic Growth (Guardian)

• 1% Of Households In 2014 Made Up 42% Of Total Private Global Wealth (Forbes)

• Foreign Investors Pose Threat To US Residential Real Estate (MarketWatch)

• $112 Billion Fund Manager Worries Bond-Market Fire Doors Are Locked (Bloomberg)

• Fast Track Hands the Money Monopoly to Private Banks, Permanently (Ellen Brown)

• CIA Torture Has Broken Spy Agency Rule On Human Experimentation (Guardian)

• How Pension Funds Face Huge Risk From Climate Change (Guardian)

• Pope Warns Of Destruction Of World’s Ecosystem In Leaked Encyclical (Guardian)

Brussels has experince in this.

• Greece Accuses Europe Of Plotting Regime Change (AEP)

Greek premier Alexis Tsipras has accused Europe’s creditor powers of trying to subvert Greece’s elected government after five years of “pillaging”, warning in solemn terms that his country will defend its sovereign dignity whatever the consequences. The defiant stand came as the European Commission lashed out at the Greeks and warned that the country would collapse into a “state of emergency” unless there is a deal to avert a financial crash. Germany’s EU Commissioner Guenther Oettinger said the creditor powers must draw up urgent plans to cope with social unrest in Greece and a break-down of energy supplies and medicine as soon as July. In a terse statement, Mr Tsipras called on the EU institutions and the IMF to “adhere to realism”.

He accused the creditors of “political motives” for demanding further pension cuts, hinting that their real goal is to destroy the credibility of his radical-Left Syriza government and force regime change. “We are not only carrying a historical past underlined with struggles. We are carrying our people’s dignity as well as the aspirations of all Europeans. We cannot ignore this responsibility. It has to do with democracy,” he said. Germany’s Suddeutsche Zeitung reported that the creditors are drawing an ultimatum to the Greeks, threatening to cut off Greek access to the European payments system and forcing capital controls on the country as soon as this weekend. The plan would lead to the temporary closure of the banks, followed by a rationing of cash withdrawals.

Syriza sources have told the Telegraph that Greece may seek an injunction from the European Court of Justice to stop the creditors and the EU institutions acting in a way that breaches Greek treaty rights. This would be an unprecedented move, greatly complicating the picture. Equity markets fell across the Europe and bonds sold off sharply in the high-debt Latin states as investors start to think through the dramatic implications of a Greek default, followed by EMU rupture. “The Greek saga is finally reaching its climax, we think,” said Hans Redeker from Morgan Stanley. Yields on 10-year Portuguese bonds have jumped almost 170 basis points since their lows in March, reaching an eight-month high of 3.22pc. Spain’s yields have jumped by 120 points to 2.35pc.

While these levels are nothing like the panic spikes in past spasms of the EMU debt crisis, they are approaching levels that could soon tighten borrowing conditions for companies and mortgages. It may become harder for these countries to shake off deflation. Mario Draghi, the head of the European Central Bank, said the authorities could handle the immediate fall-out from a Greek default but refused to offer any further assurances. “The consequences in medium to long term to the Union is not something we are in a position to foresee,” he said.

“Why will creating money for Greece create inflation but not for Goldman Sachs, Citibank, and JPMorganChase?”

• Starvation Is The Price Greeks Will Pay For Remaining In The EU (PC Roberts)

Syriza, the new Greek government that intended to rescue Greece from austerity, has come a cropper. The government relied on the good will of its EU “partners,” only to find that its “partners” had no good will. The Greek government did not understand that the only concern was the bottom line, or profits, of those who held the Greek debt. The Greek people are as out to lunch as their government. The majority of Greeks want to remain in the EU even though it means that their pensions, their wages, their social services, and their employment opportunities will be reduced. Apparently for Greeks, being a part of Europe is worth being driven into the ground. The alleged “Greek crisis” makes no sense whatsoever.

It is obvious that Greece cannot with its devastated economy repay the debts that Goldman Sachs hid and then capitalized on the inside information, helping to cause the crisis. If the solvency of the holders of the Greek debt, apparently the NY hedge funds and German and Dutch banks, depends on being repaid, the ECB could just follow the example of the Federal Reserve and print the money to secure the Greek debt. The ECB is already printing 60 billion euros a month to save the European financial system, so why not include Greece? A conservative might say that such a course of action would cause inflation, but it hasn’t. The Fed has been creating money hands over fists for seven years, and according to the government there is no inflation.

We even have negative interest rates attesting to the absence of inflation. Why will creating money for Greece create inflation but not for Goldman Sachs, Citibank, and JPMorganChase? Obviously, the Western world doesn’t want to help Greece. The West wants to loot Greece. The deal is that Greece gets new loans with which to repay existing loans in exchange for selling municipal water companies to private investors (water rates will go up on the Greek people), for selling the state lottery to private investors (Greek government revenues drop, thus making debt repayment more difficult), and for other such “privatizations” such as selling the protected Greek islands to real estate developers. This is a good deal for everyone but Greece.

The eurozone sinks all boats.

• Not Just Greece, Everyone Should Leave The Euro -There’s No Point (Worstall)

If the 100,000 people of my native Bath all use different currencies then trade between the citizenry is going to be rather difficult. If we all use the same currency it will be easier and there will be more trade. Since trade is what gives us Smithian growth (from Adam Smith, the specialisation and division of labour and the trade in the resultant production), makes us all richer, this is a good idea. However, it’s possible to have too much of a good thing. If we’re using the same currency then we must, by definition, have the same monetary policy. And the larger the area we cover the more likely it is that we’ll have two more more areas within which it will react differently to an external or asymmetric shock (the definition of that second simply being a shock that hits different areas in different ways).

This is what Paul Krugman has been talking about with Finland and everyone has been talking about with respect to the property booms in Ireland and Spain a decade back. All of this is background: people have been chewing over how optimal the euro area is ever since the idea was first floated (hint: it’s not optimal). However, note that the size of that optimality depends upon the strength of the two effects. And if that increased trade effect is smaller then the optimal area becomes smaller. And what this most recent research seems to be showing is that there’s no extra trade effect at all:

“More importantly, we find that the trade effects of EMU are different from other currency unions. But, most disturbingly, we find that the precise econometric methodology used to estimate the currency effect on trade matters. A lot. In the large, we find no consistent evidence that EMU stimulated trade. Indeed, we are forced to conclude that econometric methodology matters so much that it undermines confidence in our ability to estimate the effect of currency union on trade.”

A reasonable rule of thumb is that if the effect you’re looking for varies a lot dependent upon the method you’re using to look for it (assuming that all the methods you are using are reasonable) then what you’re finding is not actually the effect, but variances due entirely to the measurement method. But even putting that aside they find that there’s a small through zero to possibly even negative effect upon trade of the currency union of the euro. Or, as we might put it, there’s no benefit and we’re left just with the costs. Things that cost us but have no benefit are things that we shouldn’t be doing. Thus, clearly, we shouldn’t be having the euro. Or, as we might put it, everyone should leave it, not just Greece.

“One doesn’t have to agree with the politics of the far left in Greece to vindicate the integrity of their economic case.”

• Why Greece Should Choose Eurozone Exit Rather Than Dependence (Irish Times)

The narrative of the euro zone crisis, the epicentre of which is Greece, has been airbrushed. Germany’s insistence that the 2012 bailout programme is a realistic reference point for current discussion is misconceived. Its assertion that debt relief can be discussed only after the completion of the current programme, rather than being the obvious starting point for a new agreement, is profoundly mistaken. The tenor of the euro zone’s criticism of the government of Alexis Tsipras has shifted from the patronising to the denunciatory, from faux long-suffering indulgence with a brash upstart to near visceral condemnation. The message is that the grown-ups are “exasperated” and “running out of patience” with Greece.

Germany’s minister for economic affairs, Sigmar Gabriel, argues that “Greece’s game theorists are gambling the future of their country. And Europe’s too.” This is revisionist rhetoric. Greece is more right than its critics. One doesn’t have to agree with the politics of the far left in Greece to vindicate the integrity of their economic case. What is true of a relationship is true also for a country: dependence is never healthy. Continued membership means continued dependence. Given the pressures being exerted on Greece, exit rather than dependence would be the better option. In February German finance minister Wolfgang Schäuble insisted that Greece complete the 2012 programme, regardless of the sea change in politics since then and the evidence that austerity was taking Greece further into recession.

