Tillerson Archives - The Automatic Earth

Swelling government debt levels are shaping up to be the biggest economic challenge for President Donald Trump, a problem that could spill into the stock market. This week’s Treasury Department announcement that it would have to increase the amount of bond auctions over the next three months was a low-key reminder that the government IOU is only getting bigger and will start influencing interest rates sooner rather than later. As more product comes to market, investors could be expected to demand higher yields to snap up all the supply. And those higher yields mean higher costs at a time when taxpayers already have shelled out nearly half a trillion dollars this year in debt service.

Put it all together and it raises questions about how long the spurt in economic growth will continue, what will happen the next time the economy falls into recession and what impact it all will have on financial markets. “We’re applauding strong growth — yet have no choice but to borrow the largest amount of money since the financial crisis a decade ago,” Bernard Baumohl, chief global economist at The Economic Outlook Group, said in a note. “And that’s just the start, the US will [be] running trillion dollar deficits as far as the eye can see.” The total U.S. debt just passed the $21.3 trillion mark, of which $15.6 trillion is owed by the public.

The Treasury announced Wednesday that it will be adding $1 billion each to auctions of 2-, 3- and 5-year debt over the next three months, and $1 billion each for 7- and 10-year note and 30-year bond auctions in August. In addition, the department is issuing a new two-month note to help assure liquidity in the fixed income market. The changes will add $30 billion to the debt issuance for the quarter. On the overall, the Treasury said it expects to borrow $769 billion in the second half of the year, a projected 63% increase from 2017.

So much for Apple then.

• The First Company To Reach $1 Trillion In Market Value Was In China (CNBC)

Before Apple hit $1 trillion in market value Thursday, there was Chinese oil giant PetroChina, which reached the milestone more than a decade ago. It did not fare too well after that. PetroChina’s market cap hit $1 trillion in 2007 following a successful debut on the Shanghai Stock Exchange on Nov. 5 of that year. The company’s Shanghai-listed shares nearly tripled at the open that day, with its Hong Kong-listed shares following them higher. (It had debuted on the Hong Kong exchange years earlier.) The rise gave the company a market cap of $1.1 trillion on both the Shanghai and Hong Kong exchanges.

According to Reuters, PetroChina’s opening price in Shanghai valued the company at 60 times analysts’ forecasts for its 2007 earnings per share, above the global average of 18 times for oil companys at the time. It was all downhill from there, however. PetroChina’s market value plummeted to less than $260 billion by the end of 2008, representing the largest destruction of shareholder wealth in world history, according to Bloomberg. Blame the financial crisis and a collapse in oil prices. When PetroChina made its debut in 2007 brent crude prices were at one point, above $140 a barrel. Today they are about half that.

This piece cites PetroChina, but says not enough shares were outstanding. But Apple’s outstanding shares shrank a lot as well, because of buybacks.

• Apple Becomes World’s First Trillion-Dollar Company (G.)

Apple became the world’s first trillion-dollar public company on Thursday, as a rise in its share price pushed it past the landmark valuation. The iMac to iPhone company, co-founded to sell personal computers by the late Steve Jobs in 1976, reached the historic milestone as its shares hit $207.05, the day after it posted strong financial results. Apple’s share price has grown 2,000% since Tim Cook replaced Jobs as chief executive in 2011. The company hit a $1tn market capitalisation 42 years after Apple was founded and 117 years after US Steel became the first company to be valued at $1bn in 1901. It means Apple’s stock market value is more than a third the size of the UK economy and larger than the economies of Turkey and Switzerland.

While energy company PetroChina was cited as the world’s first trillion-dollar company after its 2007 flotation, the valuation is considered unreliable because only 2% of the company was released for public trading. Saudi Arabia’s national oil company Saudi Aramco could be worth up to $2tn upon its planned stock market float but the value is yet to be tested. This week’s rise in Apple’s share price was powered by quarterly financial results released on Tuesday that were better than Wall Street had expected. The tech giant racked up profits of $11.5bn in three months on the back of record sales that hit $53.3bn, pushing shares of the iPhone giant higher and easing the value of the company up from $935bn towards $1tn (£770bn).

Ryan Cooper focuses on lower wages as a result of buybacks. I would go for the death of price discovery. Apple may be ‘worth’ one trillion, but it has a $100 billion buybacks war chest. That’s 10%. So what is it really worth.

• Ban Share Buybacks (Week)

American corporations are simply raking in profits. Some are so bloated and cash-rich they literally can’t figure out what to do with it all. Apple, for instance, is sitting on nearly a quarter of a trillion dollars — and that’s down a bit from earlier this year. Microsoft and Google, meanwhile, were sitting on “only” $132 billion and $63 billion respectively (as of March this year). However, American corporations in general are taking those profits and kicking them out to shareholders, mainly in the form of share buybacks. These are when a corporation uses profits, cash, or borrowed money to buy its own stock, thus increasing its price and the wealth of its shareholders. (Big Tech is doing this as well, just not fast enough to draw down their dragon hoards.)

As a new joint report from the Roosevelt Institute and the National Employment Law Project by Katy Milani and Irene Tung shows, from 2015 to 2017 corporations spent nearly 60% of their net profits on buybacks. This practice should be banned immediately, as it was before the Reagan administration. The most immediately objectionable consequence of share buybacks is they come at the expense of wages. Milani and Tung calculate that if buybacks spending had been funneled into wage increases, McDonald’s employees could get a raise of $4,000; those at Starbucks could get $8,000; and those at Lowes, Home Depot, and CVS could get an eye-popping $18,000.

Some economists are skeptical of this reasoning, arguing that wages are set according to labor market conditions. But if you set aside free market dogmatism, it is beyond obvious that this sort of behavior is coming at workers’ expense. Wall Street bloodsuckers are not at all subtle about it, screaming bloody murder and tanking stocks every time a public company proposes paying workers instead of shareholders. Indeed, it provides a highly convincing explanation for something that has been puzzling analysts for months: the situation of wages continuing to stagnate or decline while unemployment is at 4%. The answer is that wages are low in large part because the American corporate structure has been rigged in favor of shareholders and executives.

And Tesla was up 16% yesterday?!

• Where Are the 17,000 Model 3 Cars Tesla “Produced” But Didn’t “Deliver”? (WS)

Tesla never ceases to astound with its hype and promises and with its results that are just mindboggling, including today when it reported its Q2 “earnings” – meaning a net loss of $718 million, its largest net loss ever in its loss-drenched history spanning over a decade. It was more than double its record loss a year ago: The small solitary green bump in Q3 2016 wasn’t actually some kind of operational genius that suddenly set in for a brief period. No, Tesla sold $139 million in taxpayer-funded pollution credits to other companies, which allowed it to show a profit of $22 million. Tesla adheres strictly to a business model that is much appreciated by the stock market: The more it sells, the more money it loses.

Total revenues – automotive and energy combined – rose 43% year-over-year to $4.0 billion in Q2. This increase in revenues was bought with a 113% surge in net losses. When losses surge over twice as fast as revenues, it’s not the light at the end of the tunnel you’re seeing. In between the lines of its earnings report, Tesla also confirmed the veracity of the many videos and pictures circulating on the internet that show huge parking lots filled with thousands of brand-new, Model 3 vehicles, unsold, undelivered, perhaps unfinished, waiting for some sort of miracle, perhaps needing more work, more parts, or additional testing before they can be sold, if they can be sold.

But these thousands of vehicles were nevertheless “factory gated,” as Tesla said, to hit the 5,000 a week production goal. And so they’re unfinished and cannot be delivered but are outside the factory gate, and Tesla didn’t totally lie about its “production” numbers. Now it put a number on these “produced” but undelivered vehicles: 12,571 in Q2 on top of the 4,497 in Q1, for a total of 17,000 vehicles sitting in parking lots.

Wealth transfer.

• Middle-Class Americans Still Haven’t Recovered From Housing Bust (MW)

A new study by the Opportunity and Growth Institute at the Minneapolis Fed found that the housing boom and bust made middle-class Americans poorer but boosted wealth for the richest 10%, widening the income and wealth gap substantially. Authors of the paper examined the relationship between incomes and asset prices over the past 70 years, concluding that rising and falling housing and stock markets have been the main drivers of wealth inequality. In the simplest model, the authors wrote, how fast wealth accumulates should be a function of how fast incomes rise. But incomes played only a minor role in wealth distributions in postwar America. Instead, wealth accumulation for most Americans was driven by booming home prices over the past several decade until 2007.

[..] ..real incomes of middle-class Americans rose by a third between 1970 and 2007, or less than 1% a year, while incomes of the bottom half have been largely stagnant since about 1970. Incomes for the top 10%, meanwhile, have doubled over the same period. Incomes for the bottom 90% have stagnant over the past 10 years. On the wealth distribution side, however, the poor became poorer, while the rich became richer after the financial crisis. Up until 2007, middle class Americans saw their wealth increase at the same rate as their wealthy counterparts, rising 140% over 40 years. Incomes for households in the bottom half doubled from 1971 until 2007—all thanks to booming house prices.

Perspective: “Chinese stocks were worth $6.09 trillion, compared with $6.17 trillion in Japan. The US market is worth $31 trillion.”

• China Loses Spot As World’s No. 2 Stock Market to Japan (AFP)

China’s stock market has been overtaken as the world’s second-biggest by Japan’s, having been swiped this year by the threat of a trade war with the United States and slowing economic growth. Data from Bloomberg News in intra-day trade on Friday showed the value of equities on the mainland had slipped behind those in their neighbouring country for the first time since taking the number-two spot in 2014. The figures showed Chinese stocks were worth $6.09 trillion, compared with $6.17 trillion in Japan. The US market is worth $31 trillion. While global markets have been broadly hit by fears of a trade war between the world’s top two economies, Chinese equities are among the worst performers this year, with the benchmark Shanghai Composite Index slumping more than 16% since the start of January.

The pressure was ratcheted up this week when the White House said it was considering more than doubling threatened tariffs on a range of Chinese imports worth $200 billion. Washington has already imposed tariffs on $34 billion worth of goods and is considering hitting another $16 billion in the coming weeks. “Losing the ranking to Japan is the damage caused by the trade war,” Banny Lam, head of research at CEB International Investment in Hong Kong, told Bloomberg News. “The Japan equity gauge is relatively more stable around the current level but China’s market cap has slumped from its peak this year.”

But what really happened? Julian Assange knows. Kim Dotcom knows.

• Judge Rejects Suit Against Fox News Brought By Parents Of Seth Rich (NBC)

A New York judge has rejected a lawsuit brought against Fox News by the parents of a Democratic National Committee employee killed in 2016. In a ruling Thursday, U.S. District Judge George Daniels said he understood Joel and Mary Rich might feel that the tragic death of their son was exploited for political purposes, but that the lawsuit lacked specific instances of wrongdoing necessary to proceed to trial. In the March lawsuit, the parents said that Fox News turned the death of their son, Seth Rich, into a “political football” by claiming he had leaked DNC emails to Wikileaks during the presidential campaign. The 27-year-old Rich was killed in what Washington police believe was a random robbery attempt. The judge also dismissed a related suit by a private investigator.

Nice twist.

• Saudi Arabia Planned To Invade Qatar Last Summer. Tillerson Intervened (IC)

Thirteen hours before Secretary of State Rex Tillerson learned from the presidential Twitter feed that he was being fired, he did something that President Donald Trump had been unwilling to do. Following a phone call with his British counterpart, Tillerson condemned a deadly nerve agent attack in the U.K., saying that he had “full confidence in the U.K.’s investigation and its assessment that Russia was likely responsible.” White House Press Secretary Sarah Sanders had called the attack “reckless, indiscriminate, and irresponsible,” but stopped short of blaming Russia, leading numerous media outlets to speculate that Tillerson was fired for criticizing Russia.

But in the months that followed his departure, press reports strongly suggested that the countries lobbying hardest for Tillerson’s removal were Saudi Arabia and the United Arab Emirates, both of which were frustrated by Tillerson’s attempts to mediate and end their blockade of Qatar. One report in the New York Times even suggested that the UAE ambassador to Washington knew that Tillerson would be forced out three months before he was fired in March. The Intercept has learned of a previously unreported episode that stoked the UAE and Saudi Arabia’s anger at Tillerson and that may have played a key role in his removal. In the summer of 2017, several months before the Gulf allies started pushing for his ouster, Tillerson intervened to stop a secret Saudi-led, UAE-backed plan to invade and essentially conquer Qatar, according to one current member of the U.S. intelligence community and two former State Department officials, all of whom declined to be named, citing the sensitivity of the matter.

A nation that refuses to feed its children.

• Food Banks Appeal For Donations To Feed Children During School Holidays (G.)

Calls have been made for the public to donate to their local food bank during the summer holidays owing to increasing demand from families who rely on free school meals during term time. The Trussell Trust, an anti-poverty charity, said an increase in food bank use over the summer was driven by a rise in demand by children, as it released figures from its network of more than 420 food banks across the country. While the number of adults seeking supplies from food banks during the summer months decreased in 2017, the number of children needing support shot up. During July and August 2017, food banks provided more than 204,525 three-day emergency supplies, 74,011 of which went to children. In the preceding two months, 70,510 supplies went to children. The number of adults seeking help from food banks fell from 131,521 in May and June to 130,514 in July and August.

“..a billionaire’s flat in Knightsbridge costs just £1,421 a year, while a shop on the floor below can pay £244,000 in business rates.”

• Britain Heading Back To Pre-Victorian Days (G.)

Is Northamptonshire Britain’s first banana republic? This once lovely county, much of it now a waste of wind turbines and warehouses, is close to bankruptcy. It must sack staff, freeze pay, close two-thirds of its libraries and stop all bus subsidies. It faces default on its statutory duty to public health, children in care and the elderly. While much of this is due to mismanagement, the National Audit Office says that 15 other counties, believed to include Somerset and Surrey, are in similar straits. Years of austerity are coming home to roost – and where least expected, among the rich shires. What is going on? Local councils cannot do what central government can do, which is tax and borrow to meet need.

Each year Whitehall spends more. It can tip money into the NHS and triple-lock pensions – good causes both – as well as vanity projects such as aircraft carriers, high-speed trains and nuclear power stations. Councils have no such discretion. Since 2010 their spending has shrunk by over a third, with central government grants slashed by as much as NHS spending has risen. 95% of British taxation is controlled by the centre, against 60% in France and 50% in the US. Yet local spending must pick up the casualties of the welfare state – vulnerable children, elderly and infirm people. It must fund the day centres, youth clubs, care homes and visits to problem families. To do so, services that most modern communities expect from government must now be butchered, such as parks, libraries and museums.

Local, not national, austerity is sending Britain back to pre-Victorian days. The solution is swift and easy. The government should uncap local taxes, free local spending, and allow local people to pay for what they want. It was how local government ran, perfectly well, up to the early 1980s. In most other countries it is still regarded as a normal feature of democracy. At present Britain’s meagre local revenue derives from a regressive household tax fixed on 1991 property valuations, which no government (except in Wales) has had the guts to revalue. Thus a billionaire’s flat in Knightsbridge costs just £1,421 a year, while a shop on the floor below can pay £244,000 in business rates. It is no surprise that the former goes to the council, and much of the latter is paid to central government.

Debt Rattle March 14 2018

Mar 142018

March 14, 2018 Posted by Raúl Ilargi Meijer at 11:03 am Finance Tagged with: black holes, broke, false flag, Haspel, May, Pompeo, Putin, refugees, retirement, Stephen Hawking, Tillerson, Trump 23 Responses »

Vincent van Gogh Sprig of Flowering Almond in a Glass 1888

• One Of The Greatest Minds Ever To Live Dies Age 76 (Ind.)

• Trump Unmasked 68 Years Of Washington Duplicity (Stockman)

• What Secretary of State Tillerson’s Firing Means (Paul Craig Roberts)

• New CIA Director Gina Haspel Once Ran A Torture Site (Qz)

• Theresa May Plans For ‘Economic War’ With Vladimir Putin And His Allies (Ind.)

• False Flags for Newbies (Dmitry Orlov)

• Google To Ban All Cryptocurrency-Related Advertising (CNBC)

• The Retirement Crisis: The Elderly Are Broke (GT)

• More Than 500 Refugees, Migrants Reach Greek Islands In Four Days (K.)

Bit of a hyperbole headline perhaps (how would you know), but certainly unequalled in our times. I think Hawking greatest achievement was that once people had accepted his ‘initial’ groundbreaking theories on black holes (nothing can escape, event horizons etc.), he turned around and said they were not true: matter does escape from them after all: Hawking radiation.

• One Of The Greatest Minds Ever To Live Dies Age 76 (Ind.)

He once said, ‘It would not be much of a universe if it wasn’t home to the people you love.’ We will miss him forever.” Professor Hawking explored both the very smallest and very largest parts of the universe: testing the limits of human understanding across time and space space, and peering into the sub-molecular world of quantum theory. Sir Tim Berners-Lee, founder of the world wide web, was one of the first to respond to news of his death, saying on Twitter: “We have lost a colossal mind and a wonderful spirit”. Professor Hawking shot to international fame after the 1988 publication of A Brief History of Time, one of the most complex books ever to achieve mass appeal, which stayed on the Sunday Times best-sellers list for 237 weeks.

Over the years, he would also embrace areas of popular culture appearing in both The Simpsons and hit US science comedy The Big Bang Theory. His work ranged from the origins of the universe itself, through the possibility of time travel to the mysteries of space’s all-consuming black holes. His most famous theoretical breakthrough was the idea that black holes are not really black, but can produce thermal radiation and potentially “evaporate”. Scientists refer to such potential emanations as “Hawking radiation.” “My goal is simple,” Professor Hawking once said. “It is complete understanding of the universe, why it is as it is and why it exists at all.”

With Roger Penrose, Professor Hawking showed that Albert Einstein’s theory of relativity implies space and time would have a beginning in the Big Bang and an end in black holes. He spent much of his career trying to find a way to reconcile Einstein’s theory with quantum physics and produce a “Theory of Everything.” Professor Hawking said he wrote A Brief History of Time to convey as clearly as he could the topics that excited him. “My original aim was to write a book that would sell on airport bookstalls,” he told reporters at the time. “In order to make sure it was understandable I tried the book out on my nurses. I think they understood most of it.”

Not a general view.

• Trump Unmasked 68 Years Of Washington Duplicity (Stockman)

[..] the Korean peninsula never had anything to do with American security. Its partition was an accident in the final days of WWII; the 1950-1953 war was utterly pointless and unnecessary; and the prolonged US occupation of the southern half of the peninsula was at once a provocation, a massive waste of treasure and a prime example of what imperial rulers do once bivouacked astride a global empire. That is, like Imperial Rome, they puff themselves up with self-importance and busy-body rule for its own sake. So doing, they invent self-serving rationalizations for hegemony, such as the insidious “indispensable nation” conceit—even as they extract the taxes and issue the mountains of debt required to fund the endless fiscal needs of the state’s machinery of war and foreign domination.

Indeed, Washington has long ago forgotten how its global empire came about or why the Korean frontier has remained a vestigial Maginot Line – long after the “enemies” it was designed to contain disappeared from the pages of history. We are referring, or course, to the Soviet Empire, which is no more; and the Red China Menace, which has morphed into a colossal Red Ponzi scheme of debt, malinvestment and speculative building madness that is a danger mostly to the 1.3 billion Chinese caught up in history’s craziest economic freak show. So whether by inadvertence or blind impulse, the Donald has now opened the door to sweeping away six decades of Washington duplicity and double-speak.

The fact is, the Korean problem is not complicated or some kind of imponderable riddle that baffles even the so-called “experts”.To the contrary, both a visiting Martian and an attentive reader of history not enthrall to the groupthink of Imperial Washington can see that the key to “de-nuclearizing” Korea is to demilitarize it and de-internationalize it at the same time. That is, if Washington ever wishes to de-escalate its current dangerous nuclear brinksmanship with the Fat Boy Of Pyongyang, it needs to get its 29,000 troops off the peninsula and end the constant war games and practice invasions of the North Korea; and to also tear up the Washington imposed mutual security agreements, and let the two halves of the “Hermit Kingdom” restore their own version of the pre-1945 status quo ante.

[..] since 2002 South Korea’s economy has grown every eight months by more than the entire current GDP of North Korea. But that doesn’t change the reality on the ground and the overwhelming case to permit Korea to be run by the Koreans under whatever state arrangements they can agree to. That was the exact aim of the South Korean governments after the Cold War ended when they pursued “sunshine policy” rapprochement with the North. That is, until it was shutdown by George Bush’s neocon hatchet men.

The choice for Tillerson was never a good one. But with adding Pompeo, Haspel and next up John Bolton, Trump’s own picks are a bigger threat to him than Robert Mueller ever could be.

• What Secretary of State Tillerson’s Firing Means (Paul Craig Roberts)

The firing of Secretary of State Tillerson, the movement of CIA Director Pompeo to Secretary of State, and the promotion of Gina Haspel, who oversaw the secret CIA torture prisons in Thailand, indicate that the military/security complex has closed its grip on the Trump regime. There will be no more talk of normalizing relations with Russia. The combination of the Israel Lobby, the neoconservatives, and the military/security complex have proven to be too powerful for peace to be established between the two nuclear powers. If you look at Trump’s administration, the above three forces are those in charge. Israel remains determined to use the US military to destabilize Syria and Iran in order to isolate Hezbollah and cut off the milita’s support and supplies.

The neoconservatives both support Israel’s interest and their own desire for Washington’s hegemony over the world. The military/security complex intends to hold on to the “Russia threat” as a justification of its budget and power. The presstitutes are in complete harmony with the scheme. Although Russiagate has been proven to be false charges orchestrated by the DNC, FBI, and CIA, the presstitutes continue to repeat the charges as if evidence exists that proves the charges to be true. The “stolen election” is fiction turned into fact. And now we have a new charge, that Putin ordered a former British spy in England to be eliminated while sitting on a park bench with the use of a highly unlikely form of military poison.

The charge is preposterous, but that is not preventing the fiction from becoming fact. Having served in Washington for a quarter century and having known members of the British government, I do not believe that any of them believe the Russiagate and Skripal poisoning stories. What is happening is that an agenda has taken precedence over truth. This is an extremely dangerous agenda. Russia’s new weapons easily give Russia military superiority over the US. As China and Iran see the situation similarly to the Russians, the US is greatly out-classed.

Yet, Washington and its vassals persist in making violent and false charges and threats against Russia, Iran, and on occasion China. Russia, Iran, and China know that these charges are false. Confronting an endless string of false and hostile charges, they prepare for war. The world is being driven to war, which would be nuclear, by a tiny minority: Israeli Zionists, neoconservatives, and the US military/security complex. We are witnessing the most reckless and irresponsible behavior in world history. Where are the voices against it?

She should be held in one of those sites.

• New CIA Director Gina Haspel Once Ran A Torture Site (Qz)

As CIA director Mike Pompeo moves to become the United States’ secretary of state, deputy director Gina Haspel has been nominated to lead the agency. If confirmed by the Senate, she will become the first woman to run the CIA. Haspel’s nomination will be controversial; she played a leading role (paywall) in running a US torture site abroad and later destroyed the evidence of it. In 2002, she oversaw a secret prison in Thailand that tortured two terrorism suspects. That torture took place within the CIA’s “extraordinary rendition” program, in which suspected terrorists are sent to US allies, and interrogated in “black sites” on their soil. One of the men, known as Abu Zubayda, was waterboarded 83 times in one month and was slammed into walls by the head.

He was deprived of sleep and kept in a coffin-like box. Interrogators later decided he didn’t have any useful information. ProPublica found that Haspel personally signed cables to CIA headquarters that detailed Zubayda’s interrogation. CIA videos of the torture were destroyed in 2005, on the orders of a cable drafted by Haspel. Her then-boss Jose Rodriguez, the CIA’s director of operations for counterterrorism, signed off on the order. “The cable left nothing to chance. It even told them how to get rid of the tapes,” he wrote in his memoir, according to ProPublica. “They were to use an industrial-strength shredder to do the deed.” The European Center for Constitutional and Human Rights, a Berlin-based NGO, has been pushing Germany’s public prosecutor to arrest Haspel for her role in the torture program.

You can’t pull this stuff without proof. But note how she gets support from all over, countries, media. Like the US does when it invades yet another nation.

• Theresa May Plans For ‘Economic War’ With Vladimir Putin And His Allies (Ind.)

Theresa May is drawing up plans for an “economic war” with Vladimir Putin and his allies after Moscow refused to explain how a deadly Russian nerve agent came to be used in a rural British city. The Independent understands the ground is already being prepared for economic measures such as asset freezes and seizures, alongside visa bans against Russian individuals. Ms May is also understood to be considering expelling diplomats and pushing for joint international action with allies. The Prime Minister is set to meet her National Security Council on Wednesday to finalise her approach which is then likely be announced to the House of Commons in the afternoon.

Action came a step closer after the Russian Foreign Minister said his country would not cooperate with the British investigation into the poisoning of ex-spy Sergei Skripal and his daughter Yulia in Salisbury on 4 March. But Britain’s allies gave early support to Ms May’s push, with Angela Merkel calling for unified action and Donald Trump saying there must be “consequences” for those responsible. [..] A Government minister said: “What happens will be an economic war, these will be economic measures. “Russia’s economy is only half that of the UK, a lot of it concentrated in a few people’s hands. Well, we’ll do our bit to make it smaller if they want to carry on like this. “That doesn’t give us any pleasure at all, but we need the nations of Europe to behave within the rule of law and not like gangsters. The message has to be economic, political and diplomatic.”

“.. the British secret services, in close coordination with the British government and the press, poisoned Skripal and his daughter using a nerve agent obtained from Britain’s military research base at Porton Down..”

• False Flags for Newbies (Dmitry Orlov)

An important key to spotting a false flag is that the “knowledge” of who is to blame becomes available before any evidence is in. For example, in the case of the shooting down of Malaysian Airlines MH-17 over Eastern Ukraine, everyone in the West was convinced that “pro-Russian separatists” were to blame even before the means could be established. To this date, it isn’t understood how they could have done it given the equipment they had at their disposal. In this case, Russia was accused almost immediately, while British FM Boris Johnson was quick to volunteer that Britain should not send its team to the World Cup in Russia this summer, disclosing the real reason behind the assassination attempt.

Is there anything new and different behind this latest provocation? Not really; it seems like a replay of the Litvinenko assassination back in November 2006. The choice of an exotic poison (Polonium 210), the lack of evidence (the British claimed that compelling circumstantial evidence exists but haven’t provided any), and the instantaneous leap to “blame Russia” are all the same. The Russians offered to prosecute whoever is responsible if only the British would provide them with the evidence, but the British have failed to do so.

