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Debt Rattle July 6 2020

Jul 062020

July 6, 2020 Posted by Raúl Ilargi Meijer at 10:44 am Finance Tagged with: airborne, Assange, Biden, Bill Barr, coronavirus, Covid19, decoupling, Ghislaine, Schiff, state holding company, statues, WHO, yuan 11 Responses »

Dorothea Lange White Angel Breadline San Francisco 1933

• 100s Of Scientists Say Coronavirus Airborne, Ask For WHO Review (R.)

• Australia Closes State Border For First Time In 100 Years (R.)

• Time For China To Decouple The Yuan From US Dollar (SCMP)

• Susan Rice Sees Stock Rise In Biden VP Race (Hill)

• Susan Rice: Trump Picks Putin Over US Troops (Hill)

• Schiff Learned Of Russian ‘Bounty’ Intel In February, Took No Action (Fed.)

• Barr’s Team Startled In ‘First Chance’ To Assess Mueller Investigation (WE)

• Nomi Prins: “We’re Living In A Permanent Distortion” (USAW)

• Only Bold State Intervention Can Block A Future Owned By Corporate Giants (G.)

• Prosecutors Seek Friday Court Appearance For Ghislaine Maxwell (R.)

• Ohio Town Proclaims Itself A ‘Statue Sanctuary City’ (JTN)

New daily numbers are almost quiet. But now the weekend’s mostly over.

US’ Former FDA Commisoner: US probably as about 700,000 cases of coronavirus a day. 4 epicenters of spread. ht @fredwalton216 pic.twitter.com/R9v00bq3M9

— Kristina Jovanovski (@kjovano) July 5, 2020

I had this yesterday via the Brussels Times, but now the NYT has picked it up. Much bigger news.

• 100s Of Scientists Say Coronavirus Airborne, Ask For WHO Review (R.)

Hundreds of scientists say there is evidence that the novel coronavirus in smaller particles in the air can infect people and are calling for the World Health Organization to revise recommendations, the New York Times reported on Saturday. The WHO has said the coronavirus disease spreads primarily from person to person through small droplets from the nose or mouth, which are expelled when a person with COVID-19 coughs, sneezes or speaks. In an open letter to the agency, which the researchers plan to publish in a scientific journal next week, 239 scientists in 32 countries outlined the evidence showing smaller particles can infect people, the NYT said. “We are aware of the article and are reviewing its contents with our technical experts,” WHO spokesman Tarik Jasarevic said in an email reply to a Reuters request for comment.

Whether carried by large droplets that zoom through the air after a sneeze, or by much smaller exhaled droplets that may glide the length of a room, the coronavirus is borne through air and can infect people when inhaled, the scientists said, according to the NYT. However, the health agency said the evidence for the virus being airborne was not convincing, according to the NYT. “Especially in the last couple of months, we have been stating several times that we consider airborne transmission as possible but certainly not supported by solid or even clear evidence,” Dr. Benedetta Allegranzi, the WHO’s technical lead of infection prevention and control, was quoted as saying by the NYT.

Drones to track down people trying to swim across.

• Australia Closes State Border For First Time In 100 Years (R.)

The border between Australia’s two most populous states will close from Tuesday for an indefinite period as authorities scramble to contain an outbreak of the coronavirus in the city of Melbourne. The decision announced on Monday marks the first time the border between Victoria and New South Wales has been shut in 100 years. Officials last blocked movement between the two states in 1919 during the Spanish flu pandemic. “It is the smart call, the right call at this time, given the significant challenges we face in containing this virus,” Victoria Premier Daniel Andrews told reporters in Melbourne. The move will, however, likely be a blow to Australia’s economic recovery as it heads into its first recession in nearly three decades.

The number of COVID-19 cases in the Victorian capital of Melbourne has surged in recent days, prompting authorities to enforce strict social-distancing orders in 30 suburbs and put nine public housing towers into complete lockdown. The state reported 127 new COVID-19 infections overnight, its biggest one-day spike since the pandemic began. It also reported two deaths, the first nationally in more than two weeks, taking the national tally to 106. NSW Premier Gladys Berejiklian said there was no timetable for reopening the border, which will be patrolled by the military to prevent illegal crossings from 11.59 p.m. local time on Tuesday. The state line is highly porous, with 55 roads, wilderness parks and rivers. Some businesses straddle both sides and several workers, and school children, commute daily.

The Defence Force are expected to assist NSW Police when the border closes with Victoria says NSW Police Commissioner Mick Fuller. Police will use drones to monitor the Murray River in case people try to swim into New South Wales. https://t.co/JOSU3rhwVb #coronavirus #7NEWS pic.twitter.com/8IZRMpPJCz

— 7NEWS Sydney (@7NewsSydney) July 6, 2020

We keep on returning to the same mega problem for China: nobody wants the yuan. Can they force-feed it to enough parties?

• Time For China To Decouple The Yuan From US Dollar (SCMP)

China must brace for a full-blown escalation of the struggle with the United States and prepare to gradually decouple the Chinese yuan from the US dollar, a former senior Chinese diplomat warned amid the continued downward spiral in relations between the world’s two largest economies. Zhou Li, a former deputy director of the Communist Party’s International Liaison Department – which manages relations with foreign political parties, organisations and elites – is the latest in a series of voices in China calling for the country to be ready for a currency split with the US amid growing signs of financial war in recent weeks.

“By taking advantage of the dollar’s global monopoly position in the financial sector, the US will pose an increasingly severe threat to China’s further development,” Zhou wrote in the full version of an article published on Saturday by the Beijing-based think tank Chongyang Institute for Financial Studies at Renmin University. China should now make preparations to insulate itself from “dollar hegemony and gradually achieve the decoupling of the renminbi from the US currency”, Zhou said. “The US dollar could become a major risk issue that ‘has us by the throat’.” Zhou’s comments come as Washington is set to impose new sanctions on Chinese officials and financial firms for their part in the new national security law for Hong Kong.

The Hong Kong Autonomy Act, passed by Congress last week, requires the administration to punish foreign banks if they continue to do business with sanctioned officials, including possibly denying them access to the global US dollar payment system. His remarks also mirrored a growing consensus in Beijing that China should “give up the illusion” of friendship but instead prepare for a full-fledged conflict with the US. [..] China holds more than US$2 trillion in overseas investments, the vast majority in developed countries and denominated in US dollars. China also holds US$1.07 trillion in US Treasury securities as part of its US$3 trillion foreign exchange reserves.

China must accelerate the internationalisation of the yuan, speed up the increase in cross-border payments and clearing arrangements for the yuan, establish local currency settlement mechanisms with more countries, and create conditions to maximise the use of the Chinese currency in global industrial supply chains, Zhou said. His views echoed a call by Fang Xinghai, a vice-chairman of the China Securities Regulatory Commission, who warned in a recent speech that China must make urgent preparations for being cut off from the US dollar payment system. “Yuan internationalisation is a must to offset external financial pressure,” Fang said.

How to keep some focus on Biden while he’s hiding? Daily tidbits about VP candidates.

• Susan Rice Sees Stock Rise In Biden VP Race (Hill)

Sens. Kamala Harris (D-Calif.) and Elizabeth Warren (D-Mass.) are getting most of the buzz, but former U.S. Ambassador to the United Nations Susan Rice is also getting a lot of attention in Joe Biden’s campaign as he considers who to pick as his running mate, sources say. Rice, who also served as former President Obama’s national security adviser, has seen her stock rise amid a series of crises, including the COVID-19 pandemic. “I know she’s very much in the mix,” a source close to the Biden campaign said. One factor to watch is Biden’s relationship with Rice. The two worked closely in the Obama administration, and personal chemistry is an underrated factor in vice presidential decisions.

“I know they have a good relationship — perhaps the best relationship of anyone on the list,” the source close to the Biden campaign said. “They’ve known each other for years, they’ve worked alongside each other and she’s been tested in a way that a lot of folks on the list just haven’t been.” Biden, who has committed to selecting a woman as his running mate, has said repeatedly that he is looking for someone who is “ready to be president on day one.” He is also under pressure by some Democrats to pick a woman of color after the death of George Floyd and the demonstrations that followed urging an end to systemic racism. Harris has widely been seen as the favorite, but sources said Rice should not be counted out.

“Everyone automatically thinks of Kamala when they think he needs to pick a woman of color. It’s become conventional wisdom,” said a source who worked in the Obama administration alongside Biden and Rice. “But if you look at Susan’s credentials, she makes perfect sense. She’s a rock star who has the confidence, stature and gravitas to be vice president.”

And then put people like Rice out on TV shows, to test how people respond to her, and to create the illusion that there’s activity going on. If she can throw some outrageous claims out there, all the better.

• Susan Rice: Trump Picks Putin Over US Troops (Hill)

Former U.S. Ambassador to the United Nations Susan Rice said Sunday that President Trump picks Russian President Vladimir Putin over U.S. troops “even when it comes to the blood of American service members.” Rice, who also served as former President Obama’s national security adviser, told NBC’s “Meet the Press” that she believes Trump was briefed on the intelligence that Russia was offering bounties to Taliban-linked militants to kill U.S. and coalition service members in Afghanistan. “The message to Vladimir Putin is you can kill American servicemen and women with absolute impunity,” she said. “This is an extraordinary revelation. The president of the United States has demonstrated absolutely callous disregard for the safety and security of American forces in a war zone and there’s no explanation for this.”

“Now we learn that even when it comes to the blood of American service members, this president picks Putin over our troops,” she added. The former national security adviser said intelligence is “very, very rarely” proven with “100 percent certainty” after administration officials have claimed the intelligence was contradictory. She said if advisers did not inform Trump of the intelligence last year, she thinks it would be “because they’re scared of him.” Rice, a possible contender for presumptive Democratic nominee Joe Biden’s vice presidential pick, also cited that “everything [Trump] has done since” his denial of the intelligence community’s findings of Russian interference in the 2016 election, has benefited Russia.

But can Rice really accuse Trump of risking US troops’ lives, while that angle has been largely discredited and Adam Schiff’s role has not?

• Schiff Learned Of Russian ‘Bounty’ Intel In February, Took No Action (Fed.)

Top committee staff for Rep. Adam Schiff (D-Calif.), the chairman of the House Permanent Select Committee on Intelligence, were briefed in February on intelligence about Russia offering the Taliban bounties in Afghanistan, but he took no action in response to the briefing, multiple intelligence sources familiar with the briefing told The Federalist. The intelligence was briefed to Schiff’s staff during a congressional delegation, or CODEL, trip to Afghanistan in February. Schiff, who has acknowledged President Donald Trump was never briefed on the so-called intelligence, has thus far refused to disclose that his staff was personally briefed. The revelation raises serious questions that Schiff is once again politicizing, and perhaps even deliberately misrepresenting, key data for partisan gain.

Asked by a reporter Tuesday if he had any knowledge of the Russia story prior to the New York Times report, Schiff said “I can’t comment on specifics.” Schiff’s recent complaints that Trump took no action against Russia in response to rumors of Russian bounties are curious given that Schiff himself took no action after his top staff were briefed by intelligence officials. As chairman of the intelligence committee, Schiff had the authority to immediately brief the full committee and convene hearings on the matter. Schiff, however, did nothing. He did not brief his committee on the matter, nor did he brief the gang of 8, which consists of top congressional leadership in both chambers.

Adam Schiff on Bob Mueller.

• Barr’s Team Startled In ‘First Chance’ To Assess Mueller Investigation (WE)

Attorney General William Barr’s team was in for a shock when it met with special counsel Robert Mueller before his report was released, according to a forthcoming book. CNN legal analyst Jeffrey Toobin wrote about Barr’s “first chance” to assess the Russia investigation in early March 2019 in True Crimes and Misdemeanors: The Investigation of Donald Trump, an excerpt of which was published last week by the New Yorker. He described a “fairly relaxed session” in which Mueller “gave a brief introduction” to Barr and his staff, who later reflected on how the former FBI director didn’t live up to expectations.

“Later, Barr’s team noted that Mueller looked tired and old. Because Mueller had been the focus of so much public attention for nearly two years and said so little in public, he had taken on an almost mythic status, even among people who once knew him well, like Barr. To see him after this exhausting enterprise was startling. He was an old seventy-four,” Toobin wrote in the book that is set for release in August. They weren’t the only ones.

One prominent Democrat, House Intelligence Committee Chairman Adam Schiff, said in a recent podcast that he was surprised by Mueller’s shaky testimony before the House Judiciary and Intelligence committees in July 2019 after his report was released. The California Democrat agreed when asked whether he was “shocked” during a Daily Beast podcast last month. “I have known Bob Mueller for a long time. I have tremendous respect for him. I think he is just an amazing human being and public servant,” Schiff said. “He was not the man that I knew just in terms of his strength of presence, and so, it was quite surprising.

“We are not going to pay back this debt, and this is global. Nobody is even considering trying to pay back the debt..”

• Nomi Prins: “We’re Living In A Permanent Distortion” (USAW)

Three time best-selling book author Nomi Prins says long before the Covid 19 crisis, the global economy was faltering big time. The Fed stepped in with the start of massive money printing in late 2019 to save the day. Prins explains, “We were already in crisis mode as I mentioned at the end of my last book going into 2019.” What did we see at the end of 2019? We saw this pivot, and I call it phase two. . . . Central banks had pivoted to easing mode. . . . Come September, October, November and December, the Fed is producing repo operations. Those are short-term lending operations that are supposed to be the purview of the banks . . . . The Fed is not supposed to get involved, but it did. The Fed had all kinds of excuses. It said it was not QE, but it was. . . . The debt at the end of 2019 for the world was three times GDP. For every $3 borrowed, only $1 of economic activity occurred. That’s what we started 2020 with. Throw a pandemic into that . . . and you have a long drawn out financial and economic crisis.”

Now, the money printing has gone into overdrive to save the system from the virus crisis. The social and economic damage, according to Prins, is profound and not going away. Prins points out,

“We are not going to pay back this debt, and this is global. Nobody is even considering trying to pay back the debt that has been created. Let’s think about why that debt has been created. It’s not just because the economy slowed down. That’s one reason and kind of an excuse. The reality is the Fed is on steroids, and other central banks are on steroids . . . throughout the world in a larger number and larger magnitude than in the wake of the financial crisis of 2008. This means all this new debt created is even cheaper than the debt created going into the 2008 crisis. So, more debt, created more cheaply, means less incentive to pay it back and more incentive to push it down the road and grow it. You’ve got this snowball of debt rolling down this high mountain, and it’s rolling and growing and getting bigger. The mountain, which is the main street economy, is coming down as the snow ball is coming down, and the main street economy itself, that foundation, is really shaky. . . . How does this end? It ends with us, the foundation, which is the main street economy, by both that snowball of debt and the avalanche of the mountain. That’s going to be a multi-decade problem.”

Prins says this next stage has a brand new name and explains, “I call this a ‘Permanent Distortion.’ I have not used this term in prior books, but I am using it because . . . the disconnect between financial assets, equity markets and the real economy . . . has become massive…

A state holding company modeled after Roosevelt’s Reconstruction Finance Corporation.

• Only Bold State Intervention Can Block A Future Owned By Corporate Giants (G.)

Our economy after Covid-19 could turn out to be merely an uglier, more distorted version of the lopsided system we have today. We may find that we’ve stumbled into an “Amazon recovery”, where big businesses and corporate behemoths hold an even greater share of the market, billionaires get richer (and more numerous) and inequality is supercharged. Like a handful of other corporate giants, Amazon has seen its business expand during this crisis. In the US, the company took on 100,000 new workers between mid-March and mid-April, before looking to create another 75,000 posts. Its stock price has soared by more than 50% since the beginning of April, and Amazon’s founder, Jeff Bezos, has seen his wealth increase by $30bn (£24bn) during the pandemic alone. The global billionaire class have never had it so good.

The government must ensure the recovery works for everyone, not just for the richest. A large part of the answer lies in a move to block corporate consolidation and predatory acquisition, preventing the leveraged buyout of the economy. This could take the form of a state holding company, with a mandate to support struggling SMEs directly through the coronavirus era and to prevent the destruction of what remains of the UK’s local small-business sector. It would target businesses that were cash-positive before March and can be once again, when the crisis has passed. Later, where appropriate, this holding company could relaunch many of these rescued businesses under conditions of worker or community ownership, or as mission-driven social enterprises.

In this way, the holding company could become an important instrument in a green transition, building community wealth by supporting local economic activity. A democratic society can’t flourish under conditions of unrestrained inequality, and will be even more imperilled in an economy where wealth and power are further concentrated. The only alternative to an unjust recovery is to use state power to protect smaller firms and create a more democratic economy where ownership and economic rewards are more widely shared. History can be our guide here. A similar move lay at the heart of the US response to the economic crisis of the 1930s. Under Franklin D Roosevelt, the Reconstruction Finance Corporation, a state holding company, was permitted to acquire failing businesses until they could be relaunched during the recovery from the Great Depression. One of the engines of the New Deal, the RFC became not only the biggest bank in the US, but also the single largest investor in the country.

Bail hearing. If she gets bail, that will be a very large scandal.

