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Video: To consternation of @BrianStelter, Ted Koppel contended during 10/1 Kalb Report @PressClubDC: “You would be lost without @realDonaldTrump. CNN’s ratings would be in the toilet without Trump.” Stelter: “Ted, you know that’s not true. You’re playing for laughs.” #NPCLive pic.twitter.com/XGZl9yNzqh

— Brent Baker (@BrentHBaker) October 3, 2018

And then he closed the spigots…

• Fed’s Powell Says US Outlook ‘Remarkably Positive’ (R.)

U.S. Federal Reserve Chairman Jerome Powell on Tuesday hailed a “remarkably positive outlook” for the U.S. economy that he feels is on the verge of a “historically rare” era of ultra-low unemployment and tame prices for the foreseeable future. It is a view, he said, based on how a changed economy is operating today, with businesses and households immunized by strong central bank policy from the inflationary psychology that caused unemployment, inflation and interest rates to swing wildly in the 1960s and 1970s. It is an outlook that includes an economic performance “unique in modern U.S. data,” with unemployment of below 4 percent expected for at least two more years and inflation remaining modest even as wages rise.

And it is an outlook he feels will even survive the Trump administration’s efforts to rewrite the global trading system, a policy shift Powell said may lead to one-time price hikes, but not to persistent changes in the annual rate of inflation going forward. “This forecast is not too good to be true,” Powell told the National Associate for Business Economics, but instead “is testament to the fact that we remain in extraordinary times.” “These developments amount to a better world for households and businesses which no longer experience or even fear the scourge of high and volatile inflation.”

There can be no doubt.

• Another Market Volatility Surge Is Likely Ahead (Colombo)

The U.S. stock market is climbing to record highs once again and volatility has calmed down dramatically from its panic-induced levels reached earlier this year. Traders have become complacent as they passively ride the stock market higher and bet on lower volatility again. While it may seem like all is well, several reliable indicators are warning that another powerful volatility surge is likely ahead.

The first indicator is the 10-year/2-year Treasury spread that is calculated by subtracting the 2-year Treasury note yield from the 10-year Treasury note yield. The 10-year/2-year Treasury spread is helpful for estimating when the next recession is likely to occur, as I explained in a recent Forbes piece. The chart below (which I recreated from a chart made by BofA’s Savita Subramanian) shows that the inverted 10-year/2-year Treasury spread leads the CBOE Volatility Index or VIX by approximately three years. If this historic relationship holds true, we are about to experience a whole lot more volatility over the next few years.

The next chart shows the positioning of the “smart money” and “dumb money” in the Volatility Index or VIX futures. The “smart money”, or commercial futures hedgers (who tend to be right at major market turning points), are building up another bullish position in VIX futures, just like they did one year ago ahead of the stock market correction and volatility spike. In addition, the “dumb money”, or large traders (who tend to be wrong at major turning points), have built up a large short position, like they did before the early-2018 volatility spike. The positioning of these groups of traders indicates that another volatility spike is likely ahead in the not-too-distant future.

Decades old, started when Trump was a toddler, good luck. Of course they pay as little as they can, but once the IRS signs off on it…

• White House Responds To “Misleading” NYTimes’ Trump Tax Fraud Story (ZH)

Update 2: The White House has finally responded to the NYTimes story…(via Sarah Sanders) “Fred Trump has been gone for nearly twenty years and it’s sad to witness this misleading attack against the Trump family by the failing New York Times. Many decades ago the IRS reviewed and signed off on these transactions. The New York Times’ and other media outlets’ credibility with the American people is at an all time low because they are consumed with attacking the president and his family 24/7 instead of reporting the news.

The truth is the market is at an all-time high, unemployment is at a fifty year low, taxes for families and businesses have been cut, wages are up, farmers and workers are empowered from better trade deals, and America’s military is stronger than ever, yet the New York Times can rarely find anything positive about the President and has tremendous record of success to report. Perhaps another apology from the New York Times, like the one they had to issue after they got the 2016 election so embarrassingly wrong, is in order.”

The NYT reported that Trump and his siblings set up a “sham” corporation to help disguise otherwise taxable income that came from gifts from their parents. The president also allegedly helped his father take improper tax deductions that amounted to millions of dollars and helped formulate strategy to undervalue his parents’ real estate holdings, with the Internal Revenue Service reportedly providing little pushback against the Trumps’ reported tactics. According to the leaked confidential filings, Trump’s parents left more than $1 billion to their children, which would have resulted in a roughly $550 million tax bill at the time.

However, the Trumps paid a total of $52.2 million on that source of income, according to the NYT report. To achieve this, the newspaper cited records that showed Trump helped undervalue his father’s real estate holdings, which led to a lower tax bill when he and his siblings inherited the properties. In total, Trump received the equivalent today of at least $413 million from his father’s real estate empire, based on questionable tax dealings starting when he was a toddler and continuing to this day. And, in what will attract the most attention, the newspaper wrote that Trump’s behavior amounted to fraud in some cases.

I don’t think this one’s over yet.

• Italy Folds To Europe On Budget Deficit; Euro Surges (ZH)

After two days of brutal punishment by the markets which sent Italian bond yields to 4 years highs and slammed the euro, the Italian government appears to have folded to pressure from Brussels (and the one place in the world where the bond vigilantes still operate, just ask Sylvio Berlusconi), and according to Corriere della Sera, Italy’s draft budget plan will pledge to cut the deficit to 2% in 2021, after Rome reversed a proposal to maintain a 2.4% shortfall in the face of pressure from the EU. As a result, while the 2019 deficit will still rise to 2.4% of GDP in 2019, it will decline by 0.2% to 2.2% in 2020, and another 0.2% the year after. In kneejerk reaction, futures lept to fresh session highs, Treasury yields jumped by 2bps to 3.07% and the EURUSD spiked 50 pips higher to 1.1590.

Italy is not out of the woods yet though: according to Mizuho, the sustainability of the euro’s rebound will depend on whether the EU sees Italy’s latest budget plan as appropriate. It could be that Italy has already made compromise with the EU, but hard to predict whether the euro’s rebound has more legs until we see a reaction from the EU: “It all boils down to the EU’s response”, and if the ongoing war of words is any indication, merely promising to trim the deficit in the next three years will hardly be smiled upon. Others were even more skeptical. According to bond fund manager Daintree Capital, “The euro’s definitely reacting to the headlines on Italian budget plans, and it will continue to do so for future headlines.” However, “anyone who believes a populist government is all of a sudden going to be particularly responsible in a fiscal sense, has a misguided view.”

Merkel’s losing it.

• Merkel’s End Could Spark EU Breakdown (Luongo)

I saw a recent poll from Die Welt which has Alternative for Germany (AfD) creep past Merkel’s Grand Coalition partner, the Social Democrats (SPD), and challenge the CDU itself. Because when you back out the Christian Social Union’s (CSU) total which runs between 8% and 9% AfD is now in a position to become the party with the highest backing in Germany. And this is happening on the eve of Bavarian State elections this month. [..] I’ve talked about AfD’s chances to achieve this result in the past in terms of them crossing the 16% Chasm. And it appears, that slowly, they are doing so. German politics, from what I understand, is not used to this kind of upheaval and certainly not these kinds of leadership challenges. Earlier this year Merkel barely survived a challenge by former CSU Leader Horst Seehofer over immigration.

So, where to things go from here? As Mercouris points out, Merkel has very skillfully gutted the landscape of the CDU to keep potential leaders from emerging within the party. The SPD is falling off a cliff having lost more than half of its support since the 2014 elections. And the CSU is primarily a Bavarian party so they don’t have the support of the entirety of Germany. This landscape is why we’ve seen the Greens rise to 15% as well as AfD’s rise. And that cannot be ignored. The hard left of German politics is now split and ineffectual. But, no party has emerged in this chaos to take the reins of power.

This is reminding me of Italy’s situation at the end of 2017 with no less than five parties polling in double digits. It’s a messy situation and it makes more sense in Germany that big shifts in voter preference would occur at a slower rate given the stability of German coalition governments since the modern state was founded after World War II. In other words Germans are loathe to make these kinds of changes. So, you know the situation must be bad if these numbers are changing this quickly. So, it shouldn’t be much of a surprise really to see this type of breakdown and the slow rise of AfD past the 16% chasm. It may be the riots in Chemnitz that finally begin pushing their poll numbers into the 20’s nationally.

Glass half full: “”There’s more selection for home buyers to choose from today.”

• Vancouver Home Sales Crash 44% As “For Sale” Inventory Soars (ZH)

What happens when prices rise so high that a chasm forms between bids and asks? The market grinds to a halt. That’s what happened in Vancouver housing in September, when according to the Real Estate Board of Vancouver (REBGV), residential property sales tumbled by 17.3% from August 2018, and a whopping 43.5% from one year ago. In fact, a total of only 1,595 transactions took place as both buyers and sellers continue to sit on their hands amid confusion whether the recent torrid price gains will continue or whether the housing bubble has burst. Sales of detached properties in July was just 508, a decrease of 40.4% from the 852 recorded in September 2017, and the 812 apartments sold was a 44% drop compared to the 1,451 sales in September 2017.

And no, it’s not seasonal: last month’s sales were a whopping 36.1% below the 10-year September sales average. The reason for the collapse in transactions: the formerly all too willing buyers, mostly Chinese oligarchs who would use Vancouver real estate as their offshore Swiss bank account, have disappeared. Meanwhile sellers are dumping properties in the market in hopes of a quick flip. “Fewer home sales are allowing listings to accumulate and prices to ease across the Metro Vancouver housing market,” Ashley Smith, REBGV president-elect said. “There’s more selection for home buyers to choose from today. Since spring, home listing totals have risen to levels we haven’t seen in our market in four years.”

What would we do without our housing bubble?

• Australia Banking Royal Commission Could Trigger House Price Collapse (ABC.au)

There is a lot riding on the policy recommendations from the banking royal commission, not least of which is the stability of the Australian property market, according to some respected analysts. Independent economist Saul Eslake said there was potential for the royal commission’s recommendations to have what economists refer to as “unintended consequences”. The unintended consequences Mr Eslake is referring to include a steep fall in house prices spurred on by a royal commission-inspired clampdown on bank lending. Capital Economics chief economist Paul Dales said while house price falls to date have been small, Australia could be in for a record housing decline, at least in its recent history.

“At the moment the trajectory is a bit worrying cause the house prices seem to be declining at a faster rate and, in our view at Capital Economics, this will eventually prove to be the largest downturn in Australia’s modern history,” he said. Mr Dales is forecasting a protracted slowdown in the housing market as a result of a crackdown in bank lending standards, the banking royal commission itself and rising interest rates. “There’s significant time delays with these things,” he said. “I would have thought over the next six to 12 months is where we would, if there was going to be a big pullback in lending, that’s when we would see it and then, thereafter as and when the royal commission makes any recommendations and the Government implements them, the next six to 12 months after that.

Korea’s move on.

• DMZ Demining Operations Lay Groundwork For Korean Peninsula Peace (YH)

After a 15-minute bumpy ride along a dusty, hilly path inside the Demilitarized Zone (DMZ), dozens of South Korean troops in full gear disembarked near a grisly site of intense battles during the 1950-53 Korean War. Accompanying them in the buffer zone separating the two Koreas was a phalanx of security guards, medical specialists and other personnel specializing in disposing of unidentified explosives and excavating war remains. They are part of the 120-member team tasked with removing landmines in the Arrowhead Ridge, or Hill 281 in Cheorwon, some 90 kilometers northeast of Seoul — a site that the two Koreas have designated for a joint project to retrieve war remains from April to October next year.

There were three key battles against communist forces on the notorious ridge from 1952-53. The remains of more than 200 South Korean soldiers and dozens of U.N. Command (UNC) forces, such as U.S. and French troops, are thought to be buried in it. “We have made preparations (for the landmine removal) for a long period and are well prepared now,” the commander in charge of the frontline areas told reporters on condition of anonymity on Tuesday, the second day of the demining work set to continue until Nov. 30. “We will not rush and will carry out our mission with the first and foremost priority placed on the safety of our troops,” he added.

EU and NATO want to keep pushing, but how about democracy?

• Russia May Veto Greece-FYROM Name Deal at the UN (GR)

Russia is implicitly threatening that it may block the Prespa agreement at the UN Security Council. In a statement on Monday, following the referendum in FYROM, the Russian foreign ministry says that the low turnout “means that the referendum cannot be recognised as valid.” It clearly indicates that the voters “chose to boycott the solutions imposed on Skopje and Athens.” The statement also blasts leading politicians from NATO and EU member states who participated in “large-scale propaganda campaign directly, freely interfering in the internal affairs of this Balkan state.” Despite the low turnout, Prime Minister Zoran Zaev vowed to push ahead with the name change on Monday.

The Russian foreign ministry condemned the move: “There is a clear drive to ensure Skopje’s entanglement in NATO despite the will of the Macedonian people.” Russia is traditionally wary of NATO’s enlargement in eastern Europe. The alliance’s 1999 bombings of its ally Serbia caused a major rift in Russia’s relations with the West at the time. Moscow says that a long-term solution can only be agreed upon by the two parties on their own, without any external interference, and only within the framework of the law and with broad public support.

Inequality in Europe rises fast, too. Where are the breaking points?

• The Case For Paying Every American A Dividend On The Nation’s Wealth (MW)

The newest research shows that unconditional cash transfers boost work productivity and quality of life, including better mental and physical health, and reduce crime. A study by the Roosevelt Institute in New York, a left-leaning think tank, concludes that giving $500 a month to every adult American could meaningfully grow the U.S. economy and address its widening wealth gap. (The top 1% of Americans now receive 20% of the national income, while those in the bottom 50% receive 13%; in 1980, the numbers were essentially reversed, at 11% and 20%, respectively, according to the 2018 World Inequality Report.)

Yet basic income in the U.S., characterized as a utopian solution by its true believers but as welfare, socialism or worse by its detractors, has gone nowhere. Basic income did enjoy a bit of a heyday in the U.S. in the 1960s and 1970s and was even embraced in conservative circles; free-market economist Milton Friedman went so far in 1962 as to propose a negative federal income tax that would guarantee a basic income to the poorest Americans while also incentivizing work. Other ideals of the era — the four-day workweek, the 30-hour workweek, the all but limitless vacation allotment — have fallen by the wayside, even as U.S. labor conditions have worsened.

In France, this is a nation-wide law.

• Restaurants In Austin Banned From Throwing Away Food (Hill)

Restaurants in Austin, Texas, will no longer be allowed to throw out food waste, the city announced this week. Under a new policy that began Monday, all food-permitted businesses in the city are required to keep organic material, such as food scraps and soiled paper products, from landfills. Businesses can dispose of their food waste by donating extra food, giving scraps to local farms for animals, or composting, the city government said in a press release announcing the policy.

The city’s Universal Recycling Ordinance also requires businesses to provide employees with training on organic waste diversion, and to post information about the plan. Official city data shows that 37 percent of material sent to landfills is organic and could have otherwise been donated or composted, the city said. Austin’s ordinance is the latest move by a major city to introduce eco-friendly policies. Dozens of cities and businesses nationwide have banned plastic straws and other single-use plastic items in an effort to cut down on waste.

Welcome to Europe.

• ‘We Have Found Hell’: Trauma Runs Deep For Children At Dire Lesbos Camp (G.)

The drawings tell of trauma. Stormy seas dotted with terrified faces. Lifeless bodies of children floating among the waves. And planes dropping bombs, down on to homes and on to people. Eyes that weep blood. The pencil scrawls were made by children who are part of a growing phenomenon in the Moria refugee camp in Lesbos, Greece. All have attempted suicide or serious self-harm since they came to this place. Approximately 3,000 minors live in the Moria camp, which Médecins Sans Frontières (MSF) calls a giant open-air “mental asylum” owing to the overcrowding and dire sanitary conditions. Last Tuesday an adolescent attempted to hang himself from a pole. In August, a 10-year-old boy only just failed to take his own life.

The camp, among hills dotted with olive trees a few kilometres from the island’s capital town of Mytilene, is home to 9,000 asylum seekers living in a centre designed to hold one third of that number. Migrants live in groups of up to 30 people, crammed into tents or metal containers situated just centimetres apart. Rubbish, scattered everywhere, makes the air almost unbreathable. Most come from war-torn countries like Syria, Iraq and Afghanistan. They arrive in dinghies from the Turkish towns of Ayvalik or Canakkale. According to aid agencies, the controversial deal brokered between Brussels and Ankara aimed at stopping the flow of migrants to Europe via Turkey, combined with the refusal on the part of European countries to take in asylum seekers arriving in Greece, have transformed Lesbos into an Alcatraz, leaving people imprisoned on the island with no way out.

“Although the vast majority of migrants who arrive in Moria are traumatised, after having fled from violent conflicts in their home countries, conditions in the camp have exacerbated their trauma,” says Luca Fontana, field coordinator of MSF on the island. “After two years, some are still awaiting transferral, even if they know they could be deported to Turkey at a moment’s notice. I’ve worked in camps infested with Ebola in Sierra Leone and Guinea, but I guarantee you that this is the worst situation I’ve ever seen.”

Debt Rattle September 30 2018

Sep 302018

September 30, 2018 Posted by Raúl Ilargi Meijer at 9:30 am Finance Tagged with: Bannon, Facebook, FBI, Kavanaugh, Macedonia, Musk, property tax, Silk Road, Sulawesi, Tesla, Vancouver, Wikileaks 2 Responses »

M. C. Escher Bond of union 1956

• White House Directs FBI to Interview Two Kavanaugh Accusers, Not Third (WSJ)

• Where Does Our Attention Belong: Kavanaugh or Yemen? (PCR)

• “Dirty Money” Crackdown As Vancouver Housing Market Grinds To A Halt (ZH)

• May Acts To Tackle Housing Crisis By Imposing Levy On Foreign Buyers (O.)

• Brexit Costing Britain £500m A Week And Rising (O.)

• Steve Bannon Thinks Michael Avenatti Has A Serious Shot In 2020 (ZH)

• New WikiLeaks Release: Corruption in UAE Arms Deal Fueling War on Yemen (MPN)

• Musk Out As Tesla Chair, Remains CEO in $40M SEC Settlement (AP)

• How Facebook Was Hacked And Why It’s A Disaster For Internet Security (F.)

• Fearing Debt Trap, Pakistan Rethinks Chinese ‘Silk Road’ Projects (R.)

• FYROM Citizens Go to the Polls to Decide on Name Change (GR)

• Indonesia Earthquake: Huge Surge In Death Toll (BBC)

Swetnick’s gang rape story looks far-fetched. And not one person corroborates it.

• White House Directs FBI to Interview Two Kavanaugh Accusers, Not Third (WSJ)

The Federal Bureau of Investigation has been instructed by the White House to interview two of the women who have alleged sexual misconduct by Brett Kavanaugh, according to people familiar with the matter. The parameters of the FBI probe don’t include interviewing Julie Swetnick, who said this week the Supreme Court nominee attended a party decades ago where she was gang-raped, according to one of the people. The focus on the first two accusations suggests that the White House doesn’t consider Ms. Swetnick’s accusations credible, people familiar with the instructions said, a decision that drew criticism from Ms. Swetnick’s attorney, Michael Avenatti.

The Wall Street Journal has attempted to corroborate Ms. Swetnick’s account, contacting dozens of former classmates and colleagues, but couldn’t reach anyone with knowledge of her allegations. No friends have come forward to publicly support her claims. She has recorded a TV interview to be aired Sunday, the first woman making accusations against the Supreme Court nominee to do so. NBC’s “Morning Joe” on Thursday aired a clip of her interview with John Heilemann of Showtime’s “The Circus,” in which Ms. Swetnick called for an investigation into the allegations against Judge Kavanaugh.