Giving the British story the benefit of the doubt, let’s see what would compel Russia’s secret services to go after Skripal. In Russia, he was convicted and sentenced for treason, then pardoned and released to the British in a prisoner exchange that included ten Russian spies who had worked in the US, including the rather memorable Anna Chapman. It is a very important rule of the spy business that those released in a spy swap are never acted against; if this rule were violated, the resulting bad faith would make spy swaps impossible to negotiate.

[..] My simple and consistent explanation, expressed in a single sentence, is as follows: Under direction from their colleagues in the US, and closely following a script previously worked out in the Litvinenko case over a decade ago, the British secret services, in close coordination with the British government and the press, poisoned Skripal and his daughter using a nerve agent obtained from Britain’s military research base at Porton Down in order to obtain an excuse to compromise the World Cup games in Russia this summer and also to create a scandal immediately before the Russian presidential election.

Too close to politics.

• Google To Ban All Cryptocurrency-Related Advertising (CNBC)

Google is cracking down on cryptocurrency-related advertising. The company is updating its financial services-related ad policies to ban any advertising about cryptocurrency-related content, including initial coin offerings (ICOs), wallets, and trading advice, Google’s director of sustainable ads, Scott Spencer, told CNBC. That means that even companies with legitimate cryptocurrency offerings won’t be allowed to serve ads through any of Google’s ad products, which place advertising on its own sites as well as third-party websites. This update will go into effect in June 2018, according to a company post.

“We don’t have a crystal ball to know where the future is going to go with cryptocurrencies, but we’ve seen enough consumer harm or potential for consumer harm that it’s an area that we want to approach with extreme caution,” Scott said. Google’s hard-line approach follows a similar ban that Facebook announced earlier this year. While the crypto-currency boom has produced a lot of excitement and wealth, it’s still a largely unregulated space and has spawned countless high-profile scams.

Virginia Fidler has it right, except for this: “The good news is, Millennials are aware of the problem”. Thing is, it makes no difference if they’re aware or not. I’ve said it before: the demise of retirement systems is the no. 1 reason for UBI.

• The Retirement Crisis: The Elderly Are Broke (GT)

42% of Americans are facing their golden years with less than $10,000 in savings. A lack of savings and planning has reduced what should be an enjoyable time in seniors’ lives to a period of stress and worries for many. Out-of-pocket expenses for health care is spiraling. The Bureau of Labor Statistics indicates that Americans 65 years of age and older may spend up to $46,000 annually on healthcare. This is not good news for those with only $10,000 on which to fall back on. For adults over 50, this should be a call to act now, while there is still time. Only one-third of adults in that age group have savings greater than $10,000. Retirement planning needs to become a priority, as there is little time to waste.

Pensions are becoming rarer, and Social Security is becoming less secure than it used to be. Many health needs of seniors are not covered by Medicare. Some experts believe the Social Security system will be depleted by 2030. Adults over the age of 50 need to consider making contributions into 401(k) accounts or similar retirement plans. Social Security was never intended to be the sole income of retiring seniors. It was meant to supplement approximately only 40% of post-retirement spending. Social security was supposed to enhance seniors’ lives, not support it entirely. However, according to Investopedia.com, 43% of unmarried seniors rely on Social Security to cover 90% of their basic needs. Almost a quarter of married couples depend on Social Security to meet most of their expenses.

Some seniors struggling with poverty are able to receive supplemental income (“SPM”), such as food stamps for a bit of additional help. The need is especially high for seniors who are women, African Americans, and Hispanics, and those with ongoing health issues.6,400,000 million American seniors are living at poverty level, struggling to meet fundamental needs such as rent and food. This number is likely to increase as more boomers become eligible for Social Security and the system becomes less able to support them.

What does this mean for the Millennial generation? The current Social Security system will be unsustainable at some point. It cannot continue at the current level. It probably won’t be abolished, as that would cause chaos for seniors. However, Millennials are aware that changes are coming. They know that benefits will likely be reduced by the time they grow older. The good news is, Millennials are aware of the problem. Members of the boomer generation who assumed Social Security would take care of their needs are learning a hard lesson.

Turkey rattles the cage.

• More Than 500 Refugees, Migrants Reach Greek Islands In Four Days (K.)

According to official figures released on Tuesday more than 500 migrants reached islands of the eastern Aegean in the previous four days, following a two-week lull in arrivals. The spike in arrivals was attributed by a Greek Police official to Turkish authorities, who, he said, control the influx. “But they always make sure not to overdo it so they can claim they are honoring the joint EU-Turkey agreement,” the official said, referring to a deal signed between Brussels and Ankara in March 2016 to curb human smuggling. The two-week drop in arrivals eased the pressure on facilities, as did the transfer of migrants to camps on the mainland. But some camps, notably on Lesvos, remain overcrowded.

Debt Rattle August 6 2017

Aug 062017

August 6, 2017 Posted by Raúl Ilargi Meijer at 8:26 am Finance Tagged with: beach, capital controls, Gulfstream, iPhone, Korea, Merkel, shadow, swamp, Tillerson, Trump 7 Responses »

Giorgio de Chirico Piazza d’Italia 1913

• The Bursting of the China Credit Bubble (Crescat)

• The Swamp Is So Undrainable It Will End Up Making Mincemeat Of Trump (Stockman)

• How The Trump Administration Broke The State Department (FP)

• Have Smartphones Destroyed a Generation? (Atl.)

• Amazon Isn’t The No. 1 Villain In Retail Sector’s Demise (Katsenelson)

• On The Beach (John Pilger)

• Merkel Is Kowtowing To The German Car Industry (Spiegel)

• North Korea Sanctions Bring Nuclear Issue To ‘Critical Phase’, Says China (G.)

• What If Every Government Paid Off Its National Debt? (Connelly)

• Are Greek Capital Controls Easing? (K.)

• More People Live Inside This Circle Than Outside It (WEF)

• Is Global Ocean Circulation Collapsing? (Forbes)

A tour de force PDF by private firm Crescat on China and its potential influence on the world of finance. It echoes a longtime theme of mine: China’s shadow banking sector could bring it all down.

• The Bursting of the China Credit Bubble (Crescat)

History has proven that credit bubbles always burst. China by far is the biggest credit bubble in the world today. We layout the proof herein. There are many indicators signaling that the bursting of the China credit bubble is imminent, which we also enumerate. The bursting of the China credit bubble poses tremendous risk of global contagion because it coincides with record valuations for equities, real estate, and risky credit around the world. The Bank for International Settlements (BIS) has identified an important warning signal to identify credit bubbles that are poised to trigger a banking crisis across different countries: Unsustainable credit growth relative to GDP in the household and (non-financial) corporate sector. Three large (G-20) countries are flashing warning signals today for impending banking crises based on such imbalances: China, Canada, and Australia.

The three credit bubbles shown in the chart above are connected. Canada and Australia export raw materials to China and have been part of China’s excessive housing and infrastructure expansion over the last two decades. In turn, these countries have been significant recipients of capital inflows from Chinese real estate speculators that have contributed to Canadian and Australian housing bubbles. In all three countries, domestic credit-to-GDP expansion financed by banks has created asset bubbles in self-reinforcing but unsustainable fashion. Post the 2008 global financial crisis, the world’s central bankers have kept interest rates low and delivered just the right amount of quantitative easing in aggregate to levitate global debt, equity, and real estate valuations to the highest they have ever been relative to income.

Across all sectors of the world economy: household, corporate, government, and financial, the world’s aggregate debt relative to its collective GDP (gross world product) is the highest it has ever been. Central banks have pumped up the valuation of equities too. The S&P 500 has a cyclically adjusted P/E of almost 30 versus a median of 16, exceeded only in 1929 and the 2000 tech bubble. The US markets are also in a valuation bubble because US-owned financial assets have never been more richly valued relative to income as we show below. The picture is equally frothy if we include real estate, also at record valuations to income. China’s capital outflow spillover from its credit bubble has driven up real estate valuations around the world.

“And then the Donald will be gone, and well before August 2018, too…”

• The Swamp Is So Undrainable It Will End Up Making Mincemeat Of Trump (Stockman)

What will be the trigger that finally sends the establishment after Trump? Ultimately, the hammer of fiscal crisis and a crashing stock market will break any remaining loyalty of the GOP elders as they smell the 2018 elections turning into a replay of the rout of 1974. And then the Donald will be gone, and well before August 2018, too. I told an audience in Vancouver last Friday that it could happen by February. The bottom line is that the Swamp is so undrainable that it will end up making mincemeat of Donald Trump. Needless to say, the ultimate causes of his demise are anchored deep in the failing status quo. America is so addicted to war, debt and central bank driven false prosperity that even the most resourceful and focused challenger would be taken down by its sheer inertia.

But the Donald is so undisciplined, naïve, out-of-touch, thin-skinned, unfocused and megalomaniacal that he is making it far easier for the Swamp critters than they deserve. To a very considerable extent, in fact, he is filling out his own bill of indictment. Moreover, he is totally clueless about how to manage his presidency or cope with the circling long knives of the Deep State which are hell bent on removing him from office. Accordingly, the single most important thing to know about the present risk environment is that it is extreme and unprecedented. In essence, the Donald is the ultimate bull in an exceedingly fragile China shop — and an already badly wounded one at that. So it is no understatement to suggest that the S&P 500 at 2470 and the Dow at 22,000 is about as fragile as the “market” has ever been.

Is Trump trying the drain the swamp anyway? Or Tillerson? Foreign Policy can’t quite decide on the latter. But these lines, intended as positives, sort of say it all:

“..the legacy of decades of American diplomacy is at risk..”, or this one: “I used to wake up every morning with a vision about how to do the work to make the world a better place..”

• How The Trump Administration Broke The State Department (FP)

Employees at the State Department couldn’t help but notice the stacks of cubicles lined up in the corridor of the seventh floor. For diplomats at the department, it was the latest sign of the “empire” being built by Secretary of State Rex Tillerson’s top aides. The cubicles are needed to accommodate dozens of outsiders being hired to work in a dramatically expanded front office that is supposed to advise Tillerson on policy. Foreign service officers see this expansion as a “parallel department” that could effectively shut off the secretary and his advisors from the career employees in the rest of the building. The new hires, several State officials told Foreign Policy, will be working for the policy planning staff, a small office set up in 1947 to provide strategic advice to the secretary that typically has about 20-25 people on its payroll.

One senior State Department official and one recently retired diplomat told FP that Tillerson has plans to double or perhaps triple its size, even as he proposes a sweeping reorganization and drastic cuts to the State Department workforce. Veterans of the U.S. diplomatic corps say the expanding front office is part of an unprecedented assault on the State Department: A hostile White House is slashing its budget, the rank and file are cut off from a detached leader, and morale has plunged to historic lows. They say President Donald Trump and his administration dismiss, undermine, or don’t bother to understand the work they perform and that the legacy of decades of American diplomacy is at risk.

By failing to fill numerous senior positions across the State Department, promulgating often incoherent policies, and systematically shutting out career foreign service officers from decision-making, the Trump administration is undercutting U.S. diplomacy and jeopardizing America’s leadership role in the world, according to more than three dozen current and former diplomats interviewed by FP. “I used to wake up every morning with a vision about how to do the work to make the world a better place,” said one State Department official, who spoke on condition of anonymity for fear of retaliation. “It’s pretty demoralizing if you are committed to making progress. I now spend most of my days thinking about the morass. There is no vision.”

Interesting, but it can’t be just one generation.

• Have Smartphones Destroyed a Generation? (Atl.)

The more I pored over yearly surveys of teen attitudes and behaviors, and the more I talked with young people like Athena, the clearer it became that theirs is a generation shaped by the smartphone and by the concomitant rise of social media. I call them iGen. Born between 1995 and 2012, members of this generation are growing up with smartphones, have an Instagram account before they start high school, and do not remember a time before the internet. The Millennials grew up with the web as well, but it wasn’t ever-present in their lives, at hand at all times, day and night. iGen’s oldest members were early adolescents when the iPhone was introduced, in 2007, and high-school students when the iPad entered the scene, in 2010. A 2017 survey of more than 5,000 American teens found that three out of four owned an iPhone.

The advent of the smartphone and its cousin the tablet was followed quickly by hand-wringing about the deleterious effects of “screen time.” But the impact of these devices has not been fully appreciated, and goes far beyond the usual concerns about curtailed attention spans. The arrival of the smartphone has radically changed every aspect of teenagers’ lives, from the nature of their social interactions to their mental health. These changes have affected young people in every corner of the nation and in every type of household. The trends appear among teens poor and rich; of every ethnic background; in cities, suburbs, and small towns. Where there are cell towers, there are teens living their lives on their smartphone. To those of us who fondly recall a more analog adolescence, this may seem foreign and troubling.

The aim of generational study, however, is not to succumb to nostalgia for the way things used to be; it’s to understand how they are now. Some generational changes are positive, some are negative, and many are both. More comfortable in their bedrooms than in a car or at a party, today’s teens are physically safer than teens have ever been. They’re markedly less likely to get into a car accident and, having less of a taste for alcohol than their predecessors, are less susceptible to drinking’s attendant ills. Psychologically, however, they are more vulnerable than Millennials were: Rates of teen depression and suicide have skyrocketed since 2011. It’s not an exaggeration to describe iGen as being on the brink of the worst mental-health crisis in decades. Much of this deterioration can be traced to their phones.

Even when a seismic event—a war, a technological leap, a free concert in the mud—plays an outsize role in shaping a group of young people, no single factor ever defines a generation. Parenting styles continue to change, as do school curricula and culture, and these things matter. But the twin rise of the smartphone and social media has caused an earthquake of a magnitude we’ve not seen in a very long time, if ever. There is compelling evidence that the devices we’ve placed in young people’s hands are having profound effects on their lives—and making them seriously unhappy.

“A lobotomy is performed on each generation. Facts are removed. History is excised and replaced by what Time magazine calls “an eternal present”.”

• On The Beach (John Pilger)

“This is the way the world ends; Not with a bang but a whimper”. These lines from T.S. Eliot’s poem The Hollow Men appear at the beginning of Nevil Shute’s novel On the Beach, which left me close to tears. The endorsements on the cover said the same. Published in 1957 at the height of the Cold War when too many writers were silent or cowed, it is a masterpiece. At first the language suggests a genteel relic; yet nothing I have read on nuclear war is as unyielding in its warning. No book is more urgent. Some readers will remember the black and white Hollywood film starring Gregory Peck as the US Navy commander who takes his submarine to Australia to await the silent, formless spectre descending on the last of the living world.

I read On the Beach for the first time the other day, finishing it as the US Congress passed a law to wage economic war on Russia, the world’s second most lethal nuclear power. There was no justification for this insane vote, except the promise of plunder. The “sanctions” are aimed at Europe, too, mainly Germany, which depends on Russian natural gas and on European companies that do legitimate business with Russia. In what passed for debate on Capitol Hill, the more garrulous senators left no doubt that the embargo was designed to force Europe to import expensive American gas. Their main aim seems to be war – real war. No provocation as extreme can suggest anything else. They seem to crave it, even though Americans have little idea what war is. The Civil War of 1861-5 was the last on their mainland. War is what the United States does to others.

The only nation to have used nuclear weapons against human beings, they have since destroyed scores of governments, many of them democracies, and laid to waste whole societies – the million deaths in Iraq were a fraction of the carnage in Indo-China, which President Reagan called “a noble cause” and President Obama revised as the tragedy of an “exceptional people”. He was not referring to the Vietnamese. Filming last year at the Lincoln Memorial in Washington, I overheard a National Parks Service guide lecturing a school party of young teenagers. “Listen up,” he said. “We lost 58,000 young soldiers in Vietnam, and they died defending your freedom.” At a stroke, the truth was inverted. No freedom was defended. Freedom was destroyed. A peasant country was invaded and millions of its people were killed, maimed, dispossessed, poisoned; 60,000 of the invaders took their own lives. Listen up, indeed.

A lobotomy is performed on each generation. Facts are removed. History is excised and replaced by what Time magazine calls “an eternal present”. Harold Pinter described this as “manipulation of power worldwide, while masquerading as a force for universal good, a brilliant, even witty, highly successful act of hypnosis [which meant] that it never happened. Nothing ever happened. Even while it was happening it wasn’t happening. It didn’t matter. It was of no interest.”

Original tile: “‘Made in Germany’ Label Badly Damaged By Car Scandal”. But the power politics behind it are far more revealing.

• Merkel Is Kowtowing To The German Car Industry (Spiegel)

Since the days of former Chancellor Gerhard Schröder, who served from 1998 to 2005, Germany’s leaders have been nicknamed the “Auto Chancellor” for their close ties to the industry. Schröder felt he was a patron of the industry. And Merkel, his successor, was quick to see the connection between maintaining close ties to the key industry and staying in power. On Sept. 23, 2008, she spoke to workers at a Volkswagen factory. “The German government stands behind VW. VW is a great piece of Germany.” The sheer mass of 18,000 workers seemed to awe her. She had likely never spoken in front of that many people at one time. She said she would travel home with the feeling that many workers at Volkswagen wanted “Germany to be doing well.” Observers of the chancellor say that visit to Wolfsburg had a deep impact on Merkel.

A short time later, as the world faced a major economic crisis, she gave employees and executives at Germany’s car companies a gift worth billions of euros in the form of government subsidies that saved jobs and kept the floor from falling out on the industry. The unsavory symbiosis between the government, the industry and the lobbying groups – and the revolving door of personnel moving between them – seems to be the root of the evil. This ensures that the industry has influence and access, and assures employees money and access to the career ladder. It can also cause a bit of head-scratching. A public servant who is supposed to one day passionately fight for the good of the people, is suddenly ready to contribute to their systematic poisoning only a moment later.

Former German Transportation Minister Matthias Wissmann, who served as a member of Merkel’s cabinet and is also a friend, sticks out. Today he’s the president of the German Association of the Automotive Industry (VDA). All he has to do to get the chancellor’s attention is send her a text message on his mobile phone. Merkel’s former chief of staff at the national headquarters of her conservative Christian Democratic Union (CDU) party, Michael Jansen, now works at Volkswagen as the head of the VW’s Berlin office, which conducts the company’s lobbying. A few months ago, carmaker Opel’s chief lobbyist, Joachim Koschnicke, left his job to join the CDU’s election campaign team. All have showered the federal government with emails and letters in recent years to ensure that their companies’ interests are fulfilled.

In May 2013, VDA head Wissmann wrote to “Dear Angela” that she should try to hinder the European Commission’s “excessive” proposals on CO2 targets. VW lobbyist Jansen also wrote to the Chancellery in July 2015 that, on the issue of “air quality/diesel,” the industry’s proposals should be given the “greatest possible consideration.” When he was still an Opel lobbyist, Joachim Koschnicke warned the head of the KBA when approval was delayed for a new Opel model that without it, there would be “potential effects on our business operations.” He said it jeopardized production at five plants and that the “negative effects would be dramatic in every aspect.” And then there’s Eckart von Klaeden, who served as minister of state in the Chancellery from 2009 to 2013 and has since served as head of global external affairs at Daimler.

How far will China go?

• North Korea Sanctions Bring Nuclear Issue To ‘Critical Phase’, Says China (G.)

The situation on the Korean peninsula is entering “a very critical phase”, China has warned after new United Nations sanctions targeting Pyongyang were announced following its recent intercontinental ballistic missile test. Speaking in Manila before a regional security summit, China’s foreign minister, Wang Yi, said the sanctions had been designed “to efficiently, or more efficiently, block North Korea’s nuclear missile development”. “Sanctions are needed but not the ultimate goal,” Wang added. “The purpose is to pull the peninsula nuclear issue back to the negotiating table, and to seek a final solution to realise the peninsula denuclearisation and long-term stability through negotiations.” “After the resolution is passed, the situation on the peninsula will enter a very critical phase,” Wang warned, according to China’s state broadcaster CGTN.

“We urge all parties to judge and act with responsibility in order to prevent tensions from escalating.” Wang met his North Korean counterpart, Ri Yong Ho, on Sunday who reportedly smiled continuously as he shook the Chinese official’s hand. According to Reuters, journalists were not given access to a meeting between the two men. On Saturday Nikki Haley, the US ambassador to the United Nations, said “further action is required” against North Korea. Earlier, National Security Adviser HR McMaster said Donald Trump had been “deeply briefed” on recent missile tests carried out by Pyongyang, and said the US would do “everything we can to to pressure this regime” while seeking to avoid “a very costly war”. Haley spoke to the UN security council after the 15-member body imposed the new sanctions against North Korea, in response to its two long-range missiles tests in July.

“We should not fool ourselves into thinking we have solved the problem,” Haley said. “Not even close. The North Korean threat has not left us, it is rapidly growing more dangerous. Further action is required. The United States is taking and will continue to take prudent defensive measures to protect ourselves and our allies.” Washington would continue annual military exercises with South Korea, Haley said. The UN-approved sanctions include a ban on exports worth more than $1bn, a huge bite out of North Korea’s total exports, valued at $3bn last year. Countries are also banned from giving any additional permits to North Korean laborers – another source of money for the regime of Kim Jong-un – and all new joint ventures with North Korean companies and foreign investment in existing ones are banned.

“The national debt is actually the government’s savings account..”

• What If Every Government Paid Off Its National Debt? (Connelly)

There were six times in US history in which budget surpluses were achieved for long enough to retire a significant amount of debt. Five of those were followed by depressions, the last of which culminated in the Great Depression of the 1930s. The last time America ran a significant budget surplus (about 2.5 years) was under President Clinton. The 2002 recession is a direct result of Clinton’s 1999 surplus which forced the domestic private sector into deficit. Consumer spending fell, unemployment rose and a recession occurred. The economy crashed first in 2000 and then onwards into the Great Recession that began in 2007. “But reducing or retiring the debt isn’t what caused the economic downturns,” says economist, Ellis Winningham. “It was the surpluses that caused it. Simply put, you cannot operate an economy with no money in it.”

So why have we convinced ourselves that government debt is the mother of all evil? That somehow, if the government is in surplus, our bank accounts will automatically improve? In fact, as we shall see, the precise opposite is what would probably happen. Anyone who has ever been chased by a debt collector has come to associate the word ‘debt’ as necessarily scary, bad and to be avoided. If you are a household, this is likely to be true. But debt has an entirely different meaning for governments. To whom is the national debt owed? That would be us: the people. But this truth has been avoided in favour of eliciting a pavlovian response based entirely on the principle that a government budget is the same as that of a household.

“People think that public debt is like a household debt, hence, they buy into the neoliberal nonsense about the government going ‘bankrupt’ and then it’s financial armageddon and we will all die,” says Winningham. “It’s total nonsense. The public debt is just a bunch of savings accounts that pay interest. “People think it will improve their lives because they believe that the government’s debt is their debt. In reality, the government’s debt is the private sector’s asset.” In truth, there is no such thing as the national debt beyond a rhetorical device used to scare the public into submission. In the US, the National Debt is the sum-total of all US dollars ever issued by the Federal Government, from the nation’s founding up until this very moment, that have never been taxed away by the Federal Government.

“From around the 1790’s until today, 2017, the US government has issued, after taxes, $18 trillion dollars for everyone in the non-government sector to use,” says Winningham. “In fact, the national debt has been around for over 170 years now, so at some point, you’re going to have to start understanding that it is not an actual problem. “Further, you need to start understanding that when you accuse Obama, or Bush, or Trump of adding to the national debt, you’re actually accusing them of adding US dollars to the US economy. Or, more precisely, you’re accusing them of adding US dollars to our national savings.” Put simply, The National Debt is the country’s total exports minus the country’s total imports, and isn’t an actual debt at all, but a “balance of trade”.

A giant sleight of hand: ..new measures that are billed as easing the capital controls but which will in fact reduce the annual amount of cash bank clients can withdraw

• Are Greek Capital Controls Easing? (K.)

The government is gearing up to launch new measures that are billed as easing the capital controls but which will in fact reduce the annual amount of cash bank clients can withdraw. As of September 1, when the new measures come into force, citizens will be able to withdraw a total of 1,800 euros per month. When the controls were first introduced in July 2015, Greeks could only withdraw €60 a day, 365 days a year, but since then they have been allowed to carry that amount forward up to a period of two weeks, giving them a €840 limit every 14 days (fixed, from midnight Friday to midnight two weeks later). That will remain the case until the end of August.

The extension of the cumulative withdrawal period may facilitate transactions, but on an annual basis the total amount a bank customer can withdraw will fall from €21,840 (€840 x 26 two-week periods) to €21,600 (€1,800 x 12 months). Greeks could in fact withdraw more money per year on the original limit of €60 per day, totaling €21,900 a year, as that avoided the fixed-two-week-period problem. In other words the “easing” of restrictions has resulted in curtailing people’s withdrawal limit by €300 per annum, for the right to transfer a withdrawal to another day or week. Bank sources tell Kathimerini it is a positive move that will strengthen confidence, make transactions easier and boost the economy.

The new measures will also affect withdrawals in foreign currency in Greece and the use of Greek debit cards for withdrawals abroad. As of September 1 any recipients of money forwarded from abroad will be able to withdraw 50% of the amount without any restrictions. Companies will also be able to open an account at a credit institution by creating a new customer ID regardless of whether they already have another account there. Farmers, who have not been allowed to open bank accounts since the controls started, will finally be allowed to (provided they do not have one already). Employees will be further able to open a new salary account at a different bank to the one at which they are already a client or if their new employer pays their salary at another lender.

Perspective.

• More People Live Inside This Circle Than Outside It (WEF)

Circle centred on 106.6° East, 26.6° North, projected using GMT, created by BCMM – Brilliant Maps

While the map looks surprising at first glance, it shouldn’t really once you consider it contains all or most of the world’s most populous countries: China, India, Indonesia (fourth), Pakistan (sixth), Bangladesh (seventh) and Japan (tenth). And according to the World Population Prospects 2017, a recently updated UN report, the world population will hit a staggering 9.8 billion by 2050. China (with currently 1.4 billion inhabitants) and India (with currently 1.3 billion inhabitants) will remain the two most populous countries, and Nigeria will overtake the United States to become the third-most populous country in the world.

Not a new theme at all, the Gulfstream, so why present it as somehow new without any new evidence? Nice map though.

• Is Global Ocean Circulation Collapsing? (Forbes)

Scientists have long known about the anomalous “warming hole” in the North Atlantic Ocean, an area immune to warming of Earth’s oceans. This cool zone in the North Atlantic Ocean appears to be associated with a slowdown in the Atlantic Meridional Overturning Circulation (AMOC), one of the key drivers in global ocean circulation. A recent study published in Nature outlines research by a team of Yale University and University of Southhampton scientists. The team found evidence that Arctic ice loss is potentially negatively impacting the planet’s largest ocean circulation system. While scientists do have some analogs as to how this may impact the world, we will be largely in uncharted territory. AMOC is one of the largest current systems in the Atlantic Ocean and the world. Generally speaking, it transports warm and salty water northward from the tropics to South and East of Greenland.