He warned Athens not to question the framework of existing agreements or “everything is over”. It was a calamitous misjudgment. The “negotiations” have demonstrated how big countries behave when small countries step out of line and just how easily history can be rewritten. Tsipras, in an interview with Le Monde, said the euro zone’s dominant players were, by degrees, bringing about the “complete abolition of democracy in Europe” and were ushering in a technocratic monstrosity with powers to subjugate states that refuse to accept the “doctrines of extreme neoliberalism”.

So much for ‘we have it under control’.

• Contagion From Greek Crisis Engulfs Eurozone Bonds (Reuters)

Italian, Spanish and Portuguese bond yields leapt on Tuesday in one of the most serious episodes of contagion since the height of Europe’s debt crisis after the latest breakdown in talks between Greece and its creditors. Except for a jump in May during a global bond sell-off driven by improving inflation expectations, yields on bonds issued by the eurozone’s most vulnerable states were on track for their biggest three-day move since mid-2013. Similarly sharp moves were seen in 2012 as the crisis peaked, although yields on the three countries’ bonds remain far below the highs of above 7% hit in that period.

The moves, analysts say, could impact the dynamic of the negotiations between Greece and European leaders, who may have thought that the relative calm in markets during the protracted talks was a sign that investors thought a Grexit was manageable. “A lot of people, especially in Germany, have seemed relaxed about Greece. We’ve seen comments saying that if Greece exits it’s not such a big thing,” said Jean-Francois Robin, head of rates strategy at Natixis. “The market is just showing exactly the opposite of that.”

Sociopaths.

• Defiant Tsipras Accuses Creditors Of ‘Pillaging’ Greece (FT)

Alexis Tsipras, the Greek prime minister, vowed not to give in to demands made by his country’s international creditors, accusing them of “pillaging” Greece for the past five years and insisting it was now up to them to propose a new rescue plan to save Athens from bankruptcy. Mr Tsipras’ remarks came less than 24 hours after the collapse of last-ditch talks aimed at reaching agreement on the release of €7.2bn in desperately needed rescue funds. The comments were part of a chorus of defiance in Athens that left many senior EU officials convinced they can no longer clinch a deal with Greece to prevent it from crashing out of the eurozone.

Without a deal to release the final tranche of Greece’s current bailout, Athens is likely to default on a €1.5bn loan repayment due to be paid to the IMF in two weeks, an event officials fear would set off a financial chain reaction from which Greece would be unable to recover. “One can only suspect political motives behind the fact that [bailout negotiators] insist on further pension cuts, despite five years of pillaging,” Mr Tsipras said in a statement. “We are carrying our people’s dignity as well as the aspirations of all Europeans. We cannot ignore this responsibility. It is not a matter of ideological stubbornness. It has to do with democracy.”

Reflecting the growing fears of a Greek default, Günther Oettinger, Germany’s European commissioner, called for an “emergency plan, a ‘Plan B’” in case Athens failed to reach a deal, saying this would lead to “a state of emergency” in Greece, including difficulties paying for energy, police services and medicines. The growing signs of breakdown sent the Athens stock exchange down nearly 5% and borrowing costs on Greek bonds sharply higher. The jitters appeared to spread to other peripheral eurozone bonds as well, with sell-offs in benchmark Italian, Spanish and Portuguese debt.

It can. And should.

• Why Can’t Greece Just Declare Bankruptcy? (Stiglitz/Guzman)

Governments sometimes need to restructure their debts. Otherwise, a country’s economic and political stability may be threatened. But, in the absence of an international rule of law for resolving sovereign defaults, the world pays a higher price than it should for such restructurings. The result is a poorly functioning sovereign-debt market, marked by unnecessary strife and costly delays in addressing problems when they arise. We are reminded of this time and again. In Argentina, the authorities’ battles with a small number of “investors” (so-called vulture funds) jeopardized an entire debt restructuring agreed to — voluntarily — by an overwhelming majority of the country’s creditors.

In Greece, most of the “rescue” funds in the temporary “assistance” programs are allocated for payments to existing creditors, while the country is forced into austerity policies that have contributed mightily to a 25% decline in gross domestic product and have left its population worse off. In Ukraine, the potential political ramifications of sovereign-debt distress are enormous. So the question of how to manage sovereign-debt restructuring — to reduce debt to levels that are sustainable — is more pressing than ever. The current system puts excessive faith in the “virtues” of markets. Disputes are generally resolved not on the basis of rules that ensure fair resolution, but by bargaining among unequals, with the rich and powerful usually imposing their will on others.

The resulting outcomes are generally not only inequitable, but also inefficient. Those who claim that the system works well frame cases like Argentina as exceptions. Most of the time, they claim, the system does a good job. What they mean, of course, is that weak countries usually knuckle under. But at what cost to their citizens? How well do the restructurings work? Has the country been put on a sustainable debt path? Too often, because the defenders of the status quo do not ask these questions, one debt crisis is followed by another. Greece’s debt restructuring in 2012 is a case in point. The country played according to the “rules” of financial markets and managed to finalize the restructuring rapidly; but the agreement was a bad one and did not help the economy recover.

Three years later, Greece is in desperate need of a new restructuring. Distressed debtors need a fresh start. Excessive penalties lead to negative-sum games, in which the debtor cannot recover and creditors do not benefit from the larger repayment capacity that recovery would entail.

Note: Peston rarely has anything worth quoting. But even he can see something’s amiss in the Greece ‘debate’.

• Greece Isn’t Any Old Troubled Debtor (BBC)

it is not just the quantum of austerity that divides Athens from its creditors, it is also the method of execution. So the eurozone and IMF want further pension cuts and an increase in VAT on electricity. These measures are toxic for the Greek Syriza government because they are regressive, they disproportionately hurt the poorer Greeks who elected Syriza. So “why insist on pensions?”, says Blanchard. His answer is that pension expenditure in Greece is 16% of GDP, and “transfers from the budget to the pension system are close to 10% of GDP”. Now here in Britain we would think that public spending on pensions of close to a tenth of GDP is incredibly lavish: the equivalent figure for the UK, and indeed for most anglophone countries like the US and Canada, is much lower (at around 6% of GDP in Britain).

But in the UK, US and Canada, private pension saving is much higher than on the continent of Europe. And Greece’s government spending on pensions, as a share of GDP, is very much in the ballpark of spending in the rest of the eurozone: on the basis of the last official OECD figures, which admittedly are five years old, Greece spent less than Italy, France and Austria on pensions and only a bit more than Germany. And there is another thing: in 2009 the OECD calculated that Greek government cash spending on old-age and survivors benefits was 13% of its GDP. If the equivalent figure today is 10%, which is what Blanchard seems to suggest, that implies the outlay on pensions has already been reduced by around 40%, given that Greece’s GDP has shrunk by a quarter.

That said, on the basis of the last Eurostat figures, which are for 2012, Greece’s old-age outlay – including disability and incapacity payments – was considerably higher than the euro area average. So the stats are murky. But it is worth pointing out that Greece has proportionately more old people than the eurozone average, and more poor people (thanks to five years of slump). In other words, it is not obvious that there is outrageous excess in the Greek pension system (and there certainly isn’t in comparison with provision in Blanchard’s French home).

To state the obvious, which seems however to be lost on the leaders of the eurozone, once the euro is not forever for any member, it is not forever for all members. And once that clonking penny drops for global investors, the notion that the whole project will fall apart – not tomorrow, but one day – will increasingly become the default view.

“We should have fought for this from the start.”

• Ex-IMF Official Says ‘Errors’ By Lenders Worsened Greek Crisis (Kathimerini)

Greece’s former representative at the IMF, Panayiotis Roumeliotis, appeared before the parliamentary inquiry into the country’s debt and argued that Greece’s lenders have contributed to worsening the Greek crisis through the policies they advocated. “The mistake made by lenders is that they placed emphasis on the fiscal side and high taxes, which they are continuing to do now,” he said. “This resulted in the recession.” Roumeliotis was Greece’s envoy to the IMF when the first bailout was signed in 2010 and he claimed at the hearing that there was contact at the time between German and French officials to ensure that there would not be a restructuring of Greece debt as much of it was held by German and French banks. “They took too long to restructure Greece’s debt,” he said. “We should have fought for this from the start.”