Paul Craig Roberts is right, but undermines himself by saying women should have more responsible sex.

• Where Does Our Attention Belong: Kavanaugh or Yemen? (PCR)

There are reports that the Washington-initiated and militarily- supported Saudi Arabian war against Yemen have a starving Yemeni population eating leaves. The Saudis, with Washington’s GPS support, continue to target school busses, massacring children as an element of the terror assault against the population, trying to break Yemeni resistance by murdering children on school busses. Washington continues to supply the Saudis with the weapons to target school buses and the diplomatic support to protect the criminal Saudi regime from war crimes charges. The European cowards turn their heads. Even Russia is silent. Putin’s “partnership” with the criminal state of Saudi Arabia is more important.

Isn’t this a far greater offense, an offense that most definitely does not lack evidence, than the accusation that Kavanaugh, a nominee to the US Supreme Court attempted to rape a women 30 or 40 years ago, for which there is no evidence, only accusation, an accusation that the female defense atttorney who questioned for the Senate committee the woman claiming abuse found insufficient for an indictment.

Signs the housing bubbles are nearing their end. This article and the next.

• “Dirty Money” Crackdown As Vancouver Housing Market Grinds To A Halt (ZH)

Thanks to an influx of demand from Chinese nationals and other foreigners, Vancouver’s housing market soared in the post-crisis years, with prices more than doubling to levels that were clearly unsustainable, cementing the Pacific Northwest metropolis’ status as the most unaffordable housing market in North America. But the torrid growth ground to a halt earlier this year as home sales plummeted, along with construction of new homes and apartments. The typical single-family home in Vancouver costs more than C$1.5 million ($1.15 million) – roughly 20x the median household income. In an effort to let some air out of one of the continent’s most egregious property bubbles, British Columbia’s government has announced an unprecedented crackdown on money laundering in Vancouver’s property market in an attempt to stop a housing-market collapse from taking the city’s GDP with it.

The initiative, launched by Attorney General Daid Eby, seeks to create more transparency to expose all the “numbered corporations” (often used as fronts for foreign investors) buying property in Vancouver. The probe will also examine horse-racing and luxury car sales. Attorney General David Eby said that his office is launching an independent review into potential money laundering in real estate, horse-racing and luxury car sales. The review comes in response to recommendations from a previous review into money laundering in the province’s casinos. In addition, Finance Minister Carole James has appointed an expert panel to look directly at money laundering in the housing sector. Both probes will be done by March.

“There is good reason to believe the bulk of the cash we saw in casinos is a fraction of the cash generated through illicit activities that may be circulating in British Columbia’s economy,” Eby told reporters Thursday in the capital of Victoria. “We cannot ignore red flags that came out of the casino reviews of connections between individuals bringing bulk cash to casinos, and our real estate market.” […] “Our goal is simple, as you’ve heard: Get dirty money out of our housing market,” James said. “When the real estate market is vulnerable to illicit activity and unethical behavior, people, our communities and our economies suffer. This is something we have to tackle.”

Foreign buyers have carried the boom for years. And now you act?

• May Acts To Tackle Housing Crisis By Imposing Levy On Foreign Buyers (O.)

Foreign buyers of properties in the UK will have to pay a new levy, in a renewed attempt by Theresa May to tackle the housing crisis. With concern growing among senior Tories that the party has allowed Brexit to drown out a compelling domestic agenda, plans unveiled on Saturday night will see foreign buyers pay extra stamp duty to fund a drive to tackle rough sleeping. The announcement marks the start of the party’s conference in Birmingham, where the prime minister is desperate to avoid another row over her Brexit plans that might threaten to engulf her premiership. Ministers are also concerned that the party has been failing to respond to the radicalism of some of Labour’s economic programme, set out at its own conference in Liverpool last week.

On Sunday the prime minister will attempt to return to her vow to tackle social injustices and champion what she describes as the “British dream” – the idea that the next generation should do better than the last. Fixing the housing market is a major part of the programme. It comes as the latest Opinium poll for the Observer suggest the Conservatives take a three-point lead into their conference. Despite being carried out during the Labour conference week, which can often provide a poll bounce, the poll puts the Tories on 39% support, with Labour on 36%. According to Opinium, Labour had entered its conference with a two-point lead.

Just the start.

• Brexit Costing Britain £500m A Week And Rising (O.)

Brexit is already costing the public purse £500m a week, new research has found – a stark contrast to the £350m “dividend” promised by the Leave campaign. The Centre for European Reform’s analysis also suggests that the government’s austerity drive would be on the way to completion had Britain voted to stay in the European Union. It shows that the UK economy is already 2.5% smaller than it would have been had Remain won the referendum. Public finances have been dented by £26bn a year, more than half of the defence budget. This translates to a penalty of £500m a week, a figure that is growing. The stark finding comes as the Tory conference begins in Birmingham, with Theresa May’s premiership under severe strain.

The prime minister faces competing proposals from cabinet ministers over how she should resolve the Brexit impasse with the EU. The febrile conference coincides with explosive claims that the boss of one UK-based carmaker has been flown by private jet to meet President Emmanuel Macron, in an attempt to persuade the company to move manufacturing to France after Brexit. Carolyn Fairbairn, director general of the Confederation of British Industry, told the Observer this development was a sign of the economic damage Britain faces from the wrong Brexit deal. While some cabinet ministers are pushing for a loose, Canada-style trade deal, support is growing in May’s ministerial team and on her backbenches for a deal under which Britain would stay closely tied to the EU for a limited period.

A three way race.

• Steve Bannon Thinks Michael Avenatti Has A Serious Shot In 2020 (ZH)

Former Trump strategist Steve Bannon said on Friday that attorney Michael Avenatti could become the Democratic nominee for president in 2020. Speaking with Bill Maher about the state of the Democratic party, Bannon agreed with the HBO host that Avenatti – lawyer to porn star Stormy Daniels and Judge Brett Kavanaugh’s “gang rape” accuser – can capture the left with his bravado and plain spoken language. “The guy who’s the outsider, who like blows through the regular politician because he looks different and he’s got balls,” said Maher – to which Bannon replied: “If Bernie Sanders had an ounce of Avenatti’s fearlessness, he would have been the Democratic nominee and we would have had a much tougher time beating him.”

“Bernie doesn’t have fearlessness?” asked Maher. “Not like Avenatti,” Bannon replied. “I’ve not done any due diligence on this guy, but I tell you he’s got a fearlessness and he’s a fighter. I think he’ll go through a lot of this field if he decides to stick with it.” “I don’t happen to think a professional politician is going to be there at the end of the day. I’ve always said it’s going to be an Oprah or an Avenatti — somebody who’s more media savvy,” said Bannon. “You’re gonna have Trump on the right, a politician, maybe a Kamala Harris or somebody on the left, and I think you’ll have a Bloomberg or a Romney or somebody in the center,” Bannon concluded. “I think it will be a three-way race.”

Assange is no longer in charge, which makes room for more releases. This is about Germany and France.

• New WikiLeaks Release Exposes Corruption in UAE Arms Deal Fueling War on Yemen

The transparency organization WikiLeaks just released a new document that sheds light on the corruption behind a lucrative French-German arms deal with the United Arab Emirates (UAE), weapons that are currently being used to wage a disastrous and genocidal war against the people of Yemen. The document details a court case from the International Chamber of Commerce (ICC) International Court of Arbitration regarding a dispute over a “commission payment” made to Abbas Ibrahim Yousef Al-Yousef, an Emirati businessman, as part of a $3.6 billion arms deal between France’s state-owned weapons company Nexter Systems (then GIAT Industries SA) and the UAE.

Per the deal, which was signed in 1993 and set to conclude in 2008, the UAE purchased 388 Leclerc combat tanks, 46 armored vehicles, 2 training tanks, and spare parts, as well as ammunition. Those weapons have been an important part of the UAE and Saudi coalition’s war in Yemen since it began in 2015. The war has killed over ten thousand civilians, largely the result of the Saudi/UAE bombing campaign, which has targeted and crippled the country’s civilian infrastructure. The result of those bombings, as well as of the UAE/Saudi blockade of Yemen, has been over 17 million people near starvation – including 5.2 million children – and preventable disease epidemics that have claimed tens of thousands of additional lives.

Big surge in share prices Monday, from whish Musk will profit?

• Musk Out As Tesla Chair, Remains CEO in $40M SEC Settlement (AP)

Tesla and its CEO Elon Musk have agreed to pay a total of $40 million and make a series of concessions to settle a government lawsuit alleging Musk duped investors with misleading statements about a proposed buyout of the company. The settlement with the Securities and Exchange Commission allows Musk to remain CEO of the electric car company but requires him to relinquish his role as chairman for at least three years. Tesla must hire an independent chairman to oversee the company, something that should please a number of shareholders who have criticized Tesla’s board for being too beholden to Musk. The deal was announced Saturday, just two days after SEC filed its case seeking to oust Musk as CEO.

Musk, who has an estimated $20 billion fortune, and Tesla, a company that ended June with $2.2 billion in cash, each are paying $20 million to resolve the case, which stemmed from a tweet Musk sent on Aug. 7 indicating he had the financing in place to take Tesla private at a price of $420 per share. “A reckless tweet cost a lot of money — the $20-million tweet,” said Michelle Krebs, executive analyst at Autotrader. [..] Tesla’s stock plummeted 14 percent Friday after the SEC filed its lawsuit, erasing more than $7 billion in shareholder wealth. Many analysts predicted the shares were bound to fall even further if Musk had been forced to step down. Tesla’s stock has dropped 30 percent since Aug. 7, closing Friday at $264.77.

The steep downturn in Tesla’s market value may have influenced Musk to have an apparent change of heart and negotiate a settlement. Musk had rejected a similar settlement offer before the SEC sued Thursday, maintaining he had done nothing wrong when he posted a tweet declaring that he had secured the financing to lead a buyout of Tesla.

Serious. Incompetent.

• How Facebook Was Hacked And Why It’s A Disaster For Internet Security (F.)

Facebook dropped a bombshell on Friday when it revealed an unknown hacker had breached the site, compromising the accounts of 50 million users. The company’s security team found three bugs were used in the attacks, saying they were used in combination to successfully break into Facebook accounts. Forbes spoke with professional web app hacker and cybersecurity researcher Thomas Shadwell, who pieced together a likely hypothesis on how the mystery hacker or hackers carried out what’s believed to be the most significant ever attack to have hit the social media beast. The perpetrator’s ultimate aim was to steal what are known as “OAuth bearer tokens.” Essentially, these tokens prove the Facebook user is the rightful owner of an account and denote what they have access to.

As Shadwell describes them: “OAuth tokens are like car keys, if you’re holding them you can use them, there’s no discrimination of the holder.” And in the context of this attack, those keys unlocked not just Facebook accounts, but any site that affected users accessed with a Facebook login. That might include Instagram or news websites. To get those keys, the hackers abused a feature in Facebook called “View As.” It allows any user to see what another can access on their profile. For instance, if you’ve blocked your dad from looking at your photos, you can check it’s working by effectively impersonating your father and viewing your profile. “It looks like when Facebook built the View As feature, they did this by making it a modification of how Facebook would work if actually viewed by that other user,” said Shadwell.

“Which of course means if there’s a mistake they might end up sending the impersonated user’s credentials to the user of the ‘View As’ feature.” This is where things get a bit weirder. If a user, via View As, impersonated a friend who themselves had a friend who had a birthday, the feature would also show a box prompting them to post a “happy birthday” video. Thanks to an error made by Facebook in July 2017, the video provided the user with one of those precious tokens, Shadwell said. More specifically, the video player generated and sent the user a token, one that would log them into the Facebook mobile app as if they were the person they were impersonating via View As. From there the user (in this case a malicious hacker) would have total access over that other person’s account.

Increasingly, the reality of the model shines through.

• Fearing Debt Trap, Pakistan Rethinks Chinese ‘Silk Road’ Projects (R.)

After lengthy delays, an $8.2 billion revamp of a colonial-era rail line snaking from the Arabian Sea to the foothills of the Hindu Kush has become a test of Pakistan’s ability to rethink signature Chinese “Silk Road” projects due to debt concerns. The rail megaproject linking the coastal metropolis of Karachi to the northwestern city of Peshawar is China’s biggest Belt and Road Initiative (BRI) project in Pakistan, but Islamabad has balked at the cost and financing terms. Resistance has stiffened under the new government of populist Prime Minister Imran Khan, who has voiced alarm about rising debt levels and says the country must wean itself off foreign loans.

“We are seeing how to develop a model so the government of Pakistan wouldn’t have all the risk,” Khusro Bakhtyar, minister in Pakistan’s planning ministry, told reporters recently. The cooling of enthusiasm for China’s investments mirrors the unease of incoming governments in Sri Lanka, Malaysia and Maldives, where new administrations have come to power wary of Chinese deals struck by their predecessors. Pakistan’s new government had wanted to review all BRI contracts. Officials say there are concerns the deals were badly negotiated, too expensive or overly favored China. But to Islamabad’s frustration, Beijing is only willing to review projects that have not yet begun, three senior government officials have told Reuters.

Pushed through by EU and US so Balkan can join NATO. Still very contested in Greece.

• FYROM Citizens Go to the Polls to Decide on Name Change (GR)

FYROM citizens are going to the polls today (Sunday) to vote on the referendum on the name change to “Republic of North Macedonia”, as agreed between their government and Greece on June 17. The question of the referendum to which Macedonian voters are asked to answer is: “Are you in favor of membership in NATO and the European Union by accepting the deal between (the) Republic of Macedonia and Republic of Greece?” Opinion polls so far show that a “Yes” in the referendum is most likely, as the majority of the Former Yugoslav Republic of Macedonia citizens are in favor of NATO and EU membership.

However, the question of the Zoran Zaev government is whether the participation is satisfactory. Specifically, 50 percent plus one of registered voters are needed to cast a ballot for the referendum results to be valid. In his referendum campaign, Prime Minister Zoran Zaev stressed the NATO and EU membership prospects for the Balkan country. Meanwhile, opponents, including the country’s president, Gjorge Ivanov, have called for a boycott of the referendum, describing the Prespa agreement with Greece a “flagrant violation of sovereignty.”

A lot of people live there.

• Indonesia Earthquake: Huge Surge In Death Toll (BBC)

At least 832 people were killed in the devastating earthquake and tsunami that hit the Indonesian island of Sulawesi, the national disaster agency says. It added that the affected area was bigger than initially thought. Many people were reported trapped in the rubble of buildings that collapsed in Friday’s 7.5-magnitude earthquake, agency spokesman Sutopo Purwo Nugroho told a news conference. The quake triggered tsunami waves as high as 6m (20ft), he added. Rescuers have been digging by hand in the frantic search for survivors in the city of Palu.

“What we now desperately need is heavy machinery to clear the rubble. I have my staff on the ground, but it’s impossible just to rely on their strength alone to clear this,” Muhammad Syaugi, head of the national search-and-rescue agency, told AFP news agency. There have also been concerns about the town of Donggala, where the impact is still unclear. The Red Cross estimates that more than 1.6 million people have been affected by the earthquake and tsunami which it described as a tragedy that “could get much worse”. Indonesia’s Vice-President Jusuf Kalla said the final death toll could be in the thousands.

Debt Rattle June 4 2017

Jun 042017

June 4, 2017 Posted by Raúl Ilargi Meijer at 9:28 am Finance Tagged with: bubble, Chomsky, Clapper, debt relief, IMF, inquiry, May, refugees, terror, Vancouver 3 Responses »

Eugène Delacroix Les femmes d’Alger 1834

• Theresa May Suppresses Release Of Report On Who Funds Terrorism In UK (Ind.)

• ‘Sensitive’ UK Terror Funding Inquiry May Never Be Published (G.)

• British PM May’s Election Gamble In Doubt As Poll Lead Falls To One Point (R.)

• What Young People Think About This Election

• The Biggest Real Estate Bubble Of All Time Just Did The Impossible (ZH)

• Australia’s Record-Breaking Run Teeters On Edge With ‘Paltry’ Growth (Smh)

• Why A $15 Minimum Wage Is Good For Business (MacLeans)

• Noam Chomsky: Neoliberalism Is Destroying Our Democracy (Nation)

• Clapper Says Russians ‘Genetically Driven’ To Be Untrustworthy (Ryan)

• A Moment of Intoxication (K.)

• Greece Debt Relief Could Mean Creditors Waiting For Up To €123 Billion (R.)

• EU Mulling Secret Plan B For Greece (K.)

• Mediterranean Death Rate Doubles As Migrant Crossings Fall (G.)

• Far Right Raises £50,000 To Target Boats On Refugee Rescue Missions In Med (G.)

This is a few days old (Mey 31). Think it’ll get more attention after last night’s attacks? A report, supposed to be out in early 2016, commissioned by Cameron while May was Home Secretary, is ‘disappeared’ now she is PM.

• Theresa May Suppresses Release Of Report On Who Funds Terrorism In UK (Ind.)

An investigation into the foreign funding of extremist Islamist groups may never be published, the Home Office has admitted. The inquiry commissioned by David Cameron, was launched as part of a deal with the Liberal Democrats in December 2015, in exchange for the party supporting the extension of British airstrikes against Isis into Syria. But although it was due to be published in the spring of 2016, it has not been completed and may never be made public due to its “sensitive” contents. It is thought to focus on Saudi Arabia, which the UK recently approved £3.5bn worth of arms export licences to. A spokesperson from the Home Office told The Independent a decision on the publication of the report would be taken “after the election by the next government”.

But in a separate interview with The Guardian, a spokesperson said the report may never be published, describing its contents were “very sensitive”. Tom Brake, the Liberal Democrat foreign affairs spokesman, has written a letter to the Prime Minister pressing her on when the report will be published and what steps she proposes to take to address “one of the root causes of violent extremism in the UK”. “You will agree with me that the protection of our country, of the British people, is the most important job of any government,” he wrote. “Certainly, more important than potential trade deals with questionable regimes, which appear to be the only explanation for your reticence. “When will this report be finished and published? And what steps do you propose to take to address one of the root causes of violent extremism in the UK?”

Same report. I’m doubling up.

• ‘Sensitive’ UK Terror Funding Inquiry May Never Be Published (G.)

An investigation into the foreign funding and support of jihadi groups that was authorised by David Cameron may never be published, the Home Office has admitted. The inquiry into revenue streams for extremist groups operating in the UK was commissioned by the former prime minister and is thought to focus on Saudi Arabia, which has repeatedly been highlighted by European leaders as a funding source for Islamist jihadis. The investigation was launched as part of a deal with the Liberal Democrats in exchange for the party supporting the extension of British airstrikes against Islamic State into Syria in December 2015. Tom Brake, the Lib Dem foreign affairs spokesman, has written to the prime minister asking her to confirm that the investigation will not be shelved.

The Observer reported in January last year that the Home Office’s extremism analysis unit had been directed by Downing Street to investigate overseas funding of extremist groups in the UK, with findings to be shown to Theresa May, then home secretary, and Cameron. However, 18 months later, the Home Office confirmed the report had not yet been completed and said it would not necessarily be published, calling the contents “very sensitive”. A decision would be taken “after the election by the next government” about the future of the investigation, a Home Office spokesman said. In his letter to May, Brake wrote: “As home secretary at the time, your department was one of those leading on the report. Eighteen months later, and following two horrific terrorist attacks by British-born citizens, that report still remains incomplete and unpublished.