This warm water cools to ambient water temperature then sinks as it is saltier and thus denser than the relatively more fresh surrounding water. The dense mass of water sinks to the base of the North Atlantic Ocean and is pushed south along the abyss of the Atlantic Ocean. This process whereby water is transported into the Northern Atlantic Ocean acts to distribute ocean water globally. What’s more important, and the basis for concern of many scientists is this mechanism is one of the most efficient ways Earth transports heat from the tropics to the northern latitudes. The warm water transported from the tropics to the North Atlantic releases heat to the atmosphere, playing a key role in warming of western Europe. You likely have heard of one of the more popular components of the AMOC, the Gulf Stream which brings warm tropical water to the western coasts of Europe.

Evidence is growing that the comparatively cold zone within the Northern Atlantic could be due to a slowdown of this global ocean water circulation. Hence, a slowdown in the planet’s ability to transfer heat from the tropics to the northern latitudes. The cold zone could be due to melting of ice in the Arctic and Greenland. This would cause a cold fresh water cap over the North Atlantic, inhibiting sinking of salty tropical waters. This would in effect slow down the global circulation and hinder the transport of warm tropical waters north. Melting of the Arctic sea ice has rapidly increased in the recent decades. Satellite image records indicate that September Arctic sea ice is 30% less today than it was in 1979. This trend of increased sea ice melting during summer months does not appear to be slowing. Hence, indications are that we will see a continued weakening of the global ocean circulation system.

Debt Rattle June 21 2017

Jun 212017

June 21, 2017 Posted by Raúl Ilargi Meijer at 9:51 am Finance Tagged with: Brazil, Brexit, EU, Greece, Iran, ISIS, recession, refugees, Russia, sanctions, Snowden, Syria, Tillerson 4 Responses »

Fred Lyon Post&Powell Union Square San Francisco 1947

• 100% Chance of Recession Within 7 Months? (DR)

• The Secret Source of Eternal Australian Growth (Steve Keen)

• We Need A Public Inquiry Into The Economics Profession (Pettifor)

• Where Are The Empty Homes In Kensington? (Whoownsengland)

• Security…or Surveillance? Ron Paul Edward Snowden Interview (TAM)

• Brazil Police Claim To Have Evidence President Temer Received Bribes (G.)

• House Republicans Block Russia Sanctions Bill (ZH)

• We Are Inches From A New World War (Medium)

• Iran Slams Tillerson Call For Regime Change (RT)

• The US Seems Keener To Strike At Assad Than To Destroy Isis (Robert Fisk)

• EU Says Greece Needs More Debt Relief Despite €10 Billion Buffer (BBG)

• Europe’s Unserious Plan for Greece (BBG)

• Greek Property Market Has Lost 65% Of Its Value Since 2009 (K.)

• At Least 120 Migrants Drown In Mediterranean On World Refugee Day (Ind.)

The numbers say it.

• 100% Chance of Recession Within 7 Months? (DR)

We asked this question one week after Trump was elected: “What does history predict for the Trump presidency?” The answer we furnished — based on over a century of data — was this: “A 100% chance of recession within his first year.” Not a 90% chance, that is. Not even a 99% chance. But a 100% chance of recession. That answer came by way of a certain Raoul Pal. He used to captain one of the largest hedge funds in the world. And to prove his case he called the unimpeachable witness of history to the stand… Crunching 107 years worth of data, he showed the U.S. economy enters or is in a recession every time a two-term president vacates the throne: “Since 1910, the U.S. economy is either in recession or enters a recession within 12 months in every single instance at the end of a two-term presidency… effecting a 100% chance of recession for the new president.”

Obama was a two-term president – if memory serves. Only two incoming presidents were not treated to a recession within the first year of office. And both followed one-term reigns: “Not every single election sees a recession, only every two-term incumbent change… Only two presidents in history did not see a recession, and they were inaugurated after single-term presidents.” Mr. Pal couldn’t fully explain the phenomenon. Maybe it takes two terms for presidential mischief to work its way into the economic machinery. One-term presidents just can’t heave enough sand in the gears. Regardless of the reason, this fellow’s research pointed him to one conclusion: “It is not a coincidence.” Trump’s now five months into his first 12. Where does the prediction stand? By grace of God or Janet Yellen or neither or both, no recession yet.

But our pessimistic side reminds us that seven months remain. And anxiety riles the deeps of our being… For we’ve spotted ill omens… disturbing portents of recession among the recent economic data… Old Daily Reckoning hand Wolf Richter: Over the past five decades, each time commercial and industrial loan balances at U.S. banks shrank or stalled… a recession was either already in progress or would start soon. There has been no exception since the 1960s. Last time this happened was during the financial crisis. “Now,” Wolf says, “it’s happening again.” Last month commercial and industrial loans (C&I) outstanding fell to $2.095 trillion, according to the St. Louis Fed. That’s down 4.5% from their November 2016 peak, says Wolf. And it marked the 30th consecutive week of no growth in C&I loans. Wolf argues C&I loans matter because they directly reflect the real economy – unlike today’s stock market, which is crooked as a Brit’s teeth.

Tons of graphs from Steve. I find his use of ‘debt and ‘credit’ as seemingly separate terms a bit confusing.

• The Secret Source of Eternal Australian Growth (Steve Keen)

Much was made of the fact that Australia recently replaced The Netherlands as the world record holder for the longest period without a recession (using the colloquial definition of two consecutive quarters of negative growth). The Netherlands went just under 26 years (103 quarters between 1982 and 2008) without a recession, and Australia surpassed this when it recorded 0.3% growth in the March 2017 quarter (for an annual growth rate of 1.7%).

Rather less attention was given to another Australian record: household debt. Before its recession-free record was set, Australia had already overtaken The Netherlands for the record of the highest level of household debt ever recorded for a large country (one with more than 10 million people).

Australia’s household debt level of 123% of GDP has been exceeded only by Switzerland (population 8.3 million, household debt of 128% of GDP in 2016 Q3) and Denmark (population 5.6 million, 139% of GDP in 2009).2 Australia also stands apart from its household leverage competitors in another important respect: Denmark, Switzerland and The Netherlands also run significant current account surpluses—Switzerland’s average surplus since 2000 has been the highest on the planet at over 10% of GDP; Denmark’s has averaged 5.75% since 2005; The Netherlands’ average current account surplus is around 8% of GDP.

Australia, in contrast, has averaged a current account deficit of 3.2% of GDP since 1960, and 4.3% since 2000. Australia therefore holds the record of the highest level of household debt for a country running a trade deficit, and has done so since 2010, when it overtook the previous record-holder: Ireland. Ireland’s household debt level has also plunged since then, from a peak of 118% of GDP in 2010 to 54%. Australia’s closest competitor now is Canada, which has a household debt level 22% lower than Australia’s, and an average trade deficit of 1.4% of GDP, versus Australia’s long-run average of 3.2%.

Why does this matter? Because Australia’s two records are related: Australia avoided a recession in 2008 only by adding additional leverage to its already over-indebted household sector, and the only ways that Australia can keep its winning streak on GDP growth going (given that its government is obsessed with trying to run a surplus) is to either to achieve a huge trade surplus, or for the household sector to continue piling on debt faster than GDP itself grows. A trade surplus is one of three ways to increase both aggregate demand and the amount of money in an economy:3 goods you sell to foreigners are paid for in US dollars, which the exporter then effectively sells to its country’s Central Bank in return for domestic currency (on that front, The Netherlands is, like Germany, a huge beneficiary of the Euro).

A valiant effort, and economics should be redefined for sure, but Ann shirks far too close to assuming Brexit was about economics only and purely. Tempting when you’re an economist, but…

• We Need A Public Inquiry Into The Economics Profession (Pettifor)

If the British economy crashes as a result of Brexit, it will not vindicate economists. It will simply illustrate once again, their failure. I and my colleagues at Policy Research in Macroeconomics (PRIME) believe there is urgent need for an independent, public inquiry into the economics profession, and its role in precipitating both the financial crisis of 2007-9, the subsequent very slow ‘recovery’; and in the British European referendum campaign. Financial disarray is not unlikely under Brexit, but whether this turns into anything material depends in the first instance on economic policy. How can we trust economists at the Treasury not to impose more disastrous policies? Economists have once again proved themselves not only irrelevant, but a dangerous irrelevance. For too long they have resisted call after call for reform. If they will not do it themselves then it is time for others to take control.

The profession should be brought to account through a public inquiry into the this failure. In voting to leave the EU, England overwhelmingly has rejected economics – and in particular the dominant economic narrative. Unfortunately, the economics profession as a whole cannot resign, though perhaps the President of the RES, Andrew Chesher, should consider his position. Because this hardship is indirectly a consequence of the economics profession. Economists led the way to financial liberalisation of the past 40 years, which led to soaring levels of debt, crises and financial ruin. Economists dictated the terms for austerity that has so harmed the economy and society over the past years. As the policies have failed, the vast majority of economists have refused to concede wrongdoing, nor have societies been offered alternative economics policies.

While it is risky to second guess public opinion, it may just be that the prospect of hardship to come might not have been very compelling for those already suffering the hardship of low wages, insecure low-skilled jobs, bad housing, high rents, an under-resourced and increasingly privatised NHS, and other forms of public sector ‘austerity’. With this historic vote, the British people have not just rejected the EU. They have done something that should worry the British establishment, and their friends in the City of London, and internationally, far more. Perhaps most symbolically, even the Queen suggested they did not know what they were doing. It is hardly surprising, therefore, that the British public did not find the opinion of Remain ‘experts compelling’.

If you allow for homes to be speculative ‘assets’, you will end up with homeless people.

• Where Are The Empty Homes In Kensington? (Whoownsengland)

As the nightmare of the Grenfell Tower disaster continues to unfold, one of the many painful questions being asked by survivors is: ‘Where are we going to live now?’ Kensington & Chelsea Council have still been unable to give firm assurances that residents will be rehoused in the area, issuing a statement on Friday afternoon (later contradicted) that “Given the number of households involved, it is possible the council will have to explore housing options that may become available in other parts of the capital”. On Friday, the Times reported that Jeremy Corbyn had an alternative solution. “Corbyn: seize properties of the rich for Grenfell homeless” ran its above-the-fold headline (£). This was not, of course, what Corbyn had actually proposed, as the article itself revealed.

In a parliamentary debate, the Labour leader had suggested that “Properties must be found, requisitioned if necessary, to make sure those residents do get rehoused locally… It cannot be acceptable that in London you have luxury buildings and flats kept as land banking for the future while the homeless and the poor look for somewhere to live.” Not quite the State appropriation of private property conveyed by the sub-editor’s fevered headline, then – but a proposal for making better use of empty housing which happens to be supported by 59% of the British public, according to YouGov. So how many empty homes are there in Kensington? A lot, it turns out. The Department for Communities and Local Government regularly publishes statistics on vacant dwellings, broken down by local authority area.

The latest figures for Kensington & Chelsea reveal there are 1,399 vacant dwellings in the borough, as of April 2017 – and the number hasn’t dropped below a thousand for over a decade. 600 people lived in Grenfell Tower – so there are more than enough empty homes in the borough to house them all, if the properties could be accessed. But where are these empty homes? And who owns them? It turns out that Kensington Council themselves know precisely where they are. In a report published in July 2015, the council’s Housing and Property Scrutiny Committee examined in detail the problem of ‘buy to leave’ in the borough. ‘Buy to leave’ is the phenomenon of purchasing a property where the buyer has no intention to live in it; where the home is regarded purely as an investment – one that, in London’s super-heated property market, will rapidly accrue in value.

The council’s report used a variety of methods to locate empty housing, from council tax registers and payment data, to energy use and Land Registry records. Their findings broadly corroborate central government stats – that there are around a thousand long-term empty homes in Kensington & Chelsea. And on page 13 of the report, they display an extraordinary map of the 941 homes classified as unoccupied dwellings for the purposes of council tax:

Science and technology will not enforce human rights. Moral values will.

• Security…or Surveillance? Ron Paul Edward Snowden Interview (TAM)

Saying that you don’t care about privacy because you have nothing to hide is no different than saying you don’t care about freedom of speech because you have nothing to say.” That comment was made by famed whistleblower Edward Snowden during a recent interview on the Ron Paul Liberty Report. In his conversation with Dr. Paul and Daniel McAdams, published Tuesday, an articulate Snowden discusses the true meaning of freedom, the nature of the deep state, and even his upbringing as a child of a government family. “I’d like to know a little bit, what do you do all day long?” a genuinely curious Dr. Paul asks as his opening question. After talking about the insanity that erupted — both in the political spectrum and his personal life — following the revelations he made back in 2013, Snowden says he’s now become a hot commodity for groups championing causes.

“They want me to sort of front for these issues of privacy and civil liberties and protection of people’s rights,” Snowden replies. “And I want to do what I can, but I’m not a politician. I’m an engineer.” The whistleblower goes on to talk about how he’s now, at long last, finally able to devote time to more practical applications. For him, this means focusing on the area that holds the key to finding a balance between rights and laws in the digital age — technology. “How technically is this even happening?” Snowden poses, digging straight to the heart of the issue of mass surveillance. “How is it that so many governments are spying on so many people? Because even if we pass the best legal reforms in the world in the United States, that doesn’t do anything against China, or Russia, or Germany, or France or Brazil or any other country in the world.”

Continuing, Snowden says that future generations’ rights and protections will be dependent on the current generation’s ability to adapt to a constantly shifting environment: “We need to find new means, new mechanisms, for enforcing these rights in the new times. And I think that’s going to be primarily through science and technology.”

Wherever you live in the world, if you think things are a mess where you are, spare a thought for Brazil.

• Brazil Police Claim To Have Evidence President Temer Received Bribes (G.)

Brazil’s federal police has said that investigators have found evidence the president, Michel Temer, received bribes to help businesses, raising a new threat that the embattled leader could be suspended from office pending a corruption trial. Temer has been under investigation due to plea bargain testimony by the wealthy businessman Joesley Batista of the giant meatpacking company JBS that linked the president and an aide to bribes and the president to an alleged endorsement of hush money for jailed ex-House Speaker Eduardo Cunha. Temer has denied any wrongdoing and insists he will not resign. If Brazil’s top prosecutor agrees with the federal police recommendation, Congress will decide whether Temer should be investigated by the supreme court, which is the only body that can formally investigate the president.

If two-thirds of Congress voted to allow the investigation, Temer would be suspended from office pending trial. In a report published on Tuesday by Brazil’s top court, federal police investigators said they had enough evidence of bribes being paid to warrant a formal investigation of Temer for “passive corruption” – Brazil’s charge for the act of taking bribes. It said former Temer aide Rodrigo Rocha Loures directly received bribes from JBS on the president’s behalf. A previously released video made by investigators shows Loures carrying a suitcase filled with about $150,000 in cash allegedly being sent from JBS to the president. Loures later gave the bag and most of the money to Brazil’s federal police, authorities have said.

They’ll pass at some point.

• House Republicans Block Russia Sanctions Bill (ZH)

After recruiting Trump, the KGB and Moscow have clearly also managed to make all House Republicans their puppets, because the Senate bill that passed last week and slapped new sanctions on Russia (but really was meant to block the production on the Nord Stream 2 gas pipeline from Russia and which Germany, Austria and France all said is a provocation by the US and would prompt retaliation) just hit a major stumbling block in the House. At least that’s our interpretation of tomorrow’s CNN “hot take.” Shortly after House Ways and Means Chairman Kevin Brady of Texas said that House leaders concluded that the legislation, S. 722, violated the origination clause of the Constitution, which requires legislation that raises revenue to originate in the House, and would require amendments, Democrats immediately accused the GOP of delaying tactics and “covering” for the Russian agent in the White House.

“House Republicans are considering using a procedural excuse to hide what they’re really doing: covering for a president who has been far too soft on Russia,” Senate Minority Leader Chuck Schumer of New York said in a statement. “The Senate passed this bill on a strong bipartisan vote of 98-2, sending a powerful message to President Trump that he should not lift sanctions on Russia.” And, if the House does pass it, a huge diplomatic scandal would erupt only not between the US and Russia, but Washington and its European allies who have slammed this latest intervention by the US in European affairs… a scandal which the Democrats would also promptly blame on Trump. That said, the bill may still pass: Brady pushed back against Democrat suggestions that House GOP leadership is trying to delay the bill, stressing that he thought the Senate legislation was sound policy.

“I strongly support sanctions against Iran and Russia to hold them accountable. We were willing to work with the Senate throughout the process, but the final bill and final language violated the origination clause in the Constitution,” Brady told reporters on Tuesday. “I am confident working with the Senate and Chairman [Ed] Royce that we can move this legislation forward. So at the end of the day, this isn’t a policy issue, it’s not a partisan issue, it is a Constitutional issue that we will address.”

We’re still not clued in to how dangerous ‘our own’ are.

• We Are Inches From A New World War (Medium)

This is your fault, Clinton Democrats. You created this, and if our species is plunged into a new world war or extinction via nuclear holocaust, it will be your fault. You knuckle-dragging, vagina hat-wearing McCarthyite morons made this happen. American military provocations against the pro-Assad coalition in Syria are fast becoming a daily occurrence. In response to the US air force’s gunning down of a Syrian military plane on Sunday, Russia has cut off its hotline with which it was coordinating operations with America to avoid aerial collisions, and has warned that all US aircraft west of the Euphrates river will now be tracked and treated as potential targets. Today, 25 miles northwest of the Russian enclave of Kaliningrad, a US reconnaissance plane was intercepted by an armed Russian aircraft which came within five feet of the plane’s wingtip.

This on the same day that the US shot down yet another Iranian military drone in Syria. Clintonists have been working tirelessly since the election to manufacture these new Cold War tensions. Stephen Cohen, easily America’s foremost authority on US-Russia relations, has warned again and again that the political pressures being placed on the Trump administration to maintain escalations with Russia without conceding an inch has placed our species in a situation that is in some ways even more dangerous than those we faced at the height of the Cuban Missile Crisis. If Kennedy had had to negotiate that crisis while being pressured by his entire country to keep escalating tensions with the USSR without yielding an inch, there is no way any terrestrial life would have existed beyond 1962. The Clintonists (along with their neocon buddies on the other side of the aisle) are responsible for creating those pressures.

“You know it’s easy to joke about this, except that we’re at maybe the most dangerous moment in US-Russian relations in my lifetime, and maybe ever. And the reason is that we’re in a new cold war, by whatever name.

We have three cold war fronts that are fraught with the possibility of hot war, in the Baltic region where NATO is carrying out an unprecedented military buildup on Russia’s border, in Ukraine where there is a civil and proxy war between Russia and the west, and of course in Syria, where Russian aircraft and American warplanes are flying in the same territory. Anything could happen.”
~ Stephen Cohen

It wasn’t enough for these Democratic neocons to try and elect a woman who had been pushing for dangerous escalations with Russia since long before any hacking allegations and who campaigned on a promise to invade Syria and seize control of an airspace wherein Russian military planes were conducting operations. No, once their initial bid to start World War 3 failed, these deranged death cultists began attacking Trump for any movement away from escalations with Russia or regime change in Syria and showering him with praise when he launched a missile strike against a Syrian airbase. The current administration is culpable for its own actions and should be unequivocally condemned for bowing to these pressures instead of honoring Trump’s campaign promises of pursuing detente with Russia and avoiding regime change in Syria, but if Clintonists had been pushing for peace instead of war this entire time the situation would doubtless look very, very different.

The opposite of what America needs.

• Iran Slams Tillerson Call For Regime Change (RT)

Iran has accused the United States of interfering in its domestic affairs after calls by the US Secretary of State to support “elements” that would ensure a “peaceful transition” in the Islamic Republic. Tehran also officially delivered a note of protest to the UN. Speaking last Wednesday before the House Foreign Affairs Committee, Rex Tillerson said Washington will support efforts of a regime change in Iran. “Our policy towards Iran is to push back on this hegemony, contain their ability to develop obviously nuclear weapons, and to work toward support of those elements inside of Iran that would lead to a peaceful transition of that government. Those elements are there, certainly as we know,” Tillerson said on June 14. In addition to voicing Washington’s apparent support of a regime change, Tillerson also said the US could pursue sanctions on Iran’s entire Islamic Revolutionary Guard Corps.

Tillerson’s remarks sparked an avalanche of criticism and condemnation from Iran. In the latest development, the Iranian Foreign Ministry summoned the Swiss charge d’affaires to Tehran to protest Washington’s policy. The Embassy of Switzerland represents American interests in the Islamic Republic after the US cut diplomatic relations with Iran in April 1980 in the wake of the 400-day US Embassy hostage crisis of 1979-1981. “Following the interfering and meddling statements made by the US Secretary of State Rex Tillerson… the charge d’affaires of the European country was summoned to express Iran’s complaint about Tillerson’s anti-Iran remarks in the country’s House of Representatives,” Iran’s Foreign Ministry spokesperson said in a statement, Mehr News reported.

[..] Tillerson’s remarks “is a brazen interventionist plan that runs counter to every norm and principle of international law, as well as the letter and spirit of UN Charter, and constitutes an unacceptable behavior in international relations,” Iran’s UN Ambassador Gholamali Khoshroo said in the letter. Tehran further accused the US of violating the 1981 Algiers Accords, a set of agreements signed by Washington and Tehran to end the Iran hostage crisis. “The United States pledges that it is and from now on will be the policy of the United States not to intervene, directly or indirectly, politically or militarily, in Iran’s internal affairs,” Point I of the Accord reads.

No surprise here.

• The US Seems Keener To Strike At Assad Than To Destroy Isis (Robert Fisk)

On the ground, the Syrian army is now undertaking one of its most ambitious operations since the start of the war, advancing around Sueda in the south, in the countryside of Damascus and east of Palmyra. They are heading parallel with the Euphrates in what is clearly an attempt by the government to “liberate” the surrounded government city of Deir ez-Zour, whose 10,000 Syrian soldiers have been besieged there for more than four years. If they can lift the siege, the Syrians will have another 10,000 soldiers free to join in the recapture of more territory. More importantly, however, the Syrian military suspects that Isis – on the verge of losing Raqqa to US-supported Kurds and Mosul to US-backed Iraqis – may try to break into the garrison of Deir ez-Zour and declare an alternative “capital” for itself in Syria.

In this context, the American strike on Monday was more a warning to the Syrians to stay away from the so-called Syrian Democratic Forces – the facade-name for large numbers of Kurds and a few Arab fighters – since they are now very close to each other in the desert. The Kurds will take Raqqa – there may well have been an agreement between Moscow and Washington on this – since the Syrian military is far more interested in relieving Deir ez-Zour. The map is quite literally changing by the day. But the Syrian military are still winning against Isis and its fellow militias – with Russian and Hezbollah help, of course – although comparatively few Iranians are involved. The US has been grossly exaggerating the size of the Iranian forces in Syria, perhaps because this fits in with Saudi and American nightmares of Iranian expansion. But the success of the Assad regime is certainly troubling the Americans – and the Kurds.

So who is fighting Isis? And who is not fighting Isis? Russia claims it has killed the terrible and self-appointed “caliph of the Islamic State”, al-Baghdadi. Russia says it is firing Cruise missiles at Isis. The Syrian army, supported by the Russians, is fighting Isis. I have witnessed this with my own eyes. But what is America doing attacking first Assad’s air base near Homs, then the regime’s allies near Al-Tanf and now one of Assad’s fighter jets? It seems that Washington is now keener to strike at Assad – and his Iranian supporters inside Syria – than it is to destroy Isis. That would be following Saudi Arabia’s policy, and maybe that’s what the Trump regime wants to do. Certainly, the Israelis have bombed both the Syrian regime forces and Hezbollah and the Iranians – but never Isis.

Complete nonsense: “..The baseline scenario is based on nominal GDP growth rates between 3 and 4% until 2060”

• EU Says Greece Needs More Debt Relief Despite €10 Billion Buffer (BBG)

Greece will need additional debt relief to regain the trust of investors, even though it’s likely to exit its bailout with a €9 billion ($10 billion) cash buffer, the European Commission said in a draft report obtained by Bloomberg. The country’s €86 billion third bailout program from the European Stability Mechanism, agreed by Prime Minister Alexis Tsipras and European creditors in 2015, will expire in August 2018 with €27.4 billion left unused, the commission estimates in the so-called “compliance report” dated June 16. Disbursements up to then should also “cater for the build-up of seizable cash buffer” of around €9 billion, according to the document. The report contains an analysis of the country’s public debt that points to potential wrangling with the IMF following an agreement last week to disburse bailout funds, in which the fund only agreed to a new program “in principle.”

Even as the commission’s analysis points “to serious concerns regarding the sustainability of Greek public debt,” its assumptions about the country’s future growth prospects are still more optimistic than those of the IMF. The IMF hasn’t disbursed funds to Greece in almost three years on fears that the country’s debt is unsustainable. Last week’s compromise deal averts a Greek financing crisis this summer by allowing release of €8.5 billion of ESM funds, while the IMF holds out for more Greek debt relief from European creditors at a later stage before it gives out new loans. The June 15 deal by euro-area finance ministers commits to capping gross financing needs at 15% of GDP for the medium term, and 20% thereafter. The country’s gross financing needs will drop to 9.3% of GDP in 2020 from 17.5% this year, before rising again and surpassing 20% after 2045, according to the baseline scenario of the commission’s debt sustainability report.

[..] The baseline scenario is based on nominal GDP growth rates between 3 and 4% until 2060, considerably higher than past IMF baseline estimates. The fund’s own assessment will be released before its executive board meets to approve the in-principle stand-by arrangement next month. The debt dynamics “become explosive” from the mid-2030s in the the most adverse scenario. In this scenario, which is still more optimistic than IMF assumptions, Greece’s gross financing needs exceed 20% in 2033, reaching 56% by 2060, while debt skyrockets to 241.4% of Greek GDP by 2060.

Bloomberg, too, will first have to understand that Greece does not have €326 billion in debt, and why it is people state that regardless.

• Europe’s Unserious Plan for Greece (BBG)

The deal struck last week between Greece and its euro-zone creditors is business as usual – and that’s not a good thing. This protracted game of “extend and pretend” serves nobody’s long-term interests: not those of the Greek government, the IMF or, most of all, the people of Greece. Euro-zone finance ministers have unlocked a payment of €8.5 billion ($9.5 billion), the newest installment of a rescue plan worth €86 billion. This will let Athens make debt repayments of €7 billion that fall due next month. But there’s still no agreement on how to get Greece’s debt burden under control. The IMF had previously insisted that this question should be settled now. It was right, and it should have stuck to that position. The new agreement fails to recognize what everybody knows: that Greece’s debt is unsustainable on the current terms.