Galbraith is Varoufakis’ friend and adviser he brought with him from texas.

• What Is Reform? The Strange Case Of Greece And Europe (James Galbraith)

On our way back from Berlin on Tuesday, Greek Finance Minister Yanis Varoufakis remarked to me that current usage of the word “reform” has its origins in the middle period of the Soviet Union, notably under Khrushchev, when modernizing academics sought to introduce elements of decentralization and market process into a sclerotic planning system. In those years when the American struggle was for rights and some young Europeans still dreamed of revolution, “reform” was not much used in the West. Today, in an odd twist of convergence, it has become the watchword of the ruling class.[..]

What is missing from the creditors’ demands is, well, reform. Cuts in pensions and VAT increases are not reform; they add nothing to economic activity or to competitiveness. Fire-sale privatization can lead to predatory private monopolies as anyone living in Latin America or Texas knows. Labor market deregulation is in the nature of an unethical experiment, the imposition of pain as therapy, something the internal records of the IMF as far back as 2010 confirm. No one can suggest that wage cuts can bring Greece into effective competition for jobs in traded goods with either Germany or Asia. Instead, what will happen is that anyone with competitive skills will leave. Reform in any true sense is a process that requires time, patience, planning, and money.

Pension reform and social insurance, modern labor rights, sensible privatizations and effective tax collection are reforms. So are measures relating to public administration, the justice system, tax enforcement, statistical integrity and other matters, which are agreed in principle and which the Greeks would implement readily if the creditors would permit it – but for negotiating reasons they do not. So would be an investment program emphasizing the advanced services Greece is well-suited to provide, including in health care, elder-care, higher education, research, and the arts. It requires recognizing that Greece cannot succeed by being the same as other countries; it must be different – a country with small shops, small hotels, high culture, and open beaches. A debt restructuring that would bring Greece back to the markets (and yes, that could be done, and the Greeks have a proposal to do it) would also be, on any reasonable reckoning, a reform.

The plain object of the creditors’ program is therefore not reform. It is the doubling-down on debt collection in the face of disaster. Pension cuts, wage cuts, tax increases and fire sales are offered up on the magical thought that the economy will recover despite the burden of higher taxes, lower purchasing power, and external repatriation of profits from privatization. The magic has already been tested for five years, with no success in the Greek case. That is why, instead of recovering as predicted after the bailout of 2010, Greece has suffered a loss of over 25% of its income with no end in sight. That is why the debt burden has gone from about 100% of GDP to 180%, when measured in terms of face values. But to admit this failure, in the case of Greece, would be to undermine the entire European policy project and the authority of those who run it.

Still a very well educated people.

• 3% of the World’s Top Scientists are Greek (Greek Reporter)

Greeks may be only 0.2% of the world population but 3% of top international scientists are of Greek nationality, says a survey. John Ioannidis, Professor of Medicine at Stanford University, conducted the research and presented it on Saturday at the Panhellenic Medical Conference in Athens. Ioannidis gave a lecture in memory of prominent Doctor and Professor Dimitris Trichopoulos who died in December 2014. The title was “The exodus of Greek scientists – a meta-analysis,” and the survey showed statistics for a total of 672 scientists with Greek names who have the most influence in the international scientific bibliography. The professor used statistical data from the Google Scholar database.

On average, the 672 Greek scientists have received 17,000 reports each in the international scientific bibliography. Only one in seven of them (14%) lived or live in Greece, 86% of them live abroad where several of them were born, and 33 of them have passed away. In the wider scientific community there are about 20 million authors who have made at least one scientific publication. Greek names represent about 1% of those, meaning 200,000, while Greek names represent 3% of all scientists. The most ancient Greek scientist, Aristotle, is constantly used as a reference in the scientific bibliography. Statistically, out of the 672 leading Greek scientists, only 95 (14%) are located in Greece.

How one can not be speechless after this 4 minute video is beyond us.

• Sunday Times ‘Reporter’ ‘Defends’ Snowden ‘Article’ (CNN)

CNN’s George Howell speaks with Sunday Times correspondent Tom Harper about reports that Russia and China have decrypted files stolen by NSA leaker Edward Snowden.

As its leadership promotes more of it.

• IMF: Inequality Hurts Economic Growth (Guardian)

The idea that increased income inequality makes economies more dynamic has been rejected by an IMF study, which shows that the widening income gap between rich and poor is bad for growth. A report by five IMF economists dismissed “trickle down” economics, and said that if governments want to increase the pace of growth they should concentrate on helping the poorest 20% of their citizens. The study, covering advanced, emerging and developing countries, said technological progress, weaker trade unions, globalisation and tax policies that favoured thewealthy had all played their part in making widening inequality “the defining challenge of our time”. The IMF report said the way income is distributed matters for growth.

“If the income share of the top 20% [the rich] increases, then GDP growth actually declines over the medium term, suggesting that the benefits do not trickle down. In contrast, an increase in the income share of the bottom 20% [the poor] is associated with higher GDP growth,” said the report. Echoing the frequent warnings about rising inequality from the Fund’s managing director Christine Lagarde, the report says governments around the world need to tackle the problem. It said: “Raising the income share of the poor, and ensuring that there is no hollowing-out of the middle class, is actually good for growth.” The study, however, reflects the tension between the IMF’s economic analysis and the harder-line policy advice given to individual countries, such as Greece, that need financial support.

During its negotiations with Athens, the IMF has been seeking to weaken worker rights, but the research paper found that the easing of labour market regulations was associated with greater inequality and a boost to the incomes of the richest 10%. “This result is consistent with forthcoming IMF work, which finds the weakening of unions is associated with a higher top 10% income share for a smaller sample of advanced economies,” said the study.

Guillotines must follow.

• 1% Of Households In 2014 Made Up 42% Of Total Private Global Wealth (Forbes)

The total number of millionaire households around the world reached a record 17.4 million in 2014, up 13.7% from 15.3 million the year before. Meanwhile, the ultra high net worth set is expected to grow at an equally impressive rate over the next five years. According to the Boston Consulting Group, wealth for the richest global families worth more than $100 million is projected to cross the $18 trillion mark by 2019. Currently, private wealth held by families with a fortune of more than $100 million total a combined $10 trillion, or roughly 6% of global wealth. Those ultra rich fortunes grew by 11% in 2014. To get to $18 trillion by 2019, the report predicts that household wealth will grow at a compound annual rate of about 12% in the next five years.

The report, published Monday, says there are more than 5,000 U.S. households worth $100 million or more. China follows with more than 1,000 ultra rich households. “This top segment is expected to be the fastest growing, in both the number of households and total wealth,” the reports’ authors wrote. In addition, the research shows that the top 1% of households in 2014 made up 42% of total private global wealth. Keep in mind, the survey only analyzes cash deposits, securities and life and pension plans. That means other big drivers of wealth like real estate, business ownership and collections aren’t included in the estimates.

Forbes’ own billionaires list, which analyzes all assets an individual can hold, counts 1,826 individuals from across the world with personal 10-figure fortunes, according to the World Billionaires list released in March. They controled an estimated $7.05 trillion at the time of the report. In the U.S. alone, Forbes estimates that there’s nearing 450 American billionaires. Many investors are “benefiting from the markets going up,” senior partner and wealth management expert Bruce Holley said at a Monday briefing. The amount of wealth held in equities rose to 64.1 trillion, up 17.5% from 2013, according to the report.

All over the Anglo world.

• Foreign Investors Pose Threat To US Residential Real Estate (MarketWatch)

U.S. real estate purchases by foreign nationals over a recent 12-month period totaled $92 billion. The negative impact of foreign investments in American residential real estate might have been badly overlooked by some U.S. government officials — and the potential harm it might cause is largely unknown to the average American. Reports from a variety of sources suggest that a housing recovery is taking place, though not at the pace expected. As of last month, it was still some 16% below its peak in 2008. Yet at the same time, some U.S. cities are experiencing an unusually high demand for residential real estate, with buyers outbidding each other, often by tens, and sometimes hundreds of thousands of dollars.