• Prosecutors Seek Friday Court Appearance For Ghislaine Maxwell (R.)

Prosecutors have asked a judge to schedule a Friday court appearance in New York for Ghislaine Maxwell, the former girlfriend and longtime associate of the late disgraced financier Jeffrey Epstein. Maxwell was arrested on Thursday on U.S. charges of luring underage girls so that Epstein could sexually abuse them. The FBI arrest of the British socialite was the latest twist in the mystery of Epstein, who went from a high school math teacher to a high-flying lifestyle of private Caribbean islands and powerful connections that his victims say allowed him to abuse minors with impunity.

Maxwell, 58, was arrested in Bradford, New Hampshire, where she had been laying low since December, the FBI said last week. In a letter on Sunday to Judge Alison Nathan at the U.S. District Court for the Southern District of New York, acting United States Attorney Audrey Strauss said Maxwell’s defense lawyer, Christian Everdell, has requested a Friday, July 10, bail hearing. Maxwell is charged with four criminal counts related to procuring and transporting minors for illegal sex acts and two of perjury, according to the indictment by federal prosecutors in New York.

Here is my call with the 24/7 automated inmate line for the jail holding Ghislaine Maxwell… pic.twitter.com/n7SBHYMqNm

— Spiro (@o_rips) July 4, 2020

One man’s misery is another man’s good fortune.

• Ohio Town Proclaims Itself A ‘Statue Sanctuary City’ (JTN)

As protesters target statues around the nation, one town is becoming a statue sanctuary city for monuments honoring select figures. Newton Falls, Ohio City Manager David M. Lynch has signed a proclamation that states that the city will accept and display spurned statues of people including George Washington, Abraham Lincoln, and certain other prominent figures.

“A Proclamation declaring that Newton Falls is a Statuary Sanctuary City and declaring a general amnesty for George Washington, Abraham Lincoln, Thomas Jefferson, Ulysses S. Grant, Patrick Henry, Francis Scott Key, Theodore Roosevelt and Christopher Columbus as represented by the statues of these great leaders, and volunteering to accept these statues that have been removed throughout the USA and place them in a location of honor in our community,” the proclamation says, according to a copy posted by 21-WFMJ. “They founded our nation, they ended slavery, and established and protected our national parks,” Lynch said, according to Fox 8. “Yes, they had warts but they laid the foundation for what we have today,” he said.

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Assange. Don’t miss.

I wonder if it will allow me to post this one. Fingers crossed! pic.twitter.com/ZLTl9jUtO6

— Justice Seeker (@helena_jennie) July 5, 2020

This is brilliant. Who on earth made this happen?

Donald Trump ❌
Joe Biden ❌
Kanye West ❌
Tom Cruise ✅#2020Elections
pic.twitter.com/qcAsFBMcWu

— Mehdi Omaïs (@MehdiOmais) July 5, 2020

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Debt Rattle January 3 2020

Jan 032020

January 3, 2020 Posted by Raúl Ilargi Meijer at 11:15 am Finance Tagged with: cronies, dollar, Erdogan, Fed, Idlib, Iran, Iraq, PBOC, Pentagon, Syria, Trump, yuan, zombies 14 Responses »

Alfred Palmer New B-25 bomber at Kansas City plant of North American Aviation 1942

• America Just Took Out The World’s No. 1 Bad Guy (CNBC)

• US Strike That Killed Iranian Commander Starkly Divides US Lawmakers (CNN)

• Erdogan Questions Europe As 250,000 Flee Idlib (ZH)

• US Dollar as Global Reserve Currency vs Euro, Yen, Renminbi, & Others (WS)

• China Cuts US Dollar Weighting In Key Index To Boost Fortunes Of Yuan (SCMP)

• China’s Central Bank Frees Up $115 Billion To Support Growth (SCMP)

• What the Fed Did to Calm Year-End Hissy-Fit of its Crybaby Cronies (WS)

• Greece, Israel, Cyprus: Turkey’s Libya Troops Bill Dangerous Escalation (R.)

• Leaders Of Greece, Israel, Cyprus Ink Deal For Pipeline (K.)

• The Terrifying Rise of the Zombie State Narrative (Craig Murray)

Inevitably, the killing of Qassim Soleimani in Baghdad leads to the confirmation of US party lines’ divide. While the GOP stands behind the decision, the Dems have a hard time reconciling their own contradictions. They are a war party, if you look past Tulsi Gabbard and Bernie Sanders, but they can’t be seen to agree with Trump. So the likes of Schumer and Pelosi say that while Soleimani won’t be mourned by any American since he was a really terrible person, Trump should have asked for their permission.

The logic being that this could lead to WWIII, a theme that’s all over the internet, so much it makes one think independent thought is under threat. Be that as it may, the president needs permission to declare war, not to hit an individual. Moreover, since they agree killing the man might have been a good idea, they surely realize that he was in a spot where they could get at him, for a limited amount of time, so asking for permission would heve risked losing the opportunity. Weak.

The following two tweets are worth citing:

Nicole Alexander Fisher: “Pelosi voted for Trump’s NDAA which stripped a provison that would have prevented unauthorized war with Iran. She sided with Trump and warhawks on this, as did 188 other Democrats. 41 Dems like AOC, Ilhan Omar, Tulsi Gabbard, Ro Khanna, and Joe Kennedy voted no.”

Soleimani fought ISIS, Al-Nusra, Al-Qaeda etc., along with the US.

Sara Abdallah: “The “no. 1 bad guy” who led the counter-terrorism campaigns that defeated ISIS and Al-Qaeda in Iraq, Syria and Lebanon; the “no. 1 bad guy” who prevented a jihadist takeover of the Middle East.”

I’m still wondering how CNBC became the no. 1 warmonger for the MSM. This is some headline. As for the Dems and GOP, one would be inclined to say: pick your side. But if you look just a little bit closer, you see there is only one side.

• America Just Took Out The World’s No. 1 Bad Guy (CNBC)

So, just who is this top Iranian general the U.S. just eliminated? For many of us who watch and analyze news out of the Middle East daily, he was the world’s number one bad guy. Qassim Soleimani has been in control of Iran’s Quds Force for more than 20 years. His current greatest hits include helping Bashar al Assad slaughter hundreds of thousands of his own people in the Syrian civil war, stoking the Houthis in Yemen’s civil war, and overseeing the killing of hundreds of Iraqi protesters recently demonstrating against Iranian influence in their country. But most importantly for Americans, Soleimani was behind the deaths of hundreds of American soldiers during the Iraq War. Last year, the U.S. State Department put the number of Americans killed by Iranian proxies in Iraq at 608 since 2003.

The killing of Soleimani doesn’t have the emotional power of the takedown of Osama bin Laden, and he wasn’t even as well-known to Americans as ISIS founder Abu Bakr al Baghdadi. But in many ways, taking him out means much more in terms of saving current lives. Remember that bin Laden and al Baghdadi were mostly out of business and in hiding at the time of their deaths. Solemani was busier than ever, directing mayhem all over the Middle East and beyond. For example, these last few days have made it clear to the whole world just how much Iran controlled just about all of Iraq and Iraq’s Shia population. It appears Solemeini not only felt justified in being the likely mastermind behind Tuesday’s attack on the U.S. embassy in Baghdad, he also was comfortable enough to travel to Iraq personally to oversee it. But this time, he got too comfortable.

No, it doesn’t.

• US Strike That Killed Iranian Commander Starkly Divides US Lawmakers (CNN)

The US airstrike that killed Iran Quds Force commander Qasem Soleimani generated starkly different reactions along party lines Thursday night, with Republicans heaping praise on President Donald Trump and Democrats expressing concerns about the legality and consequences of the attack. The Pentagon confirmed in a statement that Trump had ordered the strike, saying Soleimani “was actively developing plans to attack American diplomats and service members in Iraq and throughout the region. General Soleimani and his Quds Force were responsible for the deaths of hundreds of American and coalition service members and the wounding of thousands more.”

[..] Some key members of Congress — such as Senate Minority Leader Chuck Schumer, a New York Democrat who is a member of the congressional Gang of Eight leaders, who are briefed on classified matters — had not been made aware of the attack ahead of time. It’s not clear how many other lawmakers had advance notice of the strike. The Pentagon added that “this strike was aimed at deterring future Iranian attack plans” and the US “will continue to take all necessary action to protect our people and our interests wherever they are around the world.”

[..] Democrats pushed back on Republican sentiments about the attack, stressing the potential consequences and lambasting the decision to carry out the strike without congressional authorization. Sen. Chris Murphy of Connecticut emphasized that Soleimani “was an enemy of the United States” in a tweet before stating, “The question is this – as reports suggest, did America just assassinate, without any congressional authorization, the second most powerful person in Iran, knowingly setting off a potential massive regional war?” In a more explicit statement, Sen. Tom Udall of New Mexico said, “President Trump is bringing our nation to the brink of an illegal war with Iran without any congressional approval as required under the Constitution of the United States.”

[..] On the campaign trail, Democratic former Vice President Joe Biden said “no American will mourn” Soleimani but that the strike that killed him is a “hugely escalatory move.” “President Trump just tossed a stick of dynamite into a tinderbox, and he owes the American people an explanation of the strategy and plan to keep safe our troops and embassy personnel, our people and our interests, both here at home and abroad, and our partners throughout the region and beyond,” Biden said in a statement. “I’m not privy to the intelligence and much remains unknown, but Iran will surely respond. We could be on the brink of a major conflict across the Middle East. I hope the Administration has thought through the second- and third-order consequences of the path they have chosen.”

This situation is not likely to improve after the assassination:

• Erdogan Questions Europe As 250,000 Flee Idlib (ZH)

As Russian and Syrian jets have dramatically stepped up their bombardment of jihadist-held Idlib over the past three weeks, Turkish President Recep Tayyip Erdogan has again warned a massive wave of refugees is headed into Turkey, but that his country is without help and thus is seeking to prevent the new influx. “Right now, 200,000 to 250,000 migrants are moving toward our borders,” Erdogan said while addressing a conference in Ankara. “We are trying to prevent them with some measures, but it’s not easy. It’s difficult, they are humans too.” This after the UN on Monday said that of Idlib province’s some 3 million civilian population, up to 284,000 are currently on the move.

International reports commonly put the current numbers of Syrian refugees hosted by Turkey at about 3.7 million, which Erdogan has of late constantly reminded Europe of as he seeks support for foreign military intervention in places like northeast Syria and now even Libya. During his latest comments, Erdogan actually put the number of refugees across all provinces of Turkey at a whopping 5 million — which would be larger than many small countries. Crucially, during his speech on Thursday, he alluded to his prior threats to “open the gates” and allow refugees to flood into Europe, starting with Greece and other Mediterranean nations:

“Although they [the West] have more resources than we do, why don’t they accept them, why don’t they open the gates?” Erdogan asked. While also slamming Arab League member states for not acting, he answered his own question with, “We are Turkey. Alone this gives us a power and superiority that nobody has.” In late December, Erdogan reiterated prior provocative threats underscoring that “Turkey cannot handle a fresh wave of migrants from Syria, President Tayyip Erdogan said on Sunday, warning that European countries will feel the impact of such an influx if violence in Syria’s northwest is not stopped,” as Reuters summarized of the statement.

Remarkably stable, really.

• US Dollar as Global Reserve Currency vs Euro, Yen, Renminbi, & Others (WS)

The US economy and financial system – including being able to maintain and fund the gargantuan trade deficits and fiscal deficits – has become reliant on the dollar being the dominant global reserve currency. And the IMF just released its next installment on how this status has been changing. Total foreign exchange reserves in all currencies combined declined 0.6% in the third quarter from the second quarter to $11.66 trillion, according to the IMF’s quarterly COFER data. US-dollar-denominated exchange reserves – such as Treasury securities, US corporate bonds, etc. held by foreign central banks – ticked down 0.4% to $6.51 trillion. But holdings denominated in other currencies fell faster, and the share of dollar-denominated reserves edged up to 61.8% of total exchange reserves.

The US dollar’s share of total global reserve currencies declines when central banks other than the Fed proportionately reduce their dollar-denominated assets and add assets denominated in other foreign currencies. Over the long term, the recent moves in the dollar’s share are relatively small. There have been huge moves from 1977 through 1991, when the dollar’s share plunged from 85% to 46%, and then huge moves as the share rose again to 70% by 2000:

In October 2016, the IMF included the Chinese renminbi in the currency basket of the Special Drawing Rights (SDR), and the renminbi became officially a global reserve currency. But since then, progress of the currency has been exceedingly slow, and there are no signs the RMB would dethrone the US dollar anytime soon.The creation of the euro came with a lot of hopeful rhetoric that it would reach parity with the US dollar in every way, including as global trade currency, global financing currency, and global reserve currency. [..] During the initial phase of the conversion of European currencies to the euro, the euro’s share of global reserve currencies rose and the dollar’s share fell from 71.5% in 2001 to 66.5% in 2002.

Wait, so China is desperate for dollars, and then decides dollars are becoming less important? Yeah, we’ll all believe it.

• China Cuts US Dollar Weighting In Key Index To Boost Fortunes Of Yuan (SCMP)

China’s decision to cut the weighting of the US dollar in a basket of foreign currencies used to determine the strength of the yuan will help Beijing’s long-term efforts to weaken the international dominance of the American currency, economists said. The China Foreign Exchange Trade System (CFETS), a unit of the Chinese central bank, trimmed the weighting of the US dollar on Wednesday to 21.59 per cent from 22.40 per cent in a key yuan exchange index to make it “more representative” of current trade conditions. The new version of the index will be based on 2018 trade data, rather than data from 2015, when the CFETS was first established. The move, which comes amid heightened trade tensions between China and the United States, will help Beijing’s long-term efforts to create an alternative international payments system, economists said.

“The yuan hopes to become a reserve currency, to prevent the situation where the US dollar dominates the global financial system – or the so-called hegemony of the US dollar. This is a longer-term goal … and an inevitable trend,” said Shen Jianguan, vice-president and chief economist at JD Digits, although he added that the adjustment also reflected changes to China’s trading environment. His remarks were echoed by Lu Zhengwei, chief economist at China Industrial Bank, who said the cut would give the yuan marginally more independence against the US dollar. “The yuan should live its own way – now there is too much shadow from other [currencies] hanging over it,” he said.

The amount is symbolic.

• China’s Central Bank Frees Up $115 Billion To Support Growth (SCMP)

China’s central bank has announced a move to unleash 800 billion yuan (US$115 billion) from the banking system to support the economy, sending a pro-growth message on the first day of 2020. The People’s Bank of China (PBOC) will reduce the deposit reserve ratio in financial institutions by 0.5 percentage points from January 6, mainly to offer sufficient funding to the real economy, according to a notice published on the bank’s website. The announcement on Wednesday came after growth continued to weaken while China and the United States prepared to sign an interim trade deal in mid-January. The central bank said this round of funding was partially to offset cash withdrawals before the Lunar New Year, and would not change its stance on monetary policy.

From Monday, the reserve requirement ratio (RRR) for big banks will be lowered to 12.5 per cent, while the ratio for medium and small banks will be reduced to 10.5 per cent and 7 per cent respectively. In 2019, the central bank cut the RRR rate three times. “The RRR cut will help boost investor confidence and support the economy, which is gradually steadying,” said Wen Bin, an economist at Minsheng Bank in Beijing, who also expects another cut in China’s new loan prime rate this month. After 18 months of the trade war between China and the United States, the Chinese economy, the world’s second largest, is facing external and domestic headwinds, with growth slowing to 6 per cent in the third quarter, the lowest since 1992. By value of goods, China’s export growth fell 0.3 per cent between January and November 2019, while import growth was down 4.5 per cent for the same period.

End the Fed. They lost control a decade ago.

• What the Fed Did to Calm Year-End Hissy-Fit of its Crybaby Cronies (WS)

The big fear was that the repo market would blow out again at the end of 2019, as banks would be window-dressing their balance sheets by building up reserves to certain levels. In the process, they would refuse to lend to the repo market. And borrowing pressure on the other side – such as hedge funds or mortgage REITs that borrow cheaply in the repo market to fund long-term bets – would drive up repo rates. At the end of 2018, repo rates blew out, but quickly settled down without the Fed’s involvement. In September 2019, repo rates blew out again. At this point, the rattled Fed started dousing the market with hundreds of billions of dollars to calm the repo market and prevent another year-end blowout.

To do this, the Fed engaged in repo operations and also began purchasing short-term Treasury bills. This calmed the repo market, and at the end of December, repo rates didn’t blow out. But on January 1, the Fed did a huge $64 billion reverse repo, the opposite of a repo, thus draining overnight $64 billion in liquidity from the market. This astounding spike in reverse repo balances showed up on its balance sheet for the week ended January 1, released today:

In a reverse repo, the Fed sells securities and takes in cash, under an agreement to buy back those securities at a fixed price on a set date. A reverse repo drains liquidity from the market. When the reverse repo unwinds on the maturity date, as the Fed buys back those securities, it adds liquidity to the market. Reverse repos are liabilities on the Fed balance sheet. In a normal repo, the Fed buys Treasury securities and mortgage-backed securities (MBS) guaranteed by Fannie Mae and Freddie Mac, or Ginnie Mae, under agreements to repurchase them at a fixed price on a specific date, such as the next day or in a longer period. This adds liquidity to the market for the duration of the repo.