In an effort to pretend otherwise, Athens has promised primary budget surpluses (meaning net of interest payments) of 3.5% of GDP until 2022, and then of “above but close to 2%” until 2060. True, the Greek economy achieved a better-than-expected primary surplus last year. As the European recovery gathers pace, there could be more good fiscal news. But the idea that Greece can maintain this degree of fiscal control for the next 40 years is ridiculous. For instance, at some point during the next four decades, there might be another recession. Stranger things have happened. The blow to the credibility of the IMF could prove to be lasting damage. The fund points to its refusal to disburse money at this point as proof it’s serious about debt relief. Yet it remains a partner in a project that, by its own analysis, is bound to fail.

It should have said, enough. Europe doesn’t need the fund’s money or expertise. Governments only sought the fund’s seal of approval – and should have been denied it. Granted, the euro zone has done a lot to support Greece since its fiscal crisis began. Athens has been granted no fewer three rescue packages, worth €326 billion€ in total. The euro zone has allowed generous grace periods for official loans, extended their maturities and lowered the interest rate. As a result, Greece’s debt repayments are actually quite manageable for now.

While taxes have risen. An endless hole.

• Greek Property Market Has Lost 65% Of Its Value Since 2009 (K.)

The value of the local property market has plummeted some €2 trillion since the outbreak of the financial crisis eight years ago, according to the calculations of a Greek real estate consultancy. CBRE-Atria calculated that the Greek market has lost 65% of its value in the years from 2009 to 2017, dropping from about €3 trillion to €1 trillion today. The head of the consultancy, Yiannis Perrotis, says the problem is that the majority of properties are not quality assets, which means that the economic crisis has affected them more by increasing their value loss. “Properties such as old apartments in less popular areas, fields in non-touristic areas, stores or offices of low standards in secondary spots,” Perrotis explains, have been hardest hit.

The drop in values has been aggravated by the imposition of high taxation. It’s easy to find examples of properties whose value has dropped 60-65% in the last few years: Data from estate agents show that a new fifth-floor apartment of 60 square meters in Kypseli, central Athens, which sold for €150,000 in 2008, was resold at end-2016 for just €60,000, a decline of 60%; a newly built apartment in Ambelokipi, also in Athens, was sold for €270,000 before the crisis, and today is for sale for just €120,000, down 55%.

So fitting. Though, World Refugee Day is the most cynical expression possible of the disaster we’ve created.

• At Least 120 Migrants Drown In Mediterranean On World Refugee Day (Ind.)

More than 120 refugees are feared to have drowned in the Mediterranean after a boat sank off the Libyan cost on Friday, the International Organization for Migration (IOM) has said. Four survivors who were rescued by Libyan fishermen said the boat sank after its motor was stolen by human traffickers, according to IOM spokesman Flavio Di Giacomo. After drifting for a while, the boat, believed to have been carrying 130 refugees — most of them of Sudanese and Nigerian nationality — capsized. News of the deaths comes on World Refugee Day, during which NGOs encourage the world to commemorate and show support for those forced to flee persecution. But there is little sign of the plight of refugees in the Mediterranean abating.

The death toll passed 1,000 in April — marking a record high with that figure not reached until the end of May last year — and the latest count by the IOM shows at least 1,850 have lost their lives on the dangerous crossing. Up to 146 people drowned when a refugee boat sunk in March, and up to 250 refugees, including a baby, were reported to have drowned in May after two refugee boats sunk in the Mediterranean Sea. It comes after a report earlier this month accused the EU of disregarding human rights and international law in its desperation to slow refugee boat crossings across the Mediterranean Sea. The bloc has pledged tens of millions of euros in funding for authorities in Libya, despite the country’s ongoing civil war and allegations of torture, rape and killings earning it the moniker “hell on Earth” among migrants, according to the report, published by the US-based Refugees International (RI) group.

Debt Rattle June 6 2017

Jun 062017

June 6, 2017 Posted by Raúl Ilargi Meijer at 9:32 am Finance Tagged with: Corbyn, Intercept, leak, LNG, May, Qatar, refugees, repo, Russia, shadow, Tillerson, Trump 1 Response »

Pablo Picasso Les femmes d’Alger 1955

• Trump Set To Make First Moves At Completely Revamping The Fed (CNBC)

• Trump’s ‘Been Clear To Me’ To Try To Rebuild Russia Ties: Tillerson (R.)

• Contractor Charged With Leaking Document About US Election Hacking (R.)

• How The Intercept Outed Reality Winner (ErrataS)

• China’s Biggest Bank Is Wall Street’s Go-To Shadow Lender (BBG)

• One Belt, One Road, and One Debt Hangover (Rickards)

• Qatar Stocks Tumble 7% As Six Arab Nations Cut Diplomatic Ties (CNBC)

• Qatar’s Real Power Is As The World’s Largest LNG Exporter (BBG)

• Britain’s Economic Model Is Broken: This Is Our First Post-Crash Election (G>)

• Simple Numbers Tell Story Of Police Cuts Under Theresa May (G.)

• Earnings vs. Profits & The Bull Market (Roberts)

• US M&A: One Of The Scariest Charts To Look At – Citi (BI)

• IMF’s Lagarde Offers Eurozone Greek Debt Compromise, Handelsblatt Says (R.)

• The Euro’s Future Demands Trust (K.)

• An Occupied Hotel In Greece Models How To Welcome Refugees (WNV)

Well, it’ll be different alright. Given the Fed’s actions over the past decade, it can hardly get wrose.

• Trump Set To Make First Moves At Completely Revamping The Fed (CNBC)

President Donald Trump appears ready to remake the Federal Reserve in an image that will be considerably different than what investors have known for many years. The president is prepared to nominate Randal Quarles and Marvin Goodfriend to two of three vacancies at the central bank, according to multiple press accounts that have not been disputed by the administration. Quarles likely would assume the role vacated by Daniel Tarullo to oversee the nation’s banking system. White House officials did not respond to a CNBC request for comment. Should Trump nominate the two men and they receive confirmation, it will represent the first steps in a possible substantial remaking of a Fed that has practiced ultra-loose monetary policy for the past decade but has been tight on banking regulations.

Trump will have the opportunity to name one more person now, then can fill two even more critical vacancies in 2018 — that of Chair Janet Yellen and Vice Chair Stanley Fischer. If the Quarles and Goodfriend moves are indicators of what’s to come, things could start getting less comfortable for Yellen. Both are considered solidly conservative, in line with the Republican president and Congress but perhaps not with Yellen. “Clearly, these appointees are a significant departure from the crowd that we’ve had on the board,” said Christopher Whalen, head of Whalen Global Advisors and a former investment banker and long-time financial analyst. “Yellen is probably the most left-wing Fed chair we’ve ever had. I also think both Quarles and Goodfriend have much better grounding in the financial markets. That would be refreshing.”

Yellen, however, may not think so, particularly if the coalition she has carefully crafted since taking the chair’s seat in 2014 starts to unravel. “I welcome these additions,” Whalen said. “Hopefully they put a banker in the third slot. Then eventually Yellen’s going to leave because she’s going to start losing votes.”

Kiwis flipping birds.

• Trump’s ‘Been Clear To Me’ To Try To Rebuild Russia Ties: Tillerson (R.)

U.S. President Donald Trump told his top diplomat that the dispute over probes into links between his inner circle and Russia should not undermine U.S. efforts to rebuild relations with Moscow, Secretary of State Rex Tillerson said on Tuesday. Speaking in New Zealand after a trip to Australia, Tillerson reiterated the U.S. commitment to the Asia-Pacific region as global leaders have expressed growing mistrust over the Trump administration, which has withdrawn from key international agreements since taking office. At home, Trump’s administration has been plagued by questions over links to the Russian government. Tillerson said Trump told him to try to improve ties with Russia regardless of the U.S. political backdrop.

“I can’t really comment on any of that because I don’t have any direct knowledge,” Tillerson told a news conference in Wellington, when asked how worried he was that the U.S. political crisis could take down the Trump administration. “The president’s been clear to me: do not let what’s happened over here in the political realm prevent you from the work that you need to do on this relationship and he’s been quite clear with me… that we might make progress. I’m really not involved in any of these other issues,” he said after a meeting with New Zealand Prime Minister Bill English.

This is another very curious story, and it’s not just the girl’s name, Reality Leigh Winner. Still, even The Intercept jumps to conclusions:

“Russian military intelligence executed a cyberattack on at least one U.S. voting software supplier and sent spear-phishing emails to more than 100 local election officials just days before last November’s presidential election, according to a highly classified intelligence report obtained by The Intercept.”

Even though they know that when signs point to Russia, it’s probably not Russial, the caveat only come later:

“While the document provides a rare window into the NSA’s understanding of the mechanics of Russian hacking, it does not show the underlying “raw” intelligence on which the analysis is based. A U.S. intelligence officer who declined to be identified cautioned against drawing too big a conclusion from the document because a single analysis is not necessarily definitive.”

If the raw intelligence is not available, how can one draw the Russia conclusions? The Intercept now blindly trusts US intelligence agents? And that’s not all, see next article…

• Contractor Charged With Leaking Document About US Election Hacking (R.)

The U.S. Department of Justice on Monday charged a federal contractor with sending classified material to a news organization that sources identified to Reuters as The Intercept, marking one of the first concrete efforts by the Trump administration to crack down on leaks to the media. Reality Leigh Winner, 25, was charged with removing classified material from a government facility located in Georgia. She was arrested on June 3, the Justice Department said. The charges were announced less than an hour after The Intercept published a top-secret document from the U.S. National Security Agency that described Russian efforts to launch cyber attacks on at least one U.S. voting software supplier and send “spear-phishing” emails, or targeted emails that try to trick a recipient into clicking on a malicious link to steal data, to more than 100 local election officials days before the presidential election last November.

While the charges do not name the publication, a U.S. official with knowledge of the case said Winner was charged with leaking the NSA report to The Intercept. A second official confirmed The Intercept document was authentic and did not dispute that the charges against Winner were directly tied to it. The Intercept’s reporting reveals new details behind the conclusion of U.S. intelligence agencies that Russian intelligence services were seeking to infiltrate state voter registration systems as part of a broader effort to interfere in the election, discredit Democratic presidential candidate Hillary Clinton and help then Republican candidate Donald Trump win the election. The new material does not, however, suggest that actual votes were manipulated.

… but it gets weirder. Soon after the Intercept published the story and docs, the leaker was arrested. How? She could easily be traced back to these docs. Was the Intercept not aware of this? That’s hard to believe, leaked documents is what they do. Was someone careless? We haven’t seen any excuses made. Did they knowingly give her up? Is this then the end of the Intercept?

• How The Intercept Outed Reality Winner (ErrataS)

Today, The Intercept released documents on election tampering from an NSA leaker. Later, the arrest warrant request for an NSA contractor named “Reality Winner” was published, showing how they tracked her down because she had printed out the documents and sent them to The Intercept. The document posted by the Intercept isn’t the original PDF file, but a PDF containing the pictures of the printed version that was then later scanned in. The problem is that most new printers print nearly invisibly yellow dots that track down exactly when and where documents, any document, is printed. Because the NSA logs all printing jobs on its printers, it can use this to match up precisely who printed the document. In this post, I show how.

You can download the document from the original article here. You can then open it in a PDF viewer, such as the normal “Preview” app on macOS. Zoom into some whitespace on the document, and take a screenshot of this. On macOS, hit [Command-Shift-3] to take a screenshot of a window. There are yellow dots in this image, but you can barely see them, especially if your screen is dirty.

We need to highlight the yellow dots. Open the screenshot in an image editor, such as the “Paintbrush” program built into macOS. Now use the option to “Invert Colors” in the image, to get something like this. You should see a roughly rectangular pattern checkerboard in the whitespace.

It’s upside down, so we need to rotate it 180 degrees, or flip-horizontal and flip-vertical:

Now we go to the EFF page and manually click on the pattern so that their tool can decode the meaning:

This produces the following result:

The document leaked by the Intercept was from a printer with model number 54, serial number 29535218. The document was printed on May 9, 2017 at 6:20. The NSA almost certainly has a record of who used the printer at that time.

“With 260-to-1 Leverage A Chinese Giant Takes On Goldman In US Repo”

• China’s Biggest Bank Is Wall Street’s Go-To Shadow Lender (BBG)

High up in a New York City skyscraper, China’s biggest bank is playing in the shadows of American finance. The prize for Industrial & Commercial Bank of China isn’t stocks, bonds or currencies. It’s the grease in the wheels of all those markets: repurchase agreements. By exploiting a loophole in rules intended to keep U.S. banks from getting “too big to fail,” the state-owned ICBC has become a go-to dealer in repos in just a few short years, alongside longtime powerhouses like Goldman Sachs Group Inc. The short-term loans allow investors to borrow money by lending securities, serving a vital role in day-to-day trading on Wall Street. ICBC’s rise reflects not only China’s global ambitions in high finance, but also how post-crisis rules have let a whole host of new players profit from the murky world of shadow banking, largely beyond the reach of bank regulators.

As big banks face tougher standards, they’re being replaced by brokers, asset managers and foreign firms like ICBC, which can use more leverage and take greater risks. That has some regulators worried non-bank lenders are once again emerging as a threat to financial stability, less than a decade after panic in the repo market wiped out Lehman Brothers. “The concern is that non-bank dealers are becoming a larger part of the repo market,” said Benjamin Munyan, who specializes in shadow banking and regulation at Vanderbilt University’s Owen Graduate School of Management. “These intermediaries are outside the scope of our traditional Federal Reserve safety net.” In some ways, the development is emblematic of how steps taken to stamp out financial risk-taking in one area have created unforeseen risks in another. But it also highlights the willingness and ability of firms to jump through whatever holes regulators leave or create.

In a repo, firms borrow money by putting up securities like Treasuries as collateral. The cash can then be used to buy higher-yielding assets, something hedge funds often do. When the agreement expires, the borrower “repurchases” the collateral, paying interest to the lender. The process can be repeated over and over, boosting a firm’s leverage, as long as the assets backing the repo maintain their value. During the credit crisis, reliance on such short-term funding helped bankrupt Lehman and imperiled the financial system. Bailouts put the biggest securities firms under Fed supervision as banks, and Dodd-Frank regulations forced them to shrink their assets. A key provision has been the enhanced capital requirements, which made it prohibitively expensive for large U.S. banks to warehouse low-yielding Treasuries and finance repos.

China runs out of collateral.

• One Belt, One Road, and One Debt Hangover (Rickards)

China is not only one of the world’s largest debtors, it is one of the world’s largest creditors. China uses debt not in the customary financial manner, but as a political tool to generate employment and maintain social stability. Likewise China uses loans and investment as a tool to advance its strategic interests. This may be good geopolitics in the short run, but it will be a disaster economically in the long run. Just as Chinese state owned enterprises (SOEs) can’t repay debts to Chinese banks, China’s foreign partners will not be able to repay debts to China itself. These twin disasters-in-the-making may converge in such a way that China’s assets disappear or become illiquid at exactly the time they are most needed to bail-out its own banking system.

China has launched four major overseas investment initiatives in the past ten years. The oldest is their sovereign wealth fund, China Investment Corporation, or CIC, established in 2007. Sovereign wealth funds are a way for countries to invest their reserves in securities other than safe instruments such as U.S. Treasury notes. CIC today has assets of over $800 billion, spread among stocks, corporate bonds, hedge funds, private equity, commodities, and commercial real estate. Some of CIC’s investments are directly-owned enterprises, including gold mines in Zimbabwe. While these assets may outperform Treasury notes over time, they are also illiquid, and would tend to decline in value during a financial panic. This means that about 20%, of China’s reserves are unavailable for critical tasks such as bailing out the banking system or defending the currency.

[..] The problem with One Belt, One Road is that many of the potential recipients of development loans are not highly creditworthy or have a track record of defaulting on debts or requiring substantial debt restructuring in order to stay current. As with Chinese bank loans to SOEs, the NDB, AIIB, and One Belt, One Road efforts are not primarily economic but political. China is seeking to use its economic clout to create jobs and control critical infrastructure. [..] As with its other policies, China will turn liquid assets into illiquid assets in order to pursue its ambitions. This could make sense if nothing goes wrong. But, things will go wrong. China will face a monumental liquidity crisis sooner than later and find that its liquid assets have been turned into bridges to nowhere.

This thing has been developing over decades.

• Qatar Stocks Tumble 7% As Six Arab Nations Cut Diplomatic Ties (CNBC)

Qatar’s stock market tumbled more than 7% on Monday as six of the Middle Eastern country’s neighbors reportedly severed diplomatic relations with Doha for allegedly supporting terrorism. The key stock index in Doha slipped shortly after Monday’s open – the benchmark’s sharpest fall in more than seven years – before paring some its losses to trade down 7.2% at around 3:00 p.m. local time. Six countries, including Saudi Arabia and Egypt, had all coordinated on Monday to accuse the wealthy Gulf state of supporting terrorism, which Qatar has denied. Investors viewed the diplomatic withdrawal as a major breakdown between powerful Gulf nations, who are also close U.S. allies. While Saudi Arabia – the world’s leading crude oil exporter – said Qatar had supported “Iranian-backed terrorist groups,” Qatar described the joint decision as having “no basis in fact” and was therefore “unjustified”.

Political tensions in the region had been building in recent weeks as Egypt, Saudi Arabia, Bahrain and the United Arab Emirates – all countries to have cut relations with Doha on Monday – had blocked Qatari-based news sites in May. However, Monday’s decision was reported to be based on Qatar’s alleged role in supporting Islamist groups and its stance concerning Iran – a regional rival to Saudi Arabia. Qatar, a member of the U.S. coalition against the so-called Islamic State, has frequently and consistently rejected accusations from Iraq’s Shia leaders that it has provided financial backing to ISIS. “Whilst Qatar is the member of the U.S. coalition against IS, wealthy individuals have reportedly made donations to extremist groups and the government is also accused of supporting extremists – allegations that Qatar vehemently deny,” Tamas Varga, oil associates analyst at PVM, said in an email on Monday.

If I remember, the UK gets 90% of its LNG from Qatar.

• Qatar’s Real Power Is As The World’s Largest LNG Exporter (BBG)

Oil markets seem impervious to geopolitical risk. As four Arab neighbors imposed an unprecedented embargo on Qatar on Monday, oil prices briefly jumped 1.6 percent before falling back. The fuel to watch, though, is not oil, but gas. If this dispute is not resolved quickly, it may mean a hot summer in the Gulf. The problem has been simmering for a long time, with three of Qatar’s Gulf Cooperation Council colleagues blaming it for backing Islamist groups including the Muslim Brotherhood, and being too friendly with Iran. But in a dramatic escalation shortly after U.S. President Donald Trump’s visit to Saudi Arabia, the United Arab Emirates and Bahrain, along with Egypt, the shaky official government of Yemen and Libya’s contested eastern government broke relations with Doha and imposed a ban on air, land and sea travel.

Much of Qatar’s food and key equipment comes by land from Saudi Arabia, or reshipments through Dubai’s Jebel Ali port. Qatar is one of the smallest oil producers in OPEC, at 618,000 barrels per day, but condensate (light oil) and natural gas liquids – byproducts of its giant North Field – add about another 1.3 million barrels per day. It will stay in the OPEC production cuts deal, and even if it does not, its contribution is small. Its real power comes from being the world’s largest liquefied natural gas exporter. Qatar’s liquefied natural gas and oil exports should not be affected, even if Saudi and Emirati waters are barred to its ships. They can sail via Iranian waters and then pass the Strait of Hormuz via the usual shipping lane in Omani territory, or stay in the Iranian sector if Oman joins its GCC colleagues in the blockade. Any attempt to stop Qatari exports would be a major crisis, and would invite a serious response from major LNG customers Japan, South Korea, China and India.

So is Britain’s political model.

• Britain’s Economic Model Is Broken: This Is Our First Post-Crash Election (G>)

Mayism could mean Brexit Britain renaming itself Poundland – cheap goods and cheap workers – or it might mean a reversion to some kind of one-nation Toryism. Her party just doesn’t know. Were it not for the Tories’ slim majority, their crisis would be far more exposed. The sofa class don’t do political economy, more’s the pity, but if they did they’d see the contradictions of Conservatism in 2017. The party of capital is now pursuing a policy – hard Brexit – hated by capital. The political arm of the City is about to rip a hole through the City. All these paradoxes are given almost physical representation on our tellies every night by May herself – a populist who doesn’t actually like people.

As a non-believer in New Labour, Corbyn has no such ideological awkwardness, while John McDonnell is one of the few people in the Labour party who didn’t subcontract out their economic thinking to Brown and Ed Balls. But still, their team admit they have a way to go in rethinking Britain’s economy – and they are having to do so against a famously hostile parliamentary party. The result is Corbyn’s manifesto, which is chiefly remarkable for its unabashed defence of basic social democratic values. It’s the programme you imagine Brown would like to have delivered – if only he hadn’t been so busy triangulating.

But behind the scenes, the party is doing much deeper thinking. I have seen an internal Labour report commissioned by McDonnell. It forms one part of what could be a far more radical programme after Thursday night. Some of the lines in it will give the Daily Mail stories for days – such as calling for a overhaul of the BBC trust (which is “dominated by appointees from the corporate and financial sectors”) and hundreds of millions in public money to be spent on establishing workers co-ops. For the sympathetic reader, however, it contains some of the most imaginative thinking around economic democracy to come out of the party in decades (not saying much, sadly). In that, it sits alongside the speeches made by Corbyn’s team last week about the need for “industrial patriotism”, and to give public backing to new sectors.

More cuts are being prepared.

• Simple Numbers Tell Story Of Police Cuts Under Theresa May (G.)

Police numbers, including the number of armed police officers, have fallen sharply under Theresa May’s watch first as home secretary between 2010 and 2016 and then as prime minister. The simple numbers tell the story. In 2010 May as home secretary made the mistake that Margaret Thatcher never made in the 1980s and agreed to a Treasury demand to cut police budgets by 18%. Over the next five years the number of police officers in England and Wales fell from a peak of 144,353 in 2009 to 122,859 in 2016. At the same time the number of specialist armed police officers has fallen from a peak of 6,796 in 2010 to 5,639 in 2016. As the graph shows it would appear to be an open and shut case that cuts in police officer numbers have had an impact on the capacity of the police to respond.

May was told in 2010 that in cutting police funding she was making a mistake that Thatcher never made when she instinctively realised that there would come a crucial moment when the country, and her premiership, would depend entirely on the resilience of the thin blue line. May took a different approach as home secretary that was not without foundation. She argued that with the big continuing falls in crime that had been seen since the mid-1990s it was not necessary to maintain such a large police force. Anyway, it was argued, there was no direct link between the number of officers and the level of crime.

What you get after years of having zero price discovery. It gets worse as we go along.

• Earnings vs. Profits & The Bull Market (Roberts)

As I have discussed previously, the operating and reported earnings per share are heavily manipulated by accounting gimmicks, share buybacks, and cost suppression. To wit: “The tricks are well-known: A difficult quarter can be made easier by releasing reserves set aside for a rainy day or recognizing revenues before sales are made, while a good quarter is often the time to hide a big ‘restructuring charge’ that would otherwise stand out like a sore thumb. What is more surprising though is CFOs’ belief that these practices leave a significant mark on companies’ reported profits and losses. When asked about the magnitude of the earnings misrepresentation, the study’s respondents said it was around 10% of earnings per share.“ However, if we analyze corporate profits (adjusted for taxes and inventory valuations) we find a very different story. Since the lows following the financial crisis, the S&P 500 has grown by 266% versus corporate profit growth of just 98%.

Important Note: The profits generated by the Federal Reserve’s balance sheet are included in the corporate profits discussed here. As shown below, actual corporate profitability is weaker if you extract the Fed’s profits from the analysis. As a comparison, in the first quarter of 2017, Apple reported a net income of just over $17 billion for the quarter. The Fed reported a $109 billion profit.

With corporate profits still at the same level as they were in 2011, there is little argument the market has gotten a bit ahead of itself. Sure, this time could be different, but it usually isn’t. The detachment of the stock market from underlying profitability suggests the reward for investors is grossly outweighed by the risk. But, as has always been the case, the markets can certainly seem to “remain irrational longer than logic would predict.” This was something Jeremy Grantham once noted: “Profit margins are probably the most mean-reverting series in finance, and if profit margins do not mean-revert, then something has gone badly wrong with capitalism. If high profits do not attract competition, there is something wrong with the system, and it is not functioning properly.” Grantham is correct. As shown, when we look at inflation-adjusted profit margins as a percentage of inflation-adjusted GDP we see a clear process of mean reverting activity over time. Of course, those mean reverting events are always coupled with a recession, crisis, or stock market crash.

More importantly, corporate profit margins have physical constraints. Out of each dollar of revenue created there are costs such as infrastructure, R&D, wages, etc. Currently, one of the biggest beneficiaries to expanding profit margins has been the suppression of employment, wage growth, and artificially suppressed interest rates which have significantly lowered borrowing costs. Should either of the issues change in the future, the impact to profit margins will likely be significant. The chart below shows the ratio overlaid against the S&P 500 index.

Well, if you don’t know what something’s worth, how are you going to justify purchasing it? At some point that stops.

• US M&A: One Of The Scariest Charts To Look At – Citi (BI)

The slowdown in US dealmaking since 2015 is cause for concern, Citi’s equity strategists say. “In some respects, one of the scariest charts to look at currently is the number of announced mergers & acquisition deals over the past year or two,” Tobias Levkovich, the chief US equity strategist at Citi, said in a note on Friday. “M&A lawyers argue the ‘uncertainty’ factor, which has come about recently, given some unpredictable aspects of the new Trump administration, has been the issue. It only may explain the last six months, but the trend has been poor for about two years or more. In the past, there has been some correlation with the S&P 500 and thus it could generate more legitimate fears than some of the other excuses that are put forth for not wanting to buy American equities.”

This year through June 5, 7,561 deals were announced, the lowest count since 2013, according to S&P Global Market Intelligence. M&A volume reached a record $2.055 trillion that year, the firm’s data show, slipping in 2016 to $1.7 trillion. More dealmaking signals, in part, that companies are placing big bets on the long-term growth of certain pockets of the market. Levkovich said tough antitrust measures from European authorities and the Department of Justice antitrust division may be slowing dealmaking.

Please let it stop.

• IMF’s Lagarde Offers Eurozone Greek Debt Compromise, Handelsblatt Says (R.)