The same kind of outbidding was going on just prior to the 2007 real-estate crash where wealthy buyers, mostly foreign, were buying homes by paying for them in cash. Average American home owners, of whom one in three is on the verge of financial ruin, aren’t fueling such buying frenzies. Skyrocketing real-estate prices in America’s selected urban centers are likely the result of a foreign influx of cash, more particularly mainland Chinese money, which is now flooding major American cities in the billions of dollars. Last year, Bloomberg revealed a secret path that allows wealthy Chinese to transfer billions overseas. Before that, The Wall Street Journal outlined the questionable mechanics of moving cash out of China, where wealthy mainland Chinese bring their funds to Hong Kong and from there to other parts of the world.

Most of it ends up invested in favorite foreign destinations — namely the U.S., Australia, and Canada. Despite some Chinese banks across the border from Hong Kong allowing for a trial program (introduced in 2011) for overseas property purchases and emigration, the Bloomberg report noted that, “China’s foreign-exchange rules cap the maximum amount of yuan that individuals are allowed to convert at $50,000 each year and ban them from transferring the currency abroad directly.” So it’s illegal for mainland Chinese to take more than $50,000 out of the country — but wealthy Chinese are smuggling out billions. You can bet your last dollar that a good chunk of that Chinese money (of dubious origin) was earmarked for residential real-estate purchases, that is, the roofs over American heads.

Let ‘er rip.

• $112 Billion Fund Manager Worries Bond-Market Fire Doors Are Locked (Bloomberg)

If you haven’t realized by now that a lot of people are worried about bond-market liquidity, then I’m not sure why you’re bothering to read me. But in the hope that you’ll at least start taking an interest in where your pension fund is hanging out these days, maybe you’ll listen when a guy who manages $112 billion tells you that if bad things happen in bond land, the fire doors might turn out to be locked. Martin Gilbert runs Aberdeen Asset Management which, as previously mentioned, manages rather a lot of money. On Monday, he explained why he’s lined up a $500 million overdraft facility and has a further $1 billion of cash: “It will get ugly. You want bank lines in place in case you have to meet a redemption and there is no market.”

Let’s pause for a second to parse that sentence. Gilbert was talking about the risk of either Greece leaving the euro or the U.S. starting to raise borrowing costs. Either or both could spook investors, who in turn might ask Aberdeen for their money back. Except Aberdeen is concerned it might not be able to sell the things it bought with their money – so it would either have to deplete its cash to make the repayments, or borrow money to meet those redemptions. Setting aside a rainy day fund of $1.5 billion, just in case, is “a substantial amount but you’ve got to be prepared,” Gilbert said.

With the benefit of hindsight, I decided a while ago that the starting gun for the credit crunch was fired on Aug. 9, 2007. That day, BNP Paribas told investors it was freezing redemptions from three of its investment funds because it had decided there was no reliable way to determine the value of the assets in the funds, which in turn would make it impossible to sell things to repay investors. In other words, to echo Aberdeen’s Gilbert, there was no market.

Permanently.

• Fast Track Hands the Money Monopoly to Private Banks, Permanently (Ellen Brown)

On June 3, 2015, WikiLeaks released 17 key documents related to TiSA, which is considered perhaps the most important of the three deals being negotiated for “fast track” trade authority. The documents were supposed to remain classified for five years after being signed, displaying a level of secrecy that outstrips even the TPP’s four-year classification. TiSA involves 51 countries, including every advanced economy except the BRICS. The deal would liberalize global trade in services covering close to 80% of the US economy, including financial services, healthcare, education, engineering, telecommunications, and many more. It would restrict how governments can manage their public laws, and it could dismantle and privatize state-owned enterprises, turning those services over to the private sector.

Recall the secret plan devised by Wall Street and U.S. Treasury officials in the 1990s to open banking to the lucrative derivatives business. To pull this off required the relaxation of banking regulations not just in the US but globally, so that money would not flee to nations with safer banking laws. The vehicle used was the Financial Services Agreement concluded under the auspices of the World Trade Organization’s General Agreement on Trade in Services (GATS). The plan worked, and most countries were roped into this “liberalization” of their banking rules. The upshot was that the 2008 credit crisis took down not just the US economy but economies globally. TiSA picks up where the Financial Services Agreement left off, opening yet more doors for private banks and other commercial service industries, and slamming doors on governments that might consider opening their private banking sectors to public ownership.

What the f*ck is this? How much Mengele literature have these bozos been reading?

• CIA Torture Has Broken Spy Agency Rule On Human Experimentation (Guardian)

The Central Intelligence Agency had explicit guidelines for “human experimentation” before, during and after its post-9/11 torture of terrorism detainees, the Guardian has learned, which raise new questions about the limits on internal oversight over the agency’s in-house and contracted medical research. Sections of a previously classified CIA document, made public by the Guardian on Monday, empower the agency’s director to “approve, modify, or disapprove all proposals pertaining to human subject research”. The leeway provides the director, who has never in the agency’s history been a medical doctor, with significant influence over limitations the US government sets to preserve safe, humane and ethical procedures on people.

CIA director George Tenet approved abusive interrogation techniques, including waterboarding, designed by CIA contractor psychologists. He further instructed the agency’s health personnel to oversee the brutal interrogations – the beginning of years of controversy, still ongoing, about US torture as a violation of medical ethics. But the revelation of the guidelines has prompted critics of CIA torture to question how the agency could have ever implemented what it calls “enhanced interrogation techniques” – despite apparently having rules against “research on human subjects” without their informed consent.

Indeed, despite the lurid name, doctors, human-rights workers and intelligence experts consulted by the Guardian said the agency’s human-experimentation rules were consistent with responsible medical practices. The CIA, however, redacted one of the four subsections on human experimentation. “The more words you have, the more you can twist them, but it’s not a bad definition,” said Scott Allen, an internist and medical adviser to Physicians for Human Rights. The agency confirmed to the Guardian that the document was still in effect during the lifespan of the controversial rendition, detention and interrogation program.

Just on of the risks to pension funds.

• How Pension Funds Face Huge Risk From Climate Change (Guardian)

The pension funds of millions of people across the world, including teachers, public sector workers, health staff and academics in the UK and US, are heavily exposed to the plummeting coal sector, a Guardian analysis has revealed. It has also found that just a dozen people, including the owner of Chelsea FC, Roman Abramovich, own coal reserves equivalent to the annual carbon emissions of China, the world’s biggest polluter. The UN, which advocates a shift to clean energy, has more than $100m (£65m) invested in coal through its own pension fund. The Guardian examined the ownership of the biggest 50 publicly traded coal companies, ranked by the reserves held which in total are equivalent to more than 11 years of global emissions.

This alone could push the planet past beyond the 2C of climate change deemed dangerous by the world’s governments. A fast-growing, global fossil fuel divestment movement, backed by the Guardian’s Keep it in the Ground campaign, is having particular success in persuading investors to dump coal stocks. The world’s largest sovereign wealth fund, held by Norway, decided earlier this month to sell off more than $8bn of coal assets. The World Bank and the Bank of England have both warned that global action to cut carbon emissions could render fossil fuel reserves worthless, as analyses show most must remain in the ground. Coal, the most polluting fuel, is particularly at risk and investment bank Goldman Sachs declared in January the fuel had reached “retirement age”.

The coal price has crashed by 60% since 2011, as gas, renewable energy and climate policies have damaged demand. Tom Sanzillo, a former New York State comptroller who oversaw a $156bn pension fund, said: “Coal is arguably the worst performing sector in the whole world. Pension funds, which have a fiduciary duty to make money, have no business owning any of these companies. It is not a prospective risk, it is a now risk.” “The coal sector is falling into a financial death spiral,” said Mark Campanale, founder of the Carbon Tracker Initiative, which has pioneered analysis of the financial risks of fossil fuels. “The members of university, healthcare and UN pension funds are smart and informed people; they will be shocked to discover just how far exposed their funds are to coal investment risk.”

How hostile will Washington be when he visits later this year?