When the repo matures and unwinds, the liquidity gets drained. But a new repo can roll this over. Repos are assets on the Fed’s balance sheet. Total repos on the Fed’s balance sheet on January 1 rose to $256 billion, up $48 billion from a month earlier (as of Dec 4 balance sheet):

Erdogan is not sitting pretty.

• Greece, Israel, Cyprus: Turkey’s Libya Troops Bill Dangerous Escalation (R.)

Turkey’s bill allowing troop deployment in Libya marks a dangerous escalation in the North African country’s civil war and severely threatens stability in the region, a joint statement by Greece, Israel and Cyprus said late on Thursday. “This decision constitutes a gross violation of the UNSC resolution…imposing an arms embargo in Libya and seriously undermines the international community’s efforts to find a peaceful, political solution to the Libyan conflict,” Greek Prime Minister Kyriakos Mitsotakis, Israel’s Prime Minister Benjamin Netanyahu and Cyprus President Nicos Anastasiades said in the statement.

Turkish parliament overwhelmingly approved a bill that allows troops to be deployed in Libya, in a move that paves the way for further military cooperation between Ankara and Tripoli but is unlikely to put boots on the ground immediately. Turkey’s move comes after Ankara and the internationally recognized government of Libyan Prime Minister Fayez al-Serraj signed two separate agreements in November: one on security and military cooperation and another on maritime boundaries in the eastern Mediterranean, infuriating Greece, Israel, Egypt and Cyprus.

The exact same countries want to cut a pipeline straight through an area claimed by Turkey. Think there’s a connection?

• Leaders Of Greece, Israel, Cyprus Ink Deal For Pipeline (K.)

The intergovernmental agreement signed on Thursday by Greece, Israel and Cyprus for the construction of the EastMed pipeline sent out multiple diplomatic messages. The first of these relates to the endurance of the trilateral cooperation itself. In the 10 years since its inception, Cyprus President Nicos Anastasiades and the prime ministers of Israel, Benjamin Netanyahu, and Greece, Kyriakos Mitsotakis, confirmed that the relationship between the three countries is not circumstantial. Skepticism concerning the situation in Jerusalem after three consecutive national elections which will have been held by March is reasonable. However, it will be very difficult for any Israeli government to roll back years of planning.

The second message concerns Turkey, as the pipeline will link Israel’s reserves with Cyprus, then Crete and mainland Greece through an area that Ankara says belongs to Turkey, according to the pact it signed with Libya’s Tripoli-based government. The EastMed agreement is essentially a legal act stemming from international law as it expresses the will of three sovereign and elected governments (in contrast to that in Tripoli) to deepen their cooperation. At the same time it is a message of cooperation which leaves the door open for Ankara to take part if it decides so. However, signs Thursday were not encouraging as a pair of Turkish F-16s fighter jets made six overflights over Oinousses and the nearby island of Panagia, while the presence of the Turkish fleet around Cyprus remains emphatic.

Moreover, the Turkish Parliament decided on Thursday to approve the deployment of troops to Libya, if deemed necessary. A Turkish Foreign Ministry spokesman said any project that ignores the rights of Turkey and Turkish Cypriots in the region will fail, while Turkish-Cypriot leader Mustafa Akinci said the pipeline is an obstacle to efforts for a solution to the Cyprus problem. The third message is to countries such as Italy and Egypt. With the signing of the deal, Athens, Nicosia and Jerusalem showed they were not willing to wait for the perfect conditions to prevail before moving ahead.

“..the western powers are now busily attacking the Iraqi Shia majority government they themselves installed, for the crime of being a Shia majority government.”

• The Terrifying Rise of the Zombie State Narrative (Craig Murray)

The ruling Establishment has learnt a profound lesson from the debacle over Iraqi Weapons of Mass Destruction. The lesson they have learnt is not that it is wrong to attack and destroy an entire country on the basis of lies. They have not learnt that lesson despite the fact the western powers are now busily attacking the Iraqi Shia majority government they themselves installed, for the crime of being a Shia majority government. No, the lesson they have learnt is never to admit they lied, never to admit they were wrong. They see the ghost-like waxen visage of Tony Blair wandering around, stinking rich but less popular than an Epstein birthday party, and realise that being widely recognised as a lying mass murderer is not a good career choice.

[..] The security services outlet Bellingcat would publish some photos of big missiles planted in the sand. The Washington Post, Guardian, New York Times, BBC and CNN would republish and amplify these pictures and copy and paste the official statements from government spokesmen. Robert Fisk would get to the scene and interview a few eye witnesses who saw the missiles being planted, and he would be derided as a senile old has-been. Seymour Hersh and Peter Hitchens would interview whistleblowers and be shunned by their colleagues and left off the airwaves. Bloggers like myself would be derided as mad conspiracy theorists or paid Russian agents if we cast any doubt on the Bellingcat “evidence”.

Wikipedia would ruthlessly expunge any alternative narrative as being from unreliable sources. The Integrity Initiative, 77th Brigade, GCHQ and their US equivalents would be pumping out the “Iraqi WMD found” narrative all over social media. Mad Ben Nimmo of the Atlantic Council would be banning dissenting accounts all over the place in his role as Facebook Witchfinder-General.

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Debt Rattle August 7 2019

Aug 072019

August 7, 2019 Posted by Raúl Ilargi Meijer at 9:15 am Finance Tagged with: Brexit, China, Cummings, Epstein, Erdogan, EU, liquidity, Mifsud, PNG, Putin, Salisbury, Skripal, Svengali, USD, yuan 11 Responses »

Pablo Picasso Portrait of Dora with bun 1937

• The Future Of Britain Is In The Hands Of Unelected Svengali Cummings (Oborne)

• No-Deal Brexiteers Are Winning Because They Want It More (Sky)

• UK Too Desperate To Secure US Trade Deal – Larry Summers (G.)

• Brexit: Michael Gove Accuses ‘Wrong And Sad’ EU Of Intransigence (G.)

• Met Police Examine Vladimir Putin’s Role In Salisbury Attack (G.)

• China State Banks Seen Supporting Yuan In Forwards Market (R.)

• Forget China, The Fed Has A Much Bigger Problem On Its Hands (ZH)

• Papua New Guinea Asks China To Refinance Its National Debt (G.)

• Chinese Port Plans Put Pacific Back In Play (R.)

• Pentagon Set to Prevent “Unacceptable” Turkish Invasion Of Northern Syria (ZH)

• The Mainstream Media Wants the Mifsud Story to Just Go Away (ET)

• Epstein’s Mysterious Manhattan Apartment Building On East 66th Street (BI)

Conservative journalist/editor Peter Oborne says the exact same thing I said a few days ago in A Tale of Two Cummings. Boris Johnson is just a figurehead.

Nigel Farage is complaining that the Tories want him and his Brexit party to step aside, but that’s Cummings and his polls that show Farage is too unpopular.

• The Future Of Britain Is In The Hands Of Unelected Svengali Cummings (Oborne)

Cummings is no longer in the shadows, operating behind the scenes — this Svengali is out in the open. Indeed, he seems to relish being seen in public, striding ostentatiously into Downing Street every morning. Now, we are all familiar with his shaven head, scruffy T-shirts, crumpled appearance and contemptuous and appraising eyes, his newspapers and bundles of documents carried in a Vote Leave bag. According to some papers, and many ministers and civil servants I have spoken to recently, this is the man who is truly running Britain. It’s Cummings who oversees the No 10 grid which controls the timing of announcements and public events. It’s in this capacity that he dispatches the PM up and down Britain, photographed in hospitals, sharing selfies with nurses, and on construction sites wearing a hard hat.

It is also Cummings, not Johnson, who determines political strategy — hence the huge public spending announcements on health, extra police and other issues. Indeed, it looks very much as if Johnson has become the public face of Cummings. And this, I am afraid, is profoundly disturbing. No one ever voted for Cummings, he has little experience of life outside politicking yet he has been given unprecedented power at a moment of immense crisis in the national fortunes. Within hours of Johnson becoming Tory leader two weeks ago, newly anointed special adviser Cummings called ‘his’ staff together in the magnificent Downing Street first-floor state room. He told them that he plans to deliver Brexit ‘by any means necessary’.

Quoting Michael Jordan: “Some people want it to happen. Some wish it to happen. Others make it happen.”

• No-Deal Brexiteers Are Winning Because They Want It More (Sky)

Consider this: we now have a prime minister and a government, buttressed by a not inconsiderable rump of the Conservative party, who have made it clear that there is not a convention they are not willing to break, an institution they are not willing to smash, a precedent they are not willing to burn, in the pursuit of their goal. The PM and his coterie have said that they would prorogue parliament because it might stand in their way; that they are willing to schedule an election far in excess of the usual time limits because it would ensure our exit on the 31 October. In so doing they would therefore go against yet more precedent in pursuing a highly tendentious policy during an election period (where normally a caretaker administration would do little of controversy).

And now, we have news that the prime minister would squat in Number 10 after he loses a confidence vote in the House of Commons. He is even willing to do so, apparently, if the Commons coalesces around an alternative prime minister, despite the fact the Cabinet Manual (the closest we have to a constitution) makes it clear that this is quite unacceptable and that it would risk the neutrality of the Queen. All of this would be constitutional vandalism. Brexit then, “whatever the cost”, as Dominic Cummings has said. It is a nihilistic vision of politics and indeed, a most unusual one for self-described “Conservatives” but it is, relentless and clear-sighted. Indeed, its recklessness has imbued this administration with a strange purpose and energy.

Larry craves attention.

• UK Too Desperate To Secure US Trade Deal – Larry Summers (G.)

The former US treasury secretary Larry Summers has said he does not believe that a “desperate” UK would manage to secure a post-Brexit trade deal with Washington, as Dominic Raab, the new foreign secretary, heads to the US to scope out the potential for such an agreement. Summers, who was a senior official under Bill Clinton and Barack Obama, said the UK was in a weak position when it came to negotiating with trade partners. He told BBC Radio 4’s Today programme on Tuesday: “Britain has no leverage, Britain is desperate … it needs an agreement very soon. When you have a desperate partner, that’s when you strike the hardest bargain.”

Despite warm words from Donald Trump about a trade deal, Summers said: “We have economic conflict with China and, even on top of that, the deterioration of the pound is going to further complicate the negotiating picture. “We will see it as giving Britain an artificial comparative advantage and make us think about the need to retaliate against Britain, not to welcome Britain with new trade agreements.” Even if the two countries could come to an agreement, Summers said, the UK was in a weak negotiating position. “Britain has much less to give than Europe as a whole did, therefore less reason for the United States to make concessions,” he said. “You make more concessions dealing with a wealthy man than you do dealing with a poor man.”

The UK says the EU doesn’t want to talk, and vice versa. The demand to take the backstop out is a perfect dealbreaker. It can only lead to a no-deal Brexit. Re: Cummings.

• Brexit: Michael Gove Accuses ‘Wrong And Sad’ EU Of Intransigence (G.)

Michael Gove has accused the European Union of intransigence over Brexit talks, calling it “wrong and sad”, as divisions between the UK and Brussels became further entrenched with the government seemingly intent on a no-deal departure. Gove, who is in charge of no-deal preparations, reiterated Boris Johnson’s position that the only route to progress would be the EU starting again with withdrawal negotiations, something Brussels has repeatedly and consistently ruled out. Adding to the impression of Johnson’s hardening position, newly released government read-outs of the prime minister’s phone calls with a series of EU leaders over recent days showed he delivered the same uncompromising message to them.

While the Irish prime minister, Leo Varadkar, insisted on Tuesday that a no-deal departure was not inevitable, both he and the country’s finance minister, Paschal Donohoe, warned of a significant and long-term change to relations between the countries if it did happen. Downing Street has increasingly pushed the message that Brexit will happen on 31 October under any circumstances – even intimating that No 10 believes the mandate of the 2016 Brexit referendum would overrule even a blocking vote in parliament.

There is increasing worry among some MPs that Johnson could try to force through a no-deal Brexit against the will of the Commons, with his de facto chief of staff, Dominic Cummings, reportedly threatening No 10 staff with the sack if they dissent. The government’s official position is still that it is seeking a formalised departure, albeit only if Brussels ditches the Irish backstop border insurance policy and reopens the withdrawal agreement.

And of course Britain is anxious to keep the Skripal narrative going. In reality, all it would take is to present the man.

• Met Police Examine Vladimir Putin’s Role In Salisbury Attack (G.)

Scotland Yard has examined the role of the Russian president, Vladimir Putin, in the novichok nerve agent attack in Salisbury, it has been revealed. Putin is assessed by UK intelligence agencies as having been “likely” to have approved of the attack in March 2018 on Sergei Skripal, a former Russian military officer, and his daughter, both of whom were left seriously ill but survived. Dawn Sturgess later died after coming across a discarded perfume bottle used by two Russian intelligence agents to carry the military grade nerve agent. Two Russian agents have been charged over the attack, and Britain wants them extradited and has issued a European arrest warrant (EAW) and Interpol red notice for their detention.

The Metropolitan police assistant commissioner Neil Basu, the head of UK counter-terrorism policing, said the investigation into the attack was continuing. Basu said the issues involved in bringing charges over the attack were complex. “You’d have to prove he [Putin] was directly involved,” he said. “In order to get an EAW, you have to have a case capable of being charged in this country. We haven’t got a case capable of being charged. “We’re police officers, so we have to go for evidence. There has been a huge amount of speculation about who is responsible, who gave the orders, all based on people’s expert knowledge of Russia. I have to go with evidence.”

“The movement in forward points may reflect a tightening in USD (dollar) liquidity..”

• China State Banks Seen Supporting Yuan In Forwards Market (R.)

China’s state banks have been active in the onshore yuan forwards market this week, using swaps to tighten dollar supply and support the Chinese currency, four sources with knowledge of the matter told Reuters. The spot value of the yuan has fallen sharply this week against the dollar as tensions between China and the United States escalated and prompted fears that their trade war could shift into a currency war. The sources said banks had conducted significant amounts of buy-sell swaps in the onshore market on Tuesday. Buy-sell swaps help to reduce the supply of dollars that the market can access to short-sell the yuan. “Yesterday big banks were all selling one-year onshore forward swaps, then in the afternoon the spot dollar-yuan fell,” said a trader at a foreign bank in Shanghai.

One state bank also was seen active in offshore forward swaps, two traders at foreign banks with knowledge of the matter said. On Wednesday, one-year onshore dollar-yuan forwards were at 175 points, down from 321 points on Monday, according to Refinitiv data. One-year offshore dollar-yuan forwards were at 459 points, down from 640 points on Monday. “The movement in forward points may reflect a tightening in USD (dollar) liquidity when some market participants need to buy spot dollars and sell them back in forwards. Meanwhile, the spot and outright moves were also partly due to a stabilization in RMB (yuan) sentiment on Tuesday,” said Frances Cheung, head of macro strategy for Asia at Westpac in Singapore.

Liquidity.

• Forget China, The Fed Has A Much Bigger Problem On Its Hands (ZH)

The Fed may have launched its first easing cycle since 2007 and liquidity-sapping quantitative tightening may finally be over, but Powell may have a much bigger problem on his hands – one which has nothing to do with China, and everything to do with a dramatic drain of liquidity in the market over the next two months.

We first hinted at this last week when we noted that as part of the recently completed debt ceiling deal, instead of taking its time in replenishing the cash balance (green line in the chart below), the US Treasury will scramble to rebuild its cash balance up to $350 billion, from today’s level of $133 billion (gray line), a process which as we said last Wednesday will “significantly tighten up liquidity in the banking system and potentially result in turmoil in funding and money markets as the world is flooded with an issuance of T-Bills” as the Treasury seeks to fill the $217 billion cash hole, which will lead to a substantial liquidity withdrawal from the broader financial system as shown in the following Nordea chart.

The problem, in a nutshell, is that traditionally such a rapid liquidity withdrawal leads to weaker risk appetite, a far stronger USD and lower treasury yields, while widening the LIBOR/OIS spread and further depressing the already negative EURUSD cross-currency basis. While we cautioned about all this last week (even before the FOMC announcement), it appears that our appreciation of just how severe this problem may be for the Fed and capital markets was overly optimistic, because according to a new analysis by Bank of America’s Mark Cabana, the Fed may have no choice but to resume Quantitative Easing and start expanding its balance sheet again – potentially as early as 4Q – in order to ease funding pressures expected during the coming wave of Treasury supply.

Debt denominated in dollars by any chance?

• Papua New Guinea Asks China To Refinance Its National Debt (G.)

Papua New Guinea has asked China to refinance its entire government debt in a blow to Australia’s attempts to counter China’s influence in the region. The request marks a “significant shift” in regional politics and PNG’s allegiances, according to Pacific experts. Australia has traditionally been the largest aid donor and most important ally of PNG, but in recent years ties between China and PNG have strengthened. PNG’s prime minister, James Marape, visited Australia two weeks ago at the invitation of his counterpart, Scott Morrison, in his first international visit since becoming the Pacific nation’s leader at the end of May.