IMF Managing Director Christine Lagarde has offered Greece’s European creditors a way out of their impasse over Athens’s debts that would allow the eurozone to release a tranche of aid later this month. The IMF believes Greece needs a debt haircut, which Germany rejects. Lagarde suggested agreeing a deal whereby the IMF would stay on board in the bailout, as Berlin wants, but not pay out further aid until debt relief measures are clarified. “There can therefore be a program in which the disbursement only takes place when the debt measures have been clearly outlined by the creditors,” she told Handelsblatt in pre-released comments to run in its Tuesday edition. The compromise could allow eurozone finance ministers to give the go-ahead for their next payment of their tranche of aid at their meeting on June 15, Handelsblatt said.

“It is a possibility for an agreement,” Lagarde said. Greece has about €7 billion of debt maturing in July, a sum it will not be able to repay unless it gets new loans out of its current bailout worth up to 86 billion euros, the third aid program since its debt crisis began. Eurozone finance ministers failed to agree with the IMF last month on debt relief terms for Greece. They did not release new loans to Athens but recognized it had made significant progress with reforms. Greece hopes that eurozone finance ministers will offer enough clarity in June on debt relief measures that could be carried out after its bailout ends in 2018, to show investors that its debt – now at 197% of GDP – will be sustainable and help it return to bond markets as early as this summer.

Trust in the Troika has proven to be a very expensive mistake.

• The Euro’s Future Demands Trust (K.)

The European Commission presented its proposal for possible ways to deepen Europe’s Economic and Monetary Union a few days ago, as part of the public debate on the EU’s future. It went unnoticed in Greece, which is a pity, because if all that is proposed is adopted, the Greek problem will be overcome; also, if the mechanisms and procedures now in place had existed from the start, our country would not have hit a dead end. The question now is how Greece will be part of a system that was established because of the Greek crisis but from which our country is still excluded.

For the Greeks – sinking in recession, insecurity and isolation – the ironies are many. Presenting the proposals in Brussels on Wednesday, Commission Vice President Valdis Dombrovskis said: “The euro is one of Europe’s most significant achievements. It is much more than just a currency. It was conceived as a promise of prosperity. To keep that promise for future generations, we need the political courage to work on strengthening and completing Europe’s Economic and Monetary Union now.” Pierre Moscovici, commissioner for economic and financial affairs, added: “The euro is already a symbol of unity and a guarantee of stability for Europeans. We now need to make it a vehicle for shared prosperity. Only by reversing economic and social divergence in the euro area will we be able to defeat the dangerous populism that this fuels.”

The indirect references to Greece are clear. This is where the euro’s weaknesses first appeared, this is where the political center was torn apart and fringe groups gained power, this is where confidence in the common currency and in solidarity is being tested. The Commission’s proposals focus on completing a genuine financial union, achieving a more integrated economic and fiscal union, on greater democratic accountability and strengthening euro-area institutions (including a full-time Eurogroup chair and a European Monetary Fund). The Commission noted the euro’s successes, adding, “And yet it is only 25 years since the Treaty of Maastricht paved the way for the single currency and only 15 years since the first coin was used.” So we ask: As the currency is so new, and as the necessary mechanisms and procedures are only now being instituted, why is Greece continually an outcast? How can we pretend all is well with the euro? .

Nice thing is the City Plaza is not really occupied, nor a squat. The former employees own everyhting inside the building.

• An Occupied Hotel In Greece Models How To Welcome Refugees (WNV)

It is almost summer in Europe. Temperatures are rising, and many are preparing for vacations somewhere in the Mediterranean, which means searching for accommodation online. “No pool, no minibar, no room service, and nonetheless: the best hotel in Europe” reads the City Plaza Hotel’s homepage. A joke? Yes. A lie? Not at all. While this hotel in Athens, Greece might not offer those conventional services, it provides something far better: Free housing, medical care and meals for hundreds of people who have had to flee their countries. [..] Over the course of the year, the hotel has provided decent housing for over 1,500 refugees — 400 at any one time — in times of undignified detention camps. It is a model of self-organization and solidarity with refugees — who share living quarters with locals — in times of rising racism and nationalism.

[..] Thousands of homeless refugees are living in the streets of Athens, including families with small children. In response to this crisis, the Greek state set up more than 49 detention centers and camps. Activists and refugees had another idea of how to respond. On April 22, 2016 they took over the City Plaza — which, like many businesses since the economic collapse, had been abandoned for six years. Along with eight other self-organized shelters occupied by refugees and activists around the city, the hotel offers displaced people a safe and dignified alternative to the miserable, unhygienic and cruel conditions of the detention facilities. When the City Plaza went bankrupt in 2010, the management failed to pay the employees their final salaries. According to a court ruling, since they were unable to pay the workers monetarily, everything that is inside the building belongs to the workers.

However, the owner prevented auctioning the hotel for years. When the seven-story building was finally occupied last year, the former hotel employees declared that they were happy to offer and share everything. And the activists running City Plaza now support the workers and are planning common efforts to meet the demands of both the former workers and the refugees. The refugees’ demands include access to housing, education and employment. By providing everything that is needed themselves, the project proves that decent living conditions for everyone is possible, even in a country as burdened by crisis as Greece. And the warm reception that the refugees have received by those living near the hotel demonstrate that poverty is not an obstacle to welcoming people with open arms. “The neighbors bring some clothes, some food — you know, they are warm. Although their lives are also ruined, they see in the ruins of their lives, the ruins of the lives of other people,” said Maria, one of the Greek activists running the hotel.

Debt Rattle January 12 2017

Jan 122017

January 12, 2017 Posted by Raúl Ilargi Meijer at 10:24 am Finance Tagged with: bitcoin, broken arm, CNN, Deep State, Greece, Icarus, Kyle Bass, Modi, refugees, Tillerson, Trump 5 Responses »

Matisse Icarus 1944

• Trump Slams BuzzFeed As “Failing Pile Of Garbage”, CNN As “Fake News” (ZH)

• Scorching Press Conference Shows Trump Won’t Have An Easy Presidency (GT)

• Tillerson Says China Can’t Have Access to South China Sea Isles (BBG)

• The Deep State Goes to War with President-Elect (Greenwald)

• America Versus the Deep State (Jim Kunstler)

• 160 Million Americans Can’t Afford To Treat A Broken Arm (BI)

• Suddenly, Home Sale Agreements Are Falling Apart Across the US (BBG)

• Perils Of The Icarus Trade As The World Runs Short Of Dollars (AEP)

• China’s $34 Trillion Experiment Is Exploding (Kyle Bass)

• China To Merge State Media For Stronger Voice In Financial News (R.)

• Bitcoin Collapses, Chinese Latecomers Get Fleeced (WS)

• VW Officials Destroyed Files, E-Mails as Diesel Scheme Unraveled (BBG)

• India Central Bank Won’t Share Details Of Modi Cash Ban, Mystery Deepens (BBG)

• Greece Sends Navy Ship To Lesbos To House Freezing Refugees (AP)

• Weather Wreaks Havoc In Northern Greece (Kath.)

• Refugees In Greece Defy Extreme Cold To Help The Homeless (AJ)

Well, I was entertained..

• Trump Slams BuzzFeed As “Failing Pile Of Garbage”, CNN As “Fake News” (ZH)

In an epic (mutual) trolling between president-elect Trump on one hand and BuzzFeed and CNN, on the other, the two media organizations which issued yesterday’s unsubstantiated report about Russia having compromising information on the president-elect, Trump first addressed the question of why he referred to Nazi Germany, saying it is “disgraceful” that intelligence communities would allow the release of any information. “That’s something Nazi Germany would have done and did do,” he says. He then unleashed on Buzzfeed which alone published the 35-page memo behind the Russian allegations, saying “Buzzfeed which is a failing pile of garbage… will suffer the consequences” .

And then, in an even more stunning episode, Trump slammed CNN reporter Jim Acosta, who he also called out during the presser over their report on a two-page synopsis they claim was presented to Trump. With Trump looking to call on other reporters, Jim Acosta yelled out, “Since you are attacking us, can you give us a question?” “Not you,” Trump said. “Your organization is terrible!” Acosta pressed on, “You are attacking our news organization, can you give us a chance to ask a question, sir?” Trump countered by telling him “don’t be rude.” “I’m not going to give you a question,” Trump responded. “Don’t be rude. I’m not going to give you a question. You are fake news!” Trump responded, before calling on a reporter from Breitbart.

A snubbed Jim Acosta then tweeted the following: “Fortunately ABC’s Cecilia Vega asked my question about whether any Trump associates contacted Russians. Trump said no.”These exchanges followed an initial statement by Trump spokesman Sean Spicer who said that “for all the talk lately about ‘fake news,’ this political witch hunt by some in the media…is frankly shameful & disgraceful…. Highly irresponsible for a left-wing blog… to drop highly salacious and flat out false information on the Internet.” Following this, we expect the war between Trump and the media in general, or at least CNN in particular, to reach biblical proportions.

View from China offical media.

• Scorching Press Conference Shows Trump Won’t Have An Easy Presidency (GT)

US President-elect Donald Trump, who will officially take office on January 20, held his first press conference since winning the presidency on Wednesday local time. In about an hour, the most questions raised were regarding reports of Russia having compromising information on Trump. He also spent some time responding to how he will handle ties between his business and his presidency. Trump insisted on building a wall on US border with Mexico and the latter is going to pay for it. He also reiterated the future abolishment of Obamacare and will replace it with a new medical reform plan. Trump mentioned China six times on four issues, including describing Jack Ma of Alibaba as an incredible person and that they are going to do tremendous things together.

He said the US is losing hundreds of billions of dollars every year due to trade imbalance with China, Japan, Mexico and other countries. On the issue of Russia hacking the 2016 election, he noted his nation gets hacked by other countries as well, including China, which resulted in the loss of personal information of 22 million employees who work for the US government. He said that “Russia and other countries — and other countries, including China, which has taken total advantage of us economically, totally advantage of us in the South China Sea by building their massive fortress, total. Russia, China, Japan, Mexico, all countries will respect us far more, far more than they do under past administrations.” During the conference, which attracted widespread attention, Trump did not mention the Taiwan question, nor did he articulate how he will handle Sino-US ties. Relevant questions were not raised by reporters either.

It looks like that US mainstream public opinion still finds it hard to accept the fact that Trump has been elected as their new president. They are suspicious about and alert to Trump’s friendly attitude toward Russia, his family businesses and how he would transform Obama’s medical policy. US media outlets are particularly eager to hype Trump’s relations with Russia and the Kremlin’s alleged influence on the election. It seems they are, intentionally or unintentionally, restricting Washington’s ability to improve ties with Moscow under Trump.

Tillerson said many things, but I can’t find a good report on it. Watched the first bit, before the Trump show, wrote some stuff to a friend:

Watching the conformation thing, Unreal. All these senators saying stuff about Russia, and he can’t really tell them they’re wrong, or they won’t confirm him. But he himself knows much more about Russia than they do, yet that’s not what they’re looking for. They just want him to say bad things about Putin.

Marco Rubio asks: Do you think Putin is a war criminal. (Tillerson: I would not use that word.) And now goes off listing all the atrocities Russia is supposed to have committed in Aleppo. As reported by US fake media. Without sources on the ground… Next list of “countless” people supposedly killed by Putin in Russia. All Tillerson can say on all these things is “i don’t have sufficient information”. Next: Sen. Menendez. Topic? Russia!

Tillerson had interesting views on climate change too. Yeah, he has a mind of his own, not a blind Trump follower. Does that surprise anyone? Certainly not Trump.

• Tillerson Says China Can’t Have Access to South China Sea Isles (BBG)

President-elect Donald Trump’s nominee for secretary of state said China must be denied access to artificial islands built in the South China Sea, a move that would raise the risk of conflict between the world’s biggest economies. Hours into a confirmation hearing with the Senate Foreign Relations Committee, where he was grilled extensively about his views on Russia, former Exxon Mobil Corp. chief Rex Tillerson said that a failure to respond to China’s actions had allowed it to “keep pushing the envelope” in the South China Sea. “We’re going to have to send China a clear signal that first the island-building stops and second your access to those islands is also not going to be allowed,” he said when asked whether he would support a more aggressive posture in the South China Sea. He compared China’s actions to those of Russia in the Crimea.

The remark is the latest from Trump’s administration to signal a more aggressive defense posture against China in addition to calls for a tougher line on trade. Trump earlier questioned the U.S.’s policy of recognizing Beijing over the government in Taiwan, and criticized China’s ties with North Korea. China pushed back against Tillerson’s comments on Thursday even while saying it agreed with him on areas of cooperation between the two countries. On Monday, Alibaba Group Holding Ltd. Chairman Jack Ma met with Trump and discussed plans to create 1 million new jobs in the U.S. by helping small businesses sell goods to China. “Like the U.S., China has the right within its own territory to carry out normal activities,” Chinese Foreign Ministry spokesman Lu Kang said at a regular briefing in Beijing in response to a question on Tillerson’s remarks. “That is within the limits of its sovereignty.”

Tillerson offered no detail about how the U.S. could stop China from building islands, or prevent access, but in recent years the U.S. has consistently conducted freedom of navigation operations throughout the area. “This is the sort of off-the-cuff remark akin to a tweet that pours fuel on the fire and maybe makes things worse,” said Malcolm Davis, a senior analyst at the Australian Strategic Policy Institute in Canberra. “Short of going to war with China, there is nothing the Americans can do.”

“.. there is no bigger favor that Trump opponents can do for him than attacking him with such lowly, shabby, obvious shams, recruiting large media outlets to lead the way. When it comes time to expose actual Trump corruption and criminality, who is going to believe the people and institutions who have demonstrated they are willing to endorse any assertions no matter how factually baseless..”

• The Deep State Goes to War with President-Elect (Greenwald)

In January, 1961, Dwight Eisenhower delivered his farewell address after serving two terms as U.S. president; the five-star general chose to warn Americans of this specific threat to democracy: “In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.” That warning was issued prior to the decadelong escalation of the Vietnam War, three more decades of Cold War mania, and the post-9/11 era, all of which radically expanded that unelected faction’s power even further.

This is the faction that is now engaged in open warfare against the duly elected and already widely disliked president-elect, Donald Trump. They are using classic Cold War dirty tactics and the defining ingredients of what has until recently been denounced as “Fake News.” Their most valuable instrument is the U.S. media, much of which reflexively reveres, serves, believes, and sides with hidden intelligence officials. And Democrats, still reeling from their unexpected and traumatic election loss as well as a systemic collapse of their party, seemingly divorced further and further from reason with each passing day, are willing — eager — to embrace any claim, cheer any tactic, align with any villain, regardless of how unsupported, tawdry and damaging those behaviors might be.

The serious dangers posed by a Trump presidency are numerous and manifest. There are a wide array of legitimate and effective tactics for combatting those threats: from bipartisan congressional coalitions and constitutional legal challenges to citizen uprisings and sustained and aggressive civil disobedience. All of those strategies have periodically proven themselves effective in times of political crisis or authoritarian overreach. But cheering for the CIA and its shadowy allies to unilaterally subvert the U.S. election and impose its own policy dictates on the elected president is both warped and self-destructive. Empowering the very entities that have produced the most shameful atrocities and systemic deceit over the last six decades is desperation of the worst kind.

I like Jim’s thinking that since WalMart parking lots are the new town square, and WalMart sells pitchforks and patio torches…..

• America Versus the Deep State (Jim Kunstler)

The bamboozlement of the public is nearly complete. The Deep State has persuaded 80% of Americans that all news is propaganda, especially the news emanating from the Deep State’s own intel department. They’re still shooting for 100%. The fakest of all “fake news” stories turns out to be… “Russia Hacks Election.” It was reported conclusively Saturday on the front page of The New York Times, a wholly-owned subsidiary of the Deep State: “Putin Led a Complex Cyberattack Scheme to Aid Trump, Report Finds: WASHINGTON — President Vladimir V. Putin of Russia directed a vast cyberattack aimed at denying Hillary Clinton the presidency and installing Donald J. Trump in the Oval Office, the nation’s top intelligence agencies said in an extraordinary report they delivered on Friday to Mr. Trump.”

You can be sure that this is now the “official” narrative aimed at the history books, sealing the illegitimacy of Trump’s election. It was served up with no direct proof, only the repeated “assertions” that it was so. In fact, it’s just this repetition of assertions-without-proof that defines propaganda. It can also be interpreted as a declaration of war against an incoming president. The second civil war now takes shape: It begins inside the groaning overgrown apparatus of the government itself. Perhaps after that it spreads to the WalMart parking lots that have become America’s new town square. (WalMart sells pitchforks and patio torches.) Did the Russians make Hillary Clinton look bad? Or did Hillary Clinton manage to do that herself? The NSA propaganda was designed as a smokescreen to conceal the veracity of the Wikileaks releases.

Whoever actually rooted out the DNC and Podesta emails for Wikileaks ought to get the Pulitizer Prize for the outstanding public service of disclosing exactly how dishonest the Hillary operation was. The story may have climaxed with Trump’s Friday NSA briefing, the heads of the various top intel agencies all assembled in one room to emphasize the solemn authority of the Deep State’s power. Trump worked a nice piece of ju-jitsu afterward, pretending to accept the finding as briefly and hollowly as possible and promising to “look into the matter” after January 20th — when he can tear a new asshole in the NSA. I hope he does. This hulking security apparatus has become a menace to the Republic.

This is the America that Obama leaves for Trump.

• 160 Million Americans Can’t Afford To Treat A Broken Arm (BI)

A lot of Americans are really struggling. The precarious personal finance situation of Americans has made news for years. It is something we’ve written about a lot at Business Insider. Elevate’s Center for the New Middle Class wanted to look into the issue to find when an unexpected expense becomes a crisis for ordinary Americans. And the results were pretty depressing. Elevate carried out a study based on a 10-minute online questionnaire surveying 502 nonprime (credit score below 700) and 525 prime Americans (credit score of 700 or above). It turns out that nonprime Americans with credit scores below 700 are likely to be hit harder, and more often, by unexpected expenses than prime Americans. 160 million Americans come under the nonprime category, according to the study.

“A bill becomes a crisis for nonprime Americans at $1,400. For Prime, it’s $2,900,” the study said. “An unexpected expense becomes a significant disruption to prime Americans when it is 53% of their monthly income. Nonprime Americans can only swallow a 31% impact to their income.” The study noted that many common expenses, such as covering the out-of-pocket on a broken arm, an apartment security deposit, or replacing a vehicle transmission, cost more than $1,400. “It’s hard for many to believe that unexpected car repairs can cause a major upset in a household’s finances,” Jonathan Walker, executive director of Elevate’s Center for the New Middle Class, said. “Unfortunately, it happens all too often, simply because nonprime Americans don’t have the available resources to help absorb some of these financial shocks. This can cause a downward spiral on their daily finances as well as their credit history.”

If it quacks like a bubble…

• Suddenly, Home Sale Agreements Are Falling Apart Across the US (BBG)

Spending months to find the perfect home in your price range, only to have your mortgage application rejected, or a home inspection turn up expensive repairs, is a nightmare—one that is coming true with increasing frequency, according to a new report from real estate listings website Trulia. A Trulia analysis of U.S. listings shows that 3.9% of homes that moved from for-sale to pending moved back to for-sale again, nearly double the rate in 2015. Such “failed sales” increased in 96 of the 100 biggest U.S. metros, with big swings in areas large and small, rich and poor. That includes Los Angeles and Charleston, S.C., as well as San Jose and Akron, Ohio.

In Ventura County, Calif., where the median home value is $548,000, 11.6% of prospective sales failed to close in 2016. That’s the highest in the U.S., up from 3.1% in 2015. Tucson, where the median home price is $176,000, had the second-highest rate of failed sales, at 10.8%, up from 3.5% the year before. The problem of failed sales has been most acute for cheaper homes and older ones: Some 6.3% of sales of starter homes fell through last year, according to Trulia’s analysis, compared with 3.6% of so-called premium home sales. Homes built in the 1960s had the highest fail rates, while sales of newer and older houses were more likely to go through.

“There will certainly be tax cuts but circumstances are nothing like the Reagan stimulus of the early 1980s when the US was coming out of recession.”

• Perils Of The Icarus Trade As The World Runs Short Of Dollars (AEP)

The great unknown is where the pain threshold lies in a global system with debt ratios that are now roughly 40pc of GDP higher than just before the Lehman crisis. Bank of America fears a further rise in yields of 50 to 75 basis points may be enough to trigger a “financial event”. HSBC’s latest global outlook is even darker. Indeed, it is astonishing. The bank expects yields on 10-year US Treasuries to push a little higher to 2.5pc before crashing back to historic lows of 1.35pc by the end of the year, taking global yields with them. Markets will conclude by the summer that Trumpian stimulus does not add up to much, and that the reflation narrative is a hoax. “We believe that equities are walking a tightrope, and there is a fairly long way to fall,” said the bank.

While I do not take a view on stock prices, HSBC’s outlook is broadly in line with my own. The world cannot easily withstand the sort of Fed tightening now being etched into forecasts by the macro-economic fraternity. The Institute of International Finance says debt has reached $217 trillion, a record ratio of 325pc of GDP. What is remarkable is that even in mature economies – trying to ‘deleverage’ – the ratio jumped by 6pc of GDP to 390pc over the first nine months of last year. There is almost nowhere left to hide. Corporate debt in emerging markets has risen from $6.5 trillion to $25.5 trillion since Lehman, with the ‘credit gap’ signalling danger in China, Hong Kong, Singapore, Thailand, Saudi Arabia, Chile, Turkey, and Indonesia. Total off-shore dollar debt has risen fivefold to $10 trillion since 2000.

The financial system is clearly out of kilter. The pattern of the last 35 years is a steadily falling “natural” rate of interest, requiring ever more radical action by central banks at the trough of each cycle. The policy elites badly misjudged the force of this ‘Wicksellian’ slide in the build-up to the global crisis in 2008. While the subprime saga makes for electrifying Holywood films, it was not the reason why the Western banking system collapsed. The trigger of the crash was overly tight money. The ECB raised rates into the teeth of the storm. Hawkish Fed rhetoric from March to August 2008 pushed up US borrowing costs sharply, ignoring warnings from some of their own staff that the money supply was by then imploding. Both banks under-estimated the fragility of the system.

Central bankers are more alert this time but they have not scrapped their infamous ‘DSGE’ models, and I suspect that political pressure – from Congress, or regional Fed banks, or from Germany – will cause them to over-tighten again. We may find that three US rate rises and even a smidgeon of ECB tapering are all it takes to detonate the next crisis. Markets seem to be betting that Donald Trump’s fiscal largesse will be large enough to break the deflationary grip. HSBC says they are “cherry-picking the good bits” from his campaign. We do not yet know whether his infrastructure plan really exists. There will certainly be tax cuts but circumstances are nothing like the Reagan stimulus of the early 1980s when the US was coming out of recession.

Excellent by Bass. Recommended. h/t Valuewalk

• China’s $34 Trillion Experiment Is Exploding (Kyle Bass)

Over the past decade, we have worked diligently to identify anomalies in financial systems, governments, and companies around the world. We have been vigorously studying China over the last year, with the view that the rapid credit expansion in the Chinese banking system will result in significant credit losses that will require the recapitalization of Chinese banks and materially pressure the Chinese currency. This outcome will have many near-term and long-term effects on countries and markets around the world. In other words, what happens in China will not stay in China. The unwavering faith that the Chinese will somehow be able to successfully avoid anything more severe than a moderate economic slowdown by continuing to rely on the perpetual expansion of credit reminds us of the belief in 2006 that US home prices would never decline.

[..] China has allowed (and encouraged) its banking system to grow into a gargantuan $34 trillion behemoth (a whopping 340% of Chinese GDP). For context, consider what the United States banking system looked like going into the GFC of 2007-2009. On-balance sheet, the US banking system had about $1 trillion of equity and $16.5 trillion of banking system assets (100% of US GDP). If non-banks and off-balance sheet assets are included, it would add another $12.5 trillion to get to about 175% of GDP. US banks lost approximately $650 billion of their equity throughout the GFC. We believe that Chinese banks will lose approximately $3.5 trillion of equity if China’s banking system loses 10% of assets.

Historically, China has lost far in excess of 10% of assets during a non-performing loan cycle (The Bank for International Settlements estimated that Chinese banking system losses throughout the 1998-2001 cycle exceeded 30% of GDP). We expect losses in this cycle to exceed prior cycles. Remember, 30% of Chinese GDP approaches $3.6 trillion today. Think about how much quantitative easing (QE) the US Fed had to create in order to entice $650 billion of common and preferred equity into the US banks and prevent a Japanese-style deflationary bust. The Fed had to expand its balance sheet by roughly $4.5 trillion.

How significantly will the Chinese central bank have to expand its balance sheet in order to compensate for $3.5 trillion of lost bank capital? What will that do to the renminbi? What will happen to Chinese credit growth and broader Asian credit growth while this happens? If the US Fed’s experience serves as a proxy for what could happen in China, we believe that China will likely have to print in excess of 10 trillion US dollars’ worth of yuan to recapitalize its banking system. The weakening renminbi is the product of larger banking system problems. By the time the loss cycle has peaked, we believe the renminbi will have depreciated in excess of 30% versus the US dollar.

What country does this remind me of?

• China To Merge State Media For Stronger Voice In Financial News (R.)

China is set to consolidate five state media companies to create a “modern financial media group” to increase the state’s voice in economic and financial news coverage, the state-run Xinhua news agency said on Wednesday. Since taking power in 2012, President Xi Jinping, who has called for Beijing to take a bigger role in a global governance system, has stepped up media control and scrutiny to project China’s “soft power” and better communicate its message. The State Council, China’s cabinet, has given Xinhua permission to acquire and consolidate China Securities Journal, Shanghai Securities News, Economic Information Daily and Xinhua Publishing House and launch a new company under the banner China Fortune Media Corporation Group.

The move aims at “deepening the central authority’s reforms of the cultural system” and “increasing mainstream media’s influence in the area of financial information,” Xinhua said in a notice. The new financial news-focused company will be launched in Beijing on Thursday next week, it said. While visiting three major state news agencies in February last year, Xi ordered the organizations to strictly follow the Communist Party’s leadership and focus on “positive reporting”, Xinhua reported at the time. “All news media run by the Party must work to speak for the Party’s will and its propositions and protect the Party’s authority and unity,” Xi was quoted as saying. The three media Xi visited – Xinhua, People’s Daily and state-owned broadcaster CCTV – are considered by the central leadership as the “throat and tongue” of the party.

“No one is going to bail out these folks that got in late and are losing a ton of money on their bitcoin bets, or those that tried to catch that knife and got their fingers sliced off. On the contrary. Learn your lesson – that’s what Chinese authorities seem to say..”