• Pope Warns Of Destruction Of World’s Ecosystem In Leaked Encyclical (Guardian)

Pope Francis will this week call for changes in lifestyles and energy consumption to avert the “unprecedented destruction of the ecosystem” before the end of this century, according to a leaked draft of a papal encyclical. In a document released by an Italian magazine on Monday, the pontiff will warn that failure to act would have “grave consequences for all of us”. Francis also called for a new global political authority tasked with “tackling … the reduction of pollution and the development of poor countries and regions”. His appeal echoed that of his predecessor, pope Benedict XVI, who in a 2009 encyclical proposed a kind of super-UN to deal with the world’s economic problems and injustices.

According to the lengthy draft, which was obtained and published by L’Espresso magazine, the Argentinean pope will align himself with the environmental movement and its objectives. While accepting that there may be some natural causes of global warming, the pope will also state that climate change is mostly a man-made problem. “Humanity is called to take note of the need for changes in lifestyle and changes in methods of production and consumption to combat this warming or at least the human causes that produce and accentuate it,” he wrote in the draft. “Numerous scientific studies indicate that the greater part of the global warming in recent decades is due to the great concentration of greenhouse gases … given off above all because of human activity.”

The pope will also single out those obstructing solutions. In an apparent reference to climate-change deniers, the draft states: “The attitudes that stand in the way of a solution, even among believers, range from negation of the problem, to indifference, to convenient resignation or blind faith in technical solutions.” The leak has frustrated the Vatican’s elaborate rollout of the encyclical on Thursday. Journalists were told they would be given an early copy on Thursday morning and that it would be released publicly at noon following a press conference. On Monday evening, the Vatican asked journalists not to publish details of the draft, emphasising that it was not the final text. A Vatican official said he believed the leak was an act of “sabotage against the pope”.

Debt Rattle February 24 2015

Feb 242015

February 24, 2015 Posted by Raúl Ilargi Meijer at 1:23 pm Finance Tagged with: Apple, Greece, Putin, reform, Ron Paul, Shale, Ukraine, war, Yellen 5 Responses »

Russell Lee Washington DC, “Cafe on L Street.” 1938

• Will Yellen Set The Dollar Free? (CNBC)

• European Commission Backs Greek Reform Proposals (WSJ)

• Greek Plan to Tackle Economy Goes Before Finance Chiefs (Bloomberg)

• Greece ‘Delays Reform Plan Deadline’ (BBC)

• ‘It’s Treason!’ Greek Anger At Government U-Turn (CNBC)

• Interventionism Kills: Post-Coup Ukraine One Year Later (Ron Paul)

• Why the World Is So Bad at Tracking Dirty Money (Bloomberg)

• Medicines To Cost Taxpayers Millions More In Secret TTIP Trade Deal (Guardian)

• Apple Now Twice As Big As World’s 2nd-Largest Company, ExxonMobil (Telegraph)

• The Performance of Many Hedge Funds Just Comes Down to Owning Apple (Bloomberg)

• How Goes the War? (Jim Kunstler)

• Putin Says War With Ukraine ‘Unlikely’ (BBC)

• Tales From an Oil-Sands Slide: Angst Amid Bravado in Alberta (Bloomberg)

• European Shale Dream Is Dying Before It Started (CNBC)

• Work Of Prominent Climate Change Denier Funded By Energy Industry (Guardian)

• UK Will Need To Import Over Half Of Its Food Within A Generation (Guardian)

Hike, grandma, hike. And then get under the bus.

• Will Yellen Set The Dollar Free? (CNBC)

The U.S. dollar has been range bound for weeks, but if Federal Reserve Chair Janet Yellen sounds more upbeat about the labor market in her testimony to Congress this week, analysts say the greenback could test recent highs against several currencies. “The U.S. dollar has been in consolidation mode. If Janet Yellen comes out sounding fairly hawkish and suggests the rate hike cycle could start in the middle of the year, the dollar could rise,” said ANZ senior currency strategist Khoon Goh. The greenback has been waiting for a fresh catalyst for a month following its near 19% surge from September to 95.50 in January, to 12 year highs.

If the scenario that Goh outlined comes true, the U.S. dollar index could test its all-time high, he said; it’s currently around 94.58. Expectations that the Fed will hike rates sooner rather than later underpinned the dollar’s rise, but some soft economic data including Monday’s below-view housing figures are limiting further gains. Investors will focus on Yellen’s testimony to Congress on Tuesday and Wednesday for further clues on when the Fed will hike rates. Should she sound “more upbeat about labor market developments, it would be a key factor in conditioning the markets’ expectations that the Federal Reserve is preparing to create options to set the stage for a rate hike at its next meeting,” said NAB’s Ray Attrill.

He sees the U.S. dollar index rallying by 0.5% or dropping by 1%, depending on whether Yellen is hawkish or dovish. “Currency markets have been more confident about an earlier rate hike, perhaps in June, than the bond markets, which are factoring in an October rate hike,” said NAB’s Attrill. But even if Yellen confirms the markets’ dollar-long positions with hawkish comments, it won’t have equal impact on all currencies, say analysts.

Yay?!

• European Commission Backs Greek Reform Proposals (WSJ)

The European Commission on Tuesday backed proposals made by the Greek government for reworking its bailout program, putting Athens one step closer to securing a four-month extension to its expiring bailout. But the bloc’s governments will require more detail on the proposals before giving Greece more money and possibly before approving its extension request. Eurozone finance ministers will discuss the list of proposals, sent by Greece to its creditors on Monday night, on a conference call Tuesday afternoon. “In the commission’s view, this list is sufficiently comprehensive to be a valid starting point for a successful conclusion of the review, as called for by [eurozone finance ministers],” said commission spokesman Margaritis Schinas. “We are notably encouraged by the strong commitment to combat tax evasion and corruption.”

However, Jeroen Dijsselbloem, the Dutch finance minister who leads meetings of the eurozone ministers, said the proposals represented “just a first step.” “This list is just an indication of the kind of reforms they would like to replace and also the ones they would like to continue,” Mr. Dijsselbloem said at the European Parliament on Tuesday. The commission is one of three institutions—along with the European Central Bank and International Monetary Fund—that have been overseeing Greece’s bailout and had been asked to assess the list before the eurozone ministers speak on their conference call at 13:00 GMT. Mr. Schinas said the fact that a conference call has been scheduled indicates the ECB and the IMF support the Greek proposals. The list, reviewed by The Wall Street Journal, includes pledges on privatizations, reforms to pension policy and government spending cuts, including reducing the number of ministries from 16 to 10. It also pledges to raise the minimum wage, a measure that has raised concerns among some of Greece’s creditors.

A eurozone official who had seen the list was skeptical. “It should be much more concrete, but hopefully we will receive more concreteness,” the official said. Nevertheless, Greek stocks surged on the news that the commission believes the proposals appear to meet the demands of eurozone finance ministers, with the main stock exchange in Athens rising almost 7% in early trade. Bonds also jumped. The Greek government needs its creditors to approve its proposals to secure a four-month extension to its €240 billion ($273 billion) bailout, which expires at the end of the month. Mr. Dijsselbloem said he received the list of reforms at 11:15 on Monday evening. That means Athens submitted the list in time, despite an announcement by the Greek government on Monday night that it wouldn’t send the measures until Tuesday morning. Greek Finance Minister Yanis Varoufakis also sent the list of reforms to the commission, the ECB and the IMF.

Hierarchy.

• Greek Plan to Tackle Economy Goes Before Finance Chiefs (Bloomberg)

Greece’s month-old government is about to find out whether a package of new economic measures sketched in recent days is enough to win more funding from the rest of the euro region to keep the country solvent. A draft list was sent to creditor institutions on Monday, based on a provisional agreement on Feb. 20. A Greek government official said the policies will be provided to the euro-area group of finance ministers on Tuesday before they discuss on a conference call whether the commitments go far enough. “I am very confident,” Dutch Finance Minister Jeroen Dijsselbloem, who is president of the group, said on Monday. “The Greek government has been very serious, working very hard the last couple of days. We need it to be strong enough to work on the next couple of months. I am always optimistic.”