In a speech during his visit, Marape said he wanted PNG to move away from an “aid-donor” relationship with Australia within 10 years, and step up alongside its neighbour as a leader in the Pacific region. However, on Tuesday, after a meeting with Xue Bing, the Chinese ambassador in Port Moresby, Marape requested that China refinance its debts of A$11.8bn (27bn kina, or US$7.95bn). PNG’s debt sits at around 32.8% of its GDP. “[The prime minister] requested the ambassador to inform Beijing on a bid to assist the government of PNG refinance its existing country’s K27bn debt,” said Marape’s office in a statement seen by the Guardian.

“He suggested that both the Bank of PNG and [China’s] People’s Bank will take the lead with the department of treasury in ensuring that consultations are under way,” the statement continued. “It suggest a significant shift in the relationship between Australia and Papua New Guinea and Papua New Guinea and China,” says Matthew Clarke, professor of international development at Deakin University. “In the past Australia would have been the natural country to turn to for this sort of refinancing, but now we see China’s place in the region shift and it becomes potentially a much more dominant player in the donor relationship.”

“The United States, and allies including Japan, Australia and New Zealand, are actively expanding their diplomatic postings in the Pacific to counter China’s influence..”

• Chinese Port Plans Put Pacific Back In Play (R.)

Early in the morning, before sunrise, low tide on the Samoan island of Savai’i reveals the remnants of an old American airstrip, washed away by decades of erosion, cyclones and tsunamis. The World War II site in Asau, which also hosts a 1960s-era concrete wharf in its well-protected natural harbor, is being considered for a new port to be developed by China, according to the Samoan government and the area’s highest ranking chief, Masoe Serota Tufaga. The proposed construction of a facility that could be turned into a military asset in hostile times has worried the United States and its regional allies, which have dominated international influence in the vast waters of the South Pacific since 1945.

Sitting at his coconut and cocoa plantation on the hills above the port site, Tufaga told Reuters he would abide by any government deal for a Chinese-developed port even though he was concerned about Beijing’s growing influence. “The government and China came here to look at it – they offered it,” said 71-year-old Tufaga, who has the final say over land-use agreements affecting Asau. “If China wants to operate this, it’s too hard for us to say to the government, no, we can not allow China here. The people are looking for some jobs. “That’s right – it’s money. It’s money.”

The United States, and allies including Japan, Australia and New Zealand, are actively expanding their diplomatic postings in the Pacific to counter China’s influence, and warning island nations that Beijing-funded projects needed to make financial sense. China is using “predatory economics” to destabilize the Indo-Pacific and the United States is working with its partners to address the region’s pressing security needs, U.S. Defence Secretary Mark Esper said in Sydney on Sunday.

Erdogan bluff. I hope.

• Pentagon Set to Prevent “Unacceptable” Turkish Invasion Of Northern Syria (ZH)

Turkey has for days been poised to unilaterally invade northern Syria over US objections, which Ankara officials say is to establish a 32 kilometer (20 mile) zone inside the war torn country, giving Turkey complete control of a region where the Syrian Kurdish YPG operates (People’s Protection Units). Turkey has long considered the US-backed group, which forms the core of the Syrian Democratic Forces (SDF), to be a terrorist extension of the outlawed PKK. The Pentagon has condemned the impending Turkish unilateral move, with US Defense Secretary Mark Esper telling reporters early Tuesday that it would be unacceptable and thwarted by Washington, though it’s unclear how far the Pentagon would be willing to go.

“What we’re going to do is prevent unilateral incursions that would upset, again, these mutual interests that the United States, Turkey and the SDF share with regard to northern Syria,” Esper said. Crucially, according to ABC News, US officials “have made clear that an invasion is an extremely risky venture that could threaten the safety of U.S. forces working with the SDF…”. On Sunday Turkish President Recep Tayyip Erdogan said that his forces would launch an operation in Syria east of the Euphrates River at an unspecified start date, and noted that the US and Russia had been notified. In ongoing negotiations this summer the US and Turkey have clashed over just such a “safe zone,” given Turkey wants the area completely clear of Kurdish armed groups, which the Pentagon simultaneously backs.

Turkish defense officials have lately threatened their “patience is limited” as the army builds up its forces along the border. The Foreign Ministry on Friday warned, “We won’t let this process be dragged out. If our expectations aren’t met, we are fully capable of taking whatever measures [are needed] to ensure our national security.”

If Mifsud is an FBI asset, there are zero Russians left in the story.

• The Mainstream Media Wants the Mifsud Story to Just Go Away (ET)

John Solomon of The Hill is reporting that an audiotape containing professor Joseph Mifsud’s deposition has been given to both U.S. Attorney John Durham’s investigators and to the Senate Judiciary Committee. “I can report absolutely that the Durham investigators have now obtained an audiotape deposition of Joseph Mifsud, where he describes his work, why he targeted George Papadopoulos, who directed him to do that, what directions he was given, and why he set that entire process of introducing Papadopoulos to Russia in motion in March of 2016, which is really the flashpoint the starting point of this whole Russia collusion narrative,” Solomon told Fox News’ Sean Hannity.

“I can also confirm that the Senate Judiciary Committee has also obtained the same deposition,” he said. Mifsud, who I have written about extensively in previous columns, is the key that turns the lock to the lid of this Pandora’s box that we refer to as “Spygate.” So I’m wondering why Solomon appears to be the only mainstream reporter pursuing this Mifsud story. I suspect it’s because many DNC Media outlets, after having fallen deeply and passionately in love with the Trump-Russia collusion hoax, are reluctant to call attention to something that would be the final nail in its coffin. The last thing the mainstream media wants right now would be for Mifsud to go on the record with both Durham’s investigative team and with Congress to say he was working for the FBI and was only pretending to be a Russian agent.

If Mifsud was an FBI asset sent to entrap Papadopoulos, then there are no real Russian agents anywhere in this entire Trump-Russia collusion story. Ponder what that means for a minute. You can’t save the Russian collusion narrative, if you can’t find any real Russians anywhere in the story. The FBI under James Comey will then be seen as having engaged in an operation to entrap people, and “Russian agents” turn out to be fakes working for the FBI and who were making fake offers of Russian help to the Trump campaign.

But nobody knew a thing.

• Epstein’s Mysterious Manhattan Apartment Building On East 66th Street (BI)

Before his extended stay in New York’s Metropolitan Correctional Center began in July, disgraced sex offender Jeffrey Epstein dwelled in some of the city’s most exclusive real estate, laying his head in a palatial Upper East Side townhouse and conducting his mysterious business out of a landmarked mansion on Madison Avenue. But it hasn’t been all private islands and 7,000-acre ranches for the half-billionaire. For decades Epstein has run some of his operations quietly out of a squat Second Avenue residential building owned by his brother, Mark Epstein, and frequently visited by the former Israeli Prime Minister Ehud Barak. According to property records and court filings, Jeffrey Epstein has long housed girlfriends, associates, employees, and businesses in a handful of units at 301 East 66th St.

There are 200 units at the address, and the majority of them are owned on paper by his brother’s development firm, Ossa Properties. While Ossa nominally owns the units connected to Jeffrey Epstein, the aforementioned records and filings show that Epstein effectively controls them. The postwar white-brick high-rise sits atop a nail salon, a coffee shop, and an Italian restaurant along a traffic-choked stretch of Second Avenue. Topped by a green canopy, the front door opens to a doorman guarding a hallway that leads to a light-filled lobby decorated with two couches and an armchair. Though the building shares a ZIP code with Epstein’s townhouse, its share of the neighborhood east of Park Avenue is less upscale, catering more to families and young professionals than foreign heads of state.

Will China Retreat Into Itself?

Aug 052019

August 5, 2019 Posted by Raúl Ilargi Meijer at 7:30 pm Primers Tagged with: BRI, CCP, central control, China, devaluation, dollar, Europe, foreign reserves, forex, renminbi, Russia, tariffs, trade talks, US, yuan 16 Responses »

Odilon Redon Peyrelebade landscape 1880

It’s never easy to gauge what exactly is happening in China, or why the CCP Politburo takes the decisions it does. Today, or overnight, is no exception to that. However, one thing that appears certain, but which I don’t see reflected in all the analyses, is that Beijing pushing the value of the renminbi (yuan) down below 7 to the USD in one fell swoop, is a major setback for Xi Jinping and his government.

Yes, China may have given up hope of reaching positive conclusions in its trade talks with the US. And yes, some may think, even in China itself, that devaluing the currency is a tool that can be useful in a potential currency war. But there’s another side to this coin. It’s not even about the value itself, or the change in it, it’s the heavy-handed way it’s executed.

China wants, and desperately needs too, for the yuan to be a force in global financial markets. In very simple terms this is true because if it then wants to buy something, it can simply print the money for it. But only about 1% of global trade today is executed in yuan. That is not nearly enough. It means China needs dollars and euros, all the time. And devaluing the yuan means the country needs even more of those.

You’d almost think: why would you want to do that? What are the long-term prospects for a move like this? You’re telling forex markets that the value of the yuan is not trustworthy, because if Xi or the PBOC decides in the next five minutes that it should go up or down by 10% or 20%, they can do it. The Fed and ECB also have tools to manipulate their currencies (re: interest rates), but none of that magnitude.

The crux of the dilemma probably lies in the Belt and Road Initiative (BRI), which I’ve been saying for years is just China’s way to sell its overcapacity and overproduction abroad. Sure, there may be loftier goals, and surely in the glitzy brochures, but the fact remains that China has tried to be an economic miracle, doing in 10 years what took the US a century, and it never slowed down its growth, at least not voluntarily, even if that might have been a wise move.

Already lately, purchases by Chinese citizens and companies of real estate and businesses abroad have been curtailed, and not a little bit, by Beijing. There’s no better way to convince Chinese people of the miracle’s success than to let them travel the world and spend there, but that, too, may well soon be cut. It kills foreign reserves.

If Beijing could charge participating countries in the Belt and Road Initiative in yuan, and they could pay for the overcapacity’s steel and cement and what not in yuan, that could be a game-changing program for the entire planet. But these countries have no reason to hold yuan, other than the BRI itself. And they, too, were watching the overnight move above 7 and must have thought: let’s be careful now.

And to top it all off, China right now needs for these countries to pay in dollars instead of yuan, because its foreign reserves are shrinking so fast. It’s Catch-22 all the way down. China’s need for dollars goes against everything BRI stands for.

Could the move hurt the US as well? Absolutely. But the long-term view behind the tariffs, and the talks China appears to have lost faith in, is to move the US away from its near all-encompassing addiction to Chinese production, and to move at least some of that production back home. Problem of course is, that is precisely what China’s miracle growth has been built on.

If the US starts bringing production home, who is Beijing going to sell its (over-)production to? Yes, I hear you, to the BRI countries. But there it runs into the currency problems mentioned before. To Europe? The top of that trade route is also behind us. Europe will have to follow the US to an extent, and also bring factories back to the continent (and not just to Germany either).

China could perhaps sell more than it does today to Russia. But that country still does produce a lot of things, and has been forced to be much more self-sufficient due to US and EU sanctions. It’s also a mighty small market compared to 350 million North Americans and 500 million Europeans, who are on average much richer than your average Russian to boot.

There is a way for China to make the yuan more important in global trade (but devaluation is definitely not that way): Beijing could let go of its central and total control over the value of its currency, and let forex markets figure it out. That would give traders -and everyone else- faith in the value. Problem with that is, this is not how central control communist governments think.

Beijing wants both: central total control AND a prominent place in world trade. And it may take them a long time to figure out that is not going to happen, unless of course they first conquer the entire world militarily. That is not an option, at least not for the foreseeable future. Come see me next century.

It wouldn’t be the first time for me to say I can see China retreat into itself, into its own borders and culture and market (1.3 billion people!). If the Communist Party wants to remain in power, and there’s no doubt it does, this may be only possible choice going forward. If growth has indeed left the miracle -as many observers think-, it can implode in very rapid succession. And even if growth hasn’t yet evaporated, it may well very soon. Without the growth, there is no miracle anymore.

And if China can no longer grow its exports, its domestic growth will also become a thing of the past. Domestic consumption can only grow as long as exports do too. Seen from that angle, the problems with trade and the currency look downright ominous. If you need dollars that badly, and you notice that you’re already getting fewer of them, not more, you’re in trouble.

Devaluing your currency may afford you some temporary respite, but it can’t possibly solve your troubles. It can make them much worse though.

I think China has wanted too much too fast, got carried away and forgot to take care of a few potential barriers to its growth, in particular the standing its currency had and still has in the world, and the grinding need for dollars that stems from it. And the Communists have no answer to this problem.

Debt Rattle August 5 2019

Aug 052019

August 5, 2019 Posted by Raúl Ilargi Meijer at 8:50 am Finance Tagged with: austerity, Bellingcat, crashes, currency war, Fed, Hong Kong, job growth, Original Sin, populism, PPT, Russiagate, Tulsi, yuan 4 Responses »

Piet Mondriaan Study for Blue Apple Tree Series 1908

• Currency War Begins: China Crashes Yuan Past 7, Halts US Agri Imports (ZH)

• China Lets Yuan Slump Past 7 Per Dollar For First Time In Over A Decade (R.)

• Hong Kong Brought To A Standstill As City-Wide Strikes And Protests Hit (G.)

• Job Growth In Trump Land Is Dead In The Water (MW)

• 10 Alarming Things About The Economy That Politicians Won’t Tell You (MW)

• The Crashes That Cause Grown Men To Cry (Eric Peters)

• Inside The Plunge Protection Team: Chaos (ZH)

• Russiagate is the New 42 (Craig Murray)

• Austerity Populism (G.)

• Bellingcat Unloads 4,000-Word Hit Piece On Tulsi Gabbard (RT)

• America’s Other Original Sin (Bacevich)

“..trade talks, even the fake kind, is now over, dead and buried..”

• Currency War Begins: China Crashes Yuan Past 7, Halts US Agri Imports (ZH)

Update 2: – China’s central bank has confirmed that it is, indeed, on, saying that it is able to keep the yuan exchange rate at a reasonable and balanced level – whatever that means – while acknowledging that the Yuan plunging beyond 7 per dollar is due to market supply and demand, trade protectionism and expectations on additional tariffs on Chinese goods. Meanwhile, resorting to its old, tired and worn out tricks, Dow Jones reports that the PBOC will crack down on short-term Yuan speculation, and anchor market expectations. Which is great… if only the PBOC didn’t say exactly the same back in May, when it warned currenct traders that those “shorting the yuan will inevitably suffer from a huge loss.” Three months later, it’s currency traders 1 – Beijing 0.

Update 1 – China is firing all the big guns tonight, because just an hour after Beijing effectively devalued the yuan, when it launched the latest currency war with the US, Bloomberg reported that the Chinese government has asked its state-owned enterprises “to suspend imports of U.S. agricultural products after President Donald Trump ratcheted up trade tensions with the Asian nation last week.” China’s state-run agricultural firms have now stopped buying American farm goods, and are waiting to see how trade talks progress. Translation: trade talks, even the fake kind, is now over, dead and buried, and the only question is how Trump will react.

[..] in a dramatically unsettling move for global stability, China’s offshore yuan just collapsed below 7/USD — after the PBOC fixed the onshore yuan below 6.90 for the first time in 2019 — the currency plunging a stunning 12 handles to its weakest on record against the dollar as countless stop losses were triggered and thousands of traders were margined out.

“A break of 7 is quite shocking to the market, and close attention will be paid to how China would deal with this move,” says Tsutomu Soma, general manager of the investment trust and fixed-income securities at SBI Securities Co. in Tokyo in a phone interview. This is the weakest offshore yuan has ever been against the dollar…

Beijing control over the yuan is worrisome. It also prohibits uptake of the currency in global trade.

• China Lets Yuan Slump Past 7 Per Dollar For First Time In Over A Decade (R.)

China on Monday let the yuan tumble beyond the key 7-per-dollar level for the first time in more than a decade, in a sign Beijing might be willing to tolerate further currency weakness in the face of an escalating trade row with the United States. The sharp 1.4% drop in the yuan came after the People’s Bank of China set the daily mid-point of the currency’s trading band at 6.9225 per dollar, its weakest level since December 2018. “Today’s fixing was the last line in the sand,” said Ken Cheung, senior Asian FX strategist at Mizuho Bank in Hong Kong. “The PBOC has fully given the green light to yuan depreciation”. The shakeout in the yuan comes days after Trump stunned financial markets by vowing to impose 10% tariffs on the remaining $300 billion of Chinese imports from Sept. 1, abruptly breaking a brief month-long ceasefire in the bruising trade war.

After opening the onshore session at 6.9999 per dollar, the yuan had weakened to 7.0266 per dollar by 0351 GMT, down 1.2% on the day after earlier losing as much as 1.4% of its value. Monday marked the first time the yuan had breached the 7-per-dollar level since May 9, 2008. With the escalating trade war giving Beijing fewer reasons to maintain yuan stability, analysts said they expect the currency to continue to weaken. “In the short-term, the yuan’s strength would be largely determined by the domestic economy. If third-quarter economic growth stabilizes, the yuan could stabilize around 7.2 or 7.3 level,” Zhang Yi, chief economist at Zhonghai Shengrong Capital Management in Beijing.