• Bitcoin Collapses, Chinese Latecomers Get Fleeced (WS)

The People’s Bank of China announced on Wednesday that it is probing the major bitcoin exchanges in Beijing and Shanghai – BTCC, Huobi, and OKCoin – for a list of violations, including market manipulation, money laundering, and unauthorized financing. This is part of the PBOC’s efforts to crack down on capital flight, a major escalation from last week, when Chinese officials warned investors – if you can call them “investors” – to be careful with bitcoin. That warning came at the peak of the spike and tipped the whole thing over. Ironically, China’s many other crackdowns on capital flight have pushed the hapless Chinese, who want their capital to flee, into bitcoin. It was seen as a way of converting their yuan into something other than yuan, which they fear will depreciate relentlessly.

The yuan lost 6.5% against the dollar last year, its worst year since 1994, which is nothing compared to some other major currencies, such as the British pound which lost 16.3% against the dollar, and the Mexican peso which lost 17%. But the Chinese are not used to getting whacked by a depreciating currency. It spooks them. So the promise of convenient capital flight along with the lure of bitcoin’s semi-anonymity and the hope of quickly doubling their money have just been too much to resist. The rest of the world lost interest in bitcoin after it transferred a lot of money to those that got in early and got out in time from the latecomers that ended up holding the bag when it began to crash in late 2013. It went from over $1,100 to a range of around $250 in 2015. But recently, the Chinese have picked up the baton and in an insane frenzy drove it to $1,140 all over again.

And just in time, bitcoin crashed again. As of Wednesday evening, as I’m writing this, it plunged 14.5% to $772, just in one day. In the five days since its peak of $1,140 on January 6, it has crashed 32% against the dollar. What a crazy spike! In terms of yuan, it’s even worse: It plummeted 19% against the yuan on Wednesday and 41% over those five misbegotten days! No one is going to bail out these folks that got in late and are losing a ton of money on their bitcoin bets, or those that tried to catch that knife and got their fingers sliced off. On the contrary. Learn your lesson – that’s what Chinese authorities seem to say..

6 arrests now?!

• VW Officials Destroyed Files, E-Mails as Diesel Scheme Unraveled (BBG)

Volkswagen’s nearly decade-old plot to cheat U.S. emissions tests – all while marketing its diesel cars as environmentally friendly – was quickly unraveling by 2015. A campaign to mislead regulators was failing so badly that top executives signed off on a script for employees to use when questioned. It didn’t work. The next day, Aug. 19, 2015, an employee went off script and told regulators for the first time that its diesel cars were designed to behave differently during emissions tests, according to court documents. In the home office in Germany, some executives and engineers began deleting documents related to U.S. emissions and the company’s head of engine development told an assistant to dispose of a hard drive containing e-mails from him and other supervisors.

All this was laid out by U.S. prosecutors on Wednesday as they announced charges against five officials they said had been key to developing and carrying out the scheme. As part of the carmaker’s settlement concluding criminal and civil probes in the U.S., VW agreed to plead guilty to conspiracy to defraud the government and consumers and obstruction of justice, and to pay $4.3 billion in penalties. Prosecutors continue to look into the roles individuals played and the investigation is still open, U.S. Attorney General Loretta Lynch said at a press conference Wednesday.

“..citing danger to life and national security..” Does this imply it wasn’t Modi who took the decision? Whose life is at risk?

• India Central Bank Won’t Share Details Of Modi Cash Ban, Mystery Deepens (BBG)

India’s central bank refused to share specific details of Prime Minister Narendra Modi’s ban on high-value banknotes citing danger to life and national security, as the mystery deepens over who took the unprecedented decision. The Reserve Bank of India recommended the move, which was accepted by the cabinet and announced by Modi on Nov. 8, Power Minister Piyush Goyal told parliament in November. The RBI board approved the ban three hours before Modi’s speech and hadn’t discussed the matter before, a slew of responses to Bloomberg News’s Right to Information requests show. However, the RBI told a lawmakers’ panel this week that the government had “advised” the monetary authority to “consider” the ban a day before the RBI board made its recommendation. The government then “considered the recommendations” and decided to withdraw the notes, culminating in Modi’s address that blindsided the nation.

The cloak of secrecy that has shrouded the currency ban decision is likely to bolster the view that authorities, both on Mint Street and in New Delhi, were not prepared for such a decision and the way it was announced. It risks undermining perceptions of the central bank’s independence and raises questions about Modi’s decision-making style and his communication with the RBI. More clarity may emerge when RBI Governor Urjit Patel deposes before a parliamentary committee on Jan. 20. Details are essential to help assess the success of the shock move as well as gauge the impact of the decision “It is very perplexing that the RBI doesn’t answer questions about how the decision was arrived at,” said Shilan Shah, Singapore-based India Economist at Capital Economics. “There are concerns that in the whole process the RBI has been sidelined by the government and that raises questions about its independence,” he said, adding that authorities have not been transparent.

They have horses and barns in Greece too. Now the worst cold seems to pass, here’s the cavalry.

• Greece Sends Navy Ship To Lesbos To House Freezing Refugees (AP)

Greece’s navy has sent a tank landing ship to the island of Lesvos to house refugees and migrants during a cold snap that has triggered public health warnings. The vessel has docked and is due to provide accommodation for about 500 migrants. A medical association on Lesvos said Tuesday that conditions at the main camp there were “inhuman” with migrants in tents exposed to freezing temperatures. Schools have been closed on Lesvos because of the bad weather, as a state of emergency was expanded to other areas in northern Greece, where snow has blocked roads and caused power and water outages.

This country is not prepared for any kind of snow. Saw footage of Evia island, which had 10 feet. Luckily, no refugees there.

• Weather Wreaks Havoc In Northern Greece (Kath.)

Transport Minister Christos Spirtzis has ordered an administrative investigation into why hundreds of passengers remained trapped in trains in northern Greece on Wednesday in the freezing weather. Two trains carrying around 600 passengers came to a halt at Thermes and Larissa in central Greece while traveling from Thessaloniki to Athens because of icy conditions, while another Intercity train stopped in Tithorea and Larissa’s suburban railway ran into mechanical problems in Platy Imathias. Rail management company Trainose said on Wednesday that the problems were due to heavy snowfall in northern and central Greece and announced that it will be cancelling several services between Athens and Thessaloniki, as well as local services in the area, on Thursday.

Heavy snowfall has also caused problems with public transport in the northern port city of Thessaloniki, where bus company OASTH said that 11 neighborhoods are too snowed in to allow service. It also said that around 50 buses have been fitted with snow chains so they can navigate icy streets along their routes. Meanwhile on Thursday morning, fog and low-lying clouds led to flight cancellations and delays at Thessaloniki’s Makedonia airport, while freezing temperatures caused problems in the city’s natural gas and electricity network, leaving thousands of residents without heat or power as temperatures dropped to as low as -14 Celsius.

Look, if nobody else helps out, people find ways. But it’s still wholly unnecessary suffering. Konstantinos and his crew have scoured the streets of Athens with tea and bread and blankets.

• Refugees In Greece Defy Extreme Cold To Help The Homeless (AJ)

Temperatures in northern Greece have fallen to -10. Refugees living in camps have been collecting spare food and donating it to those sleeping on the streets – including homeless Greek families.

Debt Rattle January 11 2017

Jan 112017

January 11, 2017 Posted by Raúl Ilargi Meijer at 10:54 am Finance Tagged with: Boeing, BuzzFeed, euro, fake news, golden showers, Le Pen, McCain, refugees, Tillerson, Trump 5 Responses »

Dorothea Lange Hoe culture in the South. Poor white, North Carolina 1936

• Trump Said to Be Told of Unverified Russian Intelligence (BBG)

• BuzzFeed Publishes Unsubstantiated Report On Trump (G.)

• 4Chan Claims To Have Fabricated Anti-Trump Report As A Hoax (ZH)

• Michael Cohen: ‘It Is Fake News Meant to Malign Mr. Trump’ (Atlantic)

• Tillerson To Face Questions On Russian Ties At Confirmation Hearing (R.)

• Meryl Streep, Obama Prosecuted Whistleblowers & Bombed Weddings (Ryan)

• Banks Forced To Cover Tracks Of China’s Forex Regulator (R.)

• Boeing: 3 More Waves of Layoffs in 2017, Orders Collapse, Shares Rise (WS)

• Euro May Not Exist In 10 Years, French Pres. Candidate Macron Says (CNBC)

• Le Pen Says All French Banks Have Refused to Meet With Her (BBG)

• Greek Severe Weather: Refugees Freeze, Aid Industry Fails (G.)

What an incredible story. What has the country turned into? What happened to verifying sources, stories? So strike out BuzzFeed as a news source. And John McCain. Any story that contains his name is fake.

• Trump Said to Be Told of Unverified Russian Intelligence (BBG)

U.S. intelligence officials have informed President-elect Donald Trump about unsubstantiated reports they’ve received that the Russian government had compiled potentially damaging personal and financial information on him, a person familiar with the situation said. CNN reported earlier on Tuesday that as part of a briefing on Russian attempts to meddle in the presidential election, U.S. spy chiefs included a two-page summary of memos compiled by a former British intelligence operative about alleged Kremlin operations to gather prejudicial information on Trump and Democratic candidate Hillary Clinton. The FBI hasn’t been able to verify the information in the documents, CNN said.

BuzzFeed later published the entire 35-page compilation of memos, which contain potentially damaging but uncorroborated information about Trump and his associates. The person confirmed that the document was the same as the material in the government’s possession. The aim of the alleged Russian government intelligence-gathering was to leverage the information to shift U.S. policy toward Russia, including by potentially blackmailing Trump, according to the memos. President Barack Obama also was briefed on the documents. Trump denounced “FAKE NEWS – A TOTAL POLITICAL WITCH HUNT!” on Twitter at about 8:20 p.m. in New York, without mentioning or linking to any of the reports.

He retweeted a Trump Organization official, Executive Vice President Michael Cohen, who tweeted that “I have never been to Prague in my life” with a picture of the front of his passport. One of the memos alleged that Cohen had met with “Kremlin officials” in Prague in August 2016. Trump then tweeted an article by Lifezette, a website run by conservative radio host Laura Ingraham, that was critical of the BuzzFeed report.

BuzzFeed is like WaPo. Done. No credibility. Cheap clickbait chasing.

• BuzzFeed Publishes Unsubstantiated Report On Trump (G.)

BuzzFeed’s decision to publish an intelligence report filled with salacious and unsubstantiated claims about Donald Trump’s purported behaviour in Russia has triggered a political storm and debate over media ethics. The news website posted the unredacted documents on Tuesday, just 10 days before Trump’s inauguration, with a warning that the contents contained errors and were “unverified and potentially unverifiable”. The decision to put the claims in the public domain forced other media outlets to repeat the allegations or ignore a story that lit up the internet. Some critics rounded on BuzzFeed, calling it irresponsible. The documents, reportedly compiled by a British former intelligence agent, alleged that the Kremlin was “cultivating, supporting and assisting” Trump for at least five years.

They also alleged that Russian spies exploited the president-elect’s “personal obsessions and sexual perversion” to gather compromising material. The president-elect denied and denounced the claims in a series of tweets. “FAKE NEWS – A TOTAL POLITICAL WITCH HUNT.” The memos were compiled by the former intelligence officer on behalf of some of Trump’s Republican opponents in the primaries, and later by Democrats. Other media outlets including the Guardian obtained and reviewed the documents in recent weeks but declined to publish because there was no way to independently verify them. The stakes rose on Tuesday when CNN reported that America’s intelligence chiefs gave Trump and Barack Obama a two-page summary of the reports last week. CNN and The Guardian also reported that Senator John McCain delivered a copy to FBI director James Comey last month, but withheld the documents’ most eye-opening details, citing lack of corroboration.

This is what America has become. Not Trump’s doing.

• 4Chan Claims To Have Fabricated Anti-Trump Report As A Hoax (ZH)

In a story that is getting more surreal by the minute, a post on 4Chan now claims that the infamous “golden showers” scene in the unverified 35-page dossier, allegedly compiled by a British intelligence officer, was a hoax and fabricated by a member of the chatboard as “fanfiction”, then sent to Rick Wilson, who proceeded to send it to the CIA, which then put it in their official classified intelligence report on the election. Here is 4Chan’s explanation of how the story came to light:

And a summary posted on pastebin:

On january 10, Buzzfeed posted a story under the byline of Ken Bensinger, Mark Schoofs and Miriam elder titled “these reports Allege Trump Has Deep Ties To Russia” and posted a link to a document alleging, among other things, that russia has been cultivating trump for 5+ years, that trump has been in constant contact with the kremlin for information on his opponents, and perhaps most inflammatory, that there are many recorded instances of blackmail of trump in sexual misconduct. A prominent claim is that trump rented the presidential suite of the Ritz Carlton Hotel in moscow, where he knew that the Obamas had slept in; he them hired a number of prostitutes to perform a ‘golden shower’ (pissplay) on the bed and in the room. https://www.buzzfeed.com/kenbensinger/these-reports-allege-trump-has-dee…
https://assets.documentcloud.org/documents/3259984/Trump-Intelligence-Al…

Noted #nevertrump voice Rick Wilson later commented on twitter, stating that the report “gave a new meaning to Wikileaks” (https://twitter.com/TheRickWilson/status/818982395202379777) and that the report was the reason everybody was fighting so hard against the election of Trump. (https://twitter.com/TheRickWilson/status/818983514335047680)

The remarkable thing? It’s all fake. And not only fake; it’s a prank perpetuated by 4chan, on Rick Wilson himself. A post on 4chan on october 26 stated “mfw managed to convince CTR and certain (((journalists))) on Twitter there’ll be an October surprise on Trump this Friday” along with a picture of a smug face with a hash name. https://archive.4plebs.org/pol/thread/94704894/#94705224

on november 1, a person without a picture but is assumed to be the same person posted “So they took what I told Rick Wilson and added a Russian spy angle to it. They still believe it. Guys, they’re truly fucking desperate – there’s no remaining Trump scandal that’s credible.” https://archive.4plebs.org/pol/thread/95568919/#95571329

on january 10, moments after the story broke and began to gain traction on social media, a person with the same smug grin face, and the same hash title for the picture, stated “I didn’t think they’d take it so far.” https://boards.4chan.org/pol/thread/106514445#p106520376

This story has taken on something of a life of it’s own. Going through Rick Wilson’s twitter, you can find many different stories from the time that he had shown the story to a wide number of anti-trump news sources, trying to find a news organization that would actually publish the story. During that time period, he referred to it often as ‘the thing’, and often playing coy with followers on the content with the story with anybody who was not also a #Nevertrumper. Unconfirmed sources has people as high up as John McCain giving the story to FBI Director James Comey to attempt to verify the story. Given that Rick Wilson runs in Establishment circles, it is not an impossible scenario that long-serving senators are falling for what amounts to a 4chan troll trump supporter creating an ironic October Surprise out of wholecloth to punk a GOPe pundit who derogatorily referred to them as single men who masturbate to anime.

While this entire incident is laughable, and even more so if the 4Chan account is accurate, what makes it quite tragic, is that it is no longer possible to dismiss the “fake news” angle to an intelligence report. And if the CIA is compromised, what is left for “news outlets” like CNN and BuzzFeed, which were all too eager to run with the story without any attempt at verification?

Maybe Cohen should sue BuzzFeed?

• Michael Cohen: ‘It Is Fake News Meant to Malign Mr. Trump’ (Atlantic)

Donald Trump and his lawyer on Tuesday night denied allegations in an explosive, unverified dossier that describes a purported Russian operation to compromise Trump. Trump tweeted that the document, which was referred to in a CNN report and later published in full on BuzzFeed News, was “FAKE NEWS – A TOTAL POLITICAL WITCH HUNT!” Trump was reacting to allegations in a memo originating from research reportedly compiled by a former British intelligence officer that purports to show that the Russian government has compromising information on Trump. The document also makes specific claims about contacts between people working for Trump and Russian officials. It alleges that Michael Cohen, special counsel to Trump, was central to “the ongoing secret liaison relationship between the New York tycoon’s campaign and the Russian leadership,” and that he met secretly with Kremlin officials in Prague in August 2016.

Reached by telephone on Tuesday night, Cohen denied the dossier’s allegations. The story is “totally fake, totally inaccurate,” Cohen said. “I’m telling you emphatically that I’ve not been to Prague, I’ve never been to Czech [Republic], I’ve not been to Russia,” Cohen said. “The story is completely inaccurate, it is fake news meant to malign Mr. Trump.” Cohen said that during the time the report places him in Prague, he was actually with his son visiting USC and meeting with the baseball coach. A USC baseball source confirmed Tuesday night that Cohen and his son had visited USC on August 29th. Cohen said that he was in Los Angeles from the 23rd through the 29th of August, and that the rest of the month he was in New York. He said that his only trip to an EU country over the summer had been a vacation to Italy in July. Cohen also tweeted a photo of his passport: “I have never been to Prague in my life. #fakenews.” Trump retweeted Cohen’s tweet.

They won’t get to Tillerson.

• Tillerson To Face Questions On Russian Ties At Confirmation Hearing (R.)

President-elect Donald Trump’s pick for secretary of state, Rex Tillerson, faces tough questioning at his confirmation hearing on Wednesday over his ties to Russian President Vladimir Putin as both Democrats and Republicans worry about Moscow’s increasingly aggressive behavior. The central question facing Tillerson, 64, the former chairman of Exxon Mobil, is how effectively he can transform himself from a Big Oil “dealmaker” to being America’s top diplomat with little government experience. According to excerpts from his opening statement released before the hearing, Tillerson will say that Russia poses a danger and NATO allies are right to be alarmed at a resurgent Moscow. He will argue, however, that Russia’s resurgence happened in the “absence of American leadership” and will call for open and frank dialogue with Moscow.

“We must be clear-eyed about our relationship with Russia,” Tillerson will say. “Russia today poses a danger but it is not unpredictable in advancing its own interests,” according to the transcript of his remarks. “We need an open and frank dialogue with Russia regarding its ambitions, so that we know how to chart our own course,” he will say. He will also emphasize the need to destroy Islamic State, and will criticize China’s behavior in the South China Sea and call on Beijing to pressure North Korea. Tillerson’s confirmation hearing comes at a time of rising tensions with Russia over its role in the U.S. presidential election and an assessment by U.S. intelligence agencies that Russia was behind the hacks of political figures in an effort to help Trump win the Nov. 8 election. Moscow has denied the allegations. Tillerson opposed U.S. sanctions against Russia in 2014 over its annexation of Crimea from Ukraine because he thought they would be ineffective.

There was a good take down from Piers Morgan of all people on the same topic.

• Meryl Streep, Obama Prosecuted Whistleblowers & Bombed Weddings (Ryan)

Streep’s anti-Trump speech on Sunday night at the Golden Globes was a sublime performance. It was delivered with emotion and grace. A real tear-jerker for anyone worried about the oncoming era of Trump. And yet… it also stank. It reeked, in fact. Of pure, unadulterated hypocrisy. Because Streep, sadly, is that common breed of liberal Hollywood hypocrite. You know, the ones whose bleeding heart credentials are suddenly nowhere to be found when the occupant of the White House is a cool Democrat who’s besties with Beyonce. In her impassioned speech, Streep called on her peers and fans to join with her in donating to the Committee to Protect Journalists: “We need the principled press to hold power to account, to call them on the carpet for every outrage. That’s why our founders enshrined the press and its freedoms in our constitution,” she said.

She’s right, of course. But one wonders is Streep even aware, for instance, that the Obama administration has prosecuted more whistleblowers than all of his predecessors combined? It’s a tradition Trump is likely to continue, of course, but it’s rather strange that the issue never crossed her mind until now. And where was Streep – only suddenly concerned about how “violence incites violence” – when Obama was helping Saudi Arabia level Yemen, bombing funerals and wedding parties? Or when his “humanitarian intervention” in Libya went so disastrously wrong that it turned the country into a failed state, allowing the terrorist group ISIS to flourish? Or when the great uniter earned himself the nickname “The Drone King” as he expanded the US drone program and conducted ten times more strikes than George W. Bush? Also a tradition Trump will likely be only too happy to uphold.

Where was Streep as the Nobel Peace Prize winner bombed not one, two or three — but seven different countries? To be fair to Streep, she probably didn’t notice because the “principled press” didn’t seem to either. Funny thing about that too, since Streep and her friends are worried about Trump’s apparent disdain for foreigners: All of the countries bombed by the Obama administration were Muslim countries. And where was Streep when Obama’s administration was negotiating on behalf of Al Qaeda-linked “moderate” rebels in Syria? In fact, where were all the hypocrites in the room, as Obama spent 2016 dropping 26,171 bombs? Oh that’s right, they were partying in his house!

“You must control your forex deficit, but you can’t say that SAFE is controlling capital outflows..”

• Banks Forced To Cover Tracks Of China’s Forex Regulator (R.)

China’s forex regulator is telling banks to keep its instructions about curbing capital outflows secret and to ensure that research analysts keep any negative views about the yuan’s prospects to themselves, several bankers said. Both demands are seen as an attempt by the authorities to prevent alarm that could trigger further declines in the yuan, the bankers from local and foreign banks said. The yuan lost more than 6% against the dollar last year and is at eight-year lows, prompting a flurry of restrictive measures on capital outflows from the State Administration of Foreign Exchange (SAFE), including setting limits on banks’ currency volumes in some cities or provinces and requiring approval for ever smaller transactions.

SAFE, which is part of the People’s Bank of China, is insisting in oral instructions to dozens of banks that they don’t reveal its role in such restrictions, six bankers said, which was damaging their relationships with clients since they were unable to explain why they were turning away business. SAFE and the PBOC have yet to respond to requests for comment. SAFE’s reticence began at least as far back as August, when its Shanghai branch called at least 20 of the major foreign and domestic banks operating in the city to a meeting with the regional heads of several SAFE departments. A representative from an international bank attending the meeting said there were no written instructions, but a high-ranking SAFE official told them explicitly what was expected of them. “You must control your forex deficit, but you can’t say that SAFE is controlling capital outflows,” the official told the bankers.

World trade is collapsing.

• Boeing: 3 More Waves of Layoffs in 2017, Orders Collapse, Shares Rise (WS)

This is not the way to start your workday… to find this email from your boss in your inbox: “As we enter 2017, our plan calls for us to reduce our Engineering staff. I realize some of this news is unpleasant. But I wanted to respect your right to know what is occurring this year.” But that’s what happened on Tuesday at Boeing. Hammered by slowing aircraft sales and a declining order book, Boeing warned on Tuesday in an internal memo that it would conduct involuntary and voluntary layoffs of engineers in Washington state, southern California, and South Carolina, according to The Seattle Times. The memo did not mention the size of the staff cuts. The memo by John Hamilton, VP of engineering at Boeing Commercial Airplanes, summed the situation up this way: “We continue to operate in an environment characterized by fewer sales opportunities and tough competition.”

These staff cuts come on top of the cuts in 2016, when Boeing slashed its workforce in Washington state down by 9.3%. That’s 7,357 jobs. Business has been tough. In 2016, deliveries fell by 14 jets from a year ago, to 748. Net orders dropped 13% from an already rotten level in 2015, to just 668, down 53% from 2014. And the lowest level since 2010! Of these orders, 550 were for the 737 model. But Boeing only sold 58 Dreamliners, and analysts are speculating that it will need to cut production. And it only sold 17 of its twin-aisle long-range 777, its most profitable plane. In December, Boeing said it would slash production of the 777 by 40%. Order cancellations in 2016 jumped by 67% to 180 airplanes, another sign that airlines are getting increasingly cautious – and nervous.

Boeing had already given a foretaste of these job cuts on December 19, without going into specifics. It showed that it is slashing jobs faster and more aggressively than forecast in early 2016. The new CEO, Kevin McAllister, who’d succeeded Ray Conner in November, is getting his feet on the ground, so to speak. And Boeing shares hit an all-time high. [..] orders have plunged 53% in two years, order cancellations have soared, deliveries have dropped, production is getting cut, as wave after wave of layoffs sweep out engineers and productions worker – but no problem. In this wondrous era of ours, stocks can only go up no matter what. Boeing closed up on Tuesday, at $159.07 a share, just a buck shy of its all-time high in December:

No kidding: “The dysfunctioning of the euro is of good use to Germany, I have to say..”

• Euro May Not Exist In 10 Years, French Pres. Candidate Macron Says (CNBC)

The euro may not exist in 10 years’ time if Paris and Berlin fail to bolster the single currency union, French presidential candidate Emmanuel Macron said on Tuesday, adding the current system benefited Germany at the expense of weaker member states.Macron was economy minister under Socialist President Francois Hollande until he resigned last year to create his own political movement and stand as an independent candidate in this year’s presidential election.”The truth is that we must collectively recognise that the euro is incomplete and cannot last without major reforms,” Macron said in a speech at the Humboldt University in Berlin. Speaking in English, he added: “It has not provided Europe with full international sovereignty against the dollar on its rules. It has not provided Europe with a natural convergence between the different member states.”

France must implement labour market reforms and revamp its education system to revive growth, while Germany must accept that more investment instead of austerity can boost growth across the euro zone area, the centrist politician said. “The dysfunctioning of the euro is of good use to Germany, I have to say,” said Macron, adding that a lack of trust between France and Germany was blocking major reforms that would increase solidarity among the 19 members of the euro zone.”The euro is a weak Deutsche Mark,” said Macron. “The status quo is synonymous, in 10 years’ time, with the dismantling of the euro. “He proposed the creation of a euro zone budget to finance growth-oriented investments and to extend financial assistance to struggling member states.

“It’s the banks who decide who can run and who can’t.”

• Le Pen Says All French Banks Have Refused to Meet With Her (BBG)

National Front leader Marine Le Pen said French banks have refused to meet with her to discuss the possibility of financing her presidential campaign. All the other candidates have received funding from French banks, Le Pen said in an interview on France 2 television. “The fact that the banks won’t lend to us, playing a political role, poses a real problem for democracy,” she said. “It’s the banks who decide who can run and who can’t.” The leader of the anti-euro, anti-immigrant National Front said she is looking for foreign banks for financing.

In France public funds are provided to candidates for campaign expenses after presidential elections provided they win at least 5% of the vote. Typically candidates borrow during campaign with the idea of using public funds to repay the loans after the vote. Polls suggest Le Pen will win at least 20% of votes in the first round of the presidential election on April 23.

Nobody puts the NGOs under fire? What about the EU? People will have to die first. And even then, all there is, is the aid industry that is obviously criminally dysfunctional.

• Greek Severe Weather: Refugees Freeze, Aid Industry Fails (G.)