“It is no secret that Saudi Arabia in particular provides funding to hundreds of mosques in the UK, espousing a very hardline Wahhabist interpretation of Islam. It is often in these institutions that British extremism takes root.”

How can you have an election in these circumstances? Campaigning this time has been suspended only until the end of the day…

• British PM May’s Election Gamble In Doubt As Poll Lead Falls To One Point (R.)

British Prime Minister Theresa May’s gamble on a June 8 snap election was thrust into doubt after a Survation poll showed her Conservative Party’s lead had dropped to a new low of just one percentage point. While British pollsters all predict May will win the most seats in Thursday’s election, they have given an array of different numbers for how big her win will be, ranging from a landslide victory to a much more slender win without a majority. Some of the polls indicate the election could be on a knife edge that would throw Britain into political deadlock just days before formal Brexit talks with the European Union are due to begin on June 19.

In a sign of how much her campaign has soured just five days before voting begins, May’s personal rating turned negative for the first time in one of ComRes’s polls since she won the top job in the turmoil following the June 23 Brexit referendum. Survation said the Conservatives were on 40% and Labour on 39%, indicating May’s lead has collapsed by 11 percentage points over two weeks and that her majority was now in doubt. “Prime Minister May’s overall majority now hangs in the balance based on our most recent data,” Survation founder Damian Lyons Lowe told Reuters. “The risk of May not having an overall majority has increased significantly based on our data.”

The Tories rely on the ‘grey’ vote.

• What Young People Think About This Election (HnH)

Nearly two-thirds of young people say that they are certain to vote in Thursday’s General Election, which, if it happens, could see them play a decisive role in many marginal seats and thus, in the final outcome. Of those who are registered and say they are certain to vote, two-thirds (68%) plan to back Labour. That’s according to an exclusive ICM poll commissioned by Hope Not Hate and supported by the National Union of Teachers (NUT). If the turnout is anywhere near the 63% of young people who said that they were “certain” to vote, then this represents a major increase on the 43% who voted in the 2015 General Election.

Living in a key battleground seat could be an important factor in youth turnout, with four out of ten (39%) of 18-24 year-olds saying that living in a marginal constituency would make them more likely to vote. With the latest Lord Ashcroft polling, out yesterday, suggesting that there are 70 constituencies where the two leading parties’ estimated vote shares are within 5% of each other, the turn out rate amongst young people could define the outcome. Among the marginal seats where the youth vote could decide the outcome are Leeds North West, Norwich South, Cambridge, and Cardiff Central. But it is not just the big University seats where the youth vote could make the difference. In Harrow West, for example, Ashcroft’s polling predicts there is only 2% between Labour and Conservatives and according to the 2011 census, there are 9,500 18-24 years in the constituency.

Even if only two-thirds of them are registered, a turnout of 60% could have a major influence on the result. Our poll found huge support for Jeremy Corbyn’s Labour Party, with two-thirds of those who were registered and certain to vote saying they supported Labour (68%), with half (50%) saying Jeremy Corbyn had the right qualities to be Prime Minister (vs 28% for Theresa May).

Trust, or more precisely the lack of it, remains a major issue for young people. Most of them also felt that tabloid newspapers and wealthy individual donors had an unhealthy influence on British politics. The BBC came out as a trusted source of information for 49% of young people, making it the single most trusted news platform. This compares to just 22% who trust newspapers (and 42% distrusted) and 18% social media (and 45% distrusted). Family and friends were trusted by 46%.

Vancouver doesn’t stop. Not by itself. Do all these people think they’ll be bailed out when the crash comes? The government can hardly afford to bail out the banks.

• The Biggest Real Estate Bubble Of All Time Just Did The Impossible (ZH)

One month ago, we said that “the Vancouver housing bubble Is back, and it’s (almost) bigger than ever.” Fast forward to today, when we can scrap the almost part: according to the latest data from the Real Estate Board of Greater Vancouver, nearly a year after British Columbia implemented a 15% property tax targeting foreign buyers, in May the biggest real estate bubble of all time did the impossible and in a testament to the persistence of Chinese oligarchs, criminals, money launderers and pretty much anyone who is desperate to park their cash as far away as possible, after a modest drop following last summer’s tax the Vancouver housing bubble has bounced right back to new all time highs, as prices of detached, attached houses and apartment all surged to new record highs.

The only thing that did fall in May was the number of actual transactions, as residential property sales in the region totaled 4,364 in May 2017, a decrease of 8.5% from the 4,769 sales in May 2016, an all-time record. In other words, all that the 15% surtax achieved was to drastically slowdown the rate of transactions (or perhaps home flipping). Meanwhile, as sellers held out to find more aggressive buyers, they were in luck as the new wave of buyers has emerged, and undeterred by the 15% premium, they have been slowly but surely lifting all available offers. While there is little we can add to this month’s update that we didn’t already say a month ago, below we again put Canada’s housing market, and bubble, in perspective with some of our favorite charts, first showing total Canadian household debt compared to the US. Most of this is in the form of mortgages.

[..] the punchline: indexed home prices in Canada compared to the US. This needs to commentary.

Slow bursting bubbles are exceedingly rare.

• Australia’s Record-Breaking Run Teeters On Edge With ‘Paltry’ Growth (Smh)

Australia is on the brink of hitting a technical recession just as it breaks the record for the longest run of uninterrupted economic growth in the developed world. While Treasurer Scott Morrison has insisted there are “better days ahead,” consumers are suffering from a dual frustration of weak wages and underemployment hitting household budgets, fuelling low levels of growth and restricting how much they are willing to spend. Three of Australia’s major financial institutions are forecasting a “paltry” growth of 0.1% or less, with the National Australia Bank the first to tip negative growth for the three months to March when National Accounts figures are released on Wednesday. Morgan Stanley has predicted negative growth of 0.3%. If it were to happen, it would only be the fourth time since the recession of the early 1990s that Australia had endured a quarter of negative territory.

The sluggish outcomes offer some good news for home owners, with many tipping the Reserve Bank will keep interest rates on hold for the forseeable future, and, when they do move, it will be a cut. The prediction comes after house prices Australia wide fell for the first time in 18 months, also giving some hope to aspiring home owners struggling to get into the market. If Wednesday’s gross domestic product figures reveal a contraction, it would be the second in three quarters, narrowly avoiding the technical recession, defined as two consecutive quarters of negative growth. Analysts say there is a “small possibility of a negative GDP” in the next quarter, due to the impact of Cyclone Debbie, which would take Australia “into technical, but not real, recession”, according to the National Australia Bank. “While some of the contraction has undoubtedly been driven by the weather and other one-offs, the question for next week will be whether the slowdown includes signal as well as noise, and implies a more fundamental economic slowdown,” said NAB Chief Economist Alan Oster.

There’s one thing missing from here: You have to take into account how much of what’s for sale in a society is produced within it. If too much of it is imported, no minimum wage can save anything, the money will just vanish.

• Why A $15 Minimum Wage Is Good For Business (MacLeans)

When higher income households see wage gains, some of it goes to savings. Additional consumption also often flows to vacations and luxury goods, often imported. In other words a non-trivial part leaks out of the local economy. When lower income households see a sustained rise in incomes, they spend virtually all of it. Most goes to food (more nutritious food or eating out), better health care and more education. Sometimes it also goes to rent (moving to a better neighbourhood). Almost all of this spending stays in the local economy. So boost the minimum wage and you boost the economy from the bottom up.

You may be surprised to learn nearly 30% of Ontario’s labour market earned less than $15 an hour in 2016. The nation’s biggest labour market has more people working at low wages than any other big economic engine of Canada (Quebec, B.C., Alberta) While some workers may lose their job after the minimum wage increase (more on that in a minute), a very large number of workers will see an important pay hike, and that will loop back into the economy. Increased consumer spending will grow the top line of businesses, and increase the need for more workers to meet the higher demand for goods and services…and earning better pay. Rising costs will also raise productivity, something virtually every business and economist says we want and need. That’s harder to do if you’re doing things the way you’ve always done them.

Canada has been running a low-wage economy for decades, relatively speaking, according to Statistics Canada. In fact, at last count Canada outpaced the U.S. in the reliance on low-wage work. Within Canada, Ontario has the highest reliance on low-wage work. Boosting wages may knock out some jobs and some marginal businesses. The remaining enterprises that rely on low-wage work will see improved productivity, less absenteeism and turnover, reducing recruitment and training costs. We shouldn’t rue the loss of a few poorly paid jobs, particularly when rising minimum wages also help meet the twin challenges of the early 21st century: constrained revenue growth and higher service needs due to population aging. We’ve got to spur change, and a substantially higher minimum wage will surely spur change.

Good long interview with Noam. We’re going to miss him something awful when he dies. Societies need thinkers like him, no matter what the political views are.

• Noam Chomsky: Neoliberalism Is Destroying Our Democracy (Nation)

I think is if you take a look at recent history since the Second World War, something really remarkable has happened. First, human intelligence created two huge sledgehammers capable of terminating our existence—or at least organized existence—both from the Second World War. One of them is familiar. In fact, both are by now familiar. The Second World War ended with the use of nuclear weapons. It was immediately obvious on August 6, 1945, a day that I remember very well. It was obvious that soon technology would develop to the point where it would lead to terminal disaster. Scientists certainly understood this. In 1947 the Bulletin of Atomic Scientists inaugurated its famous Doomsday Clock. You know, how close the minute hand was to midnight? And it started seven minutes to midnight. By 1953 it had moved to two minutes to midnight.

That was the year when the United States and Soviet Union exploded hydrogen bombs. But it turns out we now understand that at the end of the Second World War the world also entered into a new geological epic. It’s called the Anthropocene, the epic in which humans have a severe, in fact maybe disastrous impact on the environment. It moved again in 2015, again in 2016. Immediately after the Trump election late January this year, the clock was moved again to two and a half minutes to midnight, the closest it’s been since ’53. So there’s the two existential threats that we’ve created—which might in the case of nuclear war maybe wipe us out; in the case of environmental catastrophe, create a severe impact—and then some. A third thing happened. Beginning around the ’70s, human intelligence dedicated itself to eliminating, or at least weakening, the main barrier against these threats. It’s called neoliberalism.

There was a transition at that time from the period of what some people call “regimented capitalism,” the ’50s and ’60s, the great growth period, egalitarian growth, a lot of advances in social justice and so on— Social democracy, yeah. That’s sometimes called “the golden age of modern capitalism.” That changed in the ’70s with the onset of the neoliberal era that we’ve been living in since. And if you ask yourself what this era is, it’s crucial principle is undermining mechanisms of social solidarity and mutual support and popular engagement in determining policy. It’s not called that. What it’s called is “freedom,” but “freedom” means a subordination to the decisions of concentrated, unaccountable, private power. That’s what it means. The institutions of governance—or other kinds of association that could allow people to participate in decision making—those are systematically weakened. Margaret Thatcher said it rather nicely in her aphorism about “there is no society, only individuals.”

Russiagate is rotting America.

• Clapper Says Russians ‘Genetically Driven’ To Be Untrustworthy (Ryan)

The former US Director of National Intelligence James Clapper thinks Russians have some sort of biological predilection to be an untrustworthy bunch. I wish I was making that up, but sadly, I’m not. Clapper said it during last Sunday’s episode of Meet The Press on NBC, during a response to a question about Jared Kushner’s ties to Moscow. The Russians are “typically, almost genetically driven to co-opt, penetrate, gain favor, whatever” — was the exact quote.There’s great irony in that comment by Clapper, with his own record of perjury, implying that an entire ethnicity can’t be trusted. So, of course, widespread outrage followed the blatantly xenophobic comment. Nah, I’m only joking. No one actually noticed or cared.

Chuck Todd, the interviewer, let the comment slide without even acknowledging that Clapper had said something untoward. If there was a debate about Clapper’s comment and it was deemed somehow acceptable, that would be bad enough — but it’s actually worse than that, because anti-Russian sentiment is so deeply ingrained in the American psyche, that no one even notices when a high profile figure like Clapper makes a comment about the “genetics” of Russians in an effort to brand them as inherently devious and conniving. But it shouldn’t be surprising. Unlike any other group of people, it’s been well-established that you can say pretty much whatever you like about Russians with no repercussions or backlash of any kind, particularly if you pass it off as comedy.

“We want a peaceful Europe, not one where Germany puts itself above all.”

• A Moment of Intoxication (K.)

With Donald Trump elected to the office of president of the United States, developments are following their predetermined course, with the relationship between Washington and Berlin being sorely tested. Some had maintained hope that the new president of the US would adjust to the reality that’s been established for years. Trump, however, is battling and trying to overthrow this reality, treating it as something that’s against American interests. The informal NATO summit in Brussels and the G7 have dashed the optimists’ expectations. Trump strongly criticized his European partners, including Germany, for being inconsistent with their financial obligations toward NATO. Germany’s disappointment with this was to be expected, but less so was the audacity that followed.

German Chancellor Angela Merkel’s strong remarks at a Munich beer tent, that Europe cannot rely on its American and British partners and that it should take its fate into its own hands, were the product of arrogance. They represent the beginning of a rupture, even if some attempt to attribute a “strategic depth” to the whole issue – something like an emancipation for the European Union and a fresh impetus for the completion of the EU project. Except that the introduction of the common currency, rather than make Europe more united, has created a two-tiered Europe, divided between north and south, and Chancellor Merkel’s immigration policies have accelerated centrifugal trends. It doesn’t require much intelligence for one to realize the likely outcome of another amateur initiative like a “common European defense” structure without the active participation of the US and the UK.

This would be opportunism with disastrous consequences. It goes without saying that Greece outside the UK/US defense system puts us in grave danger. We haven’t, of course, reached that point just yet. We’ve simply reached a period of typical European babble and confusion. The hope is that it doesn’t last too long. Nevertheless, the cries of German politicians must stop. Of course, Pax Americana has been violently disputed from time to time. We have already had a taste of Germany in a dominant economic role, as implemented by Wolfgang Schaeuble. Let us consider the remarks by Chancellor Merkel as a moment of intoxication at the beer tent. We want a peaceful Europe, not one where Germany puts itself above all.

Creative accounting as an excuse not to do the obvious. Germany’s power must be clipped or else.

• Greece Debt Relief Could Mean Creditors Waiting For Up To €123 Billion (R.)

A Greek debt relief scenario that put back interest payments until 2048 would mean the nation’s eurozone creditors deferring receipt of up to €123 billion, according to a forecast by Germany’s Finance Ministry. The ministry’s calculations, which were contained in a letter to a member of parliament seen by Reuters on Friday, contemplated the various restructuring scenarios laid out by the eurozone bailout fund, the European Stability Mechanism (ESM). “With such an interest deferral, it would de facto be a new loan with a volume that depends on the development of interest rates,” the document said. “The estimated volume of the deferred interest up until 2048 would be around €118-123 billion.”

The IMF says it cannot contribute loans to Greece’s current bailout unless it gets assurances that its debt will be sustainable. The Fund has estimated that the Greek economy will only grew by 1% per year on average and that Greece will return to a primary surplus of 1.5% from 2023 after five years at 3.5%. Greece needs about €7 billion in loans from its €86 billion rescue package to repay debt maturing in July, but the disbursement hinges on its lenders’ assessment of its bailout progress, the conclusion of the so-called second review.

No IMF.

• EU Mulling Secret Plan B For Greece (K.)

In the wake of last week’s Eurogroup impasse, European officials are mulling a plan B for Greece that would sideline the IMF, curb debt relief and reduce the need for austerity after 2019, Kathimerini understands. According to sources, European officials have already started discussing an alternative plan that could be put into effect in the fall, after September elections in Germany, which have made Berlin cautious of any politically contentious moves. The plan being considered would ensure that the IMF is no longer in the “driving seat of the Greek bailout program,” the sources said, adding that it would offer Greece less debt relief than it had hoped for but also less austerity in 2019 onward, after the current bailout has expired.

That would mean Athens could revoke some of the tough austerity measures it pushed through Parliament last month. The pension cuts and tax increases are due to come into effect in 2019 and 2020 respectively. However, a worse deal for Greece as regards debt relief would be a hard sell for the government of Prime Minister Alexis Tsipras, who has basically reneged on all pre-election promises and is keen to deliver something concrete with respect to the country’s debt. His government has already started shifting its narrative away from an insistence on a “comprehensive solution on the debt” to a “solution that will pave the way for accessing the markets.” Athens is still expected to make one last push for a deal at a Eurogroup summit on June 15.

According to sources, Tsipras will aim to broach the issue at a subsequent summit of EU leaders on June 22 if no solution transpires at the Eurogroup, as is expected. The Greek leader has already secured the support of French President Emmanual Macron for such a discussion to take place, sources say. Earlier this week German Finance Minister Wolfgang Schaeuble hit out at Tsipras, claiming the leftist premier has not shifted the burden of austerity away from poorer Greeks as he had pledged and that party influence in the public administration has increased, not decreased, during his time in government. Tsipras did not respond in person but a government source issued a terse response. “The responsibility of Schaeuble in managing the Greek crisis has been recorded historically,” the source said. “There is no point in his ascribing it to others.”

Merkal won’t lift a finger until her election. Those are the priorities. And no other country can do a thing without her.

• Mediterranean Death Rate Doubles As Migrant Crossings Fall (G.)

The death rate among migrants attempting to cross the Mediterranean to enter Europe has almost doubled over the past year. Comparing the first five months of this year with the same period last year, UN agency data reveals that the mortality rate grew from 1.2% to 2.3%. The death rate during all of 2015 was 0.37% – a sixth of its current level. Details of the drownings came as it emerged that far-right activists are planning to send boats to the Mediterranean this summer to disrupt search-and-rescue vessels that are attempting to save the lives of refugees. The new figures prompted calls for the international community to stop turning a blind eye to the unfolding crisis. Aid agencies said the rising death rate was caused by a shortage of search-and-rescue vessels and the increasingly unsafe boats being provided by smugglers and traffickers in Libya.

Last week a Médecins Sans Frontières (MSF) vessel rescued 1,500 people in 10 hours, more than double the boat’s capacity. Vickie Hawkins, executive director of MSF UK, accused world leaders of turning their backs on refugees and choosing to focus on border security instead of adopting a humanitarian approach that would lower the Med’s death toll. “The deterrence policies implemented to keep people away from Europe have little regard for the human consequences. As a result, the Mediterranean has turned into a giant cemetery with over 1,500 missing or dead so far this year and tens of thousands of people detained inside Libya.” Leonard Doyle, chief spokesman for the UN migration agency, the IOM, said it had detected a hardening of attitude towards economic migrants from Africa, who were looking for work as they moved north towards Europe.

“These are impoverished, black, sub-saharan Africans and there’s definitely less interest in them and less warmth towards them than there was towards the refugees coming in from Syria last year, there’s no question about that,” said Doyle. He added: “The rate of deaths has gone sky high. People looking for work are being told to get into a dinghy and they’ll get a job. These are very vulnerable people ending up in exploitative situations.” During the first five months of last year the IOM recorded 205,858 migrants reaching Europe via the Mediterranean with 2,512 deaths. So far this year a far smaller amount – 71,029 – of migrants and refugees have crossed the Med to enter Europe yet the number of deaths stands at 1,650.

Research by the University of Warwick published last week – the first large-scale comparative study of the backgrounds and aspirations of refugees and migrants heading for Europe – challenged the prevailing view that they pick Europe as their destination of choice. Instead, researchers found that many did not even know anything about the EU prior to their arrival and had in fact been manipulated by traffickers who promised them work.

Inevitable in view of government- and media rhetoric.

• Far Right Raises £50,000 To Target Boats On Refugee Rescue Missions In Med (G.)