Approval of the Greek plans would offer a four-month reprieve for the country. At the same time, Prime Minister Alexis Tsipras must try to avoid defections within his anti-austerity Syriza party after it won power on pledges to take back control of Greece’s finances. The measures are first subject to validation by the International Monetary Fund, the European Central Bank and the European Commission, the institutions that were known as the troika and from which Tsipras told voters Greece would break free. A draft was under discussion Monday evening, an official from the institutions said. The person asked not to be named because the deliberations are private. IMF Managing Director Christine Lagarde said she hoped there would be a “meeting of the minds” between Greece and the rest of Europe on the changes needed.

“Greece has to go through very in-depth, sometimes difficult reforms,” she said in an interview on HuffPost Live on Monday. They “will have to tackle vested interests, protected professions, rigidity in various markets,” she said. The government said in a statement the same day that the list will include all of Syriza’s pledges for “alleviating the humanitarian crisis” and the cabinet will convene on Tuesday after the document goes to finance ministers. The package would then be put to national parliaments for formal consent, though lawmakers and officials in Germany, Finland and the Netherlands signaled they won’t stand in the way once their governments grant consent for the aid extension. Greek government spokesman Gabriel Sakellaridis said earlier that the list will include fighting corruption and changes to the tax system.

But then, finally…

• Greece ‘Delays Reform Plan Deadline’ (BBC)

Greece will send a list of reforms aimed at securing a bailout extension to EU partners on Tuesday morning, missing a Monday deadline, officials say. The list must be approved by international creditors to secure a four-month loan extension. Analysts say the deal’s collapse would revive fears Greece will exit the euro. Minister of state Nikos Pappas says the list will include measures to fight tax evasion and trim the civil service. But Greek officials have also stressed that there will be policies aimed at fulfilling pre-election pledges to help those hit by years of economic crisis. Greece’s creditors – the ECB, EC and IMF – are expected to deliver their verdict on the proposals later on Tuesday, before the reforms are discussed in a conference call with eurozone finance ministers.

Greece agreed an extension to its financial rescue programme with eurozone countries on Friday, and said it would submit its list of reforms before Tuesday. Late on Monday, officials said that although Greece had given no reason, the Eurogroup had agreed to a delay. The four-month extension deal is widely regarded as a major climb-down for Prime Minister Alexis Tsipras, who won power in January vowing to reverse budget cuts. Greece hasn’t disclosed why the infamous list has been delayed but insists it will arrive in Brussels on Tuesday. Drafts leaked to the Greek media suggest proposals broadly fall into three categories: tackling tax evasion, structural reforms and social measures that help the poor with healthcare or electricity bills and prevent those in debt from losing their homes.

It’s not clear which will make the final list or whether the reforms will be accepted by Greece’s creditors. If there’s a fundamental disagreement, the deal to extend Greece’s loan could collapse. The government is likely to be forced into U-turns on some promises made before the election, such as raising the minimum wage or rehiring public sector workers. The hard left of the governing party is opposed. But the majority of Syriza’s supporters appear to be behind it, relieved at least that Athens is proposing reforms for the first time rather than being handed a fait accompli by its creditors. Bild, Germany’s biggest newspaper, broke down in an article what it said was a tax hit list devised by the Greek government. It will reportedly seek to raise 2.5bn euros from the fortunes of rich Greeks, 2.5bn from back taxes owed by individuals and businesses, and 2.3bn from a crackdown on tobacco and petrol smuggling.

It’s a long day… living in Reseda… there’s a free-way runnin’ through the yard….

• ‘It’s Treason!’ Greek Anger At Government U-Turn (CNBC)

[..] not only has Tsipras attracted criticism for trying to present the deal as a win for the country, he has also been accused of merely overseeing a change of names for the bailout. For example, the “troika” is now referred to as “institutions,” and the “memorandum of understanding” is now referred to as the “agreement.” “To say that we finished off the ‘Memorandum’ and the ‘troika’, just because they changed their names makes me incredibly angry,” Athens-based Giannis Loverdos said on Facebook. “It’s as if Tsipras, [Finance Minister Yanis] Varoufakis and the others are telling me: ‘We believe that you are stupid…and you will believe whatever lie we tell you.'” Whereas Kostas Karampas, who also lives in Athens, went further, called the signing of a new deal “treason” on Facebook. He argued that whoever signs the new bailout agreement and new reform measures were “collaborators and will be judged by the Greek people for ultimate treason.”

One Greek expat in London was more sympathetic to Tspiras’ Syriza party, however. “I already knew from the beginning that the things that Syriza was promising before the election were not realistic,” mechanical engineer Antonis Kountouriotis told CNBC Monday, adding that he expected the government to make some concessions during negotiations. “They’ve tried to make an agreement that will benefit Greece and they do not follow a “yes” attitude to everything that the IMF and/or Europe—let’s face it, by Europe I mean Germany—want. I think we’ll have to wait and see whether they keep that attitude of negotiation, and whether they’ll manage to achieve a better agreement for Greece, before we judge them.” Despite the deal, Greece is still at the mercy of its European neighbors.

[..] although Tsipras has only been in power a month, analysts are questioning whether Friday’s deal—and notably, Greece’s request for an extension after previously shunning the notion—will come back to haunt the prime minister, threatening his credibility as a leader. Sotirios Zartaloudis, a lecturer in politics at the University of Birmingham, said in a blog post following the deal that Greece’s new government was “threatened by its own populist agenda vis-a-vis its Western partners and its voters.” “Its fate will be the benchmark for other populist anti-systemic parties throughout Europe,” he wrote Friday.

Dead on.

• Interventionism Kills: Post-Coup Ukraine One Year Later (Ron Paul)

[..] As we soon found out from a leaked telephone call, the US ambassador in Kiev and Assistant Secretary of State, Victoria Nuland, were making detailed plans for a new government in Kiev after the legal government was overthrown with their assistance. The protests continued to grow but finally on February 20th of last year a European delegation brokered a compromise that included early elections and several other concessions from Yanukovych. It appeared disaster had been averted, but suddenly that night some of the most violent groups, which had been close to the US, carried out the coup and Yanukovych fled the country.

When the east refused to recognize the new government as legitimate and held a referendum to secede from the west, Kiev sent in tanks to force them to submit. Rather than accept the will of those seeking independence from what they viewed as an illegitimate government put in place by foreigners, the Obama administration decided to blame it all on the Russians and began imposing sanctions!

That war launched by Kiev has lasted until the present, with a ceasefire this month brokered by the Germans and French finally offering some hope for an end to the killing. More than 5,000 have been killed and many of those were civilians bombed in their cities by Kiev. What if John McCain had stayed home and worried about his constituents in Arizona instead of non-constituents 6,000 miles away? What if the other US and EU politicians had done the same? What if Victoria Nuland and US Ambassador Geoffrey Pyatt had focused on actual diplomacy instead of regime change? If they had done so, there is a good chance many if not all of those who have been killed in the violence would still be alive today. Interventionism kills.

Lack of will.

• Why the World Is So Bad at Tracking Dirty Money (Bloomberg)

The leaked revelations about the tax-evading activities of the Swiss subsidiary of HSBC Bank rumble on. Britain’s Chancellor of the Exchequer has faced questions as to why, despite evidence of 1,100 tax-evading accounts being passed to the government in 2010, there has been only one prosecution—and why the chairman of HSBC was subsequently made a government minister. The scandal is a reminder that the global institutions which try to prevent money laundering are not just ineffective—they’re also incredibly expensive to maintain. It’s time to cut them down to size.

The multilateral Financial Action Task Force (FATF), which ostensibly regulates money laundering, emerged as a response to the war on drugs and has expanded during the war on terror. The rules now officially cover almost every country. Not only banks but also lawyers, car dealers, currency exchanges, casinos, and realtors are required to report “suspicious” customers who appear to have more money than they can account for through legal transactions. If laundering activities that banks fail to report are subsequently uncovered, banks may get heavily sanctioned: HSBC itself was previously forced to pay $1.92 billion in fines related to laundering Mexican drug cartel proceeds.

Michael Levi of Cardiff University and Peter Reuter of the University of Maryland have studied the global anti-money-laundering system and conclude that it has helped facilitate some criminal investigations and prosecutions. But at best, it snares just a fraction of 1% of criminal income flows. A lower-end estimate for global laundering transactions is 2% of global gross domestic product—or about $1.5 trillion. Global money laundering convictions involve at the most hundreds of millions. In the U.S., a generous estimate of seizures would amount to a mere 0.2% of all laundered funds.