In northern Greece, where the deep freeze worsened at the weekend, the plight of refugees living in tents in abandoned industrial warehouses was further complicated by water and electricity cuts. NGOs attributed the chaos to the absence of a national response plan, saying despite warnings of bitterly cold weather the state had been woefully ill-prepared. But international organisations also said the shocking images highlighted Europe’s inhumane policies towards refugees and migrants. “What we are seeing on the islands is the manifestation of the way Europe is failing to provide dignity for some of the world’s most vulnerable,” said Panos Navrozidis, country director of the International Rescue Committee in Greece.

“It is imperative that people are moved off the Greek islands. The IRC warned of these life-threatening conditions months ago yet still now with this weather we face a life-or-death situation.” With resources stretched to breaking point in a nation itself dealing with economic and social crisis, the beleaguered government has appealed to other EU member states to expedite the process of taking in asylum seekers. Under an emergency relocation plan, agreed as part of the EU-Turkey deal, the 28-member bloc vowed to accept 63,302 refugees from Greece. To date only 7,280 have been relocated from the country, according to European commission data released this week.

Brawls between rival ethnic groups, attacks by far-right xenophobes, and frustration and uncertainty over what lies ahead have exacerbated tensions in camps. In September, thousands were forced to flee Moria after members of Greece’s neo-fascist Golden Dawn party set fire to the facility. In what it described as “an extremely urgent appeal”, the anti-racist group Keerfa said government-run installations in Athens, including a former military barracks at Malakasa, had to be closed immediately because hundreds of detainees, among them children, toddlers and disabled people were “literally freezing”.

Debt Rattle Christmas Eve 2016

Dec 242016

December 24, 2016 Posted by Raúl Ilargi Meijer at 9:23 am Finance Tagged with: craptacular, garbage, insects, Putin, refugees, Scrooge, supervolcano, Tillerson, Trump, UBI, Xi Comments Off

Alfred Palmer Annette del Sur in salvage campaign, Douglas Aircraft Co., Long Beach, CA 1942

• The Connection Between Work and Dignity (B.)

• 2016 Year In Review: A Clockwork Orange (Dave Collum)

• A Week On Jury Duty With Rex Tillerson (Roden)

• Putin Shrugs Off Trump’s Nuclear Plans, Says Democrats Sore Losers (R.)

• President Xi Open to Growth in China Falling Below 6.5% (BBG)

• Barclays Refuses To Settle With US DoJ Over ‘Craptacular Loans’ (G.)

• Greek PM in Open Confrontation With German FinMin (GR)

• Greece Takes Dig At Lenders With Scrooge Christmas Card (R.)

• Is A Big Change Underway In Global Capitalism? (Parramore/Chanos)

• Shanghai Water Supply Hit By 100-Tonne Wave Of Garbage (G.)

• 3.5 Trillion Insects Migrate Over Southern Britain Each Year (CSM)

• One of Earth’s Most Dangerous Supervolcanoes Is Rumbling (NatGeo)

• Mediterranean Death Toll Is Record 5,000 Refugees, Migrants This Year (R.)

Best ever case for basic income. And then he doesn’t even mention it!

• The Connection Between Work and Dignity (B.)

If we work hard and produce something of tangible value, we tend to feel a sense of self-worth when society rewards us for it with a decent, middle-class life. This was the essence of Franklin Roosevelt’s New Deal – if you work, you eat. The continuing power of this idea is visible everywhere. Witness Albuquerque, New Mexico, where the city gave homeless people jobs and it made them feel “human again.” Or look at the Job Corps program, where giving poor people jobs made them more likely to get married. If you give people work with tangible, visible value, you give them dignity. This, of course, is a reason the U.S.’s falling labor participation rate is such a concern – so many Americans are out of the workforce and are missing out on the dignity that comes with a job:

So is there work to be done in the U.S. that produces tangible, visible value? Of course there is. To realize this, just take a one-week trip to Japan. Where American sidewalks are cracked and uneven, Japanese ones are neat and beautiful. Where tables in American Starbucks are littered with crumbs and dirt, Japanese Starbucks tables get wiped down after every customer leaves. Where American cities like Chicago and Detroit are full of broken windows and crumbling facades, Japanese cities are clean and modern, with well-maintained, reliable public transit. Before we start complaining about make-work, let’s make the U.S. look like that. Let’s fix the sidewalks and renovate – or knock down and rebuild – all the old buildings. Let’s wipe down every Starbucks table, build quality public-transit systems and hire the workers to make them run on time.

And let’s take care of our people as well as our cities. Let’s provide child care for working moms, and elder care for old people. Let’s hire more teachers to reduce class sizes. These are all jobs that produce real, tangible results. When you fix up a building or build a train station, you can see the fruits of your labors. When you take care of an old person, you can see a real human being benefit. The value created by these jobs is a lot more tangible and clear than the value created by a lot of activities that the market rewards much more, such as high-frequency trading. The free-market age has made the economy more efficient, but it has come at a dramatic price – lost dignity for so many. The U.S. has moved away from the idea of a social compact with work at its core. That’s something that deserves to be reversed.

I warn you, don’t do it. Don’t even start reading. This innocent-enough looking ‘organic chemical professor’ with his cultivated hobo-under-the-bridge look has one thing in mind, and one only: to ruin your holidays. Being holed up with his review means no valuable and precious time left to spend with your families, letting the turkey burn in the oven (oh, would he like that!) and having no eyes for the beautiful snowy landscape out there. Talk about the Grinch who stole Christmas!

• 2016 Year In Review: A Clockwork Orange (Dave Collum)

With some notable exceptions, the mainstream media has degenerated into a steaming heap of detritus that is so bad now that it gets its own section. A congenital infobesity has morphed into late-stage disinfobesity. Enter social media—the fever swamp—to fill the void. As we shall see, however, all is not well there either. I sift and pan, looking for shiny nuggets of content that reach the high standards of a rant. Shout-outs to bloggers would have to include Michael Krieger, Charles Hugh Smith, Peter Boockvar, Bill Fleckenstein, Doug Noland, Jesse Felder, Tony Greer, Mike Lebowitz, Mish Shedlock, Charles Hugh Smith, and Grant Williams.

News consolidators and new-era media include Contra Corner, Real Vision, Heatstreet, and Automatic Earth. A carefully honed Twitter feed is a window to the world and the road to perdition. My actions speak to my enthusiasm for Chris Martenson and Adam Taggart at Peak Prosperity. However, if you gave me one lens through which to view the world, I would have to choose Zero Hedge (or maybe LadySonya.com).

Nice story. Don’t demonize the man. Give him a chance.

• A Week On Jury Duty With Rex Tillerson (Roden)

Nine years ago, I showed up to the Denton County Courthouse for jury duty and got myself picked for the job. A young girl had accused her mom’s boyfriend of sexual assault, and the case was being brought to trial. If you’ve ever served on a jury trial before, you understand the almost immediate yet very temporary bond that ties 12 strangers together who are randomly chosen from each of their private lives to fulfill a solemn public purpose. One of our first tasks was to choose our jury foreman. Perhaps it was his business suit, his impressive stature, or his charisma, but almost everyone in that jury room suggested that this middle-aged man with graying hair was likely the most fit for the task. Thanks, but I decline. I’m not interested in the spotlight, he told us. I didn’t think anything of it.

I had just bought my first BlackBerry and used my breaks to catch up on all the emails I was missing from my week at the courthouse. I recall leaving the jury room on a break with this man and remarking how busy I was and how much work I had to do. He smiled as he sat and read the paper. From the first day of jury selection, we all noticed another suited man always present in the courtroom. His presence was intriguing due to the ear piece in his ear. While grabbing lunch at Denton County Independent Hamburger on the square the second day of the trial, we noticed this mysterious man dining with our fellow juror who’d declined the foreman spot. The intrigue grew, and it was the talk of the jury: Who were these men? Finally, during a break in the jury room, one juror had the nerve to ask: “Who are you? And what do you do?”

Our fellow jury member was reading the paper again and pointed out an article with Exxon in the headlines. I work for them, he said humbly. There are a lot of people in this world who hate me for what I do, so they give me and my family guys like that to protect me. I immediately felt embarrassed for complaining about how much work I had to do. It didn’t take long before a few internet searches revealed that I was serving on this jury with the CEO of Exxon Mobil, Rex Tillerson. The trial concluded, and it was time for the jury to deliberate. The story was heartbreaking, and the facts of the case were clear enough to make the majority of the jury convinced of the guilt of this sexual offender of a little girl. But the defense did a good enough job to create a couple of hold-outs. As our deliberations came to a close, it appeared we might have a hung jury.

That’s when Tillerson began to speak. Humbly, delicately and without an ounce of condescension toward those who disagreed, he began walking us all through the details of the case. I even recall being moved by his thorough explanation about the nature of doubt and the standards set forth by our justice system. With great patience, this man who strikes multibillion-dollar deals with foreign heads of state brought our scrappy jury together — to bring a sexual predator to justice and to deliver justice for a scared and deeply wounded little girl. A local nonprofit was instrumental in fostering that young girl through this process, providing her counseling and legal help. I was so struck by their mission that I toured their facility the week after the case to learn how I could donate and volunteer to their cause.

On a whim, I decided to reach out to Tillerson to encourage him to do the same. I found an email for him online and sent him a note, touting the role this agency played in our trial and urging him to consider supporting the great work they do. To my surprise, I received an email back thanking me for my note and my jury service, and ensuring me that he would contact the agency. I later received a call from the director of that nonprofit to let me know that Tillerson followed through and gave a generous donation.

Putin was impressive. Among many other things, he announced cuts in defense spending from 4.7% of GDP in 2016, to 3.3%, and 2.8% in 2019. “If anyone is unleashing an arms race it’s not us … We will never spend resources on an arms race that we can’t afford.”

• Putin Shrugs Off Trump’s Nuclear Plans, Says Democrats Sore Losers (R.)

Russia’s Vladimir Putin said on Friday he was unfazed by President-elect Donald Trump’s plans to boost the U.S. nuclear arsenal, praising Trump for being in touch with U.S. public opinion while branding the Democrats sore election losers. Speaking at his annual news conference in Moscow, the Russian president said earlier comments he had made about his country’s own military modernization had been misunderstood in the United States and that he accepted that the U.S. military, not Russia’s, was the most powerful in the world. Putin said on Thursday Russia’s military was “stronger than any potential aggressor”. Trump later tweeted that the United States “must greatly strengthen and expand its nuclear capability until such time as the world comes to its senses regarding nukes.”

Asked to clarify his comments on Friday, MSNBC reported that Trump had said: “Let it be an arms race. We will outmatch them at every pass and outlast them all.” But Putin said he did not regard the United States as a potential aggressor and had only been talking about countries he thought might realistically launch an attack on Russia. “I was a bit surprised by the statements from some representatives of the current U.S. administration who for some reason started to prove that the U.S. military was the most powerful in the world,” Putin said, referring to State Department comments from Thursday. “Nobody is arguing with that.” Putin said he saw nothing new or remarkable about Trump’s own statement about wanting to expand U.S. nuclear capabilities anyway. “In the course of his election campaign he (Trump) spoke about the necessity of strengthening the U.S. nuclear arsenal, and strengthening the armed forces. There’s nothing unusual here,” said Putin.

“If anyone is unleashing an arms race it’s not us … We will never spend resources on an arms race that we can’t afford.” [..] Putin dismissed suggestions Moscow had helped Trump to victory in any way however. “It’s not like that,” he said. “All of this (the accusations) speaks of the current administration’s systemic problems.” Putin, who spoke positively of Trump before his election win, said that only Moscow had believed in his victory however. “Trump understood the mood of the people and kept going until the end, when nobody believed in him,” Putin said, adding with a smile. “Except for you and me.” Putin said he would be willing to visit the United States if Trump invited him and expected U.S.-Russia ties to return to normal now, particularly in the security and economic spheres.

Xi finds an opening to blame lower growth on something other than himself, and dives right in.

• President Xi Open to Growth in China Falling Below 6.5% (BBG)

President Xi Jinping isn’t wedded to China’s 6.5% economic growth objective due to concerns about rising debt and an uncertain global environment after Donald Trump’s election win in the U.S., according to a person familiar with the situation. Xi told a meeting of the Communist Party’s financial and economic leading group this week that China doesn’t need to meet the objective if doing so creates too much risk, said the person, who asked not to be named because the discussions were private. Leaders at the gathering agreed that the $11 trillion economy would remain stable with slower growth as long as employment stays firm, the person said.

Below-target growth would be in line with analyst projections that the expansion will keep decelerating in coming years from an estimated pace of 6.7% in 2016. The slowdown coincides with the nation’s broad shift from an export-led economy to services, which accounted for more than half of growth last year for the first time, and domestic consumption. Last year, policy makers pledged an annual growth rate of at least 6.5% for five years through 2020. Some economists criticize the growth objective for motivating officials to take risks that may jeopardize financial stability. The IMF is among those that have recommended a lower target.

Who came up with that word?

• Barclays Refuses To Settle With US DoJ Over ‘Craptacular Loans’ (G.)

Barclays is refusing to settle with the US Department of Justice over allegations it deliberately sold mortgage bonds to investors that it knew contained “craptacular loans”. The DoJ’s legal filing outlines an array of colourful descriptions of the types of mortgages that it alleges were used by Barclays to package up in bonds – known as residential mortgage bond securities – which could be sold on to investors. It accuses Barclays of selling investors RMBS “backed by loans it knew were made to borrowers who were not creditworthy and which were supported by house appraisals it knew were inflated”. The DoJ said Barclays was not lending to customers itself but using loans from mortgage lenders Fremont, New Century, WMC, Countrywide, and IndyMac as the basis of the bonds it was selling.

To support its case the DoJ published conversations between bankers which it claimed proved they knew they were selling poor investments. They included: • One Barclays banker in charge of reviewing the deals observed that one loan pool was “about as bad as it can be”. • On another occasion, the same banker said this “scares the shit out of me”. He also remarked about a package of loans from Wells Fargo that “we have to eat their shit loans”. • A Barclays salesperson described “the deluge of Fremont garbage being put out there”, the DoJ said. Barclays, becoming the first major lender to fail to reach a settlement with the DoJ, said it rejected the claims made in the complaint. “Barclays considers that the claims made in the complaint are disconnected from the facts. We have an obligation to our shareholders, customers, clients, and employees to defend ourselves against unreasonable allegations and demands. Barclays will vigorously defend the complaint and seek its dismissal at the earliest opportunity,” the bank said.

“No matter how big fiscal surpluses some countries manage, they will never reach the surplus of soul that Greek people have..”

• Greek PM in Open Confrontation With German FinMin (GR)

“Those who are not at peace with their souls can not cope with the problems of their country, neither Europe’s nor the world’s,” Greek Prime Minister Alexis Tsipras said on Thursday. The prime minister had in mind the German Finance Minister Wolfgang Schaeuble, who said that he can’t show any understanding to the Greek prime minister for accusing the German government of hurting Greek pensioners. Tsipras spoke in Greek parliament in an event dedicated to unescorted refugee children. “Those who shake the finger at us in the name of the agreements, and address Greek people in a condescending way, they must honor their commitments first before they turn to criticize us,” Tsipras said. Schaeuble has repeatedly said in the past that Greece is not implementing the reforms needed to help the economy to recover. “Our efforts aim to Greece so that it stands on its feet again,”he said.

Then the German minister explained further: “Solidarity can only be justified when the aid is limited and leads to change something in a positive direction. In Ireland, Portugal, Spain and Cyprus that was evident. After implementing the program, their economies are growing, rapidly for some. Greece is the third program and without the financial help of billions of euros would be bankrupt long ago. Then the Greek citizens would suffer much more.” The Greek prime minister said during his speech that the compassion and solidarity Greece showed during the refugee crisis is more important than state budgets and fiscal targets. “We now open our arms — and I believe this reflects the feelings of the vast majority of the Greek people — to these weak people. Despite our difficulties we keep our dignity and this is much greater wealth and much larger surplus of all budget surpluses. No matter how big fiscal surpluses some countries manage, they will never reach the surplus of soul that Greek people have,” Tsipras said.

That’ll go down well.

• Greece Takes Dig At Lenders With Scrooge Christmas Card (R.)

Greece’s Finance Ministry took a page out of Charles Dickens’s classic “A Christmas Carol” to have a dig on Friday at the international lenders who have imposed unpopular austerity on the country. An e-card from the press office of the Greek Finance Ministry, sent to journalists, showed a picture of a frail, stingy Ebenezer Scrooge warming by the fire during a visit of his former business partner Jacob Marley, the ghost of Christmas Past shackled in chains. “Perhaps all Christmas stories feature a terrifying Ebenezer welcoming the spirits of Christmas in his desolate loneliness, and perhaps our Christmas story is no exception,” the e-card reads. “But dear friends and colleagues, our wishes will prevail over all the Ebenezers of this world. A very happy new year, with health and love focused on those all around us.”

Lynn Parramore talks to Jim Chanos.

• Is A Big Change Underway In Global Capitalism? (Parramore/Chanos)

Jim Chanos: Bush was the MBA president who was going to be pro-business, cut taxes, and deregulate. Meanwhile, he had two recessions on his watch, less employment than when he started, and two bear markets in the stock market — probably the worst president for business since Herbert Hoover. The business guy! Yet, he did tighten up the Justice Department and go after corporate crime. The Ashcroft Justice Department, as bad as it was in lots of other things, went after corporate fraud and accounting fraud, criminally. In 2002, we got Sarbanes-Oxley to curb fraud. I don’t know that all this was Bush’s predilection — remember, his biggest supporter was Enron. But because of Enron and the other dot-com era scandals, he got backed into a corner to go hard on them.

I’ve joked that the only person who put more corporate executives in jail than George W. Bush was his father during the Savings and Loan Crisis. On these issues, I’d rather have Bush any day of the week than Obama. Both Eric Holder and Lanny Breuer of Obama’s Justice Department said in TV interviews and testimony that they factored in non-judicial aspects as to whether to mount prosecutions. I think that this had political costs to the Democrats. The crony capitalism still bothers people — the idea that Wall Street got off scot-free and they are still struggling. That lack of justice applied equally under the law was corrosive, not necessarily for Obama personally, but certainly for the party following him.

LP: How do you see a Trump presidency in this light? JC: You and I have talked about how it has become a cost calculus for lots of corporations and financial institutions to cheat. “If I get caught,” they say, “I’m just going to pay a fine.” How does this change with new faces in Washington? You still have this very pro-corporate group on Capitol Hill whose main bailiwick, in my opinion, is to protect the corporate class and the very wealthy. You’ve got what ostensibly is a proto-populist in the White House with a cabinet that is a mélange of different types, so who knows?

In my overall view, stuff happens to change people. If we go back to Bill Clinton, his “Putting People First” manifesto in ’92 was quite left-of-center, but he didn’t govern that way. If you look at things like NAFTA, Welfare reform, and cutting capital gains taxes — well, in many ways, Ronald Reagan would have been proud of him. Events conspire to derail our perceptions of presidents. When we look at their platforms, we think we know where things are headed. But in modern times, the only two presidents that I can think of who really got their ideas and platforms enacted wholesale were FDR and Reagan. Everybody else has gotten compromised, or has had events overwhelm them.

“This is so sad, just humanity digging its own grave..”

• Shanghai Water Supply Hit By 100-Tonne Wave Of Garbage (G.)

Medical waste, broken bottles and household trash are some of the items found in more than 100 tonnes of garbage salvaged near a drinking water reservoir in Shanghai. The suspected culprits are two ships that have been dumping waste upstream in the Yangtze river. It has then flowed downstream to the reservoir on Shanghai’s Chongming island which is also home to 700,000 people. The reservoir at the mouth of the river is one of the four main sources of drinking water for the country’s largest city, according to local media. China has struggled with air, soil and water pollution for years during its economic boom, with officials often protecting industry and silencing citizens that complain. China’s cities are often blanketed in toxic smog, while earlier this year more than 80% of water wells used by farms, factories and rural households was found to be unsafe for drinking because of pollution.

Officials dispatched more than 40 workers to clean up the mess, but the area around the reservoir will take about two weeks to clear, the Shanghai Daily reported. Shanghai’s water authority claims supplies are still safe to drink, but has stopped the flow coming in while it continues testing, the paper said. Videos circulating on social media showed beaches and wetlands covered in a rainbow of plastic bags. “There’s enough trash to cover several football fields,” a local resident can be heard saying in one video. Catheter bags and used IV sacks are pulled from the water, and in some places only a sea of trash can be seen, completely obscuring the river water. “This is so sad, just humanity digging its own grave,” one commenter on Twitter-like Sina Weibo said.

A tourist surrounded by rubbish on a beach in China. Photograph: Feature China / Barcroft Media

“..Britain’s overhead populations are probably “close to minimum values” because of the area’s cold and dry climate. The warm, moist skies of the Amazon – or southern California, for example – likely see far more than 3.5 trillion insects each year.”

• 3.5 Trillion Insects Migrate Over Southern Britain Each Year (CSM)

Three and a half trillion. That’s how many insects migrate over southern Britain in one year, according to a study published Friday in the journal Science. To put that number in perspective, that’s the equivalent of more than 54 bugs for every person in Britain. The team of scientists from Britain, China, and Israel spent a decade tracking insect migration at altitudes between 492 and 3,937 feet using entomological radar and an aerial insect-catching net. “High-altitude aerial migration of insects is enormous,” University of Exeter entomologist and co-author Jason Chapman told Reuters. “These aerial flows are an unappreciated aspect of terrestrial ecosystems, equivalent to the oceanic movements of plankton which power the oceanic food chains.” And the vast quantity was not the only surprising aspect of their study.

The researchers also discovered that insects migrate north and south seasonally (just like birds), and can reach speeds between 18 and 37 miles per hour by choosing wind patterns that are blowing in their chosen direction, Ars Technica reports. The trillions of migrating insects weigh a combined total of 3,200 tons – the equivalent of more than 636 elephants flying overhead each year. But if hundreds of elephants’ worth of bugs were flying overhead each year, wouldn’t we know about them already? No, say scientists: the vast majority of these bugs are super small. Take the marmalade hoverfly, for example. “It’s only about a centimeter long, it’s orange with black stripes, but it’s a hugely abundant migrant, and it actually does some very important jobs” such as pollinating crops and wildflowers, Dr. Chapman told NPR.

And the authors say Britain’s overhead migration is likely modest compared to other regions of the world. In fact, Chapman tells the Los Angeles Times that Britain’s overhead populations are probably “close to minimum values” because of the area’s cold and dry climate. The warm, moist skies of the Amazon – or southern California, for example – likely see far more than 3.5 trillion insects each year. While some bug-averse people might find this study chilling, it is really quite encouraging, say scientists. Healthy insect populations are crucial for a productive environmental landscape. “We could not function without them,” Chapman tells Reuters. The insects pollinate plants, feed birds and bats, and promote healthy soil through decomposition and other important processes.

Does ‘volatile’ capture it?

• One of Earth’s Most Dangerous Supervolcanoes Is Rumbling (NatGeo)

A long-quiet yet huge supervolcano that lies under 500,000 people in Italy may be waking up and approaching a “critical state,” scientists report this week in the journal Nature Communications. Based on physical measurements and computer modeling, “we propose that magma could be approaching the CDP [critical degassing pressure] at Campi Flegrei, a volcano in the metropolitan area of Naples, one of the most densely inhabited areas in the world, and where accelerating deformation and heating are currently being observed,” wrote the scientists—who are led by Giovanni Chiodini of the Italian National Institute of Geophysics in Rome. A sudden release of hot magmatic gasses is possible in the near future, which could trigger a large eruption, the scientists warn. Yet the timing of any possible eruption is unknown and is currently not possible to predict.

In response to the news, Italy’s government has raised the volcano’s threat level from green to yellow, or from quiet to requires scientific monitoring. In other words, the government is urging a measured response to the study, followed by additional scientific work. Campi Flegrei means “burning fields” in Italian. The volcanic region is also known as the Phlegraean Fields. Like other supervolcanoes—such as the one responsible for the geothermal features of Yellowstone—it is not a single volcanic cone. Rather, it’s a large complex, much of it underground or under the Mediterranean Sea, that includes 24 craters, as well as various geysers and vents that can release hot gas. Supervolcanoes are usually characterized by a large caldera, or depression, that formed from past explosive eruptions. Campi Flegrei’s depression, just west of Naples, is more than seven miles across.

Campi Flegrei is thought to have formed hundreds of thousands of years ago. A massive eruption 200,000 years ago spewed so much ash that it darkened the skies around the planet, triggering a “volcanic winter.” That event is thought to have been the largest volcanic episode in the history of Europe over that time. The volcano erupted again 35,000 and 12,000 years ago. An eruption about 40,000 years ago might have contributed to the extinction of the Neanderthals, a 2010 study suggested, although that report has been debated. The volcanic area was also known by the ancient Greeks.

14 per day, every single day. Before you know it, you’re talking real loss of life.

• Mediterranean Death Toll Is Record 5,000 Refugees, Migrants This Year (R.)

A record 5,000 migrants are believed to have drowned in the Mediterranean Sea this year, following two shipwrecks on Thursday in which some 100 people, mainly West Africans, were feared dead, aid agencies said on Friday. Two overcrowded inflatable dinghies capsized in the Strait of Sicily after leaving Libya for Italy, the International Organization for Migration (IOM) and the U.N. refugee agency UNHCR said. “Those two incidents together appear to be the numbers that would bring this year’s total up to over to 5,000 (deaths), which is a new high that we have reported during this crisis,” IOM spokesman Joel Millman told a Geneva briefing. The Italian coast guard rescued survivors and had recovered eight bodies so far, he said. IOM staff were interviewing survivors brought to Trapani, Italy, he added.

Just under 3,800 migrants perished at sea during all of 2015, according to IOM figures. UNHCR spokesman William Spindler said the “alarming increase” in deaths this year appeared to be related to bad weather, the declining quality of vessels used by smugglers, and their tactics to avoid detection. “These (reasons also) include sending large numbers of embarkations simultaneously, which makes the work of rescuers more difficult,” he said. The UNHCR appealed to states to open up more legal pathways for admitting refugees. Resettlement programmes, private sponsorship, family reunification and student scholarships would help “so they do not have to resort to dangerous journeys and the use of smugglers”, Spindler said.

Debt Rattle December 14 2016

Dec 142016

December 14, 2016 Posted by Raúl Ilargi Meijer at 10:02 am Finance Tagged with: Antarctica, China, fracking, Greece, IMF, Palmyra, Tillerson, Treasuries, Trump, Yellen 5 Responses »

Louise Rosskam General store in Lincoln, Vermont 1940

• Janet Yellen Needs To Announce Her Resignation — Not A Rate Hike (Crudele)

• Stephen Roach Flags Trade, China Under Trump, Tillerson (CNBC)

• Trump May Be Turning China’s $1.16 Trillion Of Treasuries Into A Weapon (F.)