Far-right activists are planning a sea campaign this summer to disrupt vessels saving refugees in the Mediterranean, after successfully intercepting a rescue mission last month. Members of the anti-Islam and anti-immigrant “Identitarian” movement – largely twentysomethings often described as Europe’s answer to the American alt-right – have raised £56,489 in less than three weeks to enable them to target boats run by aid charities helping to rescue refugees. The money was raised through an anonymous crowdfunding campaign with an initial goal of €50,000 to pay for ships, travel costs and film equipment. On Saturday the group confirmed they had reached their target but were still accepting donations. A French far-right group hired a boat for a trial run last month, disrupting a search-and-rescue vessel as it left the Sicilian port of Catania. They claimed they had slowed the NGO ship until the Italian coastguard intervened.

Figures from the UN’s migration agency, the IOM, reveal that 1,650 refugees have died crossing the Mediterranean so far this year with a further 6,453 migrants rescued off Libya and 228 bodies pulled from the waters. Humanitarian charities operating in the Mediterranean have helped save the lives of thousands of refugees, with women and children making up almost half of those making the crossing. The threat from the far right infuriates charities operating in the Mediterranean. One senior official, who requested anonymity, said politicians had helped create a climate where supporters of the far right felt emboldened to act in such a way. “When the British government and its European counterparts talk about ‘swarms’ of migrants, or perpetuate the myth that rescue operations are a ‘pull factor’ or a ‘taxi service’, that gives fuel to extreme groups such as this. The simple reality is that without rescue operations many more would drown, but people would still attempt the crossing,” the official said.

[..] During the first five months of 2015, no European or NGO search-and-rescue operations took place with 1,800 people drowning trying to make the crossing. In April alone 1,000 lives were lost. All search-and-rescue operations in the Mediterranean are coordinated by the official Maritime Rescue Coordination Centre in Rome in accordance with international maritime law. Yet the European far-right groups have accused NGOs of working with traffickers to bring migrants to Europe and claim that search-and-rescue boats are not carrying out a humanitarian intervention. The central aim of the new wave of far-right groups is preserving national differences in the belief that white Europeans will be replaced by immigrants, a stance that is articulated with anti-migrant, anti-Muslim, anti-media sentiments but repackaged for a younger audience.

The number of far-right groups is difficult to establish, but Génération Identitaire has held demonstrations in France that drew around 500 people, while its Facebook page has 122,662 likes. Its Austrian counterpart, Identitäre Bewegung Österreich, has 37,628 likes on Facebook, although critics warn of increasing links with the US alt-right which helped to propel Donald Trump to the White House. Also on the boat that attempted to obstruct SOS Méditerranée’s vessel last month was the Canadian alt-right journalist Lauren Southern, who has 278,000 Twitter followers and whose presence confirms a transatlantic convergence.

Debt Rattle February 4 2017

Feb 042017

February 4, 2017 Posted by Raúl Ilargi Meijer at 10:24 am Finance Tagged with: allegiance, Amazon, ban, euro, Grexit, hypocrisy, Iran, judge, Trump, Vancouver, visa 1 Response »

Henri Cartier Bresson Paris 1952

• Judge Blocks Trump Travel Ban Nationwide (ZH)

• Airlines Told To Allow Banned Travelers Into US After Judge’s Order (G.)

• Trump’s Travel Ban Has Revoked 60,000 Visas For Now (R.)

• If Americans Truly Cared About Muslims, They Would Stop Killing Them (BAR)

• Iran To Name US Individuals Involved In ‘Helping And Founding’ Terrorists (ZH)

• EU Flirts With Hypocrisy In Criticising Trump’s Refugee Ban (EUO)

• America Is Shedding Its Whole Middle Class (Jim Kunstler)

• Vancouver Home Sales Plummeted 40% In 2016 On Foreign Buyer Tax (AFR)

• Amazon Accounts For 43% Of US Online Retail Sales (BI)

• UniCredit Writedowns Ring Alarm Bells For Italian Banks (R.)

• Euro Too Weak For Germany But Too Strong For Others (R.)

• Eurocrats ‘Beg States To Agree To Deeper Integration To Save The Bloc’ (Exp.)

• Grexit? Greece Again On The Brink As Debt Crisis Threatens Break With EU (G.)

“It’s a case of that magnitude, it’s a case that frankly I think will ultimately end up before the U.S. Supreme Court, so that would not surprise me one way or the other.”

• Judge Blocks Trump Travel Ban Nationwide (ZH)

Following a brief moment of ‘success’ for the Trump administration as a Boston judge ruled Trump’s immigration policy was not a Muslim ban, a Bush-appointed federal judge in Seattle, who said the states of Washington and Minnesota can sue claiming their residents were harmed by the ban, granted a nationwide temporary restraining order blocking Trump’s immigration ban. District Judge James Robart ruled the executive order would be stopped nationwide effective immediately: his ruling was the most comprehensive legal rebuke of Trump’s Jan. 27 executive order prohibiting immigrants from Iran, Iraq, Syria and four other nations from entering the U.S. for 90 days. Judges in Brooklyn, New York, Los Angeles and Alexandria, Virginia, had previouslyissued orders that are less sweeping.

Washington Attorney General Bob Ferguson was delighted with the decision: “The Constitution prevailed today,” Ferguson said in a statement after the ruling. “It is not the loudest voice that prevails on the Constitution,” Ferguson continued speaking outside the courthouse. “We are a nation of laws, not even the president can violate the Constitution. It’s our president’s duty to honor this ruling and I’ll make sure he does,” Ferguson added hopefully. Good luck with that. In his ruling, Robart said that “the state has met its burden in demonstrating immediate and irreparable injury” while Fergsuon added that “Judge Robart’s decision, effective immediately, effective now, puts a halt to President Trump’s unconstitutional and unlawful executive order. It puts a stop to it immediately, nationwide.” The court order, effective immediately, will remain in place until the judge considers a motion – probably within a month – to permanently invalidate the president’s order, Ferguson said.

Ferguson, a Democrat, filed the lawsuit three days after Trump signed the executive order. The suit argued that the travel ban targets Muslims and violates constitutional rights of immigrants and their families. In his request for the order, according to Bloomberg, Ferguson had said the effects on the state included economic consequences for employers based there, including Microsoft, Starbucks and Amazon.com. Expedia, based in Bellevue, Washington, had about 1,000 customers with flight reservations in or out of the U.S. from the seven countries, he said. Minnesota, like Washington, cited the effect of the ban on students at its colleges and universities, as well as health care centers including the Mayo Clinic. The state’s 5.4 million residents included 30,000 immigrants from the affected countries, it said in the lawsuit.

According to The Hill, in a phone interview with CNN Friday evening, Ferguson said he “expected win, lose or draw” that the case would move “fairly quickly through, up to the Ninth Circuit” Court of Appeals – “just because of the magnitude of the executive order.” And hinting that the Supreme Court showdown we suggested previously now appears inevitable, Ferguson added that he is “prepared for this case to go all the way to the Supreme Court whichever way the Ninth Circuit Court of appeals goes,” he said, anticipating a challenge to Robart’s ruling. “It’s a case of that magnitude, it’s a case that frankly I think will ultimately end up before the U.S. Supreme Court, so that would not surprise me one way or the other.”

Trump’s legal team senses difficulties ahead: “..The justice department later said it would not immediately file for an emergency stay..”

• Airlines Told To Allow Banned Travelers Into US After Judge’s Order (G.)

Customs officials have reportedly told US airlines that they can board passengers who had been barred from entering the country after a federal judge in Seattle ordered a temporary halt on Donald Trump’s travel ban for refugees and people from seven predominantly-Muslim nations. District judge James Robart granted a temporary restraining order on Friday after hearing arguments from Washington state and Minnesota that the president’s order had unlawfully discriminated against Muslims and caused unreasonable harm. It was not immediately clear whether authorities would comply with the broad order, especially after officials reacted in confusion a week earlier, detaining valid visa holders and arguing with lawyers.

Late on Friday, the White House released a statement saying that it would seek an emergency stay against Robart’s ruling; an earlier request for a stay by a justice department attorney had been denied by the judge. “At the earliest possible time, the Department of Justice intends to file an emergency stay of this outrageous order and defend the executive order of the President, which we believe is lawful and appropriate. The president’s order is intended to protect the homeland and he has the constitutional authority and responsibility to protect the American people,” press secretary Sean Spicer said. In a second “updated” statement, the White House removed the word “outrageous”. The justice department later said it would not immediately file for an emergency stay, at least on Friday night, and reports said Customs and Border Protection (CBP) had informed US airlines that they should board travelers who had been barred by an executive order last week.

Looks like the worst of the chaos may be over. Trump can’t afford too many court battles, certainly if he loses them. He’s being told to confer with the lawyers first now.

• Trump’s Travel Ban Has Revoked 60,000 Visas For Now (R.)

About 60,000 visas were revoked under U.S. President Donald Trump’s executive order temporarily halting immigration from seven Muslim-majority countries, the State Department said on Friday, in one of several government communications clarifying how the order is being rolled out. The revocation means the government voided travel visas for people trying to enter the United States but the visas could be restored later without a new application, said William Cocks, a spokesman for consular affairs at the State Department. “We will communicate updates to affected travelers following the 90-day review,” he said. Earlier news reports, citing a government attorney at a federal court hearing, put the figure at more than 100,000 visas.

The government issued over 11 million immigrant and non-immigrant visas in fiscal year 2015, the State Department said. The immigration executive order signed by Trump a week ago temporarily halted the U.S. refugee program and imposed a 90-day suspension on people traveling from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen. Trump said the measures would help protect Americans from terrorist attacks. Under President Barack Obama, Trump’s predecessor, the United States added those seven countries as “countries of concern” under its visa waiver program, effectively toughening U.S. visa procedures for individuals who visited those places during the past five years.

Trump’s executive order was at least in part informed by those restrictions. The new president, who took office on Jan. 20, went further by temporarily barring passport holders from those seven countries. The State Department first issued the guidance about revoking the visas on Jan. 27, the day Trump signed his executive order, according to a memo filed in a court case in Massachusetts. But confusion about the roll out of the order sparked protests at airports across the country where people had been detained and led to a wave of lawsuits filed by individuals, states and civil rights groups.

“.. so much American hatred is directed at Muslims that Democrats and establishment Republicans must struggle to keep the Russians in the “hate zone” of the American popular psyche.”

• If Americans Truly Cared About Muslims, They Would Stop Killing Them (BAR)

In the most dramatic expression of insider opposition to a sitting administration’s policies in generations, over 1,000 U.S. State Department employees signed on to a memo protesting President Donald Trump’s temporary ban on people from seven predominantly Muslim countries setting foot on U.S. soil. Another recent high point in dissent among the State Department’s 18,000 worldwide employees occurred in June of last year, when 51 diplomats called for U.S. air strikes against the Syrian government of President Bashar al Assad. Neither outburst of dissent was directed against the U.S. wars and economic sanctions that have killed and displaced millions of people in the affected countries: Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen.

Rather, the diplomatic “rebellion” of last summer sought to pressure the Obama administration to join with Hillary Clinton and her “Big Tent” full of war hawks to confront Russia in the skies over Syria, while the memo currently making the rounds of State Department employees claims to uphold “core American and constitutional values,” preserve “good will towards Americans” and prevent “potential damage to the U.S. economy from the loss of revenue from foreign travelers and students.” In neither memo is there a word of support for world peace, nor a hint of respect for the national sovereignty of other peoples – which is probably appropriate, since these are not, and never have been, “core American and constitutional values.” “The diplomatic ‘rebellion’ of last summer sought to pressure the Obama administration to join with Hillary Clinton and her ‘Big Tent’ full of war hawks to confront Russia in the skies over Syria.”

Ironically, the State Department “dissent channel” was established during one of those rare moments in U.S. history when “peace” was popular: 1971, when a defeated U.S. war machine was very reluctantly winding down support for its puppet regime in South Vietnam. Back then, lots of Americans, including denizens of the U.S. government, wanted to take credit for the “peace” that was on the verge of being won by the Vietnamese, at a cost of at least four million Southeast Asian dead. But, those days are long gone. Since 2001, war has been normalized in the U.S. – especially war against Muslims, which now ranks at the top of actual “core American values.” Indeed, so much American hatred is directed at Muslims that Democrats and establishment Republicans must struggle to keep the Russians in the “hate zone” of the American popular psyche.

Could be interesting.

• Iran To Name US Individuals Involved In ‘Helping And Founding’ Terrorists (ZH)

Following the escalation on Friday morning, in which the US Treasury Department published a list of 13 Iranian individuals and 12 Iranian entities facing new restrictions following Iran’s recent ballistic missile test, Tehran promptly denounced the latest round of sanctions imposed by the US and said it would retaliate – something it has previously said it would do – however added a new twist when Tehran announced it would impose legal restrictions on American individuals and entities helping “regional terrorist groups”, a Foreign Ministry statement read as quoted by TV. For obvious reasons, this naming and shaming of US-based terrorists promises to be far more interesting than if Iran were to actually ban, say, the US national chess team. Such an action will quickly coalesce the world’s attention on a handful of US entities, putting under a microscope all of their offshore activities.

“The new sanctions … are not compatible with America’s commitments and resolution 2231 of the U.N. Security Council that endorsed the nuclear deal reached between Iran and six powers,” the Iranian Foreign Ministry statement said late on Friday.Tehran said it will react accordingly to any U.S. measure aimed at the Iranian nation’s interests. “In retaliation for the U.S. sanctions, Iran will impose legal restrictions on some American individuals and entities that were involved in helping and founding regional terrorist groups,” the Foreign Ministry statement said. It said names of the entities and individuals would be announced later, although it was not clear when exactly that is. As reported earlier, on Friday, the US Treasury Department blacklisted 13 individuals and a dozen businesses as part of the sanctions. The majority of the individuals in question are from Iran, as well as three Chinese nationals and two Arabs.

“Iran’s continued support for terrorism and development of its ballistic missile program poses a threat to the region, to our partners worldwide, and to the United States,” John E. Smith, acting director of the Treasury Department’s Office of Foreign Assets Control, said. He added that in countering what he called “Iranian malign activity,” Washington will not hesitate to put more pressure and restrictions “to address this behavior.” Countering rising US rhetoric, Iran’s foreign minister, Javad Zarif, said in a twitter post that “Iran unmoved by threats as we derive security from our people.” “We’ll never initiate war, but we can only rely on our own means of defense,” he stressed. Iran’s Defense Minister Brigadier General Hossein Dehqan noted that Tehran “will not allow foreigners to interfere” in the country’s defense issues and insisted “the test did not violate the nuclear deal or (UN) Resolution 2231.”

Understatement of the year.

• EU Flirts With Hypocrisy In Criticising Trump’s Refugee Ban (EUO)

The EU rightly spoke out against Donald Trump’s entry ban on asylum seekers from Syria. But its own track record leaves much to be desired. EU foreign policy chief Federica Mogherini said on Monday (Jan 30) that the EU would continue to host refugees. “It’s our identity: we celebrate when walls are brought down and bridges are built,” she said in a tweet. Her comments appeared the same day a young man from Pakistan suffocated to death in a tent at the Moria camp on the Greek island of Lesbos. He was trying to keep warm. It was the third death at the camp in a week. The misery of people is well documented in so-called hotspots set up by the EU in both Italy and in Greece. The conditions are so bad that many, including Syrian refugees, have volunteered to return to Turkey from the Greek islands.

The EU blames the Greek government. The Greek government blames EU states for not relocating asylum seekers and for sealing off the Western Balkan route. When Hungary erected a wall on its border with Serbia, the European Commission said it was a national issue. When a Syrian refugee protested against the barrier, Hungarian authorities gave him a 10-year prison sentence. The EU talks endlessly about solidarity. But in reality, solidarity does not exist except among the nameless volunteers on the ground. And some of those are risking jail for their efforts. One Danish woman went on trial for people-smuggling after giving a family of refugees a ride to Copenhagen. A similar case is unfolding in Sweden. Only around 10,000 people have been relocated from Italy and Greece to other EU states.

The two-year scheme, which ends in September, had called for 160,000. Many more have been kicked out. Almost 11,000 people were sent home last year, a four-fold increase compared with 2015 when 3,565 migrants were returned in 66 operations. Both EU commission and member states now appear to oppose issuing humanitarian visas for people in need. Germany may stand out as an exception after welcoming some 1 million in 2015. But the fact that the world’s richest nations are unwilling to properly care for the thousands stranded in Greece and on its islands is a disgrace. The task has largely been delegated to volunteers, NGOs and international aid organisations. With populist parties gaining ground in the Netherlands, France and Germany, the anti-immigrant discourse has also gone mainstream.

Dutch prime minister Mark Rutte last week told Muslims to “act normal, or go away”. France’s conservative presidential contender Francois Fillon has promised to erect national borders and German interior minister Thomas de Maiziere wants zones outside Europe to screen applicants before arrival. De Maiziere’s proposal is gaining traction. The plan is to offshore the problem to war-torn Libya. The job is already under way in a handful of other African states and Afghanistan. This is the EU’s invisible wall.

Good to see Jim is still reading the Automatic Earth.

• America Is Shedding Its Whole Middle Class (Jim Kunstler)

I guess you’ve noticed by now that the center didn’t hold. Instead of a secure platform for political premises like tradition, precedent, rationality, and cultural norms, you see a fiery maw of sheer emotion between the camps of the so-called Left and the so-called Right. I say so-called because the campus Left and the Trump Right have escaped the categorical corrals they formerly occupied. And they may have left their customary official parties stranded and dying too. It may be fatuous to say whether that is a good or bad thing; it just is, for the moment. They are two halves of a polity so broken and so far apart that it is also hard to see how they might ever come back together into a consensus about how a society might operate successfully.

Not having a consensus — some substantial overlap between circles of perspective — it’s not surprising that America can’t construct a coherent view of what is happening, or make a plan for what to do about it. Mainly what’s happening is the running down of fossil fuel based techno-industrial economies, and the main symptom is falling standards of living, with fading prospects for future happiness and security. As I’ve said before, our economic picture is basically untenable due to the falling energy-return-on-investment of the crucial oil supply. At the high point of 1920s oil production the ratio was around 100-1. The shale oil “miracle” is good for about 5-1. The aggregate of all oil these days is under 30-1. Below that number, you’ve got to shed some activities in our complex economy (or they just get too expensive to support) — things like high-paying labor jobs, medical care, tourism, college, commuting, heating 2500 square foot homes…).

Oddly the way it’s actually working out is that America is simply shedding its whole middle class and all its accustomed habits and luxuries. At least that’s how it adds up in effect. Naturally, that produces a lot of bad feeling. President Trump is unlikely to be able to fix that essential problem, unless he can pilot the whole political-economy into a glide-path leading toward neo-medievalism — what I call the World Made By Hand. Trump’s call for restoring the factory economy of 1962 is a low-percentage prospect. Instead, he’ll be saddled with the collateral damage caused by the dishonest effort of his recent predecessors to borrow from the future to pay for the way we live now — that is, racking up debt.

This mighty debt-load, never before seen in history, and the accounting fraud that enables it, has helped produce all kinds of distortions, perversities, and fragilities in our money system (finance and banking) which can easily slip into collapse if a crucial prop fails here or there, and that is exactly what I think will happen under Trump. It will not be his fault, but he’ll get blamed for it. And when it happens, he won’t be able to give his attention to anything but that.

People don’t recognize it yet, but this is how you spell success.