Capital Economics senior China economist Julian Evans-Pritchard said the PBOC had probably been holding back against allowing a weaker yuan to avoid derailing trade negotiations with the United States. “The fact that they have now stopped defending 7.00 against the dollar suggests that they have all but abandoned hopes for a trade deal with the U.S.,” he said.

Organizers swore peaceful protests. But a few agitators can take care of that.

• Hong Kong Brought To A Standstill As City-Wide Strikes And Protests Hit (G.)

Hong Kong’s embattled leader, Carrie Lam, has warned that mass protests have pushed the region to the brink of a “very dangerous situation” as residents have gone on strike, paralysing the city. Lam, who has disappeared from public view for the past two weeks, gave a media briefing in which she condemned the protests for hurting Hong Kong’s economy and stability. “Such extensive disruptions in the name of certain demands or uncooperative movement have seriously undermined Hong Kong law and order and are pushing our city, the city we all love, and many of us helped to build, to the verge of a very dangerous situation,” she said.

On Monday, transport across Hong Kong was brought to a standstill and more than 150 flights out of the city were cancelled. Almost 100 outbound and 100 inbound flights were cancelled. Protesters also blocked key roads and stopped trains throughout the city. [..] Protesters have shifted tactics beyond only marches and protests in the streets. Civil servants from more than 30 government departments, as well as pilots, teachers, construction workers, engineers, and aviation staff all pledged to strike on Monday.

On Monday morning, several lines of the MTR, the rail network serving Hong Kong, were suspended as protesters, many wearing face masks and black clothing, blocked the doors of trains, preventing them departing the stations. There were also reports of discarded umbrellas being wedged in train doors to prevent them from closing, delaying services. Monday’s planned city-wide protest, which is aimed to disrupt peak-hour travel of commuters, is the fifth consecutive day of mass demonstrations in the city. Simultaneous rallies were planned for seven of Hong Kong’s 18 districts on Monday. Hong Kong has not held a general strike in more than 50 years.

“Rural America is older, sicker, poorer and more dependent upon state aid than it was before.”

• Job Growth In Trump Land Is Dead In The Water (MW)

Since the economy began adding jobs after the Great Recession nine years ago, about 21.5 million jobs have been created in the United States, the second-best stretch of hiring in the nation’s history, second only to the 1990s. But job growth isn’t being spread evenly across the land. Most of the new jobs have been located in a just a few dozen large and dynamic cities, leaving slower-growing cities, small towns and rural areas — where about half of Americans live — far behind. Along with climate change and racial justice, economic development is America’s biggest challenge over the next few decades. Inclusive growth is a must, or else our society will fall apart. The problem: No one — certainly not President Trump — has found the magic wand that will bring back jobs to rural and small-town America.

According to a study titled “The Future of Work in America” by the McKinsey Global Institute released in July, 25 cities that are home to about 30% of Americans will capture about 60% of the job growth between 2017 and 2030, just as they did between 2007 and 2017. Twelve are megacities (and their extended suburbs): Atlanta, Boston, Chicago, Dallas, Houston, Los Angeles, Miami, New York, Philadelphia, Phoenix, San Francisco and Washington. Another 13 are high-growth hubs in smaller cities: Austin, Charlotte, Denver, Las Vegas, Minneapolis, Nashville, Orlando, Portland (Ore.), Raleigh, San Antonio, San Jose, Seattle, and Tampa. A few other smaller, fast-growing cities will also add jobs, while vast swaths of the South, Midwest and Plains will lose jobs.

The New York metro area, home to 20 million people, added more jobs over the past year than all the small towns and rural areas — with 46 million people — did combined. Anyone who’s been paying attention to the political map will recognize that the growth is mostly occurring in places that vote for Democrats, while the stagnation is mostly in places that vote for Republicans. Donald Trump has appealed to those who are the most fearful, the most resentful and the most despairing, but the situation hasn’t gotten any better since his election. Rural America is older, sicker, poorer and more dependent upon state aid than it was before.

Feel lucky?

• 10 Alarming Things About The Economy That Politicians Won’t Tell You (MW)

Here are 10 remarkable forecasts and assumptions that Washington is making and isn’t telling you. These are all contained in the Congressional Budget Office’s most recent Long-Term Budget Outlook, the cornerstone document of government financial and economic planning.

1. We’re going to have a lot more immigrants. A lot. They’re expecting a net 22.5 million more immigrants to come to the U.S. over the next 20 years. By 2049, they’re expecting immigration to account for a stunning 87% of annual population growth.

2. We’re going to have a lot more illegal immigrants. Despite the current bluster and the scandals at the border, the CBO expects we’ll have 2.4 million more illegal immigrants (or “undocumented residents,” or whatever) in 20 years’ time than we have today.

3. We’re going to be up to our eyeballs in debt. The national debt is expected to skyrocket to an “unprecedented” 144% of GDP by 2049, or twice the level today. That would put the debt just under $100 trillion. The figure today: Around $18 trillion. As recently as 2000: $4 trillion. Oh, and this isn’t even the worst-case scenario: The national debt could exceed 200% of GDP in 30 years’ time, the CBO acknowledges.

4. We’re going to owe so much money that by 2049 the annual interest on the debt will be about 5% of GDP — roughly the share that we spend today on Social Security. And that’s even if interest rates stay low. Despite rising debt and federal spending, the government is expecting — or hoping — the average rate on federal debt will rise only from today’s lowly 2.4% to 4.2%, still modest by historic standards, by 2049.

5. This debt, and these deficits, will damage the economy. They will crowd private investment out of the debt markets, reducing income and growth, says the CBO. And as we’ll have to borrow more and more from abroad to finance the government, they’ll lead to bigger and bigger interest payments leaving the country.

6. Social Security, Medicare, other health programs and net interest are going to soak up so much of the budget that we’re going to have to slash everything else to the smallest share of the economy in 70 years — just 7%. The average over the past 50 years: 11%.

7. Just to keep the federal deficit to these levels, your taxes will go up. The Obama tax hike on “Cadillac” health-insurance plans will kick in starting in 2022, and the 2017 Trump tax cuts will expire in 2025.

8. Most working stiffs can say goodbye to any other tax cuts. Uncle Sam is explicitly relying on your taxes to go up thanks to “bracket creep,” where income-tax brackets rise only in line with inflation while your income — you hope — rises faster.

9. While tax rates go up for most people, they won’t for those earning the most. That’s because more and more of their income will be above the Social Security “cap,” saving them an effective 12.4% a year. The cap this year is $132,900.

10. Meanwhile, working stiffs will be taxed at twice the marginal rate of those who live on dividends. By 2049, says the CBO, labor income will be taxed at a marginal rate of 32%, compared to just 16% for capital income. Good to know, isn’t it? It would be great to see some of this stuff come up in the presidential race, wouldn’t it?

“The Fed hiked 25bps to 3.25% in Feb 1994. Grown men cried on the trading floor. Salesmen. They were soon laid off. Their clients suffered staggering losses. They too were fired.”

• The Crashes That Cause Grown Men To Cry (Eric Peters)

He started his career in 1989, with Fed Funds at 9.75%. The Fed slashed rates to 8.25% in Dec 1989 as the S&L Crisis unfolded. They continued cutting until Aug 1992, when rates hit a mindboggling low of 3.00%. The Fed kept money that cheap for 1.5 yrs. Investors had recently earned 9.75% for taking no risk and found themselves starved for returns. So banks structured complex products that offered enhanced yields by selling volatility – they were great, provided the Fed neither hiked nor cut rates. They flew off the shelves. Salespeople gouged their clients. The Fed hiked 25bps to 3.25% in Feb 1994. Grown men cried on the trading floor. Salesmen. They were soon laid off. Their clients suffered staggering losses. They too were fired.

And as their bosses and boards discovered the scale of their unbounded risk, they instructed the banks to get them out at the best price. Whenever that happened, the cost was far bigger than expected. And this in turn was reflexive. Those clients who had earlier assured themselves that they could stomach the ride – because they were long-term investors – were forced to vomit. They call that period The Great Bond Massacre. But it seemed like every few years, another great massacre would unfold in one thing or another. So he assumed that this is how the world worked. Of course, he wasn’t alone. Global central bankers also recognized this to be the case. So they strived to avoid new massacres. But their tools only worked when the mechanic applied greater leverage with each use. Massacre after massacre, they cranked away. By 2019, they had produced the longest economic expansion and equity bull market in American history.

Is this enough to end the Fed?

• Inside The Plunge Protection Team: Chaos (ZH)

Now, thanks to Bloomberg, we have a much more detailed look into what transpired at the trading desk of the “Plunge Protection Team”, and what we learn is that the past year said institution which forms the bedrock of support for the US capital market has been gripped by what at times is sheer chaos. Why? Perhaps it will not come as a surprise to anyone, that the reason for said chaos is another career economist, in this case the “new” president of the New York Fed, John Williams (no relation to the Star Wars guy). As Bloomberg details in a “must read” report, “an unusual level of internal tension broke out in recent weeks at the fortress-like Federal Reserve Bank of New York in lower Manhattan.”

This was prompted by the sudden departure of the two longtime officials mentioned above, which “shook staff, sank morale and drew attention to the leadership of the New York Fed under John Williams as he enters his second year at the helm.” And yes, this is the same John Williams who two weeks ago prompted a mini market tantrum following one of the most epic communication fuck ups by a central banker. As Bloomberg writes “the story involves Simon Potter, who ran the all-important markets desk, and Richard Dzina, head of the financial services group. Both were abruptly relieved of their roles in late May by Williams.

Little explanation was given, but according to current and former New York Fed employees, as well as those close to the bank, the nature of the exits, by fault or design, seemed to be a warning: fall in line.” It is not clear exactly what the two titans of US capital markets had to “fall in line” for, but two things are certain – i) Potter did not “resign”, he was fired by Williams, and ii) now that an economist with zero capital markets experience is in charge, and following his termination of Potter and Dzina, the world is one step closer to collapse as a clueless PhD hack is in charge of the most important market in the world.

“Judge Koeltl concluded that, quite simply, the claims made as the basis of Russiagate are insufficient to even warrant a hearing.”

• Russiagate is the New 42 (Craig Murray)

Douglas Adams famously suggested that the answer to life, the universe and everything is 42. In the world of the political elite, the answer is Russiagate. What has caused the electorate to turn on the political elite, to defeat Hillary and to rush to Brexit? Why, the evil Russians, of course, are behind it all. It was the Russians who hacked the DNC and published Hillary’s emails, thus causing her to lose the election because… the Russians, dammit, who cares what was in the emails? It was the Russians. It is the Russians who are behind Wikileaks, and Julian Assange is a Putin agent (as is that evil Craig Murray). It was the Russians who swayed the 1,300,000,000 dollar Presidential election campaign result with 100,000 dollars worth of Facebook advertising.

It was the evil Russians who once did a dodgy trade deal with Aaron Banks then did something improbable with Cambridge Analytica that hypnotised people en masse via Facebook into supporting Brexit. All of this is known to be true by every Blairite, every Clintonite, by the BBC, by CNN, by the Guardian, the New York Times and the Washington Post. “The Russians did it” is the article of faith for the political elite who cannot understand why the electorate rejected the triangulated “consensus” the elite constructed and sold to us, where the filthy rich get ever richer and the rest of us have falling incomes, low employment rights and scanty welfare benefits. You don’t like that system? You have been hypnotised and misled by evil Russian trolls and hackers. [Whether Trump and/or Brexit were worthy beneficiaries of the popular desire to express discontent is an entirely different argument and not one I address here].

Except virtually none of this is true. Mueller’s inability to defend in person his deeply flawed report took a certain amount of steam out of the blame Russia campaign. But what should have killed off “Russiagate” forever is the judgement of Judge John G Koeltl of the Federal District Court of New York. In a lawsuit brought by the Democratic National Committee against Russia and against Wikileaks, and against inter alia Donald Trump Jr, Jared Kushner, Paul Manafort and Julian Assange, for the first time the claims of collusion between Trump and Russia were subjected to actual scrutiny in a court of law. And Judge Koeltl concluded that, quite simply, the claims made as the basis of Russiagate are insufficient to even warrant a hearing. The judgement is 81 pages long, but if you want to understand the truth about the entire “Russiagate” spin it is well worth reading it in full. Otherwise let me walk you through it.

Poverty as a means of getting rid of the unwanted.

• Austerity Populism (G.)

In a recent book ostensibly focused on Jeremy Corbyn’s Labour party, but partly about recent British political history, the academics Matt Bolton and Frederick Harry Pitts explain the last decade in terms of “austerity populism”. Cuts, welfare crackdowns and the case for leave, they explain, were all sold to the public via the exclusion of supposedly unproductive undesirables: “scroungers” in the austerity narrative; “migrants” in the stories that swirled around the 2016 referendum. Both traded on a nostalgic idea of national struggle, keeping calm and carrying on, and some strange, latent belief that the country was in need of a purgative spell of pain akin to an imaginary version of the second world war.

In this vision, David Cameron’s election victory in 2015 and the leave side’s win a year later were watershed moments on the same national journey. But if austerity populism has so far been politically successful, it also comes with obvious risks. Trumpeting the wonders of slashing services and kicking around the poor only works for as long as the majority of people are largely untouched by those things – which is why Johnson is now partly changing tack and pledging to spend money (although our nasty, broken benefits system and countless imperilled public services will surely remain untouched).

By the same token, the romance of leaving the EU will only endure while its losers – sheep farmers, car industry workers, people who have come to the UK from central and eastern Europe – form a minority, and enough voters can still be persuaded that they will be winners in a Tory Brexit. Yet, however shambolic the opposition offered by Labour, the lived reality of no deal would surely risk tipping too many people into doubt and fear and away from the Conservatives, which is one reason why Johnson and his allies are in such an obvious hurry. The emotional side of me would simply describe this all as a very English tragedy, centred on a mean-spiritedness that the woman I met in Dover would instantly recognise. And at least until the end of this long, overheated summer and the start of an autumn of nightmares, millions of us will carry on behaving much as we have done for the last decade: not just passing by on the other side, but dancing as we do it.

A weird propaganda tool. That we pay attention to it is a flashing red sign of where our societies are at.

• Bellingcat Unloads 4,000-Word Hit Piece On Tulsi Gabbard (RT)

Running as an anti-war candidate in the US comes with a target painted on your back that draws fire from those rooting for foreign interventions. In case of Tulsi Gabbard, it includes a lengthy piece on chemical attacks in Syria. Gabbard, a Democratic presidential hopeful, became the most-googled candidate during the second primary debate – but the surge of public interest came with renewed attacks against her anti-interventionist agenda. In case you’ve missed it all, Gabbard has been branded a ‘Russian’ spoiler for whichever candidate is eventually picked, and, once again, an apologist for Syrian President Bashar Assad.

Joining the chorus of bashers on Sunday was Elliot Higgins, the founder of the UK-based ‘citizen investigation’ outlet Bellingcat, who wrote a whopping 4,000-word piece attacking Gabbard’s negative attitude toward regime change wars. In particular, Higgins didn’t like her skepticism over chemical weapons attacks in Syria reflected on her campaign website. The attacks were used by Washington to justify missile attacks against the country’s government – and by extension continued illegal US military presence in the country.

The mammoth piece starts with screenshots featuring logos of RT and InfoWars (Russian propaganda, dear readers, conspiracy theories!) and goes on to criticize anyone doubting the US-favored narrative about what happened in Syria. MIT Professor Theodore Postol gets an honorable mention, with whom Higgins no longer debates in person since their encounter in 2018. Back then, Higgins failed to address Postol’s technical criticisms of his investigations and instead resorted to mocking applauses and calling his opponent a tool of Russian propaganda.

Always a sucker for a good history lesson.

• America’s Other Original Sin (Bacevich)

Can there be more than one Original Sin? I’m guessing that may be a theological nonstarter, but as a basis for historical interpretation there is real merit in considering the possibility of multiple exiles from the Garden of Eden. That the arrival of the first African slaves to Jamestown 400 years ago this month qualifies as America’s Original Sin is now widely recognized. While holdouts remain, most agree that slavery and racism together have left an indelible stain on our nation. Many would argue that this awareness has arrived belatedly. I might even cite myself as an example.

As a kid growing up in Northwest Indiana in the middle of the last century, I judged slavery to have been an unfortunate mistake long since corrected. In the de facto segregated Calumet region where my family lived, race obviously remained a sensitive subject, but to my mind one best kept at arm’s length. I had more important things to worry about than the relationship between white people like me and those who were not white—why the Cubs were permanently stuck in or near the National League cellar being but one example. In the decades since, I’ve learned to see matters differently. So have many others.

But let me suggest the possibility of a Second Original Sin, not rising to the level of the first, but at least deserving far more attention than it has received. And that’s the sin committed in December 1898, when the United States laid claim to the Philippines. The history of this transaction, centering on a transfer of sovereign authority from Madrid to Washington, is both well known and almost entirely forgotten. As had been the case with race in East Chicago, Indiana, back in the late 1950s, the incorporation of the Philippines into an increasingly far-flung American empire has been written off. This, I have come to believe, is unfortunate, especially today when the American empire appears increasingly precarious.