We better stop this while we can.

• Medicines To Cost Taxpayers Millions More In Secret TTIP Trade Deal (Guardian)

Medicines will cost Australian taxpayers hundreds of millions of dollars more each year if measures in a leaked draft of the secretive Trans-Pacific Partnership Agreement are implemented, a new report says. The most recently leaked draft of the international trade deal includes provisions proposed by the US that would further protect the monopoly pharmaceutical companies hold over drugs, and delay cheaper versions from entering the market, the Medical Journal of Australia report says. The draft agreement sets in stone low patenting standards which allow drug companies to practice “evergreening” – when a pharmaceutical company tries to maintain its market monopoly on a drug for longer by applying for extra patents.

This prevents other companies entering the market with cheaper versions of the same medicine and imposes large and unnecessary costs on the health system and consumers, the report, published on Monday, said. The report’s authors gave the example of Efexor, produced by Pfizer, an antidepressant which had major side effects. Pfizer subsequently developed slow-release versions of the drug, called Efexor-XR, which significantly reduced its side-effects and which became much more widely prescribed than Efexor.

Pfizer claimed the slow-release versions were different enough from the original to be granted new patents. Its claim was rejected, but the legal battle delayed cheaper generic versions of the drug from entering the market for two and half years. “By the time this patent was eventually declared invalid, the delay to the generic market had cost taxpayers $209m,” the authors wrote. “The three greatest concerns for Australia in the recent draft include provisions that would further entrench secondary patenting and evergreening, lock in extensions to patent terms, and extend monopoly rights over clinical trial data for certain medicines.”

Bubble, anyone?

• Apple Now Twice As Big As World’s 2nd-Largest Company, ExxonMobil (Telegraph)

Apple is now twice as big as the world’s second-largest listed company, oil giant ExxonMobil. Shares in the iPhone maker jumped 2.7pc on Monday to close at $133, giving the company a market value of more than $774bn (£500bn). ExxonMobil saw its stock fall 1pc to $89.01, valuing the US group at just under $377bn, as the 50pc collapse in oil prices since last June continues to weigh on the company. Apple’s shares have risen 21.7pc so far this year as the company prepares to follow-up the hugely successful release of the iPhone 6 in September with its first smartwatch. Apple has reportedly asked its Asian suppliers to manufacture more than 5m Apple Watches ahead of its April retail date

Strong sales of the larger-screened iPhones resulted in the biggest ever quarterly profit reported by a company, with device sales rising 29.5pc in the final three months of 2014 to $74.6bn, driving net income up from $13.1bn to $18bn in the quarter. Those results helped Apple become the world’s first $700bn company on February 10. Tim Cook, Apple’s chief executive, said at a conference earlier this month that he was confident that the company would continue to grow at a rapid pace. “We don’t believe in such laws as laws of large numbers. This is sort of an old dogma that was cooked up by somebody,” he said.

“Steve [Jobs, the co-founder of Apple and former chief executive] did a lot of things for us over many years but one of the things he ingrained in us is that putting limits on your thinking is never good.” Analysts said the company would continue to grow from strength to strength. “Given Apple’s powerful iPhone cycle, a big 4G ramp in China and the upcoming launch of Apple Watch in April, we believe there is still plenty to look forward to during this transformational cycle,” said Brian White, an analyst at Cantor Fitzgerald.

Bubble squared?!

• The Performance of Many Hedge Funds Just Comes Down to Owning Apple (Bloomberg)

In an equity environment where hedge funds are struggling to break even, Apple Inc. has played the role of savior, according to Goldman Sachs. A group of companies representing the most popular long positions for hedge funds is up just 0.2% in 2015, compared to a 2.3% gain for the Standard & Poor’s 500 Index, data compiled by Goldman Sachs show. A 19% year-to-date increase for Apple, which is owned by one in every five hedge funds and is a top-10 position for 12% of them, has provided a needed boost, the firm said. Apple came into 2015 poised to have a major impact on money managers, comprising the highest %age of hedge fund equity assets in more than two years, according to Goldman Sachs data. The technology titan constitutes 4% of an S&P 500 that’s hovering near an all-time high.

“Apple reigns undisputed as the most popular hedge fund stock,” a group of Goldman Sachs analysts including chief U.S. equity strategist David Kostin wrote in a Feb. 20 client note. The company is a “key driver of hedge fund performance, as well as U.S. equity earnings growth and returns,” they said. Goldman Sachs maintains a basket containing the 50 stocks that appear most often among the top 10 holdings of fundamentally-driven hedge fund portfolios. For its most recent report, the firm analyzed 854 hedge funds with $2.1 trillion of gross equity positions at the start of 2015. Apple is forecast to climb about 2% in the next 12 months, according to 44 analysts surveyed by Bloomberg. Goldman Sachs is more bullish, predicting a 9.7% rise to $145 per share.

Hedge fund holdings of Apple remained resilient in the fourth quarter even as some large money managers pared exposure to equities, particularly for U.S. companies. Greenlight Capital’s David Einhorn said he scaled back bets on stock gains during the fourth quarter after markets climbed and as a stronger dollar threatens to limit earnings of U.S. companies from operations overseas. David Tepper’s Appaloosa Management had $2.74 billion less in U.S. stocks in the fourth quarter, a 40% drop from the previous quarter. Soros Fund Management, the family office of billionaire hedge fund manager George Soros, moved about $2 billion into companies in Asia and Europe, according to a person familiar with the strategy.

“Few people grok that Greece is an entity with an economy not much bigger than North Carolina’s”

• How Goes the War? (Jim Kunstler)

Oh, you didn’t notice that World War Three is underway, actually has been for more than year? Well, that’s because most of it has been taking place in the banking sector, which for most people is just an alternative universe of math. The catch, which many people either miss or don’t care about, is that the math doesn’t add up. For instance, the runaway choo-choo train of linked European sovereign bond obligations with its overloaded caboose of interest rate swaps and other janky derivatives of mass destruction. That train left the station in Athens a few weeks ago bound for Frankfurt. Ever since, the German government and its cohorts in the EU, the ECB, and the IMF have been issuing reassurances that the choo choo train will not blow up when it reaches its destination.

Few people grok that Greece is an entity with an economy not much bigger than North Carolina’s, yet it is burdened with roughly $350 billion of old debt that will never be paid back. The only thing at issue is how it will not be paid back, that is, what mode of pretense will be employed to disguise the inability to pay back this debt. The mode du jour has been the crude one of lending Greece more money to pay back the interest on the old debt. A seven-year-old ought to be able to understand where that leads. It’s kind of up to the Greeks this week to possibly opt out of that farcical deal. They have at least two other present options: return to being a sunwashed semi-medieval backwater of olive farmers, shepherds, and inn-keepers, or perhaps lease out some cozy corner of their vast Mediterranean coastline to the Russian navy for enough annual walking-around money to keep the lights on for the aforementioned farmers, shepherds, and inn-keepers.

Of course, that would drive the US and its NATO quislings batshit crazy. We’ve already got our knickers in a twist over Ukraine, a so-called nation whose highest and best purpose over the millennia has been as a sort of lethal doormat in front of Russia, leaving adventurers like Napoleon and Hitler bleeding in the snow as they crawled back to their nations of origin. In short, Ukraine has worked so well for Russia that we must be insane to imagine that it would give up that traditional relationship. Yet the US and NATO persist in their foolishness and attempt to back up their Kievan intrigues with financial “sanctions” against Russia.

Who else is interested in peace?

• Putin Says War With Ukraine ‘Unlikely’ (BBC)

The Russian president, Vladimir Putin, has said war with neighbouring Ukraine is “unlikely”, in an interview for Russian television. Mr Putin also stressed his support for the Minsk agreement as the best way to stabilise eastern Ukraine. Ukraine has said there is clear evidence Russia is helping the rebels in the east, something Russia denies. Earlier, Ukraine’s military said rebel shelling had prevented them withdrawing heavy weapons from the front line.