• Vancouver Home Sales Plummeted 40% In 2016 On Foreign Buyer Tax (AFR)

Home sales in Vancouver plummeted 39.5% in January from a year ago and fell 11% from December, five months after the government slapped a tax on foreign buyers. January marked the sixth consecutive month of falling sales in Canada’s hottest real estate market, where an influx of mainly Chinese offshore buyers has helped push the price of a typical home to more than 12 times the median resident’s household income. Vancouver topped a list of cities around the world that UBS has identified as most at risk of a housing bubble. Sydney placed fourth after London and Stockholm. The Real Estate Board of Greater Vancouver said the monthly sales – 1523 homes sold in January – marked a 10.3pc drop on the 10-year average for the month.

‘It’s a lukewarm start to the year compared to 2016,” said Dan Morrison, the board’s president. “While we saw near record-breaking sales at this time last year, home buyers and sellers are more reluctant to engage so far in 2017.” The government of British Columbia – Vancouver is the province’s biggest city – acted last year to cool the market, slapping a new 15% tax on offshore buyers in August. The average benchmark price for detached properties in the Pacific port has fallen 17.8% to $C1,474,800 from a record high of $C1.83 million in January 2016. The average price has fallen 6.6% in the past six months and edged 0.6% lower from December. The composite benchmark price for all residential properties – detached, units and townhomes – has fallen 3.7% since June.

The BC Ministry of Finance earlier reported that the %age of sales in Vancouver to foreign residents had plummetted since the new foreign buyers’ tax went into effect on August 2. In September, foreign purchasers were involved in 1.3% of all transactions in the city of 1.5 million people. “From June 10 to August 1, the period before the additional tax took effect, foreign purchasers were involved in 13.2% of residential property transfers in Metro Vancouver,” a ministry statement said.

Companies like Google, Facebook and Amazon have become far too big for anyone’s good. Time to cut them down to size.

• Amazon Accounts For 43% Of US Online Retail Sales (BI)

An analysis by Slice Intelligence released this week found that 43% of all online retail sales in the US went through Amazon in 2016, as the e-commerce giant’s market share continues to grow. According to the study, which analyzed more than 4 million online purchases, Amazon accounted for the majority (53%) of the growth in US e-commerce sales for the year. Simply put, Amazon’s already dominant share of the US e-commerce market is only increasing. It reportedly captured 33% of all US online purchases in 2015, according to Internet Retailer, up from 25% in 2012. If those estimates are correct, then the company increased its share of the US e-commerce market by 10% in 2016, an incredible accomplishment given that it already controlled such a sizeable chunk of the space.

Slice said that Amazon’s growth in 2016 was driven by sales in the electronics, home, and apparel categories. Electronics contributed to an estimated 18% of the company’s sales growth in 2016, as the number of US households that own an Amazon Echo device more than doubled from 2015. The next biggest contributors were the home and kitchen category (15%), apparel and accessories (12%), food (11%), and health and beauty (10%), illustrating that Amazon is seeing significant growth in consumer packaged goods (CPGs). The company’s recent expansion of its Dash Buttons to its online site and mobile app should help fuel further growth in these categories. Amazon’s success has also been fueled by high customer loyalty and brand awareness.

The Amazon Prime subscription service continues to grow: One study released last September by Consumer Intelligence Research Partners found that 20% of all US consumers are Prime members. Meanwhile, an Internet Retailer survey of 500 US consumers last December found that more than half of them (52%) go directly to Amazon when they shop online. Although the company faces a wide range of competition in the e-commerce market from both legacy retailers and new entrants, none of them can match Amazon’s customer loyalty and brand awareness when it comes to online shopping. Other online retailers will have to build up their brand awareness to compete with Amazon, but they’ll also likely need to sell through Amazon’s marketplace to stay relevant as its market share keeps growing.

Slo-mo suffocation. Much better to swallow the bitterness and start afresh.

• UniCredit Writedowns Ring Alarm Bells For Italian Banks (R.)

UniCredit has heavily written down the value of its €700 million ($756 million) investment in Italy’s bank rescue fund and other investors are likely to follow suit, sources told Reuters, complicating efforts to stabilize the nation’s banking sector. Italy biggest bank has cut the value of its investment in the Atlante fund by significantly more than a third on its books, according to two sources familiar with the matter. The move is part of its plan to clean up its balance sheet before it taps the market for 13 billion euros in a share issue next week. By writing down the stake, UniCredit is indicating that it does not believe it will make money on the investment it made into the state-managed fund created to recapitalize a number of failing Italian banks and help the industry offload bad loans.

A source at another bank estimated UniCredit’s writedown could be closer to 70%. Intesa Sanpaolo, which together with UniCredit is Atlante’s biggest investor, on Friday said it had written down the value of its stake in the fund by 33%. A group of about half a dozen other banks that have invested in Atlante have held a series of meetings in recent days to discuss the scale of their own possible writedowns, said another source with direct knowledge of the talks. They are also likely to write down their investments by 30%, according to the source, who did not name the lenders. Atlante executives have acknowledged that the value of investments has fallen but have said the fund created last April has an investment horizon of five years and aims to create value for its backers over that period.

And that in a nutshell is what condemns the single currency.

• Euro Too Weak For Germany But Too Strong For Others (R.)

In an attack on Germany, U.S. President Donald Trump’s top trade adviser said the euro was “grossly undervalued”, a charge which may ring true for the German economy but not for the 19-member currency zone as a whole. The adviser, Peter Navarro, said Germany, the euro zone’s economic powerhouse, was exploiting the euro exchange rate for trade purposes, a charge rejected by German Chancellor Angela Merkel. There’s no clear method of establishing how much a currency is under or overvalued but many economists think that some economic measures show the German economy could easily cope with a stronger euro. It hit a 14-year low of $1.0339 last month. Even German Finance Minister Wolfgang Schaeuble said on Friday the single currency could be a bit stronger for Germany.

But he agreed with economists that this would make life hard for other euro members. For weaker economies such as Greece, economic measures show the exchange rate is too strong, and for the whole currency area it is only moderately underpriced. “The euro is below most estimates of fair value. And German exporters appear to be benefiting more than most,” said Jennifer McKeown at Capital Economics. The White House is concerned about the exchange rate because German companies sell cars, vehicle parts, pharmaceuticals, planes and helicopters around the world, competing with American, as well as other European, manufacturers. Exports account for nearly half Germany’s economic output, with 9.5% going to the United States and around 35% to euro zone countries.

In 2015, the United States became the top destination for German exports, overtaking France for the first time since 1961 due to an upturn in the U.S. economy but also due to the weaker euro. The currency has lost more than 20% of its value against the U.S. dollar since mid 2014. A handful of recent reports found that while the euro was undervalued for Germany it was too strong for other countries. The World Price Index (WPI) published by research firm World Economics each month found that the euro was undervalued on a purchasing power parity basis, a measure that takes into account what money can buy in two different currencies based on inflation and the cost of living. A “German euro” was nearly 17% undervalued against the dollar in PPP terms, while a “French euro” was overvalued by nearly 5%. A “Greek euro” was overvalued by 7%.

“German exporters remain the beneficiaries of a system that is causing stagnation and unemployment in the rest of Europe,” World Economics said in the report. The IMF also said last year that the euro was undervalued by anywhere from 0 to 10% for the region as a whole. But for Germany that undervaluation was anywhere between 10 and 20%, making it the most undervalued exchange rate for any of the 29 countries and jurisdictions around the world covered in the report.

The last gasps: ..Mr Tusk will reportedly urge leaders to pledge allegiance to the crumbling Brussels bloc..”

• Eurocrats ‘Beg States To Agree To Deeper Integration To Save The Bloc’ (Exp.)

Desperate Eurocrat Donald Tusk will urge EU nations to agree to deeper integration and recommit to the sprawling superstate, a leaked report has hinted. Mr Tusk will reportedly urge leaders to pledge allegiance to the crumbling Brussels bloc and agree to “an ambitious vision” of “political consolidation”. The European Council president will cite “unprecedented external threats” during a meeting in Malta with leaders from EU nations as a reason for recommitting to the European project. According to Politico, the document which will be proposed to officials later today, says “the EU is at a historical turning point” and is “facing important internal challenges as exemplified by Brexit”. Tusk’s lackeys, along with Italian and Maltese officials, will use Friday’s meeting to draft the proposed “Rome declaration” which will outline a future vision for the bloc.

The document urges leaders to commit to “greater unity in foreign policy and more investments in our defence” and “further deepening the Economic and Monetary Union” – two key reasons why Britain chose to divorce itself from the EU. EU leaders will also be told to sign up to an ever-increasing swathe of legislative measure in June following the “Rome declaration” a few months earlier. The report moans that Trump, Brexit, terrorism, increased military expansion by Russia and the migrant crisis pose serious threats to the stability of the EU. It also details the financial instability in Greece as another hinderance to the volatile political union. It adds that the upcoming meeting in Rome in March should “offer an ambitious vision on how to preserve unity and achieve political consolidation”. The EU is set to celebrate the 60th anniversary of the Treaty of Rome – which laid the basis for “ever closer union” between nation states and which critics argue has forced countries towards a federal Europe.

“We have become a society that has no hope, not even a slice or piece of hope for the future,” he sighed. “The only reason people want to stay in the euro is because they fear the consequences if we were to leave, but if things don’t get better that will change too.”

• Grexit? Greece Again On The Brink As Debt Crisis Threatens Break With EU (G.)

Syriza, like every governing party before it, has been hollowed out by the eviscerating effects of having to apply policies that it came to power vowing to oppose. On Tuesday its parliamentary spokesman took Greeks by storm proposing that Grexit be discussed “without taboo” in the 300-member house. The once unassailable popularity of Tsipras, meanwhile, has been pummelled by the implementation of some of the harshest measures to date and few believe he has the political capital to enforce another round of austerity. “It is not a can but a bomb being kicked down the road,” said one western diplomat. “In a world where liberal values are under threat we could be looking at a very dangerous scenario where the cradle of democracy also collapses.”

Bereft of growth and battered by cuts and tax increases, Greeks have become poorer and ever more cognizant of their own insolvency in a state where sovereignty exists in little more than name. One in three now live below the poverty line and unemployment hovers around 23%. The latest impasse has not only seen emigration levels rise and non-repayment of household and business loans soar but also nostalgia for the drachma grow. That is what worries Panagopoulos, the pollster, most. What was once a minority view is changing fast, with the majority of Greeks in a recent Alco survey saying it was wrong to have joined the euro. “We have become a society that has no hope, not even a slice or piece of hope for the future,” he sighed. “The only reason people want to stay in the euro is because they fear the consequences if we were to leave, but if things don’t get better that will change too.”

Debt Rattle November 10 2016

Nov 102016

November 10, 2016 Posted by Raúl Ilargi Meijer at 10:24 am Finance Tagged with: Bernie, Hillary, Mexico, pardon, private debt, rupee, Russia, Trump, Vancouver, Wikileaks 3 Responses »

Byron In Chinatown, Pell Street, New York 1900

• To Make America Great Again, Write Off The Private Debt (Steve Keen)

• Asian Markets Soar, Nikkei Rockets Close To 7% (CNBC)

• Dow Closes Up 250 Points; Financials Surge After Trump Election Upset (CNBC)

• The Jig Is Up: America’s Voters Just Fired Their Ruling Elites (Stockman)

• Thousands Protest Trump Win Around US (BBG)

• White House Won’t Rule Out Pardon to Protect Clinton From Trump (BBG)

• Trump Would Have Lost US Election If Bernie Had Been The Candidate (Ind.)

• WikiLeaks Mocks Dems After Election Loss (Hill)

• Trump Could Bring Russia In From The Cold (Dejevsky)

• Donald Trump’s Financial Advisory Team Stocked With Wall Streeters (WSJ)

• Mexico Will Not Pay For Trump Wall, But Seeks Cooperation (R.)

• Meanwhile, As The World Watched The Election.. (Black)

• Vancouver Wields $10,000-a-Day Fine in Crackdown on Empty Homes (BBG)

• India’s Shock Bank Note Ban Sparks Cash Chaos (R.)

• Hand Grenade Thrown Outside French Embassy In Athens (AP)

Too many pieces and opinions on Trump to keep count of. Let’s start with Steve Keen’s, the most practical one. It would be great and highly useful if Trump and/or his people read it.

• To Make America Great Again, Write Off The Private Debt (Steve Keen)

Dear President Trump, The key source of America’s economic weakness today is something you have experience with: private debt. All leaders before you have obsessed about government debt while ignoring private debt, which is far higher (150% of GDP versus 100%) and far more dangerous. You can do something about this, and unlike your purely political predecessors, your experience tells you that it can be done—the only question is how to do it. The private debt mound sitting on top of American households and businesses is the reason demand is depressed right now. With that debt mountain weighing them down, firms are reluctant to borrow and invest, while households are reluctant to use credit to consume. Credit demand is now back to the average of the 1950s to 1970s—the “Golden Age” of America, when your supporters today and their parents had well-paying manufacturing jobs.

But it will easily turn negative again like it did during the Great Recession, given how enormous the debt burden still is today, since your immediate predecessor put more effort into rescuing Wall Street than he did into rescuing Main Street. The Washington insider economists who are now going to attempt to get your ear will tell you that this private debt doesn’t matter, and that nothing can be done about it anyway. They’re wrong on both counts. On whether it matters, they’ll say that one person’s debt is another person’s asset, so the total level of debt doesn’t matter. What they ignore is that banks create money and demand when they lend, and both money and demand fall when debt is repaid. They ignore the evidence shown in Figure 2, which I’ve been shoving in front of their faces for over a decade now (from early 2006, well before the Great Recession began).

On whether it can be done, they’ll tell you that this is “helicopter money”, and that it’s a dreadful idea. But the reality is that they’re doing it already. It’s just that the Fed’s helicopter, which they call “Quantitative Easing”, has been dropping that money on Wall Street rather than Main Street. When the Fed buys bonds off a pension fund under QE, it creates the money that it buys that pension’s funds bonds with. The pension fund then does what pension funds do with money: they buy shares and other bonds. This drives up share markets, which benefits Wall Street and the 1% directly. Brokers get paid lots of commission, most of which they stuff in their offshore bank accounts. They spend a fraction of this on Main Street, buying the odd hamburger.

But there would be far more money in Main Street’s hands if you put it there directly. There are many ways to do this, and it’s important to do it in a way that doesn’t favour people who borrowed over people who didn’t. But the easiest way to illustrate it is to imagine that you tell the Federal Reserve to buy mortgages directly from the public. For the Federal Reserve, there’s little practical difference what it’s doing right now, only 100% of the money it creates turns up in Main Street bank accounts rather than those of Pension Funds and Wall Street brokers. With less debt, there’ll be more spending by Main Street, and, as a result, more employment. The only sufferers will be bankers and Wall Street, who will have far less income-earning assets than they have now, and may even have to work for a living.

So much for those predictions too.

• Asian Markets Soar, Nikkei Rockets Close To 7% (CNBC)

Asia markets soared on Thursday with the Nikkei jumping close to 7%, as traders reassessed the economic impact of Donald Trump’s victory in the U.S. presidential election. The Nikkei 225 ended up 6.72%, or 1,092.88 points, at 17,344.42, as the yen weakened against the dollar, trading at 105.42 as of 2:50 pm HK/SIN. The dollar/yen had plunged to 101 levels on Wednesday. “U.S. yields surged higher on the back of expected increased fiscal spending by Trump. This has helped the dollar rally sharply against other currencies but especially the low yielding yen and the euro,” Anthony Darvall, chief market strategist at easyMarkets, said in a note on Thursday.

“A weaker yen has helped propel Japanese stocks up…completely erasing yesterday’s losses.” The Australian benchmark index closed up 3.34%, or 172.27 points, at 5,328.8. The ASX’s strength was underpinned by its energy subindex, up 3.29%, and the materials subindex, up 5.75%. The gold subindex shed 4.82%. New Zealand’s NZX 50 ended up 1.04%, or 69.51 points, at 6,733.72. Before markets opened, the Reserve Bank of New Zealand cut rates by 25 basis points to a record low of 1.75%. The RBNZ statement warned that “numerous uncertainties remain, particularly in respect of the international outlook, and policy may need to adjust accordingly.”

The predicted crash took exactly 49 minutes.

• Dow Closes Up 250 Points; Financials Surge After Trump Election Upset (CNBC)

U.S. stocks surged more than 1% Wednesday with financials and health care leading after Republican Donald Trump won the presidential election, defying market expectations for a Hillary Clinton win. The day’s rally took the major averages within 2% of their all-time intraday highs, and marked a stunning recovery from a sharp plunge in stock index futures overnight. Trade volume Wednesday was roughly 12 billion shares, the highest since the surprise U.K. vote to leave the European Union in June. “Overnight was all about uncertainty. Today we know” the result,” said JJ Kinahan, chief strategist at TD Ameritrade. He said part of the day’s rally was fueled by short covering, and that volatility will likely continue as traders eye Trump’s potential Cabinet picks.

The Dow Jones industrial average closed up more than 250 points at 18,589, with Goldman Sachs and Caterpillar contributing the most to gains. With about half an hour to the close, the Dow briefly added more than 300 points and was tracking to close at a record high. The index came within about 25 points of its all-time intraday high of 18,668.44 touched in August and closed within half a% of that level. Financials leaped 4% in their best day since 2011 to lead S&P 500 advancers, followed by health care. Banks and diversified financials such as Morgan Stanley led financial sector gains, while biotech stocks led health care gains. “Within financial services, there is a guarded view that there may be less regulation [under Trump] than under a Clinton presidency,” said John Stadtler, head of U.S. financial services at PwC.

Strong from David. “..the giant stock market bubble will now crash. [..] We will be in an official recession within 6 months.”

• The Jig Is Up: America’s Voters Just Fired Their Ruling Elites (Stockman)

America’s voters fired their ruling elites last night. After 30 years of arrogant misrule and wantonly planting the seeds of economic and financial ruin throughout Flyover America, the Wall Street/Washington establishment and its mainstream media tools have been repudiated like never before in modern history. During the course of the past year, upwards of 70 million citizens – 59 million for Trump and 13 million for Bernie Sanders – have voted for dramatic change. That is, for an end to pointless and failed wars and interventions abroad and a bubble-based economic policy at home. The latter showered Wall Street and the bicoastal elites with vast financial windfalls – even as it left 90% of Flyover America behind, where households struggled with stagnant wages, vanishing jobs, soaring health costs, shrinking living standards and diminishing hope for the future.

The voters also said in no uncertain terms that they are fed-up with a “rigged” system that has one set of rules for establishment insiders and another for everyone else. In essence, that’s what servergate, the Clinton Foundation pay-to-play scandals and the trove of Wikileaks DNC/Podesta hacks was all about. Indeed, in his brawling style, the Donald in effect convinced a huge slice of the electorate that the Clintons amounted to America’s leading crime family. And while he may have exaggerated the extent of their personal crimes and misdemeanors, the latter functioned as a proxy for the beltway racketeering that has become the modus operandi of the Imperial City. Stated differently, the people did connect the dots. There is a straight line from repeal of Glass-Steagall by the Rubin-Clinton democrats in the late 1990s through the resounding repudiations of the Clintons last night.

This string includes the M&A roll-up of the giant Wall Street banks after 1998; the subprime mortgage scams, housing booms and subsequent crash during the next decade; the panicked multi-trillion bailouts of the Wall Street gambling houses in the fall of 2008 and the lunatic spree of central bank money pumping that followed; the soaring stock market fueled by the Fed’s free money that arose therefrom; and the egregious global fund-raising and shakedowns of the Clinton Foundation and personal wealth accumulations by the Clinton’s personally, capped by Hillary’s notorious $250,000 off-the-record speeches to Goldman Sachs.