The essential facts are these. In April 1898, the United States went to war with Spain. The war’s nominal purpose was to liberate Cuba from oppressive colonial rule. The war’s subsequent conduct found the United States not only invading and occupying Cuba, but also seizing Puerto Rico, completing a deferred annexation of Hawaii, scarfing up various other small properties in the Pacific, and, not least of all, replacing Spain as colonial masters of the Philippine Archipelago, located across the Pacific.

1898 US Political Cartoon: U.S. President William McKinley is shown holding the Philippines, depicted as a savage child, as the world looks on. The implied options for McKinley are to keep the Philippines, or give it back to Spain, which the cartoon compares to throwing a child off a cliff.

The Dying Days Of An Empire

Jun 252019

June 25, 2019 Posted by Raúl Ilargi Meijer at 7:08 pm Finance, Primers Tagged with: China, empire, Greece, military, overreach, petrodollar, reserve currency, Rome, ruble, Russia, sanctions, Trump, Vietnam, yuan 11 Responses »

Caravaggio Conversion on the way to Damascus 1600-01

Something’s been nagging me for the past few days, and I’m not sure I’ve figured out why yet. It started when Donald Trump first called off the alleged planned strikes on targets in Iran because they would have cost 150 lives, and then the next day said the US would do sanctions instead. As they did on Monday, even directly targeting Trump’s equal, the “Supreme Leader Khameini”.

When Trump announced the sanctions, I thought: wait a minute, by presenting this the way you did, you effectively turned economic sanctions into a military tool: we chose not to do bombs but sanctions. Sounds the same as not doing a naval invasion but going for air attacks instead. The kind of decisions that were made in Vietnam a thousand times.

However, Vietnam was all out war (well, invasion is a better term). Which shamed the US, killed and maimed the sweet Lord only knows how many promising young Americans as well as millions of Vietnamese, and ended in humiliating defeat. But the US is not in an all out war in Iran, at least not yet. And if they would ever try to be, the outcome would be Vietnam squared.

Still, that’s not really my point here. It’s simply about the use of having the world reserve currency as a military weapon instead of an economic one. And I think that is highly significant. As well as an enormous threat to the US. The issue at hand is overreach.

While you could still argue that economic sanctions on North Korea, Venezuela and Russia are just that, economic and/or political ones, the way Trump phrased it, comparing sanctions one on one with military strikes, no longer leaves that opening when it comes to Iran. The new Iran sanctions are a preliminary act of war. Simply because of how he presented them. He explicitly stated that he swapped one for the other.

There are quite a few people who have been harping on the demise of the USD as reserve currency for a long time, and I always think: look, nobody wants the yuan, let alone the ruble. There’s no trade being executed in these currencies. So taking over from the USD is a pipe dream.

But that may very well change, and perhaps very fast too, if the US uses the dollar not as an economic weapon (and there are plenty issues with that already), but as a military one. That would potentially hugely speed up any efforts to move away from the buck in international trade.

For the simple reason that it becomes unreliable. Traders hate that, they can’t have that. A reserve currency must be neutral -to a point-. The world of trade doesn’t want the yuan because Beijing controls it and can therefore change conditions and values overnight. But if and when the US uses the USD as a military tool, it essentially risks doing exactly the same: it deneutralizes the USD.

Using the USD as an economic weapon is ugly, but something global trade can deal with. A military weapon, though, is something else altogether. And I see no sign that Trump understands this. The thing is, using your currency, which also happens to be the world reserve currency, as a military tool, means you’ve become a threat to everyone, the entire globe, overnight.

And people don’t want to live that way. Not Iran, not Russia, not China, not Europe, no-one. It’s one thing to use the USD for sanctions. But it’s a real different thing to use it as just a military alternative to “bombing a country into obliteration”.

What Trump did comes awfully close to signing the death warrant for the USD as the global reserve currency. And it’s really only because he and his people weren’t paying attention. He could have phrased the entire thing differently, and it would have been business as usual, a business that Moscow and Beijing are actively trying to undermine, but they could have waited a bit longer reacting.

Now, however, their plans have to be sped up. They’re going to be buying a lot of gold, as they’ve already been doing, they’ll try to do their mutual business in their own currencies backed by this gold, and they’ll speed up alternatives-to-USD plans with other countries in their neighborhood. Because they have no choice anymore.

I see Tyler Durden reporting that the US threatens to throw a Chinese state-owned bank out of the SWIFT system, and I think: great idea. Why not force China to quit the reserve currency system, the petrodollar, outright?! Why not force it to hasten the Asian/Russian alternative trade model into existence? What a great and lovely idea.

The US should today make friends. It should preserve the reserve currency status of the USD for as long as it can, by convincing allies and foes alike that it will protect its neutrality in global trade. But Trump and his people are doing the exact opposite, they’re playing all-on-red.

The US no longer has the economic, political or military might to dictate to the entire world any terms it wants to. Those days are long gone. That ended in Vietnam. Trump’s living in the last century, while Bolton and Pompeo, they live in their own time and world.

But yeah, sure, perhaps this is what the dying days of an empire MUST look like. Maybe there’s a model to follow and there’s no escape, maybe it’s all written in the stars. Like Rome and Greece and Genghis Khan. Maybe things simply just have to play out. Still, looking at that Trump statement about the new Iran sanctions that started me off, it doesn’t feel all that smart.

Debt Rattle April 27 2019

Apr 272019

April 27, 2019 Posted by Raúl Ilargi Meijer at 8:56 am Finance Tagged with: Assange, Banksy, Brazil, Butina, declassify, dollar, Ecuador, FISA, GDP, Lula, Not In Labor Force, Trump, yuan 13 Responses »

Vincent van Gogh Pietà (after Delacroix) 1889

• The Big Mystery In The GDP Report – Where Did The Inventories Come From? (MW)

• China Finds Dollar Hegemony Is A Tough Nut To Crack (WS)

• Nearly 102 Million Americans Do Not Have A Job Right Now (Snyder)

• Trump Makes Post-Mueller Vow To Release “Devastating” FISA Docs (ZH)

• Blowback Is a Harsh Mistress (Kunstler)

• Marina Butina Sentenced To 18 Months In Prison (ZH)

• Labour Party In ‘Complete Meltdown’ Over Final Say (Ind.)

• London Extinction Rebellion Mural is a Banksy (G.)

• Greeks The Most Stressed People Worldwide – Gallup (K.)

• Brazil Governed By ‘Lunatics’ And US ‘Lackeys’ – Lula (G.)

Industrial production and imports are both down. But inventories rise.

• The Big Mystery In The GDP Report – Where Did The Inventories Come From? (MW)

It is a case that would make Sherlock Holmes proud. Growth in the first quarter smashed expectations, fueled in part by strong inventory building. According to the government, $32 billion of goods were added to inventories this quarter, or $128 billion annualized. This stockpiling of goods boosted first-quarter GDP growth by about 70 basis points and helped propel growth to a 3.2% annual rate, well above forecasts. The problem is that it is not at all obvious where these inventories came from. Goods have to come from somewhere, either produced by domestic firms or imported from abroad. The mystery is that both production and imports fell in the first three months of the year, according to government data.

“You can’t stockpile what you do not import or do not produce,” said Robert Brusca, chief economist at FAO Economics. The Fed reported last week that industrial output slipped at a 0.3% annual rate in the first quarter. And the government’s GDP report estimates that imports fell 3.7% in the first three months of the year. The one other explanation — that consumption fell sharply enough to leave businesses with unexpected unsold goods — also doesn’t fit the evidence, Brusca said. Consumption did not fall faster than industrial production or imports to generate any surplus, he said. To be sure, spending on consumer durable goods fell 5.3%, the biggest drop in 10 years. Business spending on equipment was also weak. “Any way you slice it, this GDP report…is an apparent mess,” he said.

Nobody will want the yuan as long as Beijing decides what it’s worth.

• China Finds Dollar Hegemony Is A Tough Nut To Crack (WS)

In terms of global reserve currency, the renminbi (RMB) has a share of only 1.9%, in fifth place, and barely ahead of the Canadian dollar, but miles behind the US dollar (61.7%) and the euro (20.7%). Over the past two years, the RMB has made only microscopic headway as a reserve currency. And as an international payments currency, the RMB has failed similarly to crack the co-hegemony of the dollar and the euro. “With more than 1,900 financial institutions now using the RMB for payments with China and Hong Kong, the internationalization of RMB carries great strategic significance” for banks and financial institutions, gushes SWIFT (Society for Worldwide Interbank Financial Telecommunication), which tracks the progress of the RMB as payment currency.

But in March 2019, the RMB had a minuscule share of merely 1.22% for international cross-border payments by value (cross-border payments from one Eurozone country to another Eurozone country are excluded). This minuscule share put the RMB in 8th position, just behind the Swiss franc:

Civilian labor force participation rate lingers around 63%.

• Nearly 102 Million Americans Do Not Have A Job Right Now (Snyder)

At this moment, we are told that only 6.2 million Americans are officially “unemployed”, and that sounds really, really good. But that is only half the story. What the mainstream media rarely mentions is the fact that the number of Americans categorized as “not in the labor force” has absolutely exploded since the last recession. Right now, that number is sitting at 95.577 million. When you add 6.2 million “officially unemployed” Americans to 95.577 million Americans that are categorized as “not in the labor force”, you get a grand total of almost 102 million Americans that do not have a job right now. If that sounds terrible to you, that is because it is terrible.

Yes, the U.S. population has been growing over the last decade, and that is part of the reason why the number of Americans “not in the labor force” has been growing. But overall, the truth is that the level of unemployment in this country is not that much different than it was during the last recession. John Williams of shadowstats.com tracks what the real employment figure would be if honest numbers were being used, and according to him the real rate of unemployment in the United States at the moment is 21.2 percent.

Just before the last recession, the civilian labor force participation rate was sitting at about 66 percent, and that was pretty good. But then the recession hit, and the civilian labor force participation rate fell below 63 percent, and it stayed between 62 percent and 63 percent for an extended period of time. So where are we today? At this moment, we are sitting at just 63.0 percent. Does that look like a recovery to you? Of course not.

“I’m glad I waited because i thought that maybe they would obstruct if I did it early..”

• Trump Makes Post-Mueller Vow To Release “Devastating” FISA Docs (ZH)

President Trump on Thursday renewed his vow to declassify a wide swath of “devastating” documents related to the Russia probe “and much more” – adding that he’s glad he waited until the Mueller investigation was complete. In a Thursday night phone interview on Fox News, host Sean Hannity asked “will you declassify the FISA applications, gang of 8 material, those 302s – what we call on this program ‘the bucket of five’?” To which Trump replied: “Yes, everything is going to be declassified – and more, much more than what you just mentioned. It will all be declassified, and I’m glad I waited because i thought that maybe they would obstruct if I did it early – and I think I was right. So I’m glad I waited, and now the Attorney General can take a look – a very strong look at whatever it is, but it will be declassified and more than what you just mentioned.”

Last September 17th, Trump vowed to release all text messages related to the Russia investigation with no redactions, as well as specific pages from the FBI’s FISA surveillance warrant application on former Trump campaign aide Carter Page, and interviews with the DOJ’s Bruce Ohr. nFour days later, however, Trump said over Twitter that the Justice Department – then headed by Attorney General Jeff Sessions (while the Russia investigation was headed up by Deputy AG Rod Rosenstein) – told him that it might have a negative impact on the Russia probe, and that key US allies had asked him not to release the documents.

“I met with the DOJ concerning the declassification of various UNREDACTED documents,” Trump tweeted. “They agreed to release them but stated that so doing may have a perceived negative impact on the Russia probe. Also, key Allies’ called to ask not to release. Therefore, the Inspector General has been asked to review these documents on an expedited basis. I believe he will move quickly on this (and hopefully other things which he is looking at). In the end I can always declassify if it proves necessary. Speed is very important to me – and everyone!”

That key ally turns out to have been the UK, according to the New York Times., which reported last September that their concern was over material which “includes direct references to conversations between American law enforcement officials and Christopher Steele,” the former MI6 agent who compiled the infamous “Steele Dossier.” We now know, of course, that Steele had extensive contact with Bruce and Nellie Ohr in 2016, while Bruce was the #4 official at the Obama DOJ, and Nellie was working for Fusion GPS – the opposition research firm hired by Hillary Clinton and the DNC to produce the infamous Steele Dossier.

“Mr. Mueller himself may well be subject to prosecution for destroying evidence and, yes, obstruction of justice…”

• Blowback Is a Harsh Mistress (Kunstler)

The Thinking Class behind the bad faith Resistance is about to be beaten within an inch of its place in history with an ugly-stick of reality as The Narrative finally comes to be fairly adjudicated. The Mueller Report was much more than just disappointing; it was a comically inept performance insofar as it managed to overlook the only incidence of collusion that actually took place: namely, the disinfo operation sponsored by the Hillary Clinton campaign in concert with the highest officials of the FBI, the Department of Justice, State Department personnel, the various Intel agencies, and the Obama White house for the purpose of interfering in the 2016 election.

It will turn out that the Mueller Investigation was just an extension of that felonious op, and Mr. Mueller himself may well be subject to prosecution for destroying evidence and, yes, obstruction of justice. John F. Kennedy once observed that “life is unfair.” It is unfair, perhaps, that a TV Reality Show huckster, clown, and rank outsider beat a highly credentialed veteran of the political establishment and that he flaunts his lack of decorum in the Oval Office. But it happens that he was on the side of the truth in the RussiaGate farrago and that happens to place him in a position of advantage going forward.

The empire destroying lives to uphold a narrative. It no longer matters what these crazies say, and they know it. The public swallows anything thrown at them. Collusion, Assange, Butina, these are all fictional stories, but today they dictate the headlines and dominate the airwaves. Butina is accused of “Ambitious conspiracy”. When she was 22.

• Marina Butina Sentenced To 18 Months In Prison (ZH)

Accused Russian spy Marina Butina has been sentenced to 18 months in prison on Friday after pleading guilty to acting as an unregistered agent of a foreign government, the Hill reports. Butina, who was arrested in 2018, pled guilty to the charges in late. 2018. She will only serve nine months, as the judge knocked nine months off her sentence for time served. Prosecutors had recommended that she serve an additional 18 months, while her lawyers had asked for no prison time and her immediate deportation. Butina wasn’t mentioned in the Mueller report. Before her sentencing hearing on Friday, Butina pleaded with the judge for leniency, RT reports.

“My parents discovered my arrest on the morning news they watch in their rural house in a Siberian village,” she told the court. “I love them dearly, but I harmed them morally and financially. They are suffering from all of that. I destroyed my own life as well. I came to the United States not under any orders, but with hope, and now nothing remains but penitence.” Butina arrived in the US on a student visa in 2016 and became active in pro-gun circles. During the investigation into Russian interference that followed Trump’s electoral triumph, she was accused of working with the Russian government to infiltrate the Republican Party and National Rifle Association. Moscow and President Putin have denied any connection with her.

Corbyn still clings to his dreams of an independent left-wing Britain. But matters haven’t stood still for the past 3 years.

• Labour Party In ‘Complete Meltdown’ Over Final Say (Ind.)

Jeremy Corbyn is under growing pressure over his party’s position on a second Brexit referendum after a leaked draft of a campaign leaflet included no mention of a Final Say vote. The Labour leader faced an angry backlash over the flyer, with MPs saying it had triggered “complete meltdown” in the party and left pro-EU MPs “utterly furious”. As the row deepened, 75 MPs and 14 MEPs wrote to Labour’s governing body to demand that “a clear commitment” to another referendum be included in the party’s manifesto for next month’s European parliament elections. Mr Corbyn’s top team is split on whether Labour should support a second referendum. Several senior shadow cabinet ministers want the party to support a public vote on any Brexit deal passed by parliament, but Mr Corbyn’s inner circle say he only supports a referendum on the government’s deal or to avoid a no-deal outcome.

Other shadow ministers oppose another public poll entirely. In their letter to the National Executive Committee (NEC), the MPs and MEPs said Labour had “a clear opportunity to win these elections” if it fully supports a Final Say vote. They wrote: “These elections are about the kind of Europe we want to live in, and we can’t make a convincing case in them without being clear about Brexit. Labour has already, rightly, backed a confirmatory public vote. The overwhelming majority of our members and voters support this, and it is the democratically established policy of the party. “Our members need to feel supported on doorsteps by a clear manifesto that marks us out as the only viable alternative to Nigel Farage’s Brexit Party.

First, you just have a wall. The next day, you have a wall worth a million dollars.

• London Extinction Rebellion Mural is a Banksy (G.)

A Banksy collector and expert believes a mural that appeared at Extinction Rebellion’s Marble Arch base overnight is an authentic piece by the Bristolian street artist. John Brandler, who owns a dozen pieces by Banksy is convinced the artwork – which features the slogan “From this moment despair ends and tactics begin” next to a young girl sitting on the ground holding an Extinction Rebellion logo – is an original because of its execution and theme. The art dealer and gallerist said: “I’m convinced about the one in London for two reasons: it’s a topic that he would support, and it’s a continuation of the Port Talbot piece that appeared in December 2018.