• China To Fine Unnamed US Automaker For ‘Monopolistic Behavior’ (R.)

• Top US Spy Agency Has Not Embraced CIA Assessment On Russia Hacking (R.)

• Lavrov Hints ISIS Recapture Of Palmyra Orchestrated By US (R.)

• There Is More Than One Truth To Tell In The Awful Story Of Aleppo (Fisk)

• How To Make A Profit From Defeating Climate Change (Carney/Bloomberg)

• Greece ‘Boxed In’ as EU and IMF Fight Over Nation’s Debt Relief Plan (G.)

• Tsipras To Propose To EU Leaders That IMF Be Excluded (Kath.)

• Crisis Leaves Greeks Gloomiest In Europe And Beyond (R.)

• Final EPA Study Confirms Fracking Contaminates Drinking Water (EW)

• A Crack In Antarctica Is Forming An Iceberg The Size Of Delaware (PopSci)

“Yellen is a lame-duck chair. And Trump is going to want to cook her goose. It isn’t going to be pheasant.”

• Janet Yellen Needs To Announce Her Resignation — Not A Rate Hike (Crudele)

If Janet Yellen had any class, she wouldn’t just be announcing an interest rate hike this week – she would also be offering her resignation. Yellen was appointed chair of the Federal Reserve by President Obama in 2014. While most heads of government agencies will soon be offering their resignations to President-elect Donald Trump, the Fed is not a government agency. It’s an independent entity. Which means Yellen doesn’t have to resign. Her term as chair – which makes her, perhaps, the second-most powerful person in Washington — doesn’t end until January 2018. And even then, she can hang around as a mere board member – one of 14 – until 2024. So, although Yellen and her colleagues have screwed things up, they get to keep their jobs. And boy has the Fed screwed things up — both before and since the financial crisis that started in 2007. [..]

It’s clear that Trump doesn’t like Yellen. And she hasn’t said anything nice about the incoming president or his policies either. So the two aren’t likely to get along. Yellen has shown no inclination to give up her job even though Trump has lashed out at her. “I think the Fed is being totally controlled,” Trump said during a campaign stop at the Economic Club of New York. “They’re not raising rates. And they’re being controlled politically.” Welcome to reality, Mr. Trump. The Fed lost its independence four decades ago. And you’ll be trying to control it soon. Yellen has hit back at Trump, saying that his pledge to spend $1 trillion on infrastructure to help the economy was dangerous. She said that after Trump spent that much money, there “is not a lot of fiscal space should a shock to the economy occur.”

Yellen also continued to assert her preposterous notion that the “economy is operating close to full employment.” If true, why hasn’t she already raised interest rates vigorously? And why, if the economy was doing so well, did the election go so badly for the incumbents — the Democrats? The Fed boss understands economics better than Trump. The higher borrowing costs that are already being seen (and which the Fed will pile onto this week) will automatically cause government borrowing costs – and therefore, spending – to increase and make US debt levels much worse. How much worse? That depends on how high rates go and how reluctant the Chinese are to continue to lend us money, especially now that Trump has picked a fight with Beijing. Yellen is a lame-duck chair. And Trump is going to want to cook her goose. It isn’t going to be pheasant.

Few people in the west know China the way Roach does.

• Stephen Roach Flags Trade, China Under Trump, Tillerson (CNBC)

Stock markets are euphoric after Donald Trump’s victory as pundits bet on U.S. economic growth based on the president-elect’s stimulus plans, but be aware of trade deficits and funding U.S. consumption, said Yale economist and noted author on China, Stephen Roach. “Given the overall savings of the U.S., that spells bigger trade deficits and for a president who is clearly raising some protectionist flags at a time when our trade deficits are going to widen, that’s a big disconnect,” Roach, a former chairman of Morgan Stanley Asia and chief economist, told CNBC’s “Squawk Box”. “The idea of larger trade deficits colliding with protectionist shifts in policy is a very worrisome development for the U.S. and for the broader global economy,” added Roach.

Roach’s comments come against a background of Trump having campaigned on remedying a wide trade gap in favor of Beijing that he said was spurred by moves to artificially weaken the yuan and restrict entry into home markets. He has also angered China by taking a congratulatory phone call from Taiwan President Tsai Ing-wen and calling into question the foundations of the “One China” policy. China is the world’s top holder of U.S Treasurys, and any major change in that stance would have broad macroeconomic impact. “The deeper question is less about the integrity of the leadership skills he can bring to the job, but how much scope for action he will have in the Trump administration … (after) Mr Trump has made some very strong statements about a number of critical foreign policy issues,” said Roach.

Roach also commented broadly on issues that will have to be resolved in the early phase of a Trump administration, including how a U.S. savings shortfall will be financed, suggesting choices of higher interest rates or a weak dollar as possibilities. He also expects a reassessment of Trump’s economic policies and outcomes in late 2017. As for Trump’s goals to shore up the battered manufacturing industries, Roach said Americans will have to pay a price for penalizing offshore operations. “As they bring those activities home, the cost of goods sold, the prices that go to American families who are hard strapped who voted for Mr. Trump, those prices are going to go up … We can’t have it both ways,”he said.

Only, the author doesn’t really say how.

• Trump May Be Turning China’s $1.16 Trillion Of Treasuries Into A Weapon (F.)

When Donald Trump talks about China devaluing its currency it’s difficult for investors to figure out exactly what he’s trying to convey. China, in fact, is trying to strengthen its own currency against the dollar as part of an effort to prevent capital from leaving the country. It leaves people uncertain whether Trump–who has access to people who know the capital markets and can point out his mistake–simply misunderstands what’s happening in global capital markets, or if he’s picking a fight with China. Trump’s decision to take a phone call Dec. 2 from Taiwan’s President, Tsai Ing-wen, sent off alarms in Beijing, and leaders there appear to be moving toward the conclusion that Trump is picking a fight. Trump’s response that the longstanding U.S. “one China” policy may be a bargaining chip in potential trade negotiations made matters worse.

China subsequently sent a bomber capable of carrying a nuclear payload outside its borders over the contested South China Sea in a show of force aimed at expressing displeasure with Trump’s posture. China held $1.16 trillion of U.S. government debt as of September, according to the most recent data available from the Treasury. That’s down by $100 billion from the year before. During that period Treasuries have actually rallied, with the benchmark 10-year note yield falling to 1.60% from 1.99%. China’s reduction in holdings didn’t hurt the bond market, as the economic stresses that led them to allocate cash away from Treasuries led other investors to seek out safety in the debt. China is well-positioned to use the bond market to show its displeasure with the U.S. in a manner that would be more than symbolic: it could sell more Treasuries. For the President-elect, who has plans to borrow to pay to ramp up infrastructure spending, that could cause real pain. The 10-year note yield has risen to a two-year high of 2.49% up from 1.88% on election day.

For more than a decade, politicians have expressed concern that China and other foreign government could use their significant stakes in Treasuries against the U.S. by dumping them on the market. Such a move would potentially drive borrowing costs throughout the U.S. sharply higher. Bond market conventional wisdom has been that this would be unlikely because it would reduce the value of the seller’s remaining reserves, weakening it’s own capital bulwarks against a future crisis. Trump’s pugnacity mixed with his seeming willingness to ignore facts contrary to his argument make it hard to assess his motives, which may scramble conventional thinking and raise the risks of an unorthodox response from China.

Let the games begin.

• China To Fine Unnamed US Automaker For ‘Monopolistic Behavior’ (R.)

China will soon slap a penalty on an unnamed U.S. automaker for monopolistic behavior, the official China Daily newspaper reported on Wednesday, quoting a senior state planning official. News of the penalty comes at a sensitive time for China-U.S. relations after U.S. president-elect Donald Trump called into question a long-standing U.S. policy of acknowledging that Taiwan is part of “one China”. Beijing maintains that self-ruled Taiwan is a wayward province of China and has never renounced the use of force to take it back. Investigators found the U.S. company had instructed distributors to fix prices starting in 2014, Zhang Handong, director of the National Development and Reform Commission’s price supervision bureau, was quoted as saying.

In an exclusive interview with the newspaper, Zhang said no one should “read anything improper” into the timing or target of the penalty. China, the world’s largest auto market, has become crucial to the strategies of car companies around the world, including major U.S. players General Motors and Ford. “We are unaware of the issue,” said Mark Truby, Ford’s chief spokesman for its Asia-Pacific operations. In a statement, GM said: “GM fully respects local laws and regulations wherever we operate. We do not comment on media speculation.”

There’s just so much borrowing going on. And that was never the Chinese way.

• Just Another Chinese Cash Crunch, But Bigger (BBG)

In markets where investors are highly leveraged, things tend to happen slowly at first, then fast. China is having one of those moments, and as with the 2008 crisis, it can’t be pinned on one event. On Monday, the Shanghai Composite Index sank 2.5%, then extended that decline Tuesday before rebounding to close little changed. The one-year government note yield rose 7 basis points to 2.72%, on top of Monday’s 15 basis-point increase. The root cause may be banks. There’s clearly a liquidity squeeze on Chinese lenders. Nothing new there: Financial institutions tend to face higher demand for cash in December, and this year that’s been exacerbated because Chinese New Year falls early – the holiday, when many people withdraw deposits to buy gifts and travel, begins Jan. 28.

Perhaps more important, banks also want to boost the deposits they can account for as of Dec. 31, when they close their books. Financial institutions struggled to meet a loan-to-deposit ratio ceiling of 75%, and that cap was scrapped in June. None of the banks wants to show that the amount they lend is completely disconnected from what they have in the coffers, however. Which may explain why short-term deposit rates are far higher than longer-term ones. In simple terms, this is a seasonal cash crunch. The issue is that this time it’s on steroids, because it comes after several months when the People’s Bank of China increased short-term rates. This boosted funding costs for wealth-management products and for investors using leverage to buy everything from stocks to bonds to iron ore. As some of the trades begin to offer negative returns, these investors are selling.

Curiously, Hong Kong is going through a similar issue because of the impending Federal Reserve rate increase. Then the vicious circle of leverage begins: Assets being sold drop below agreed levels, triggering margin calls – or the requirement that someone borrowing money to buy securities post more cash to back up the loan. To meet those calls, investors sell more of their securities, putting further pressure on prices and prompting new margin calls. The slump in Chinese stocks last year was exacerbated by just such a dynamic. Investors must now hope that China has learned the lesson from that rout and will use its pension funds to steady the market. Otherwise, if this selloff really is the result of a liquidity squeeze, it’s unlikely to stop before February, when people return from the holiday.

And neither has the FBI.

• Top US Spy Agency Has Not Embraced CIA Assessment On Russia Hacking (R.)

The overseers of the U.S. intelligence community have not embraced a CIA assessment that Russian cyber attacks were aimed at helping Republican President-elect Donald Trump win the 2016 election, three American officials said on Monday. While the Office of the Director of National Intelligence (ODNI) does not dispute the CIA’s analysis of Russian hacking operations, it has not endorsed their assessment because of a lack of conclusive evidence that Moscow intended to boost Trump over Democratic opponent Hillary Clinton, said the officials, who declined to be named. The position of the ODNI, which oversees the 17 agency-strong U.S. intelligence community, could give Trump fresh ammunition to dispute the CIA assessment, which he rejected as “ridiculous” in weekend remarks, and press his assertion that no evidence implicates Russia in the cyber attacks.

Trump’s rejection of the CIA’s judgment marks the latest in a string of disputes over Russia’s international conduct that have erupted between the president-elect and the intelligence community he will soon command. “ODNI is not arguing that the agency (CIA) is wrong, only that they can’t prove intent,” said one of the three U.S. officials. “Of course they can’t, absent agents in on the decision-making in Moscow.” The FBI, whose evidentiary standards require it to make cases that can stand up in court, declined to accept the CIA’s analysis – a deductive assessment of the available intelligence – for the same reason, the three officials said. [..] In October, the U.S. government formally accused Russia of a campaign of cyber attacks against American political organizations ahead of the Nov. 8 presidential election. President Barack Obama has said he warned Vladimir Putin about consequences for the attacks.

That’s quite the claim. Especially since all western reporting contradicts even the possibility.

• Lavrov Hints ISIS Recapture Of Palmyra Orchestrated By US (R.)

Foreign Minister Sergei Lavrov said talks with the United States on Syria were at a dead end, and Islamic State’s advance to Palmyra may have been staged by the United States and its regional allies to allow Syrian rebels in Aleppo a respite. During a visit to Belgrade, Lavrov said Russia was ready to quickly negotiate with the United States the opening of corridors for the pullout of rebels from Aleppo, but said these would have to be agreed before any ceasefire happened. “Our American colleagues do, so to speak, agree with that, and from Dec. 3 when we met John Kerry in Rome they supported such a concept and even gave us their approval on paper,” Lavrov told reporters at a news conference with his Serbian counterpart on Monday.

“But after three days they revoked that agreement and returned to their old, dead-end position which comprises this: Before the agreement on corridors there has to be a truce… as I understand, this would just mean the rebels would get a break,” he said. Earlier in the day, a military source said the Syrian army was on the verge of announcing victory in its battle to retake rebel-held eastern Aleppo. The Syrian army made new advances on Monday after taking the Sheikh Saeed district, leaving rebels trapped in a tiny part of the city. Lavrov also said he believed that Islamic State’s seizure of Palmyra might have been engineered by the U.S.-led coalition to divert attention from Aleppo. “That leads us to a thought – and I am sincerely hoping I am wrong, that this is all orchestrated, coordinated to give a break to those bandits that are in eastern Aleppo,” he said.

Robert Fisk suggests Lavrov may be on to something.

• There Is More Than One Truth To Tell In The Awful Story Of Aleppo (Fisk)

[..] it’s time to tell the other truth: that many of the “rebels” whom we in the West have been supporting – and which our preposterous Prime Minister Theresa May indirectly blessed when she grovelled to the Gulf head-choppers last week – are among the cruellest and most ruthless of fighters in the Middle East. And while we have been tut-tutting at the frightfulness of Isis during the siege of Mosul (an event all too similar to Aleppo, although you wouldn’t think so from reading our narrative of the story), we have been willfully ignoring the behaviour of the rebels of Aleppo. Only a few weeks ago, I interviewed one of the very first Muslim families to flee eastern Aleppo during a ceasefire. The father had just been told that his brother was to be executed by the rebels because he crossed the frontline with his wife and son.

He condemned the rebels for closing the schools and putting weapons close to hospitals. And he was no pro-regime stooge; he even admired Isis for their good behaviour in the early days of the siege. Around the same time, Syrian soldiers were privately expressing their belief to me that the Americans would allow Isis to leave Mosul to again attack the regime in Syria. An American general had actually expressed his fear that Iraqi Shiite militiamen might prevent Isis from fleeing across the Iraqi border to Syria. Well, so it came to pass. In three vast columns of suicide trucks and thousands of armed supporters, Isis has just swarmed across the desert from Mosul in Iraq, and from Raqqa and Deir ez-Zour in eastern Syria to seize the beautiful city of Palmyra all over again.

It is highly instructive to look at our reporting of these two parallel events. Almost every headline today speaks of the “fall” of Aleppo to the Syrian army – when in any other circumstances, we would have surely said that the army had “recaptured” it from the “rebels” – while Isis was reported to have “recaptured” Palmyra when (given their own murderous behaviour) we should surely have announced that the Roman city had “fallen” once more under their grotesque rule. Words matter. These are the men – our “chaps”, I suppose, if we keep to the current jihadi narrative – who after their first occupation of the city last year beheaded the 82-year-old scholar who tried to protect the Roman treasures and then placed his spectacles back on his decapitated head.

By their own admission, the Russians flew 64 bombing sorties against the Isis attackers outside Palmyra. But given the huge columns of dust thrown up by the Isis convoys, why didn’t the American air force join in the bombardment of their greatest enemy? But no: for some reason, the US satellites and drones and intelligence just didn’t spot them – any more than they did when Isis drove identical convoys of suicide trucks to seize Palmyra when they first took the city in May 2015. There’s no doubting what a setback Palmyra represents for both the Syrian army and the Russians – however symbolic rather than military. Syrian officers told me in Palmyra earlier this year that Isis would never be allowed to return. There was a Russian military base in the city. Russian aircraft flew overhead. A Russian orchestra had just played in the Roman ruins to celebrate Palmyra’s liberation.

The craziest thing I’ve seen in a long time.

• How To Make A Profit From Defeating Climate Change (Carney/Bloomberg)

From rising sea levels to more severe storms and more intense droughts, climate change will present serious risks to, and create major opportunities for, nearly every industry. Citizens, consumers, businesses, governments, and international organisations are all taking action. And entrepreneurs are developing disruptive technologies that will create and destroy value. The challenge is that investors currently don’t have the information they need to respond to these developments. This must change if financial markets are going to do what they do best: allocate capital to manage risks and seize new opportunities. Without the necessary information, market adjustments to climate change will be incomplete, late and potentially destabilising.

Public policy, consumer demand and technological innovation are driving a shift towards a low-carbon economy. Which companies and industries are most, and least, dependent on fossil fuels? And who stands ready to provide resilient and sustainable infrastructure? Which financial institutions are best positioned to gain and which to lose? In every case, which firms have the governance, resources and the strategy to manage, and profit from, these major shifts? We believe that financial disclosure is essential to a market-based solution to climate change. A properly functioning market will price in the risks associated with climate change and reward firms that mitigate them. As its impact becomes more commonplace and public policy responses more active, climate change has become a material risk that isn’t properly disclosed.

In response to a G20 request to consider the financial stability risks, the Financial Stability Board created a taskforce on climate-related financial disclosures. Its purpose is to develop voluntary, consistent disclosures to help investors, lenders and insurance underwriters manage material climate risks. As befits a solution by the market for the market, the taskforce is led by members of the private sector from across the G20, including major companies, large investors, global banks and insurers. After a year of intensive work and widespread consultation its recommendations are now publicly available. They concentrate on the practical, material disclosures most relevant to investors and creditors and which can be compiled by all companies that raise capital as well as financial institutions.

Poul Thomsen was always a disgrace.

• Greece ‘Boxed In’ as EU and IMF Fight Over Nation’s Debt Relief Plan (G.)

The row over how to stabilise the indebted Greek economy has resurfaced with renewed vigour after the European Union on Tuesday angrily rejected charges by the IMF that its current rescue programme is “not credible”. The spectre of the country’s economic crisis flaring up again deepened as the extent of the differences between creditors was laid bare. Caught in the middle, Athens also ratcheted up the rhetoric, as its finance minister told the Guardian that the IMF was “economising with the truth”. “Greece is being boxed into a corner,” said Euclid Tsakalotos, claiming that the country was under intense pressure to specify new austerity measures that made “no economic or political sense”. The war of words intensified after the IMF issued a 1,300-word statement distancing itself from the economic policies underpinning the nation’s latest bailout.

The adjustment programme agreed last summer in exchange for €86bn (£72bn) worth of rescue loans – a plan the IMF has so far refused to support – was based on measures that were “unfriendly to growth”, wrote Poul Thomsen, who directs the IMF’s European department, and Maurice Obstfeld, its chief economist. “It is not the IMF that is demanding more austerity,” the officials argued in a blog published late on Monday. “If Greece agrees with its European partners on ambitious fiscal targets, don’t criticise the IMF … when we ask to see the measures required to make such targets credible.” Athens, they said, had agreed to achieve a budget surplus – where state tax income exceeds expenditure – of 3.5% of GDP once the bailout expired in 2018, a feat that was not feasible without further cuts, said the IMF.

On Tuesday, the European commission hit back, insisting that the economic fundamentals were not only sound, but working. “The European institutions consider that the policies of the ESM program are sound and if fully implemented can return Greece to sustainable growth and can allow Greece to regain market access,” said commission spokeswoman Annika Breidthardt. The plan, she added, had undergone “several parts of scrutiny”, and even the European court of auditors had provided feedback, which had been taken into account. [..] Hopes of a political breakthrough are now resting on meetings Tsipras will have later this week with German and French leaders. But on past form, lenders are unlikely to yield, and Greek officials are now worrying that the row could be the precursor of the IMF pulling out of the programme altogether.

“s it likely when around 45% of pensioners receive monthly payments below the poverty line of €665, and almost 4 million people, that is more than a third of the population, have been classed as being at risk of poverty or social exclusion, that Greece’s main problem is that pensions and tax credit allowances are too generous?”

• Tsipras To Propose To EU Leaders That IMF Be Excluded (Kath.)

Prime Minister Alexis Tsipras is to suggest to European counterparts this week that the IMF should be left out of the Greek program, sources have told Kathimerini. Tsipras is expected to sound out Francois Hollande, who he is due to hold talks with Wednesday, and Angela Merkel, with whom he will have a working lunch on Friday, about the idea of the Fund no longer having a role in Greece’s bailout. If an agreement cannot be reached on this proposal, Tsipras will put forward the possibility of the IMF retaining just a technical role in the program. Athens believes that the political cost of the Fund remaining on board has become too high after the latest spat between the government and the organization, which flared up as the institutions returned to the Greek capital for further talks aimed at completing the bailout review.

The talks resumed under a cloud after the IMF’s European director Poul Thomsen and head of research Maurice Obstfeld published a blog post on Monday night in which they denied that the Fund was responsible for asking Greece to adopt more austerity measures and claimed that the country’s pensions and tax benefits are still too generous. Finance Minister Euclid Tsakalotos confronted the IMF mission chief Delia Velculescu over the blog post when talks between the Greek government and the institutions resumed in Athens Tuesday. Velculescu is said to have assured the Greek minister that the IMF did not want to make negotiations harder but simply to express its view.

A little earlier, Tsakalotos had publicly countered the claims made by the IMF officials in their article. “In effect [the Fund] is arguing for Greek pensioners and poorer wage earners to make further economies, while it economizes on the truth,” he told The Guardian. “Greek expenditure on both pensions and other subsidies is about 70% of the EU average and 52% of that of Germany. Is it likely when around 45% of pensioners receive monthly payments below the poverty line of €665, and almost 4 million people, that is more than a third of the population, have been classed as being at risk of poverty or social exclusion, that Greece’s main problem is that pensions and tax credit allowances are too generous?” he added.

But of course they are short on anti-depressants too.

• Crisis Leaves Greeks Gloomiest In Europe And Beyond (R.)

Greece’s debt crisis has made its population the unhappiest not only in western Europe but also in comparison with people in some former Communist countries, a study showed on Tuesday. The “Life in Transition” survey conducted by the European Bank for Reconstruction and Development (EBRD) and the World Bank has questioned households across a broad region since 1991 as the Cold War came to an end, but Greece was included for the first time this year. Over 92% of Greeks said the debt crisis had affected them, with 76% of households suffering reduced income due to wage or pension cuts, job losses, delayed or suspended pay or fewer working hours.

Only one in 10 Greeks were satisfied with their financial situation and only 24% with life overall, compared with 72% in Germany and 42% in Italy, the two western European countries used as comparisons. The figure was 48% in post-communist countries. Austerity measures demanded by international creditors have been tough on Greeks. Pensions, for example, have been reduced by about a third since the crisis began in 2009. Only 16% of the respondents in Greece saw their situation improving over the next four years, compared with 48% in post-communist countries and 35 and 23% in Germany and Italy, respectively. “This signals that, despite the recent political changes and attempts at economic reforms that have taken place in the country, Greeks do not see their situation improving for the foreseeable future”, the report said.

So that stops all fracking, right?!

• Final EPA Study Confirms Fracking Contaminates Drinking Water (EW)

The U.S. Environmental Protection Agency (EPA) has released its widely anticipated final report on hydraulic fracturing, or fracking, confirming that the controversial drilling process indeed impacts drinking water “under some circumstances.” Notably, the report also removes the EPA’s misleading line that fracking has not led to “widespread, systemic impacts on drinking water resources.”The report, done at the request of Congress, provides scientific evidence that hydraulic fracturing activities can impact drinking water resources in the United States under some circumstances,” the agency stated in a media advisory. This conclusion is a major reversal from the EPA’s June 2015 pro-fracking draft report. That specific “widespread, systemic” line baffled many experts, scientists and landowners who—despite the egregious headlines—saw clear evidence of fracking-related contamination in water samples.

Conversely, the EPA’s top line encouraged Big Oil and Gas to push for more drilling around the globe. But as it turns out, a damning exposé from Marketplace and APM Reports revealed last month that top EPA officials made critical, last-minute alterations to the agency’s draft report and corresponding press materials to soft-pedal clear evidence of fracking’s ill effects on the environment and public health. Thomas Burke, EPA deputy assistant administrator and science advisor, discussed the agency’s final report released Tuesday. “There are instances when hyrdofracking has impacted drinking water resources. That’s an important conclusion, an important consideration for moving forward,” Burke told reporters today, according to The Hill. Regarding the EPA’s contentious “national, systemic conclusion,” Burke said, “that’s a different question that this study does not have adequate evidence to really make a conclusive, quantified statement.”

Small state, but big chunk of ice.

• A Crack In Antarctica Is Forming An Iceberg The Size Of Delaware (PopSci)

An iceberg the size of Delaware is starting to break away from Antarctica. It began with a small crack, but has now grown 70 miles long and more than 300 feet wide. When it reaches the edges of the ice sheet, the state-sized chunk will drift away into the sea. The crack is a third of a mile deep—reaching all the way to the sea below. It’s a relatively new rift in the ice sheet, called Larsen C, but is following in its icy brethren’s footsteps: Larsen A and B both broke away from the main Antarctic sheet in the last two decades in much the same way. All three began with clefts in the ice and eventually floated away to disintegrate. That dramatic a cleft is unusual—it’s more common for ice sheets to slowly break up along the edges and fall in smaller chunks. Only in the last half century has it become common for the Antarctic to form these dramatic fault lines, and scientists say global warming is likely to blame.

NASA has been monitoring the Larsen ice sheets since Larsen A broke off in 1995. Larsen B followed it in 2002, and Larsen C is expected to go the same way soon. Operation IceBridge has surveyed the polar ice caps annually for the past eight years as a way to track changes in the glaciers and ice sheets. The MIDAS Project, a U.K.-based research group, first reported the Larsen C rift in 2014 and has kept a watchful eye on it ever since. [..] The more than 2,400 square miles that is likely to break away from Larsen C will only be about 12% of the ice sheet’s total area. But once that part comes loose, the MIDAS Project predicts that the rest of the sheet could become unstable and completely disintegrate. The crack is growing steadily and shows no signs of stopping, though the break won’t happen immediately. It takes much longer for ice sheets to break up—unlike many human relationships, this one will last through the holiday season.

A rare ice crack not formed by that squirrel from the Ice Age movies – NASA/John Sonntag