What happened was that during the eight Obama years, Washington essentially borrowed $10 trillion, or nearly as much as the first 43 presidents did over 220 years, while the Fed expanded its balance sheet by 5X more than had happened during its first 94 years of existence. [..] For months and years to come, the Imperial City will be ungovernable and the nation will be racked with fiscal, financial, political and even constitutional crisis. By kicking the can in a ruinous direction for decades, America implicitly opted eventually for the bleeding cure. To wit, the giant stock market bubble will now crash. The stock-price obsessed C-suites of corporate America will now panic and begin pitching inventory and workers overboard. We will be in an official recession within 6 months. The Federal budget will plunge back into trillion dollar annual deficits very soon.

Accordingly, Washington will descend into permanent warfare over the debt ceiling and an exploding $20 trillion+ public debt. Any notion of a Trump economic revival program – even if it could now be confected – will be stillborn in the financial and fiscal chaos ahead. And most important of all, the almighty Fed will be stranded high and dry – out of dry powder and under political attack like never before from angry politicians and citizens alike. The jig is up.

Earlier today I read what looks to be an apt observation: ‘Every white person in New York who didn’t vote for Trump is now out in the streets protesting against him’. Chaotic scenes in LA and other places too. But the people who protest now are miles off target and months too late: they should have stood up for Bernie when the Hillary camp and the DNC conspired to oust him. Indeed, Bernie himself should have stood up back then, not for himself but for his supporters; they would have stood up with him. Whether they all like it or not, being asleep and/or silent when big things happen that count, does carry a price. If you drop the ball, you can’t just pick it back up again and pretend it didn’t fall. Shouting ‘not my president’ in the wake of an election is a sign of weakness, no matter how well-intentioned. The protests should have taken place before the election, not after.

• Thousands Protest Trump Win Around US (BBG)

The raw divisions exposed by the presidential race were on full display across America on Wednesday, as protesters flooded city streets to condemn Donald Trump’s election in demonstrations that police said were mostly peaceful. From New England to heartland cities like Kansas City and along the West Coast, many thousands of demonstrators carried flags and anti-Trump signs, disrupting traffic and declaring that they refused to accept Trump’s triumph. In Chicago, where thousands had recently poured into the streets to celebrate the Chicago Cubs’ first World Series victory in over a century, several thousand people marched through the Loop. They gathered outside Trump Tower, chanting “Not my president!”

Chicago resident Michael Burke said he believes the president-elect will “divide the country and stir up hatred.” He added there was a constitutional duty not to accept that outcome. A similar protest in Manhattan drew about 1,000 people. Outside Trump Tower on Fifth Avenue in midtown, police installed barricades to keep the demonstrators at bay. Hundreds of protesters gathered near Philadelphia’s City Hall despite chilly, wet weather. Participants — who included both supporters of Democratic nominee Hillary Clinton and independent Vermont Sen. Bernie Sanders, who lost to Clinton in the primary — expressed anger at both Republicans and Democrats over the election’s outcome.

Shouldn’t this be left up to Congress?

• White House Won’t Rule Out Pardon to Protect Clinton From Trump (BBG)

The White House on Wednesday wouldn’t rule out issuing a pardon to protect Hillary Clinton from prosecution by the incoming administration over her use of a private e-mail server. President-elect Donald Trump threatened during his campaign to assign a special prosecutor to investigate Clinton. He blamed a “rigged system” for protecting her from prosecution after FBI director James Comey announced in July and again on Nov. 6, two days before the election, that his agency wouldn’t seek charges against the Democrat. “You’d be in jail,” Trump memorably warned Clinton during their final debate. Asked whether President Barack Obama might issue Clinton a pardon before he leaves office in January, White House press secretary Josh Earnest said the administration doesn’t discuss such cases in advance.

Earnest indicated Obama was hopeful a pardon wouldn’t be necessary, noting that Trump was gracious toward Clinton in his victory speech early Wednesday morning. “We’ve got a long tradition in this country of people in power not using the criminal justice system to exact political revenge,” Earnest said. “We go to great lengths to insulate our criminal justice system from partisan politics.” Crowds at Trump’s rallies frequently chanted “lock her up” when the Republican mentioned Clinton’s name. Trump would occasionally join them. On Wednesday, as he claimed victory in the presidential race, Trump complimented Clinton for her campaign and her public service. “Hillary has worked very long and very hard over a long period of time, and we owe her a major debt of gratitude for her service to our country,” he said.

Comey said in July that Clinton and her aides were “extremely careless” in handling classified information, but that criminal prosecution wasn’t warranted. The Justice Department agreed. But proactively offering a pardon isn’t unprecedented. In 1974, Gerald Ford gave former president Richard Nixon a full and unconditional pardon for any crimes he might have committed while in the Oval Office. That move, derided by critics, underscored the political risks of such a move. Ford lost re-election to Democrat Jimmy Carter. Obama and Clinton are in a less perilous situation; Obama cannot run for president again, and Clinton’s political career is also likely over.

Nothing new. And everyone knew it, too. Including Hillary and the DNC.

• Trump Would Have Lost US Election If Bernie Had Been The Candidate (Ind.)

“Right now in every major poll, national poll and statewide poll done in the last month, six weeks, we are defeating Trump often by big numbers, and always at a larger margin than Secretary Clinton is.” So spoke Bernie Sanders, Hillary Clinton’s Democratic rival in the primary, when he appeared on the May 29 2016 edition of NBC’s ‘Meet the Press’. It was not the first time the socialist former Mayor of Burlington had made the claim. And it was something that his supporters believed passionately. Time after time, supporters of the white-haired, frequently cantankerous Democratic socialist, said the media was helping prepare a coronation for Ms Clinton in a way that was neither fair or democratic.

At a rally in the Bronx, New York, in April, Paul Nagel, 58, a gay rights and housing activist, told The Independent that Mr Sanders would go into the Oval Office on the back of a popular movement and that he could continue to listen to the people. “What we’re seeing now feels 1969,” he said. At rallies for the 74-year-old across the country, there was a sense of euphoria and excitement that simply did not exist at those for Ms Clinton. Ms Clinton’s supporters said they had made a calculation to vote for her as they believed she would be the best candidate to lead the country, but there was no sense of the passion witnessed at her rivals’ events, or those of Barack Obama eight years earlier.

But it was not just anecdotal evidence. A series of polls suggested that Mr Sanders – with his calls for free college tuition, the removal of student debt, a national health service and the removal of big money from politics – would stand a better chance against Mr Trump than Ms Clinton. A poll by NBC News-Wall Street Journal on May 15 said Ms Clitnon would beat Mr Trump by three points, but said Mr Sanders would win by 15 points. A CBS News-New York Times on May 3 gave Ms Clinton a six-point advantage over Mr Trump, but said Mr Sanders would win by 13 points. At the same time, Fox News said Ms Clinton would lose to Mr Trump by three points, but said Mr Sanders would win by four.

‘Mocks’ is a ridiculous term to use here.

• WikiLeaks Mocks Dems After Election Loss (Hill)

WikiLeaks capped off Tuesday’s surprising presidential election with a tweet appearing to mock Democrats for picking Hillary Clinton as their nominee. “By biasing its internal electoral market the DNC selected the less competitive candidate defeating the purpose of running a primary,” the official account tweeted near midnight. Throughout the campaign, WikiLeaks published hacked DNC emails that it said showed the party was biased toward Clinton over her primary rival, Bernie Sanders. Some emails showed DNC staffers discussing how to expedite Sanders’s exit from the primary race after it was clear Clinton would win. Others appeared to show then-CNN analyst Donna Brazile leaking questions to the Clinton campaign in advance of town hall debates between the two Democrats.

Donald Trump’s campaign also seized on the hacked emails to argue that Clinton and Democrats had treated Sanders unfairly, as he made a play for the Vermont senator’s supporters. On Tuesday, WikiLeaks head Julian Assange posted a winding statement on his site expressing his dislike of both candidates, saying that the site had an obligation to leak the Clinton-related emails even though it did not have a similar set of Trump documents. “Publishing is what we do. To withhold the publication of such information until after the election would have been to favour one of the candidates above the public’s right to know,” Assange wrote.

Whaddaya know: A voice of reason in the otherwise full-tard anti-Trump Guardian.

• Trump Could Bring Russia In From The Cold (Dejevsky)

As the tally turned towards a victory for Donald Trump in the middle of the European night, comments began to appear on social media to the effect that Russian intelligence had won its biggest victory in the country’s history. More than this, that the Kremlin had actually captured the United States. The prominent, if spectral, role played by Russia was one of the stranger aspects of this already strange US election. And these comments were alarmist, if logical, extensions of the claims made by the Clinton camp during the campaign that Trump was somehow in cahoots with President Vladimir Putin and that the Russian state was interfering in the election on his behalf. There was precious little evidence for such claims, and Putin himself ridiculed them at his annual Valdai meeting with international Russian specialists two weeks ago.

Was the US a banana republic, he asked, that its elections could be so easily manipulated? Of course not. But they were useful to the Democrats’ campaign in showing off Hillary Clinton as a tough foreign policy president-in-waiting and demonising Trump by association. They were not useful enough, though, given the result. Either the voting public dismissed them, or perhaps they agreed with Trump that improved relations with Russia might be a good thing. In any case, they turned out not to be the black mark the Clinton campaign expected. There is no mystery about why the accusations took hold. It was in part because Trump had said early on that he thought he could do business with Putin, earning him the reputation of being soft on big bad Russia. Then the Democrats at their convention chose to divert blame for the hacking of their computer system on to Russian intelligence.

This was never conclusively proved and all the supposedly corroborating statements from US officials contained get-out clauses. People with intelligence connections suggested that everyone tried to hack everyone’s computers, especially at election time, without any intention of actually interfering. The truth of any Russian involvement will probably never be known. But certain myths that gained currency need to be dispelled. One was that Trump was receiving privileged information from Russia. In fact, anything he said was already openly available before he said it. Another was that Trump had complicated and suspect business dealings with Russia. No evidence was ever produced – despite what must have been exhaustive efforts by the Clinton campaign[..]. There also seems to have been some confusion between Russia and other parts of the former Soviet Union, which hardly reflects well on the accusers.

Let’s see first. But Donald had better be careful with that. All nominations will face heavy scrutiny.

• Donald Trump’s Financial Advisory Team Stocked With Wall Streeters (WSJ)

Donald Trump’s successful insurgent bid for the White House promised to upend a global power structure that benefited large corporations. Now, several Wall Street financiers and other successful business leaders could be in line to run top posts in his presidential administration. People close to Mr. Trump have said he is considering Steven Mnuchin, a former Goldman Sachs banker who became his national campaign finance chairman in May, as his pick for Treasury secretary. If tapped for the job, Mr. Mnuchin would become the third Goldman alumnus in the last 20 years to head the Treasury, following Robert Rubin and Hank Paulson, who both served as the bank’s chief executive.

After a 17-year career at Goldman, where Mr. Mnuchin led the mortgage-trading department and was the bank’s chief information officer, he turned to investing. He briefly worked for a hedge fund tied to George Soros, the big Democratic donor. In his closing campaign ad, Mr. Trump featured both Goldman and Mr. Soros as “the establishment…who control the levers of power in Washington.” Advisers to Mr. Trump have said promptly filling senior appointments would help calm jittery markets, which saw volatility soar after it became apparent that Mr. Trump, a political outsider who broke with the political philosophy that has defined both parties, would win the election.

“Just as he comforted a lot of people when he picked Mike Pence as his running mate, they’ll be much more comfortable when they see what the team will be,” predicted Wilbur Ross, the private-equity investor who has advised Mr. Trump on economic policy. Business leaders have been “incorrectly worried about what might happen under Trump,” Mr. Ross said.

Cooperation it is.

• Mexico Will Not Pay For Trump Wall, But Seeks Cooperation (R.)

Mexico said on Wednesday it would work with Donald Trump for the benefit of both nations after his surprise U.S. election win, but reiterated it would not pay for his planned border wall, which stirred up deep resentment during a fraught presidential campaign. As Trump strode toward victory, the peso plunged 13% in its biggest fall since the Tequila Crisis devaluation 22 years ago, before paring losses to trade down 8.7% at 19.91 per dollar. Still, officials held back from taking action to support the peso despite it hitting lifetime lows overnight. Trump’s threats to dump the NAFTA agreement with Mexico and Canada, and to tax money sent home by migrants to pay for the controversial wall on the southern border, have made the peso particularly vulnerable to events in the U.S. presidential race.

“Very hard times are coming to Mexico,” said analyst Gabriela Siller of Mexican bank BASE. Still, President Enrique Pena Nieto said he called to congratulate Trump, and had agreed to meet the New Yorker during the transition phase to discuss joint cooperation, which he hopes would strengthen the competitiveness of North America. Welcoming Trump’s victory speech pledge to seek “common ground” and partnership with other countries, Pena Nieto said in a televised statement that Mexico shared the same vision. [..] Foreign Minister Claudia Ruiz Massieu reiterated that Mexico would not pay for Trump’s proposed wall. The vow to make Mexico pay for the barrier was a key feature of his stump speeches.

“..the word “never” apparently means 49 minutes to a Nobel laureate, because that’s how long it took for the S&P 500 to turn positive for the day..”

• Meanwhile, As The World Watched The Election.. (Black)

[..] when I woke up this morning here in Thailand and flipped on the TV, the first thing I saw was Wolf Blitzer having an orgasm every time Hillary won an electoral vote. It’s almost comical to suggest there was any semblance of objectivity throughout the entire cycle. Hillary Clinton had the full and unabashed backing of the entire media establishment. And the banking establishment. And the political establishment. And countless billionaires, Hollywood celebrities, rock stars, international press, foreign leaders, and even the President of the United States. Yet all of those big guns proved to be ineffective against a citizenry that’s fed up with the status quo.

At least the losing side has accepted its defeat with quiet dignity. University students across the country have come out of their safe spaces to protest by the thousand, chanting “F*ck Donald Trump” and “Not my President”. The students’ sudden fury may be what caused the Canadian government’s immigration website to temporarily go down (though I’m sure this will somehow be blamed on the Russians). Liberal papers like the Huffington Post are running headlines like “An American Tragedy”, while NYT bloggers are calling Trump voters “racist, xenophobic, misogynistic and homophobic.” Celebrities had some real gems like “Well, congratulations America you f–ked this one up,” and “I feel like I’m about to give birth to a baby that’s already dead.”

Comedian Chelsea Handler posted one of the most bizarre Tweets of the night, saying “My condolences to the President and First Lady. We will keep aiming high. We may not have you honored you this time, but we will honor you.” So apparently this exercise of American democracy has dishonored the President. Nobel Prize-winning economist Paul Krugman commented that tumultuous financial markets would “never” recover. Wow. Never. But the word “never” apparently means 49 minutes to a Nobel laureate, because that’s how long it took for the S&P 500 to turn positive for the day once the market opened. Investors ostensibly realized that, despite the Trump victory, Disney will keep making superhero movies, Coke will keep distributing poisonous flavored water, and Mark Zuckerberg will keep selling your personal data to advertisers.

[..] I thought the late-night quickie from Clinton campaign chairman John Podesta summed it up perfectly. While Hillary stayed in her $20,000/night suite at the Peninsula Hotel, Podesta was sent to tell the crowd of Clinton supporters that “She is not done yet!” Nonsense. It was a big fat lie. Minutes later she called Donald Trump to concede the election. Anyone trying to understand why she lost might take note of this deceit– even at the bitter end. She lied to her own supporters.

All bubble cities should pay attention. Vancouver appears to be making this work.

• Vancouver Wields $10,000-a-Day Fine in Crackdown on Empty Homes (BBG)

Want to keep your million-dollar luxury pad in Vancouver empty? Get ready to pay C$10,000 ($7,450) annually in extra taxes. Lie about it? That’ll be C$10,000 a day in fines. Canada’s most-expensive property market, suffering from a near-zero supply of rental homes, announced the details of a new tax aimed at prodding absentee landlords into making their properties available for lease. The empty-home tax will take effect by Jan. 1 and will be calculated at 1% of the property’s assessed value, Vancouver Mayor Gregor Robertson told reporters at City Hall. “Vancouver is in a rental-housing crisis,” Robertson said. “The city won’t sit on the sidelines while over 20,000 empty and under-occupied properties hold back homes from renters.”

The measure is among efforts to make housing more accessible and affordable in Vancouver, ranked the world’s third-most-livable city, and has drawn attention for its sky-high prices fomented by global money flows. Public scrutiny has focused on absentee landlords, particularly from overseas, who are accused of sitting on investment properties where windows remain dark throughout the year. In August, the provincial government imposed a 15% tax on foreign buyers, and last month the federal government tightened mortgage insurance eligibility requirements. The city of Vancouver has focused its efforts on the rental market, where vacancies can get scooped up within hours while bidding wars drive up leasing costs.

The only possible outcome.

• India’s Shock Bank Note Ban Sparks Cash Chaos (R.)

Indians struggled to pay for basic goods like food and fuel on Wednesday and fretted about their savings, after the government withdrew 500 and 1,000 rupee notes from circulation in a bid to flush out money hidden from the tax man. The shock measure also sent shudders through the investment community on a day when the markets were also reeling at the election of Republican candidate Donald Trump as the next U.S. president. India’s National Stock Exchange share index slumped as much as 6.3% in early trade before recovering most losses to close the day off 1.3%.

The currency move, announced late on Tuesday night by Prime Minister Narendra Modi, aims to bring billions of dollars worth of unaccounted wealth into the mainstream economy and curb corruption. The biggest disruption in decades to cash transactions, which power much of the rural economy, comes months before a series of state elections including in India’s most populous Uttar Pradesh state. Critics have warned that ordinary people who do not have access to the banking system will be hardest hit, and that Modi risks upsetting his ruling party’s support base of small traders and businessmen who largely deal in cash.

Obama visits Athens Nov 15.

• Hand Grenade Thrown Outside French Embassy In Athens (AP)

A hand grenade attack outside the French Embassy in central Athens lightly wounded a policeman early Thursday, police said, days before U.S. President Barack Obama is due to visit the Greek capital. Authorities said the policeman, who had been on guard outside the embassy, was wounded when unknown assailants threw a hand grenade outside the embassy building, located opposite Parliament on a major avenue. Police shut down the area to vehicles and pedestrians, while anti-terrorism forensics experts combed the scene for evidence.

Police said the attack was apparently carried out by two people on a motorbike, and a bike matching the description was later found in a central Athens neighborhood popular with anarchists and was being examined to determine whether it was the one that had been used in the attack. Authorities said it appeared the policeman had only been lightly wounded because he had been inside an armored guard post outside the embassy entrance. The attack came days before Obama is to arrive in Athens next week for an expected overnight visit. Left-wing organizations have announced they will hold protests during the visit.

The gif the world needs right now: pic.twitter.com/ueUsoBaVIo

— Larry the Cat (@Number10cat) November 9, 2016

Debt Rattle September 25 2016

Sep 252016

September 25, 2016 Posted by Raúl Ilargi Meijer at 8:50 am Finance Tagged with: crash, Deutsche, dividend, naked shorts, private debt, refugees, Vancouver, Wells Fargo Comments Off

Harris&Ewing Boy Scout farm 1917

• The Market Is In Line With History. The History Of Crashes (Stockman)

• How to Suffocate Your Economy: Drown it in Massive Private Debt (Vague)

• Vancouver Property Sales To Foreigners Crash 96% (ZH)

• Merkel Rules out State Assistance for Deutsche Bank (BBG)

• EU Must Turn Off the Dividend Spigot at Under-Capitalized Banks (PS)

• China Continues to Battle Massive Capital Flight Problem (Brink)

• Naked Shorts Can’t Stay Naked Forever (Dayen)

• Whistleblower Describes Years Of Fraudulent, Criminal Culture At Wells Fargo (BB)

• Former Employees File Class Action Against Wells Fargo (R.)