“The name in the corner is not important, the signature is the work. And this is a Banksy. It’s a wonderful statement and a beautiful piece.” The work appeared at the site which had been occupied by climate activists since protests began in the capital almost two weeks ago. A spokesperson for Westminster council confirmed the work was being investigated but had not been authenticated yet. “We’re aware of the possible Banksy which appeared in Marble Arch overnight. Our officers are looking into this,” he said. Banksy has not confirmed whether the painting is legitimate, and his press team did not respond to a request for comment.

Gallup does really bad surveys.

• Greeks The Most Stressed People Worldwide – Gallup (K.)

Greeks are the most stressed people in the world, according to the results of the Gallup 2019 Global Emotions report conducted on a sample of 150,000 people in 140 countries. According to the poll, which was conducted last year, 59 percent of Greeks said they “experienced a lot of stress yesterday,” putting Greece at the top of the chart for the third consecutive year. After Greece on the list are the Philippines, Tanzania and Albania. The same poll asked respondents about their negative experiences and participants from Chad, Nigeria, Sierra Leone, Iraq and Iran polled the highest. The survey also polled anger levels with Armenians topping the chart, followd by Iraqis, Iranians and Palestinians. The five countries recording the most positive experiences are Paraguay, Panama, Guatemala, Mexico and El Salvador.

“Does anyone really think the US is going to favour Brazil?” Lula asked. “Americans think of themselves first, second, third, fourth, fifth – and if there’s any time left over they think about Americans.”

• Brazil Governed By ‘Lunatics’ And US ‘Lackeys’ – Lula (G.)

Brazil is being governed by “a bunch of lunatics” and United States “lackeys” who have shattered its international reputation, former president Luiz Inácio Lula da Silva has claimed in his first interview since being jailed one year ago. Lula, Brazil’s president from 2003 and 2011, surrendered himself to police last April after being convicted on corruption charges he disputes. The 73-year-old leftist had been forbidden from giving face-to-face interviews until Friday, when two Brazilian journalists were allowed to visit him at his prison in southern Brazil following a lengthy legal battle.

Lula told them Brazil needed to undergo period of “self-reflection” after what he described as the “crazy” fake news and hate-filled election of far-right populist Jair Bolsonaro last year. “What we can’t have is this country being run governed by a bunch of lunatics. The country doesn’t deserve this and above all the people do not deserve this.” “Brazil is adrift – so far he doesn’t know what to do,” he added of Bolsonaro, who took office in January and has suffered a turbulent opening act in power. Lula said he profoundly regretted “the disaster that is taking place in this country” and criticised Brazil’s dramatic tack towards Washington under Bolsonaro.

“I’ve never seen a [Brazilian] president salute the American flag. I’ve never seen a president go around saying, ‘I love the United States, I love it!’” Lula said of Bolsonaro, who paints himself as a “tropical Trump” and last month travelled to the United States to tout his close relations with the US president. “You should love your mother, you should love your country. What’s all this about loving the United States? “Does anyone really think the US is going to favour Brazil?” Lula asked. “Americans think of themselves first, second, third, fourth, fifth – and if there’s any time left over they think about Americans. And these Brazilian lackeys go around thinking the Americans will do anything for us.”

Debt Rattle January 28 2019

Jan 282019

January 28, 2019 Posted by Raúl Ilargi Meijer at 11:29 am Finance Tagged with: backstop, Brexit, fossil fuels, Germany, gold, home loans, Ireland, real estate, sanctions, stockpiling, Venezuela, WTO, yuan 6 Responses »

Pablo Picasso Bust of woman with arms raised 1922

• US Sanctions On Venezuela Are Killing Citizens – Former UN Rapporteur (Ind.)

• PBOC Fixes Yuan Dramatically Stronger Following Gold Spike (ZH)

• China’s Real Estate Loan Growth Slows Further In 2018 (CNBC)

• Britain’s Biggest Lender To Offer 100% Mortgages To First-Time Buyers (G.)

• UK Cannot Simply Trade On WTO Terms After No-Deal Brexit (G.)

• May To Seek Binding Changes To Irish Backstop – Boris Johnson (R.)

• Ireland Stresses It Will Not Yield On Brexit Backstop (G.)

• UK Military Bases Stockpiling To Prepare For No-Deal Brexit (Sky)

• Brexit Exposes Growing Fractures In UK Society (G.)

• In Germany’s Plan To Phase Out Coal, A Big Polluter Will Benefit (BBG)

Picked up these numbers last week on Twitter. Chavez announced cancer in late 2012, died early 2013. Oil prices only explain a smal part of it. Economic warfare does the rest.

@spectatorindex – Venezuela GDP growth.
2012: 5.6%
2013: 1.3%
2014: -3.9%
2015: -6.2%
2016: -17%
2017: -15%
2018: -16%

• US Sanctions On Venezuela Are Killing Citizens – Former UN Rapporteur (Ind.)

The first UN rapporteur to visit Venezuela for 21 years has told The Independent the US sanctions on the country are illegal and could amount to “crimes against humanity” under international law. Former special rapporteur Alfred de Zayas, who finished his term at the UN in March, has criticized the US for engaging in “economic warfare” against Venezuela which he said is hurting the economy and killing Venezuelans. The comments come amid worsening tensions in the country after the US and UK have backed Juan Guaido, who appointed himself “interim president” of Venezuela as hundreds of thousands marched to support him. European leaders are calling for “free and fair” elections. Russia and Turkey remain Nicolas Maduro’s key supporters.

Mr De Zayas, a former secretary of the UN Human Rights Council (HRC) and an expert in international law, spoke to The Independent following the presentation of his Venezuela report to the HRC in September. He said that since its presentation the report has been ignored by the UN and has not sparked the public debate he believes it deserves. “Sanctions kill,” he told The Independent, adding that they fall most heavily on the poorest people in society, demonstrably cause death through food and medicine shortages, lead to violations of human rights and are aimed at coercing economic change in a “sister democracy”. On his fact-finding mission to the country in late 2017, he found internal overdependence on oil, poor governance and corruption had hit the Venezuelan economy hard, but said “economic warfare” practised by the US, EU and Canada are significant factors in the economic crisis.

In the report, Mr de Zayas recommended, among other actions, that the International Criminal Court investigate economic sanctions against Venezuela as possible crimes against humanity under Article 7 of the Rome Statute. The US sanctions are illegal under international law because they were not endorsed by the UN Security Council, Mr de Zayas, an expert on international law and a former senior lawyer with the UN High Commissioner for Human Rights, said. “Modern-day economic sanctions and blockades are comparable with medieval sieges of towns. “Twenty-first century sanctions attempt to bring not just a town, but sovereign countries to their knees,” Mr de Zayas said in his report.

Xi remains nervous.

• PBOC Fixes Yuan Dramatically Stronger Following Gold Spike (ZH)

PBOC fixed the yuan dramatically stronger against the dollar overnight, sending offshore yuan surging to its strongest against the dollar in six months. While the Chinese currency is reportedly strengthening on the heels of trade talks optimism (which is entirely the opposite of the rhetoric coming out of Washington), we note that this was the biggest positive shift in the yuan fix in 19 months…

Notably, the yuan is strengthening considerably more against the dollar than it is against the broad basket of trade partner currencies…Shanghai Accord 2.0? And coincidentally, the surge in yuan comes the day after gold prices broke out higher… Perhaps the PBOC’s aggressive action was prompted to manage the Yuan peg against gold back into balance?

If you look closer, nothing seems very dramatic. But real estate has become such a huge part of the economy that Beijing must weigh curbing risks vs continued growth.

It’s also the speed with which this has happened. 10 years ago Chinese didn’t borrow for homes. It’s literally been used to mitigate the financial crisis.

• China’s Real Estate Loan Growth Slows Further In 2018 (CNBC)

Loans to China’s property sector grew at a slower pace in 2018 as Beijing tightened home-purchase rules to curb bubble risk, but lending to property developers expanded slightly faster than the year before, central bank data showed on Friday. Outstanding yuan property loans grew 20% from a year earlier to 38.7 trillion yuan ($5.72 trillion) by end-December, compared with 20.9% growth in 2017, the PBOC said in a quarterly financial report. Outstanding mortgage lending climbed 17.8% year-on-year to 25.75 trillion yuan by the end of 2018, below a 22.2% rise in 2017, central bank data showed.

Policymakers have vowed to ensure “stable and healthy” development of the property market, repeatedly emphasizing that homes are for living in, not speculative investment. The government’s sustained drive to reduce debt risks in the economy has cooled the property market but a continued downturn in credit growth in the sector could add to growing pressures on the world’s second-largest economy. The real estate sector is a key driver of economic growth, so any further weakness could influence the pace and scope of fresh stimulus steps expected from Beijing this year.

Property investment is also looking wobbly, with analysts waiting to see if the government will risk loosening restrictions on home buyers that have kept speculation in check. Real estate investment in December rose 8.2% from a year earlier, down from 9.3% in November, according to Reuters calculations based on data released by the National Bureau of Statistics. That was just ahead of the slowest pace of growth last year at 7.7% recorded for October. Developers raised their borrowings last year though, with loans extended for property development up 22.6% in 2018 versus growth of 21.7% in 2017, the report showed. The central bank also said outstanding household loans jumped 18.2% to 47.9 trillion yuan by end-2018.

How much can Brexit hurt the British? A lot, we must assume. Then again, if you fall for this stuff at this moment in time, maybe you deserve what’s coming. How about a crisis worse than the 1930s?

• Britain’s Biggest Lender To Offer 100% Mortgages To First-Time Buyers (G.)

Britain’s biggest lender is to offer 100% mortgages to first-time buyers in a return to lending last seen before the financial crash – but only if the buyer has family that can stand behind the loan. Under the new Lloyds Bank “Lend A Hand” deal, a first-time buyer will be able to borrow up to £500,000 for a new home, without putting down a penny of deposit. The Lloyds move marks a major expansion into the first-time buyer market, as most other mainstream lenders demand a minimum deposit worth 5% of the property purchase price, although Barclays has offered a similar “family springboard” deal. Lloyds has priced the mortgages to undercut the Barclays offer.

The deal – part of what Lloyds said is a £30bn commitment to help first-time buyers – will reopen concern about a two-tier market where buyers with well-off families can elbow aside those without. Saving for a deposit is usually cited by first-time buyers as the biggest hurdle to home ownership. Lloyds said the average deposit put down by first-time buyers has climbed to £33,211, and a staggering £110,182 in London. The Lloyds deal requires that a member of the family – such as parent, grandparent or close relative – helps out. The bank will only grant the 100% mortgage if the family member puts a sum equal to 10% of the value of the property into a Lloyds savings account.

“The anticipated recession will be worse than the 1930s, let alone 2008.”

• UK Cannot Simply Trade On WTO Terms After No-Deal Brexit (G.)

The UK will be unable to have frictionless, tariff-free trade under World Trade Organization rules for up to seven years in the event of a no-deal Brexit, according to two leading European Union law specialists. The ensuing chaos could double food prices and plunge Britain into a recession that could last up to 30 years, claim the lawyers who acted for Gina Miller in the historic case that forced the government to seek parliament’s approval to leave the EU. It has been claimed that the UK could simply move to WTO terms if there is no deal with the EU. But Anneli Howard, a specialist in EU and competition law at Monckton Chambers and a member of the bar’s Brexit working group, believes this isn’t true. “No deal means leaving with nothing,” she said. “The anticipated recession will be worse than the 1930s, let alone 2008.

It is impossible to say how long it would go on for. Some economists say 10 years, others say the effects could be felt for 20 or even 30 years: even ardent Brexiters agree it could be decades.” The government’s own statistics have estimated that under the worst case no-deal scenario, GDP would be 10.7% lower than if the UK stays in the EU, in 15 years. There are two apparently insurmountable hurdles to the UK trading on current WTO tariffs in the event of Britain crashing out in March, said Howard. Firstly, the UK must produce its own schedule covering both services and each of the 5,000-plus product lines covered in the WTO agreement and get it agreed by all the 163 WTO states in the 32 remaining parliamentary sitting days until 29 March 2019. A number of states have already raised objections to the UK’s draft schedule: 20 over goods and three over services.

To make it more complicated, there are no “default terms” Britain can crash out on, Howard said, while at the same time, the UK has been blocked by WTO members from simply relying on the EU’s “schedule” – its existing tariffs and tariff-free trade quotas. The second hurdle is the sheer volume of domestic legislation that would need to be passed before being able to trade under WTO rules: there are nine statutes and 600 statutory instruments that would need to be adopted. The government cannot simply cut and paste the 120,000 EU statutes into UK law and then make changes to them gradually, Howard said. “The UK will need to set up new enforcement bodies and transfer new powers to regulators to create our own domestic regimes,” she said.

Fast and loose with Good Friday.

• May To Seek Binding Changes To Irish Backstop – Boris Johnson

Prime Minister Theresa May will seek legally binding changes to the Irish backstop from the European Union in an attempt to break the deadlock over Brexit, lawmaker Boris Johnson wrote in The Telegraph on Sunday, citing senior government sources. The PM is looking to change the text of the agreement to insert either a sunset clause or a mechanism for the UK to escape without reference to the EU, Boris Johnson said in The Telegraph. The contentious backstop arrangement is designed to prevent a hard border between Ireland and the UK province of Northern Ireland by requiring Britain to keep some EU rules if it was unable to agree a trade deal with the bloc. Ireland said earlier on Sunday it would not accept any changes to the backstop agreement.

The backstop will be May’s major point of contention this week. Stop her! There’s already talk of reinserting issues in the deal that have already been thrown out.

• Ireland Stresses It Will Not Yield On Brexit Backstop (G.)

Ireland has launched a last-minute effort to warn Theresa May off any attempt to unravel the backstop, two days before a crucial Commons debate that may decide the next move for the UK’s rudderless Brexit policy. Simon Coveney, the Irish foreign minister and deputy prime minister, insisted the backstop – the mechanism to ensure there will be no hard border between the Irish Republic and Northern Ireland if Britain and the EU fail to strike a free trade deal – was “part of a balanced package that isn’t going to change”. In a forceful interview, he insisted it was only part of the withdrawal agreement because of the UK’s red lines.

On Tuesday Tory Brexiters may get the chance to vote for amendments that would signal their willingness to back May’s Brexit deal subject to the backstop’s either being removed or time-limited. Ministers have not formally backed any of the anti-backstop amendments, which are incompatible with the deal that May agreed with UK leaders, but if one were to pass by a majority, she would be able to present the EU with a firm idea of what changes might get her deal through parliament – something that as yet remains unclear to Brussels. In an interview with BBC One’s The Andrew Marr Show, Coveney said he did not see the need for further compromise because “the backstop is already a compromise”.

Although originally Northern Ireland-specific, it was made UK-wide at the request of May, he said. “And the very need for the backstop in the first place was because of British red lines that they wanted to leave the customs union and single market,” he said.

Many Brits are so poor they can’t even think of stockpiling.

• UK Military Bases Stockpiling To Prepare For No-Deal Brexit (Sky)

Britain has begun stockpiling food, fuel, spare parts and ammunition at military bases in Gibraltar, Cyprus and the Falklands in case of a no-deal Brexit, Sky News has learnt. Extra supplies are also being built up at bases in the UK to reduce the risk of the armed forces running short and being unable to operate if it suddenly becomes much harder to import and export day-to-day goods after 29 March. Military chiefs have spent at least £23m on what is being described as “forward-purchased” goods, Sky News understands. The move is part of contingency planning by the government – codenamed Operation Yellowhammer – to reduce disruption if Britain departs from the European Union without an agreement, according to three defence sources.

“An army marches on its stomach. If supply lines breakdown they struggle,” one source said. Any blockage in the flow of food and other vital items to Britain’s military bases overseas could impact on operations and affect thousands of soldiers, sailors and airmen. There is a concern that supplies delivered to British troops in the rest of Europe – the UK has a permanent presence in Cyprus and a base on the British overseas territory of Gibraltar, which shares a border with Spain – could be impacted, according to the sources.

We haven’t seen any of it yet.

• Brexit Exposes Growing Fractures In UK Society (G.)

Britons have become angrier since the referendum to leave the EU, according to a survey which suggests there is widespread unhappiness about the direction in which the country is heading. 69 per cent of respondents said they felt their fellow citizens had become “angrier about politics and society” since the Brexit vote in 2016, according to the Edelman Trust Barometer, a long-established, annual survey of trust carried out across the globe. 40 per cent of people think others are now more likely to take part in violent protests, the UK results from the survey show, even though violent political protest in Britain is rare.

One person in six said they had fallen out with friends or relatives over the vote to leave the bloc, the survey found. Edelman, which said the findings exposed a “disUnited Kingdom”, found widespread concern about where the government was heading, particularly among those who voted remain, and those who backed Labour. Overall, about 65% of Britons think the country is “on the wrong track”, the survey suggests. Amongst remain voters the figure is 82%, but even among leave voters the figure is 43%. Some 60% of people who identify with the Conservatives think the country is heading in the right direction, but among Labour identifiers, the figure is just 20%.