In his interview, Mr Putin was asked if there was a real threat of war, given the situation in eastern Ukraine. “I think that such an apocalyptic scenario is unlikely and I hope this will never happen,” he said. Mr Putin said that if the Minsk agreement was implemented, eastern Ukraine would “gradually stabilise”. “Europe is just as interested in that as Russia. No-one wants conflict on the edge of Europe, especially armed conflict,” he said.

They’d be fine if only reality would vanish.

• Tales From an Oil-Sands Slide: Angst Amid Bravado in Alberta (Bloomberg)

The pain of crude’s collapse is beginning to bite in Alberta, from the oil-sands boomtown of Fort McMurray to the corporate boardrooms of Calgary. As the C$340-billion ($270 billion) petro-economy confronts an oil market meltdown, a decade-long investment spree is being reversed, layoffs and spending cuts are in full swing at companies such as Suncor Energy, and everyone from oil drillers to real estate agents is feeling the pinch. In Fort McMurray, where the oil is so near the surface it oozes out of the ground in places and coats people’s boots, the mayor is reconsidering city projects. In Calgary, which boasted Canada’s biggest concentration of millionaires and one of the hottest real-estate markets, realtors just had their worst two months on record. The Bank of Canada has cut interest rates in an effort to limit the damage from spreading to the rest of economy.

Yet, even in the midst of the price swoon, many executives and workers remain confident the oil-sands industry –which has endured deep cyclical downturns before and was built on long-term investments to operate at high costs – will pull through. Here are their stories. Terence Stewart sits at home as the rain falls in Nanaimo, British Columbia, waiting for the phone to ring. A month ago, the engineering designer was making blueprints for holding tanks and scaffolding at Cenovus Energy Inc.’s oil-sands project in Narrows Lake, 1,700 kilometers (1,050 miles) away. With the 54 percent drop in the price of oil since June, Cenovus scaled back plans to develop the 130,000 barrel-a-day project – and with it Stewart’s job. Last week, the producer announced the first layoff in its history, dismissing 800 people and freezing wages.

With a decade of work experience in the oil sands, Stewart, 59, is looking a job closer to home to “tide him over” until the petroleum industry improves. He hopes liquefied natural gas projects being proposed by companies like Royal Dutch Shell Plc along the Pacific coast will get the green light and provide him with a job in the coming year. So far, none of the proponents has committed to any investment. “It is a very volatile industry,” he said. For now, he’s counting on finding work locally at one of the small manufacturers in Nanaimo or Vancouver, though he won’t be immune to the lure of oil-sands jobs that pay as much as C$100 an hour when times are good. “You do get paid very well in the oil and gas field,” he says. “But you do have to plan for a rainy day.”

Who needs a brain when you have shale?

• European Shale Dream Is Dying Before It Started (CNBC)

Oil and gas giant Chevron is giving up on its shale gas plans for Romania, marking the end of its European efforts for the resource. And it’s not alone in scrapping European plans. The California-based company said that the fracking project does not make economic sense at this time, so it is relinquishing its concessions in the country. Less than a month earlier, Chevron pulled out of shale gas exploration in Poland, citing similar reasoning. “Chevron intends to pursue relinquishment of its interest in these (Romanian) concessions in 2015,” the company’s Kent Robertson said. “This is a business decision which is a result of Chevron’s overall assessment that this project in Romania does not currently compete (favorably) with other investment opportunities in our global portfolio.”

Chevron wholly owned and operated the 1.6 million-acre Barlad Shale concession in northeast Romania, and three concessions covering 670,000 acres in the country’s southeast, according to the company’s website. The development marks a major blow for the European shale industry. Many European officials have designated energy development as a top priority, but popular backlash and a series of disappointing exploration results have stunted these hopes. In fact, Romanian Prime Minister Victor Ponta indicated last year that oil companies could be on something of a fool’s errand in his country.

“It looks like we don’t have shale gas, we fought very hard for something that we do not have,” Ponta told television channel Antena 3, according to Reuters. “I cannot tell you more than this, but I don’t think we fought for something that existed.”
A 2013 report from the U.S. Energy Information Administration projected that Romania held the fifth-largest unproved wet shale gas estimated reserves in Europe (trailing Russia, Poland, France and Ukraine).

A BIG SURPRISE.

• Work Of Prominent Climate Change Denier Funded By Energy Industry (Guardian)

A prominent academic and climate change denier’s work was funded almost entirely by the energy industry, receiving more than $1.2m from companies, lobby groups and oil billionaires over more than a decade, newly released documents show. Over the last 14 years Willie Soon, a researcher at the Harvard-Smithsonian Centre for Astrophysics, received a total of $1.25m from Exxon Mobil, Southern Company, the American Petroleum Institute (API) and a foundation run by the ultra-conservative Koch brothers, the documents obtained by Greenpeace through freedom of information filings show. According to the documents, the biggest single funder was Southern Company, one of the country’s biggest electricity providers that relies heavily on coal. The documents draw new attention to the industry’s efforts to block action against climate change – including President Barack Obama’s power-plant rules.

Unlike the vast majority of scientists, Soon does not accept that rising greenhouse gas emissions since the industrial age are causing climate changes. He contends climate change is driven by the sun. In the relatively small universe of climate denial Soon, with his Harvard-Smithsonian credentials, was a sought after commodity. He was cited admiringly by Senator James Inhofe, the Oklahoma Republican who famously called global warming a hoax. He was called to testify when Republicans in the Kansas state legislature tried to block measures promoting wind and solar power. The Heartland Institute, a hub of climate denial, gave Soon a courage award. Soon did not enjoy such recognition from the scientific community. There were no grants from Nasa, the National Science Foundation or the other institutions which were funding his colleagues at the Center for Astrophysics.

According to the documents, his work was funded almost entirely by the fossil fuel lobby. “The question here is really: ‘What did API, ExxonMobil, Southern Company and Charles Koch see in Willie Soon? What did they get for $1m-plus,” said Kert Davies, a former Greenpeace researcher who filed the original freedom of information requests. Greenpeace and the Climate Investigations Center, of which Davies is the founder, shared the documents with news organisations. “Did they simply hope he was on to research that would disprove the consensus? Or was it too enticing to be able to basically buy the nameplate Harvard-Smithsonian?”

Count your blessings.

• UK Will Need To Import Over Half Of Its Food Within A Generation (Guardian)

More than half of the UK’s food will come from overseas within a generation, as a rising population and stalling farm productivity combine to erode what remains of the UK’s self-sufficiency, according to farming leaders. The UK’s failure to produce more food will leave households more vulnerable to volatile prices and potential shortages, the National Farmers’ Union will say at its annual conference on Tuesday. The farming body will call on politicians to encourage new investment in farming, and develop a national plan for a higher degree of food self-sufficiency. Meurig Raymond, president of the NFU, warned: “The stark choice for the next government is whether to trust the nation’s food security to volatile world markets or to back British farming and reverse the worrying trend in food production. I want to see a robust plan for increasing the productive potential of farming, stimulating investment and ensuring that the drive to increase British food production is at the heart of every government department.”

The NFU cited “poorly crafted regulation”, including EU and UK policies that have “over-emphasised environmental rather than production outcomes and complicated the busienss of farming”, and farmers having weak bargaining power with big retailers as key problems affecting agriculture. Farmers meeting in Birmingham are expected to demand more attention from politicians ahead of the general election, when rural votes could play an important role in deciding the make-up of the next government. The Conservatives dominate in rural areas, but many key Liberal Democrat constituencies have a farming base. Farming production is worth about £26bn a year, while the broader food industry accounts for about £103bn to the UK economy, more than the car and aerospace industries combined, and represents about 3.5m jobs.

According to projections by the NFU, on current trends the UK will reach a tipping point in about 25 years, beyond which a majority of our food will have to be imported, unless governments take strong action to improve food production and protect consumers from a future of relying on food bought from abroad. Self-sufficiency in food in the UK has been eroded since the 1980s: about 60% of food currently consumed here is grown here, down from nearly 80% in the mid 1980s, even though more varieties of food previously thought exotic are now grown in the UK. The problems created for British farmers when cheap imports flood the UK’s market have been illustrated in recent weeks. A glut of dairy products on international markets has sent prices to farmers plummeting, driving thousands out of business and threatening a future in which the UK has to import its fresh milk.