• Clinton Server Tech Told FBI Of Colleagues’ Worries About System (R.)

• America’s War On Its Own Children (G.)

• Death Toll In Migrant Shipwreck Off Egypt Rises To 300 (G.)

The level of high grade corporate debt is more than 2X its pre-crisis peak. As Capex is down 10%, and net fixed business investment is 20% below 2000 levels. Corporations are burning and bleeding cash left right and center. Question: what has the debt been used for?

• The Market Is In Line With History. The History Of Crashes (Stockman)

By punting again [this week], our dithering money printers at the Fed are continuing to fuel a monumental orgy of corporate bond issuance. It only enables companies to speculate in their own stocks with borrowed money, while heaping windfall gains on the fast money traders who hound corporate boards into strip-mining their own balance sheets. The level of high grade corporate debt outstanding has gone nearly parabolic in the last few years and now stands at more than 2X its pre-crisis peak. Yet even Yellen admitted during yesterday’s mindlessly meandering presser that business capital expenditure (CapEx) has been extraordinarily weak. In fact, non-defense CapEx orders excluding aircraft peaked in mid-2104 and are now down by 10%.

Even more to the point, real net fixed business investment after depreciation is still 20% below the level it reached way back in early 2000. That is, two bubbles ago. Perhaps the question about where all this hand-over-fist corporate borrowing is going might have occurred to at least one of the geniuses who voted to stand pat. But apparently it didn’t because once again Yellen insisted that “valuations are largely in line with their historical trends.” What in the world is our clueless school marm talking about? At the closing price yesterday, the S&P 500 traded at 25X the $87 per share reported for the last twelve month (LTM) period ending in June. And that was in the face of earnings that have plunged 19% since peaking in the September 2014 LTM period.

Yellen is right about the historical trends, of course. But not at all in a good way. In fact, on the eve of the last crash when the market peaked in October 2007 at about 1550, S&P 500 earnings during the most recent LTM period had posted at $79 per share. That means the peak pre-crash multiple was substantially lower than today at 19.7X. Even when S&P earnings peaked at $54 per share in September 2000, the multiple was only a tad higher than today at 26.5X. So, yes, the market is in line with history. That is, the history of crashes! The truth is, the Fed is inherently, relentlessly and radically in the financial bubble business. But the Keynesian school marm who runs it wouldn’t know a bubble if one transported her to the moon and back.

The role of debt has been growing for a long time.

• How to Suffocate Your Economy: Drown it in Massive Private Debt (Vague)

[..] if a country’s private debt to GDP ratio is low, let’s say 50%, then the households and businesses in that country generally have low loan-to-income ratios and are well positioned to power growth through increased leverage. And if a country’s private debt to GDP ratio is high, let’s say 200%, then the households and businesses in that country are generally overleveraged, with, on average, very high debt ratios. They are much less likely to be able to boost growth through more borrowing.

Chart 2 showed that private debt to GDP in major economies has been growing rapidly since World War II. However, it has been growing in size relative to GDP for a lot longer than that. It’s part of a process often described by economists as “financialization” or “financial deepening,” an increase in the size of a country’s debt and equity markets usually explained as simply the maturation of a market. But as we have seen, when it comes to debt, it is much more than that—it is the path from low leverage to overleverage for the participants in that economy. The benefit of increasing leverage from low levels has played a central role in the miraculous gains in incomes over the 200-plus years since the Industrial Revolution.

You can see this clearly in Chart 3. I have made a concerted effort to reconstruct more than 200 years of private debt history for the six countries in this chart—China, Japan, Germany, Britain, France, and the United States—because collectively, they have accounted for roughly 50% or more of global GDP since the Industrial Revolution. So studying the data of these six countries during this period gives us a fairly solid proxy for the world during the most important era of economic history. (This chart is a work-in-progress which will be augmented and refined in preparation for an upcoming book on this same subject.)

Auckland, Sydney, London etc. should do the same.

• Vancouver Property Sales To Foreigners Crash 96% (ZH)

China’s favorite offshore money laundering hub is officially no longer accepting its money. According to data released by British Columbia’s Ministry of Finance on Thursday, foreign investors officially disappeared from Vancouver’s property market last month after the local government imposed a 15% surcharge to curb a record-shattering surge in home prices. Overseas buyers accounted for a paltry 0.7% of the C$6.5 billion of residential real estate purchases in August in Metro Vancouver; this represents a 96% plunge from the seven weeks prior, when foreigners were responsible for 16.5% of transactions by value. According to the latest data overseas buyers snapped up C$2.3 billion of homes in the seven weeks before the tax was imposed, and less than C$50 million in the next four weeks.

[..] As Bloomberg notes, the plunge in foreign participation joins other signs of a slowdown in Canada’s most expensive property market. The silver lining is that while transactions may have ground to a halt, the government did pick up some extra tax revenues: British Columbia has raised C$2.5 million in revenue from the new levy since it took effect. Budget forecasts released last week indicated that the Pacific coast province expects foreign investors to scoop up about C$4.5 billion of real estate through March 2019. That may prove optimistic, because as reported two weeks ago as Chinese buyers wave goodbye to Vancouver, they have set their sights on another Canadian city: Toronto. According to the Star, sales of $1-million-plus Toronto-area single-family homes rose 83% year over year in July and August. That’s 3,026 homes, with 55% of them inside Toronto’s borders.

[..] if they are looking in Canada, we believe Toronto will be the most logical place for people to consider. Montreal and Calgary will probably also get a look-see,” Henderson said. Or maybe not. As CBC reported earlier this week, economist Benjamin Tal of CIBC said that Ontario will have little choice but to copy Vancouver and implement a tax on foreign house buyers. In a recent note to clients, the economist said the biggest problem facing policymakers with regard to hot housing markets in Toronto and Vancouver is a limit on the supply of new homes. “The main reason behind higher prices in the [Greater Toronto Area] is a policy-driven lack of land supply,” Tal said. “And with no change on that front, policymakers have to use demand tools to deal with what is essentially a supply problem.”

I’m going to have my doubts here.

• Merkel Rules out State Assistance for Deutsche Bank (BBG)

Chancellor Angela Merkel has ruled out any state assistance for Deutsche Bank in the year heading into the national election in September 2017, Focus magazine reported, citing unidentified government officials. The German leader also declined to step into the bank’s legal imbroglio with the U.S. Justice Department, which may seek as much as $14 billion in sanctions against Deutsche Bank’s mortgage-backed securities business, the magazine said. The finances of Germany’s biggest lender, which has lost almost half of its market value this year, are raising concern among German politicians.

At a closed session of Social Democratic finance lawmakers this week, Deutsche Bank’s woes came up alongside a debate over Basel financial rules, according to two people familiar with the matter. Germany’s government expects a “fair outcome” in the U.S. probe, the Finance Ministry said on Sept. 16. Deutsche Bank has said it’s unwilling to pay the maximum amount sought by U.S. authorities as investors fret about the bank’s capital. Chief Executive Officer John Cryan, 55, has struggled to boost profitability by selling riskier assets and eliminating jobs as unresolved legal probes and claims add to concerns that the lender will be forced to raise capital.

Cut off dividends and share prices will fall through the floor.

• EU Must Turn Off the Dividend Spigot at Under-Capitalized Banks (PS)

Dividend payments made by under-capitalized banks amount to a substantial wealth transfer from subordinated bondholders to shareholders, because it is bondholders who will suffer the losses in a crisis. Moreover, it is potentially a wealth transfer from taxpayers to private shareholders, because under new banking rules government bailouts are possible after bondholders have covered (bailed in) 8% of a bank’s equity and liabilities. By contrast, undercapitalized banks in the US are forced to halt all forms of capital distribution if they fail a stress test. Fortunately, following the 2016 round of stress tests, the EBA is now also considering this type of regulatory sanction. Thus, “competent authorities may also consider requesting changes to the institutions’ capital plan,” which “may take a number of forms such as potential restrictions on dividends required for a bank to maintain the agreed trajectory of its capital planning in the adverse scenario.”

We estimate that if European regulators had adopted this approach and forced banks to stop paying dividends in 2010 – the start of the sovereign debt crisis in Europe – the retained equity could have paid for more than 50% of the 2016 capital shortfalls. The figure above shows our calculated capital shortfalls, using the EBA stress test’s “adverse scenario” losses and the cumulative dividends these banks have distributed since 2010. Dividends paid out by some banks, such as BNP Paribas and Barclays, actually exceed the current capital shortfalls, while at others – such as Deutsche Bank, Commerzbank, and Société Générale – capital shortfalls far exceed dividends that would have been retained. The latter banks would still require substantial capital issuances on top of dividend restrictions to make up the difference. Nonetheless, our findings suggest a simple first step toward preventing bank capital erosion: stop banks with capital shortfalls from paying dividends (including internal dividends such as employee bonuses).

Not everyone believes the omnipotency tale Beijing likes to spread.

• China Continues to Battle Massive Capital Flight Problem (Brink)

Last summer, China’s stock market collapse and unexpected devaluation deepened its capital outflow problem and accelerated the fall of reserves, which had started in mid-2014. Since February, reserves have started to stabilize. While the situation is clearly better, China continues to struggle in terms of stabilizing its massive capital outflows. Within that context, foreign reserves seem to have become a policy target. Although capital outflows are still large, it’s not enough for reserves to start falling again. In 2015, the largest net outflows stemmed from the repayment of bank loans (close to $500 billion in “other investment” outflows), followed by unrecorded outflows of residents amounting to nearly $200 billion.

Portfolio flows (equity and bond) were also negative, but smaller. The situation has hardly improved in 2016, based on first quarter data. In fact, all types of capital recorded outflows, even net foreign direct investment (FDI), which was not the case in 2015. It’s important to note that Chinese residents have been driving capital outflows for years. The difference in 2015 is that non-residents stopped investing in China and started to move their capital out. Still, the bulk of the outflow was made by residents. These are unrecorded outflows and also include the investment of Chinese companies, as well as the loans of Chinese banks abroad (increasingly in the emerging world).

SEC? FBI? Who can be trusted to investigate?

• Naked Shorts Can’t Stay Naked Forever (Dayen)

A few years into his personal quest to understand how he had lost a million dollars on a penny stock, Chris DiIorio developed a sweeping hypothesis involving Knight Capital, the mammoth brokerage company that frequently traded in them. Knight earned $333 million in pre-tax profits in 2008, and another $232 million in 2009. But DiIorio didn’t think Knight was making that kind of money simply from executing transactions for clients. As a market maker, Knight was in the rare position of being able to legally sell a stock it didn’t have (the principle being that it will get that stock soon, so no worries). That’s called naked shorting. It’s illegal when regular people do it. DiIorio suspected that Knight, either on its own behalf or on behalf of clients, made a practice of artificially increasing the number of shares available in a stock through naked shorting, thereby depressing the price.

His suspicion grew when he noticed that Knight often traded in securities that were red-flagged on the Depository Trust Company’s “chill list.” The DTC is an obscure financial industry-owned company that manages the custody of more than $1 quadrillion in securities annually, recording the transfers with journal entries and guaranteeing the trade. The company makes it easy for people to buy and sell securities without needing to exchange paper stock But when the DTC senses trouble, it will stop clearing trades on a stock temporarily. A chilled stock can still trade — as long as the market participants handle the physical certificates themselves. But it can be a sign that something is gravely wrong. The DTC states on its website that it chills stocks “when there are questions about an issuer’s compliance with applicable law.” That doesn’t stop Knight from buying and selling them, though.

Its chief legal officer, Thomas Merritt, acknowledged at a 2011 Securities and Exchange Commission roundtable that the company actively traded chilled stocks, saying that as long as the security still trades, “we are going to be involved in that business.” And DiIorio found numerous examples of Knight trading chilled penny stocks. “I didn’t know they did that,” said Jim Angel, a Georgetown University business school professor. “I’m kind of shocked to think that Knight would be working with paper stock certificates.” He suggested that Knight might simply want to accommodate customers trying to get out of chilled stocks. “Or maybe they feel there’s enough interest in a security that they can trade profitably, even if they have to shuffle the certificates.” Because most other market makers flee chilled stocks, however, this means Knight can assume even more control over the stock price.

Upper management should be dragged before a public committe.

• Whistleblower Describes Years Of Fraudulent, Criminal Culture At Wells Fargo (BB)

Beth Jacobson was a Wells Fargo loan officer who blew the whistle on the bank’s predatory, racist loan-fraud in the runup to the 2008 financial crisis, which tanked the world’s economy and nearly wiped out Wells Fargo (they were rescued with a $36B taxpayer-funded bailout). Eight years later, Wells Fargo has fired 5,300 employees for participating in a scam that involved opening 2,000,000 fake accounts in its customers’ names, stealing their money and crashing their credit-ratings – the exec who oversaw this a $125M taxpayer-subsidized bonus, and CEO John Stumpf, who took home $200M in bonuses based on profits from the fraud, will keep the money and his job, but the whistleblowers who reported the fraud starting in 2011 were all illegally fired.

Jacobson describes how Stumpf – now CEO, then a top exec – was complicit in the fraud that helped precipitate the crash and the worst recession since the Great Depression. She pins blame for the loan-fraud on the bank’s aggressive sales targets – the same thing that caused the current fraud, suggesting that the bank hasn’t learned a fucking thing since 2008, except that it can get away with crime, every time. “One means of falsifying loan applications that I learned of involved cutting and pasting credit reports from one applicant to another. I was aware of A reps who would ‘cut and paste’ the credit report of a borrower who had already qualified for a loan into the file of an applicant who would not have qualified for a Wells Fargo subprime loan because of his or her credit history.

I was also aware of subprime loan officers who would cut and paste W-2 forms. IDs deception by the subprime loan officer would artificially increase the creditworthiness of the applicant so that Wells Fargo’s underwriters would approve the loan. I reported this conduct to management and was not aware of any action that was taken to correct the problem. “High-ranking Wells Fargo managers knew that this practice was going on, because after about a year of these standby explanations being given, underwriters in the underwriting department were told to call the customers directly rather than contact the loan officer who was working with the customer. The loan officers quickly figured out how to work around this by warning customers that underwriters might call them and then coaching the customers about what to say.

CEO gone.

• Former Employees File Class Action Against Wells Fargo (R.)

Two former Wells Fargo employees have filed a class action in California seeking $2.6 billion or more for workers who tried to meet aggressive sales quotas without engaging in fraud and were later demoted, forced to resign or fired. The lawsuit on behalf of people who worked for Wells Fargo in California over the past 10 years, including current employees, focuses on those who followed the rules and were penalized for not meeting sales quotas. “Wells Fargo fired or demoted employees who failed to meet unrealistic quotas while at the same time providing promotions to employees who met these quotas by opening fraudulent accounts,” the lawsuit filed on Thursday in California Superior Court in Los Angeles County said.

Wells Fargo has fired some 5,300 employees for opening as many as 2 million accounts in customers’ names without their authorization. On Sept. 8, a federal regulator and Los Angeles prosecutor announced a $190 million settlement with Wells. The revelations are a severe hit to Wells Fargo’s reputation. During the financial crisis, the bank trumpeted being a conservative bank in contrast with its rivals. The lawsuit accuses Wells Fargo of wrongful termination, unlawful business practices and failure to pay wages, overtime, and penalties under California law. Former employees Alexander Polonsky and Brian Zaghi allege Wells Fargo managers pressed workers to meet quotas of 10 accounts per day, required progress reports several times daily and reprimanded workers who fell short.

Polonsky and Zaghi filed applications matching customer requests and were counseled, demoted and later terminated, the lawsuit said. While executives at the top benefited from the activity, the blame landed on thousands of $12-per-hour employees who tried to meet the quotas and were often required to work off the clock to do so, the lawsuit said.

It’s time to scrutinize the FBI’s role in the whole ‘affair’. That the Hillary people have not been fully honest is now so obvious one wonders why Comey et al have granted many immunity and let them off the hook in general.

• Clinton Server Tech Told FBI Of Colleagues’ Worries About System (R.)

A technician hired by Hillary Clinton to run the private email system she used while U.S. secretary of state told investigators he tried to pass on colleagues’ concerns that the system might not comply with records laws, FBI interview summaries show. Bryan Pagliano, the technician Clinton hired when she joined the State Department in 2009, told federal investigators he relayed the concerns to Cheryl Mills, then Clinton’s chief of staff. Mills has previously testified under oath she could not recall anyone alerting her to potential problems with Clinton’s email arrangement.

The episode had not been disclosed until the Federal Bureau of Investigation released on Friday night nearly 200 pages of additional records from its year-long investigation into the handling of classified government documents by Clinton and her staff via an unauthorized email server in the basement of her New York home. Clinton has said the decision to use a private email system was a mistake, but the controversy has dogged her campaign as the Democratic candidate for the presidency and raised public doubts about her trustworthiness, public opinion polls show. Republicans have criticized her for putting national security at risk. The FBI closed the year-long investigation in July, recommending no charges, although FBI Director James Comey said Clinton and her staff had been “extremely careless” in handling classified government secrets.

Pagliano has declined to answer questions by Republican lawmakers about his work on Clinton’s server, but spoke to federal investigators after securing a form of immunity from prosecution. He told investigators two colleagues from the technology office approached him with concerns during Clinton’s first year after learning about the email system. One said it could lead to a “federal records retention issue,” Pagliano told investigators, and urged him to raise the concern with Clinton’s “inner circle.” A colleague also warned Pagliano “he wouldn’t be surprised” if classified information was being sent through Clinton’s unsecure system, Pagliano told the FBI.

“Every day, on average, seven children and teens are killed by guns in America.”

• America’s War On Its Own Children (G.)

It was just another day in America. And as befits an unremarkable Saturday, 10 children and teens were killed by gunfire. They died in altercations at gas stations, accidents in bedrooms, standing on stairwells and walking down the street, in gangland hits and by mistaken identity. Like the weather, none of them would make the national news because, like the weather, their deaths did not disturb the accepted order of things. Every day, on average, seven children and teens are killed by guns in America. Firearms are the leading cause of death among black children under 19, and the second greatest cause of death for all children of the same age, after car accidents. I picked this day at random, and spent two years trying to find out who these children were.

I searched for their parents, pastors, baseball coaches, and scoured their Facebook and Twitter feeds. The youngest child was nine, the oldest 19. Four years ago, for a moment, there was considerable interest in the fact that large numbers of Americans were being fatally shot. On 14 December 2012, 20-year-old Adam Lanza shot his mother, then drove to Sandy Hook Elementary School and shot 20 small children and six staff dead. Mass shootings comprise a small proportion of gun violence, but they disturb America’s self-image in a way that the daily torrent of gun deaths does not. “Seeing the massacre of so many innocent children … it’s changed America,” said the Democrat senator Joe Manchin, who championed a tepid gun-control bill. “We’ve never seen this happen.”

“At the current rate, the death toll for 2016 is expected to easily surpass the figure for 2015 of 3,771..”

• Death Toll In Migrant Shipwreck Off Egypt Rises To 300 (G.)

A record number of migrants is expected to drown in the Mediterranean in 2016, after the estimated death toll in this week’s latest shipwreck rose to about 300 on Friday. Egyptian officials have rescued about 160 survivors from Wednesday’s shipwreck off the country’s north coast, leaving about 150 people still unaccounted for, according to the International Organisation for Migration (IOM). Those confirmed dead include 10 women and a baby, taking the estimated number of migrants to die in the Mediterranean so far this year to more than 3,500. At the current rate, the death toll for 2016 is expected to easily surpass the figure for 2015 of 3,771, which was the highest ever recorded. By this stage in 2015, 2,887 people had drowned.

The number of people trying to reach Europe has fallen significantly since last year’s record levels, as a result of the deal struck between the EU and Turkey and the closure of a humanitarian corridor between Greece and Germany. The flow of migrants from the three main departure points – Libya, Turkey and Egypt – stands at roughly the same level as 2014.

Debt Rattle August 19 2016

Aug 192016

August 19, 2016 Posted by Raúl Ilargi Meijer at 9:51 am Finance Tagged with: breakdown, China, collapse, gulag, housing, Mongolia, refugees, Vancouver, war crimes, wealth 2 Responses »

Walker Evans Waterfront in New Orleans. French market sidewalk scene 1935

• Paul Singer: Market ‘Breakdown’ To Be ‘Sudden, Intense, And Large’ (CNBC)

• Vancouver Housing Market Implodes: Average Price Plunges 20% In 1 Month (ZH)

• UK’s £8.8 Trillion Wealth Owes Much to Housing (BBG)

• Moody’s Lowers Outlook On Australia Banks To Negative (R.)

• China’s Secret Lists of Zombie Borrowers Leave Banks in the Dark (BBG)

• As China Shrinks, Mongolia Has an Epic Economic Meltdown (BBG)

• Stiglitz: The Euro Is On Course To Fail (Economist)

• The Subtle Tyranny of Blockchain (Thomas)

• It’s Time to Abolish the DEA and America’s “War on Drugs” Gulag (CHS)

• The US Is Promoting War Crimes In Yemen (G.)

• Greek Coast Guard Rescues Dozens Of Migrants Stuck On Islet (AP)

• The Fishermen of Lesbos (Hakai)

“Experience doesn’t count for much, and extreme confidence may be fatal.”

• Paul Singer: Market ‘Breakdown’ To Be ‘Sudden, Intense, And Large’ (CNBC)

In a bleak new letter to investors, Paul Singer’s Elliott Management warns that the bond market is “broken” and that when the central bank actions of recent years no longer ward off a market downturn, the subsequent loss of confidence could be severe. The fund’s recent investor letter, which covers the second quarter, notes that Elliott’s managers are currently seeing “what is in many ways the most peculiar period we have faced in 39 years.” Too much power has been ceded to central banks, the letter adds, the value of money has been debased, inflation is probably inevitable, and when it happens, it could be swift and impossible to tamp down.

Elliott is a $28 billion fund founded in 1977 by Singer, now its president. The fund is up more than 6% for the year through July, according to an investor. Given the persistence of low or negative yields on government and other bonds and the continued stampede to buy them nonetheless, today’s environment marks “the biggest bond bubble in world history,” and “the global bond market is broken,” the investor letter states. The letter discusses, at some length, the oddity of an investor mentality that flies to an asset class regarded as a “safe haven” even when there are low or nonexistent returns attached to it and no guarantee that current conditions will persist.

In one wry aside, the letter suggests a safety warning be attached to the $12 trillion government bond market now trading at negative yields: “Hold such instruments at your own risk; danger of serious injury or death to your capital!” Trading in this market is particularly difficult, it adds. “Everyone is in the dark,” Elliott notes. “Experience doesn’t count for much, and extreme confidence may be fatal.” Moreover, “the ultimate breakdown (or series of breakdowns) from this environment is likely to be surprising, sudden, intense, and large.”

Coming soon to a theater near you. Denmark, Holland, Australia, New Zealand, UK, the list is long.

• Vancouver Housing Market Implodes: Average Price Plunges 20% In 1 Month (ZH)

It appears that the Vancouver housing market has slammed shut. Which is hardly a surprise: virtually everyone saw it coming, the only question was when. Eilers says he’s been warning of a real estate slow-down for at least a year due to the region’s unsustainable and unsupportable prices. West Vancouver, where he does a large part of his business, had a benchmark detached home price of almost $3.4 million in July according to the Real Estate Board of Greater Vancouver. “The market in West Van is up 450 per cent since 2001. So is everyone making 600 per cent more income than they were so they can pay their taxes and buy their houses? Of course not. So how is this inflation been financed? By off-shore money and record debt.”

Precisely what we said at the start of the year when we first heard horror stories about Chinese buyers paying cash, sight unseen, for any and every local luxury, and not so luxury home. It appears that it is not just the 15% luxury tax implemented on on July 25 that has burst the bubble: according to Eilers sales were dropping even before the tax. According to the data, July was another slow month in West Vancouver with only 44 sales, down from 80 in 2015. June saw 74 sales, also down from 102 the year before. The pattern has left the market “devastated”, Eilers adds. While it may be too early to make a definitive conclusion, after all while earlier this month, the REBGV released its statistics for the month of July, saying the data showed the market had slowed down to “normal levels”, there was still no official August data available, and thus no actual indication of the slowdown.

Fortunately for buyers, real-time data proves otherwise. Zolo, a Canadian real estate brokerage, keeps track of MLS home sales in real-time and reports prices as an average rather than the “benchmark price” used by the REBGV. It currently shows a major correction underway in most Metro Vancouver markets. According to the website, the City of Vancouver currently has an average home price of $1.1 million, down 20.7% over the last 28 days and down 24.5% over the last three months. The average detached home is $2.6 million, down 7% compared to three months ago.

What a bubble looks like. This is going to be painful. Re: Vancouver.

• UK’s £8.8 Trillion Wealth Owes Much to Housing (BBG)

The total net worth of the U.K. at the end of 2015 was £8.8 trillion ($11.6 trillion), the Office for National Statistics said in London on Thursday. Much of the £493 billion jump from a year earlier came from the £355 billion increase in the value dwellings. The data also showed the U.K. was ahead of other G-7 countries in terms of growth of non-financial assets in 2014.

More housing shock, more pain to come. “The strong price appreciation of residential real estate has been driving an increase in household debt to a record high..”

• Moody’s Lowers Outlook On Australia Banks To Negative (R.)

Moody’s has lowered its outlook on Australia’s banks to negative from stable, warning of sluggish profit growth due to slow wage increases, record-low interest rates, strong lending competition and rising household debt. The agency said the banks, whose credit ratings are among the highest in the world, could be hurt by an increase in problem loans among mining companies and households in mining-dependent states. Moody’s action came after S&P in July also placed major Australian banks’ AA- ratings on negative outlook, in a signal that a downgrade was possible. Both agencies rate the banks one rung below the highest, triple-A, investment grade. A downgrade would make financing more expensive for banks at a time when regulators want them to put aside more cash to weather any repeat of the global financial crisis.

Australia’s highly profitable “Big Four” banks – National Australia Bank, ANZ Banking Group, Westpac and Commonwealth Bank – emerged from the financial crisis relatively unscathed but are facing questions over their capital levels, slowing earnings growth and rising bad debts. “The outlook change reflects Moody’s expectation of a more challenging operating environment for banks in Australia for the remainder of 2016 and beyond,” Frank Mirenzi, a vice president and senior analyst at Moody’s, said in a statement. He noted that profit growth could slow and asset quality decline, and make banks and consumers more vulnerable to economic shocks. “The strong price appreciation of residential real estate has been driving an increase in household debt to a record high,” Mirenzi noted.

China would collapse if not for the shadow banks. It’s fully addicted.

• China’s Secret Lists of Zombie Borrowers Leave Banks in the Dark (BBG)

There’s a list Ni Baixiang, head of Industrial & Commercial Bank of China’s Jiangxi branch, would love to get his hands on. Commonly referred to as the “zombie list,” it’s compiled by Jiangxi regional authorities and holds the names of the most deadbeat of borrowers: state-owned companies deemed too weak to survive and destined to be wound down. In short, the kind of enterprises banks already weighed down by rising bad loans want to steer well clear of. Only, neither Ni nor his competitors in Jiangxi are allowed to know who they are. “They won’t tell us because if we know, we’ll lose confidence,” Ni, whose bank is China’s largest, told reporters after a press briefing in Beijing earlier this month.

Ni’s dilemma underscores the challenge China faces as it tries to stem a tide of bad loans while carrying out an orderly restructuring of a state corporate sector burdened by overcapacity and bloated bureaucracies. Several provincial governments are withholding information on zombie borrowers from banks for fear that they’ll cut off financing immediately, according to officials who asked not to be identified. In several provinces, government-compiled lists of zombie companies are also kept secret from local banking regulators, the people said, asking not to be named discussing sensitive information. Knowing which state-owned companies get the “zombie” designation can be crucial for bankers because authorities ultimately decide whether they’ll fail, and local officials often meddle in banks’ lending decisions.

An economy growing at the slowest pace in a quarter century is adding urgency to President Xi Jinping’s push to steer China away from the investment-led model it’s relied on in the past. A key part of that is restructuring industries saddled with overcapacity, such as steel, cement and coal. McKinsey estimates that shedding surplus industrial capacity could add $5.6 trillion to the economy between now and 2030.

China’s making up the numbers it goes along, but here’s how we find out how it’s really doing.

• As China Shrinks, Mongolia Has an Epic Economic Meltdown (BBG)

Back in 2008, Mongolia honored its revered national hero Genghis Khan with an enormous, stainless steel statue on the bank of the Tuul River about a half-hour’s drive outside of the capital of Ulaanbaatar. The 13th century conqueror’s name graces the capital’s international airport and his image is also plastered on the tugrik, the local currency. Right now, Khans aren’t getting much respect. The government, having burned through much of its foreign currency reserves, faces a crushing debt burden and is having trouble meeting its civil service payroll. On Thursday, the central bank hiked its benchmark interest rate by a remarkable 4.5 percentage points to 15% to prop up the tugrik, the world’s worst performing currency in August.

Mongolia, a mineral-rich and landlocked $12 billion economy bordering Russia and China, is staring at a full-blown balance of payments crisis. It’s caused barely a ripple in global financial markets, but the nation’s economic meltdown offers instructive lessons to far bigger resource-reliant economies like Brazil, Venezuela, Russia and Saudi Arabia. This is an economy that gives new meaning to what economists call the resource curse. An overabundance of natural resources can result in lopsided economic growth, government waste and boom-bust cycles that can leave a country’s finances in tatters. “Mongolia should be much richer than it is,” said Lutz Roehmeyer, a money manager at Landesbank Berlin Investment. “There is nowhere else in the world where it is so easy to dig up resources without any problems and sell the commodities to China with such low transportation costs.”

It’s way too late to save the euro.

• Stiglitz: The Euro Is On Course To Fail (Economist)

Those in search of an antidote to the anxieties that arise from Britain’s vote to leave the European Union should avoid the latest book from Joseph Stiglitz. Its subject is the euro, which has hitherto been the main font of fears for Europe and (his analysis suggests) will soon be once again. It is a meaty subject, suited to a big-name economist. Mr Stiglitz has won a Nobel prize, served as a feather-ruffling chief economist for the World Bank and written several books with a fair claim to prescience, notably, “Globalisation and Its Discontents”, published in 2002. The main argument of his new book is that, on its current course, the euro is certain to fail—and indeed, that it was fatally flawed from birth.

It entails a fixed exchange rate and a single interest rate for its members, which means countries must forgo the option to devalue in times of economic weakness. To make up for that loss, the euro’s architects should have created institutions, such as jointly issued bonds, mutual backing of bank deposits and a common fund for unemployment insurance, so the costs of righting each economy are shared. Instead the burden falls on individual countries through austerity policies, such as tax rises and wage cuts. The results have been ugliest in Greece, where national income has shrunk by a quarter since 2007 and where the unemployment rate is 24%. There is still time to put in place better policies, thinks Mr Stiglitz. But an amicable divorce would be preferable to the current situation, which puts the considerable achievement of European integration at risk.

A good chunk of the book is taken up with a critique of policymakers’ efforts to address the euro crisis. Mr Stiglitz rightly takes issue with the blame-the-victim analysis of the euro’s failings that is commonly heard in Germany. The persistent trade surpluses of Germany and the vast deficits of boomtime Spain, Portugal and Greece are two sides of the same coin. Indeed, in a world short of aggregate demand, German thrift is the bigger failing, argues Mr Stiglitz. He favours the remedy, first proposed by John Maynard Keynes, of forcing creditor countries to adjust by taxing their trade surpluses.

“In any protocol, everyone has to act the same. But in a blockchain like Ethereum, everyone has to think the same.”

• The Subtle Tyranny of Blockchain (Thomas)

The past months have become a new chapter in the evolution of blockchain technology. Ethereum’s fork in the wake of the DAO hacks. Bitcoin’s almost-fork in the wake of the (still unresolved) block size debate. All of this is leading to the growing frustration and even disillusionment of key figures in the crypto-currency community. I left the Bitcoin community in 2012 for very similar reasons. In 2011, I was part of the group that helped Gavin Andresen design the Pay-to-Script-Hash (P2SH) feature. The design wasn’t very complex, it was backwards-compatible and provided crucial building blocks for improving Bitcoin’s security and performance. Unfortunately, getting it deployed turned out to be very political.

It was easy to extrapolate from this change to more advanced functionality still on the roadmap and get depressed about our chances to make important progress in the future. As the Bitcoin price rose, the number of stakeholders expanded and the amount of money at stake increasingly dominated the technical discussion. With this context in mind, the recent situation with Ethereum is not surprising in the slightest. As a blockchain grows, the larger and highly vested userbase becomes more and more difficult to shepard. When combined with time pressure (i.e. the 27-day DAO split creation period), something had to give. There wasn’t enough time to get the sort of buy-in and preparation needed to safely hardfork a system like Ethereum.

At the root of the difficulty in updating blockchains is the need to maintain shared state. In any protocol, everyone has to act the same. But in a blockchain like Ethereum, everyone has to think the same. Everyone’s memory (also known as “state” in computer science terms) has to be exactly the same and evolve according to the same rules. Shared state adds tremendous complexity and that has a big impact on developers: Blockchains are a pain to work with. Everyone who has done it knows what I’m talking about. The fact that blockchain has been largely ignored by major tech companies and embraced by the financial industry is partly because that industry has a relatively high tolerance for arcane and complex systems.

To once again quote Michael Moore: You can’t declare war on a noun.

• It’s Time to Abolish the DEA and America’s “War on Drugs” Gulag (CHS)

It’s difficult to pick the most destructive of America’s many senseless, futile and tragically needless wars, but the “War on Drugs” is near the top of the list.Prohibition of mind-altering substances has not just failed–it has failed spectacularly, and generated extremely destructive and counterproductive consequences. What was the result of the Prohibition of alcohol in the 1920s? Prohibition instantly criminalized 40+% of the adult populace and created hugely profitable criminal organizations. What was the result of the “War on Drugs”? This modern-day Prohibition instantly criminalized large swaths of the adult populace and created hugely profitable criminal organizations. If you want to increase drug use, criminalize innocent citizens and spawn gargantuan criminal organizations, then by all means declare “war” via Prohibition.

The results of Prohibition/War on Drugs are so visibly perverse and so destructive that the entire enterprise is sickeningly Orwellian. The well-paid apologists for Prohibition/War on Drugs claim that imprisoning millions of people “helps” them avoid drugs. If you think being tossed in prison for a few years “helps” people, then step right up and accept a fiver (5-year sentence) in an American prison, which is essentially a factory that produces one product: people damaged by imprisonment, deprived of their full citizenship, hobbled by a felony conviction–ex-con beneficiaries of years of tutorials by hardened criminals. This is as Orwellian as the Vietnam War’s famous “It became necessary to destroy the town to save it.”

If you think throwing millions of people in prison “helps” them or society, you are either insane or you’re making a living in the gulag or our sick system of “justice”. If you don’t think America has a “War on Drugs” Gulag, please glance at this chart of Americans in jail and prison – many for drug-related offenses:

“..inside Yemen this is not perceived to be a Saudi bombing campaign, this is a US bombing campaign..”

• The US Is Promoting War Crimes In Yemen (G.)

Saudi Arabia resumed its appalling war in Yemen last week and has already killed dozens more civilians, destroyed a school full of children and leveled a hospital full of sick and injured people. The campaign of indiscriminate killing – though let’s call it what it is: a war crime – has now been going on for almost a year and a half. And the United States bears a large part of the responsibility. This US-backed war is not just a case of the Obama administration sitting idly by while its close ally goes on a destructive spree of historic proportions. The government is actively selling the Saudis billions of dollars of weaponry. They’re re-supplying planes engaged in the bombing runs and providing “intelligence” for the targets that Saudi Arabia is hitting.

Put simply, the US is quite literally funding a humanitarian catastrophe that, by some measures, is larger than the crisis in Syria. As the New York Times editorial board wrote this week: “Experts say the coalition would be grounded if Washington withheld its support.” Yet all we’ve heard is crickets. High-ranking Obama administration officials are hardly ever asked about the crisis. Cable television news has almost universally ignored it. Both the Clinton and Trump presidential campaigns have been totally silent on this issue despite their constant arguing over who would be better at “stopping terrorism”. Beyond the grotesque killing of civilians, it’s clear at this point that the Saudis’ bombing campaign has also boosted al-Qaida in the Arabian Peninsula (Aqap) to a level which Reuters described as “stronger and richer” than anytime in its 20-year history.

Jake Tapper commendably broke the television news blackout about Yemen on his CNN show on Wednesday. Senator Chris Murphy of Connecticut, one of the very few elected representatives talking about the crisis, told Tapper that “it’s wild to me” that the Congress isn’t debating the “unauthorized” war in Yemen. The Saudis “could not do it without the United States”, he said. “We have made the decision to go to war in Yemen” – against Saudi Arabia’s enemies, not ours – without any debate. “If you talk to Yemenis, they will tell you that inside Yemen this is not perceived to be a Saudi bombing campaign, this is a US bombing campaign,” Murphy continued. “What’s happening is we are helping to radicalize the the Yemeni population against the United States.”

Not from Turkey. Lybia is more likely.

• Greek Coast Guard Rescues Dozens Of Migrants Stuck On Islet (AP)

Greece’s coast guard rescued dozens of migrants Friday whose boat ran aground on a deserted islet off the coast of southwestern Greece, hundreds of miles from the usual entry point of migrants into the European Union nation. The boat carrying about 70 people ran aground overnight on the tiny islet of Sapientza, off the southwestern tip of the Peloponnese, the coast guard said. The vast majority of migrants reach Greece’s eastern Aegean islands a few miles from the Turkish coast.

Coast guard vessels picked up the migrants Friday morning, ferrying them to the mainland where they were to be registered. It was not immediately clear what type of boat they had been on, where they had set sail from or where they had been sailing to. Separately, government figures showed 261 migrants or refugees arrived on Greek islands in the 24 hours from Thursday morning to Friday morning – a jump compared to recent figures, which had ranged from a few dozen to about 150 per day. Of those who arrived in the last 24 hours, the vast majority – 139 people – reached the eastern Aegean island of Lesvos. The rest arrived on Chios, Samos, Leros and Karpathos.

Endearing.

• The Fishermen of Lesbos (Hakai)

The Greek island of Lesbos is at the forefront of the refugee crisis as boatload after boatload of men, women, and children fleeing conflict in Syria, Iraq, Afghanistan, and elsewhere arrive on its shores. While citizen volunteers, NGOs, and governments claim much of the spotlight for rescue and recovery efforts, local people—especially those most experienced on the water—play a vital role, even at risk to their livelihoods and, perhaps, personal health. Greek video journalist Nikolia Apostolou introduces us to Lesbos fishermen on the front lines.

Video of The Fishermen of Lesbos