The coal phase-out is part of a 500 billion-euro switch away from fossil fuels and toward renewables..

Compensating coal-mining regions & consumers for higher electricity prices expected to cost German taxpayer up to €78bn.

But across the border lies Italy, and next to it Greece. How are they going to pay for such a switch? And if they don’t, what’s the use of Germany doing it?

• In Germany’s Plan To Phase Out Coal, A Big Polluter Will Benefit (BBG)

A proposal to stop Germany from using coal for power generation within two decades may leave an unexpected beneficiary: The company that burns the most of the fuel. While RWE AG was quick to say it’s “too soon” to shed all fossil fuel plants by 2038, the recommendations outlined this weekend by a panel advising Chancellor Angela Merkel called for compensation for the utilities and 40 billion euros ($45.6 billion) for regions coping with the transition. Together, the measures would significantly soften the blow on industry from Merkel’s vow to scale back greenhouse gases. They show how far the government has moved away from a quick clampdown on the most polluting fossil fuel and give more certainty for the future of some of RWE’s most valuable assets.

And while the proposals could yet be watered down by politicians, they signal a longer life for many of the utility’s plants than environmentalists had hoped for. “We believe that clarity, compensation payments, and a relatively long phase-out period should trigger a re-rating for the company’s conventional power generation,” said Guido Hoymann, an analyst at the private bank B. Metzler Seel. Sohn & Co. KGaA who added RWE to a list of top 10 German stocks.

Germany’s 120 or so remaining coal and lignite plants have a combined capacity of about 45 gigawatts. That’s enough to feed 40 percent of the nation’s power demand or about 32 million homes. Germany is already falling short on its targets to slash greenhouse gas emissions and sees closing coal plants as one of the most important ways to make the reductions needed. The coal commission includes members from the main political parties, environmental groups and industry charged with developing a consensus that Germany can live with for years to come.

Debt Rattle January 7 2019

Jan 072019

January 7, 2019 Posted by Raúl Ilargi Meijer at 10:54 am Finance Tagged with: Brexit, China, dollar, euro, household debt, Irish border, Macron, May, Mody, tariffs, trade talks, yellow vests, yuan 5 Responses »

Berthe Morisot Julie and her boat 1884

• China Has a Dangerous Dollar Debt Addiction (Balding)

• China Drops Hints Of Trade Pain Ahead (BV)

• US and China To Resume Trade Talks With Both Eager For Compromise (G.)

• May To Hold Parliamentary Brexit Vote On January 15 (R.)

• Theresa May Pleads For EU To Give Ground And Rescue Brexit Deal (G.)

• Germany and Ireland Step Up Efforts To Find Brexit Border ‘Fix’ (G.)

• Average UK Unsecured Household Debt Hits Record £15,400 (G.)

• UK Car Sales Record Biggest Fall Since Financial Crisis (R.)

• France’s Macron Reeling As Tough Stance Against ‘Yellow Vests’ Backfires (R.)

• The Euro: A Mindless Idea – Ashoka Mody (Spiked)

$1.2 trillion will have to be rolled over this year. There are $90 billion of offshore renminbi deposits in Hong Kong available to buy dollars. Good luck.

• China Has a Dangerous Dollar Debt Addiction (Balding)

China’s foreign debt has been rising rapidly, and that’s becoming an increasingly big problem — for the country and, potentially, the world. Officially, China lists its outstanding external debt at $1.9 trillion. For a $13 trillion economy, that’s not a major amount. But focusing on the headline number significantly understates the underlying risks. Short-term debt accounted for 62% of the total as of September, according to official data, meaning that $1.2 trillion will have to be rolled over this year. Just as worrying is the speed of increase: Total external debt has increased 14% in the past year and 35% since the beginning of 2017. External debt is no longer a trivial slice of China’s foreign-exchange reserves, which stood at just over $3 trillion at the end of November, little changed from two years earlier. Short-term foreign debt increased to 39% of reserves in September, from 26% in March 2016.

The true picture may be more precarious. China’s external debt was estimated at between $3 trillion and $3.5 trillion by Daiwa Capital Markets in an August report. In other words, total foreign liabilities could be understated by as much as $1.5 trillion after accounting for borrowing in financial centers such as Hong Kong, New York and the Caribbean islands that isn’t included in the official tally. Circumstances aren’t moving in China’s favor. The nation’s companies rushed to borrow in dollars when there was a 3% to 5% spread between Chinese and U.S. interest rates and the yuan was expected to strengthen. Borrowing offshore was cheaper and offered the additional bonus of likely currency gains. Now, the spread in official short-term yields has shrunk to near zero and the yuan has been depreciating for most of the past year. Refinancing debt in dollars has become harder, and more risky.

Beijing’s policies have exacerbated the buildup of foreign debt. To promote Xi Jinping’s Belt and Road Initiative, the president’s landmark foreign policy endeavor, China has been borrowing dollars on international markets and lending around the world for everything from Kenyan railways to Pakistani business parks. With this year and 2020 being the peak years for repayments, China faces dollar funding pressure. To repay their dollar debts, Chinese firms will either have to draw from the central bank’s foreign-exchange reserves (a prospect Beijing is unlikely to allow) or buy dollars on international markets. This creates a new set of problems. There are only 617 billion yuan ($90 billion) of offshore renminbi deposits in Hong Kong available to buy dollars. If China was to push firms to bring debt back onshore, this would necessitate significant outflows that would push down the yuan’s value against the dollar.

More trickle down fails.

• China Drops Hints Of Trade Pain Ahead (BV)

While a cut in the reserve requirement ratio, China’s fifth in a year, was not surprising, the 100-basis point shift that started off 2019 was larger than anticipated. Of course, demand for cash tends to spike around this time of year, due to both the Chinese New Year holiday and tax deadlines, but the economy is cooling uncomfortably fast. Official figures may show growth slowed to 6.3% in the fourth quarter, Standard Chartered reckons. Friday’s announcement adds to other easing measures: People’s Bank of China officials last month announced a new policy tool to encourage lenders to disburse their cash more widely. The “targeted medium-term lending facility” will make cheaper funding available to banks that the PBOC judges to be doing their part by lending more to small companies.

It’s certainly not full-blown monetary stimulus yet; the central bank has not fired its heavier artillery, such as a benchmark rate cut. The market has also been kept waiting for reductions to cost of borrowing from the PBOC’s more important channel, its regular medium-term lending facility. But the overall direction of travel is clear, and both recent moves point to structural issues that worry pessimists: the extra liquidity pumped into the system does not seem to be translating into more loans for smaller companies, which may signal deeper problems with capital allocation, not to mention the private sector’s nervousness about politics in 2019.

All of this is bad news for Beijing’s trade negotiators, when they hold talks with U.S. counterparts face-to-face this week. As the pain mounts, they may be pushed to yield more in order to gain relief. They could, for example, agree to formally drop the controversial “Made in China 2025” plan, or to announce concrete measures to beef up enforcement of intellectual property rights. Trump said on Sunday that weakness in China’s economy will push officials to negotiate. He may be right.

Tariffs rose Jan 1. It’s getting urgent.

• US and China To Resume Trade Talks With Both Eager For Compromise (G.)

US officials arrived in China for the first face-to-face negotiations since a 90-day truce was declared in a trade war between Washington and Beijing, in the hope of ending a bruising confrontation between the world’s two largest economies. Hopes that the sixth round of negotiations between the two sides could yield a breakthrough helped Asian shares rise on Monday, combined with optimism about the state of the global economy on the back of strong US jobs figures on Friday. In Tokyo, the Nikkei soared more than 3% and there were also strong positive moves in Shanghai, Hong Kong and Sydney. US and Chinese trade representatives were set to hold talks on Monday and Tuesday.

After failing to reach an agreement in December when Donald Trump and Xi Jinping met, both sides agreed to suspend tariff increases while holding discussions on technology transfers, as well as intellectual property theft and cybersecurity. If no agreement is reached, US tariffs on $200bn of Chinese goods will increase in March to 25% from the current 10%. Trump said on Sunday that China was under pressure to do a deal amid signs of a slowdown in its economy. “I think China wants to get it resolved. Their economy’s not doing well. I think that gives them a great incentive to negotiate,” he said. “China’s slowdown is occurring across the board, affecting almost every industry and region,” said Scott Kennedy, a trade expert focused on China at the Center for Strategic and International Studies. “Resolving the trade war or at least finding some common ground with Washington will be needed to fully restore confidence,” he said.

Whatever the outcome, chaos guaranteed. You can jot down next Tuesday night in your agenda for that.

• May To Hold Parliamentary Brexit Vote On January 15 (R.)

Prime Minister Theresa May will hold a delayed parliamentary vote on her Brexit deal on Tuesday, January 15, the BBC reported on Monday, citing government sources. May was forced to pull the vote on her deal in December after she said it would be defeated by a large majority. The government had previously said the vote would be held in the week of January 14. May said on Sunday that Britain would be in uncharted territory if her Brexit deal is rejected by parliament, despite little sign that she has won over sceptical lawmakers.

In case you were still wondering who will be blamed.

• Theresa May Pleads For EU To Give Ground And Rescue Brexit Deal (G.)

Theresa May is preparing to make another desperate plea to EU leaders to offer a concession on the Irish backstop as she attempts to win over Brexiters who have vowed to vote down the government’s deal. The prime minister on Sunday promised to hold the meaningful vote in parliament in the week beginning 14 January despite growing opposition from Conservative backbenchers and the Democratic Unionist party, whose votes are required to push the deal through parliament. As MPs prepare to return to Westminster with the crucial Commons vote looming on the withdrawal agreement, Downing Street insisted that new compromises could still be won from Europe that would ensure the safe passage of May’s plan.

The hope of new developments came as opposition to the prime minister’s deal hardened. The hurdles facing May include: • Brexiters say the government faces a disaster if it fails to ditch the current deal, with DUP deputy leader Nigel Dodds describing the Irish backstop as “toxic”. • EU sources say talks to be held in Dublin on Tuesday between Leo Varadkar and Germany’s foreign minister, Heiko Maas, will not seek to reopen negotiations over the 585-page withdrawal agreement. • Senior MPs including Yvette Cooper and Nicky Morgan are launching a parliamentary campaign to rewrite government legislation to block a no-deal Brexit. • Chris Patten, the former Conservative Party chairman, called for a second referendum on the UK’s decision to leave the EU. • More than 200 MPs have signed a letter calling for Theresa May to rule out a no-deal Brexit. Tory ex-minister Dame Caroline Spelman, who organised the letter with Labour’s Jack Dromey, said the group had been invited to see the prime minister on Tuesday.

In an interview on Sunday, May said the vote, which was due to be held last month and postponed, would go ahead next week, as she sought further clarification from the EU to address MPs’ concerns. She also said she would look at giving parliament a greater say in how the UK’s future relationship would be negotiated, but refused to say exactly what that might be. Asked if there had been any changes she could offer to backbenchers who were expected to vote down her deal, she told BBC1’s Andrew Marr Show: “What we will be setting out over the next few days are assurances in three areas: first are measures specific to Northern Ireland; the second is a greater role for parliament as we take these negotiations forward into the next stage for our future relationship; and third – and we are still working on this – is further assurances from the European Union to address the issues that have been raised.”

Whitehall sources insisted that a compromise could still be found with the EU and that further planned announcements will be made this week that would win over MPs opposed to the deal. “We will be working flat out. There will be further contacts with the EU leaders. The issue of the backstop is not yet over,” the source said.

“The EU cannot now give another concession ahead of the vote because if the deal isn’t ratified, it means any new concessions will simply be banked again to no benefit at all. It would be pointless.”

• Germany and Ireland Step Up Efforts To Find Brexit Border ‘Fix’ (G.)

Germany’s foreign affairs minister is to fly to Dublin on Tuesday for Brexit talks as relations with Ireland intensify in an attempt to find a “fix” that will help Theresa May get the EU withdrawal agreement ratified. Heiko Maas will address an annual gathering of Ireland’s global diplomatic corps and take part in an unofficial fourth round of talks between Ireland and German leaders since Thursday. He will make the address in English, with a large German media contingent accredited, a reflection of how significant his speech is deemed back in Berlin. Last week the taoiseach, Leo Varadkar, had a lengthy telephone call with Angela Merkel. He then flew to Munich to address a meeting of her coalition partners, the CSU, and on Friday met the Germany chancellor’s successor as CDU leader, Annegret Kramp-Karrenbauer, for discussions on Brexit and the future of Europe.

The emerging Irish-German nexus on the Irish border backstop “fix” is being seen as significant in Irish political circles, where people also point to the fact that Varadkar speaks German and has a good working relationship with Merkel. They point out it was Merkel, not the taoiseach, who requested the phone call with Varadkar last Thursday. The talks lasted 40 minutes and were, according to Varadkar, “an opportunity to kind of brainstorm a bit as to what we could do to assist prime minister Theresa May in securing ratification of the withdrawal agreement”. But informed EU sources say Brexiters should not raise their hopes of a reopening of negotiations. The “fix” will be further details in the political declaration on the future relationship and not the 585-page withdrawal agreement. “That is locked,” said one EU source.

There is deep frustration that the British cannot see how far the EU went to break the impasse on the Irish border talks, yielding to May’s demands for a UK-wide customs arrangement. One EU source said: “The EU was totally opposed to this in 2017 and again in March and June in 2018. It then emerged out of the tunnel in the autumn as the solution, but the Brexiters did not see it for what it was – a major concession. [..] “They are now looking for more concessions, but they just can’t be given. The Brits banked this major concession and just did nothing with it. People can’t understand why it wasn’t sold as a victory for May. “The EU cannot now give another concession ahead of the vote because if the deal isn’t ratified, it means any new concessions will simply be banked again to no benefit at all. It would be pointless.”

That’s about $20,000. Not including mortgages and student loans.

• Average UK Unsecured Household Debt Hits Record £15,400 (G.)

Britain’s household debt mountain has reached a new peak, with UK homes now owing an average of £15,385 to credit card firms, banks and other lenders, according to the TUC. The trade union body said household debt rose sharply in 2018 as years of austerity and wage stagnation forced households to increase their borrowing. The TUC said in its annual report on the nation’s finances that the amounts owed by British households rose to a combined £428bn in the third quarter of 2018. Each household owed £886 more than it did 12 months previously, it said. The figures do not include outstanding mortgage debts but do include student loans.

The level of unsecured debt as a share of household income is now 30.4%, the highest level it has ever been at. It is well above the £286bn peak in 2008 before the financial crisis, the TUC said. That figure also included student loans, but tuition fees then were £3,000 a year compared with up to £9,250 now. [..] The TUC general secretary, Frances O’Grady, said: “Household debt is at crisis level. Years of austerity and wage stagnation has pushed millions of families deep into the red. The government is skating on thin ice by relying on household debt to drive growth. A strong economy needs people spending wages, not credit cards and loans.”

They’re going to stay home?!

• UK Car Sales Record Biggest Fall Since Financial Crisis (R.)

British new car sales in 2018 fell at their fastest rate since the global financial crisis a decade ago, hit by a slump in demand for diesel, stricter emissions rules and waning consumer confidence due to Brexit, according to an industry body. Demand dropped by nearly 7% last year to 2.37 million vehicles, the largest fall since registrations nosedived 11.3% in 2008, preliminary data from the Society of Motor Manufacturers and Traders (SMMT) showed. A nearly 30% drop in demand for diesel was the most significant factor in the decline. Diesel has been pummelled since the Volkswagen emissions cheating scandal of 2015, prompting a crackdown and higher levies.

But the industry also warned that Britain’s departure from the European Union due at the end of March risks the future of a sector which employs over 850,000 people and has been one of Britain’s few manufacturing success stories since the 1980s. “It’s still hard to see any upside to Brexit,” said SMMT Chief Executive Mike Hawes. “Everyone recognises that Brexit is an existential threat to the UK automotive industry and we hope a practical solution will prevail,” he said, calling for lawmakers to back Prime Minister Theresa May’s deal to guarantee a transition period. [..] After record highs in 2015 and 2016, demand fell in 2017 and some analysts see car demand as a leading indicator which could be a harbinger for future economic performance. Britain’s economy slowed to a crawl at the end of 2018, the housing market is stalling and lending to consumers growing at its slowest pace in nearly four years, according to data released on Friday.

Macron is not just a fool himself, he’s surrounded by them as well. His spokesman after fleeing his office out of a back door as protesters invaded the courtyard and smashed up several cars said: “It wasn’t me who was attacked.” “It was the Republic.”.

Because the government is the Republic. The population is not.

• France’s Macron Reeling As Tough Stance Against ‘Yellow Vests’ Backfires (R.)

Emmanuel Macron intended to start the new year on the offensive against the ‘yellow vest’ protesters. Instead, the French president is reeling from more violent street demonstrations. What began as a grassroots rebellion against diesel taxes and the high cost of living has morphed into something more perilous for Macron – an assault on his presidency and French institutions. The anti-government protesters on Saturday used a forklift truck to force their way into a government ministry compound, torched cars near the Champs Elysees and in one violent skirmish on a bridge over the Seine punched and kicked riot police officers to the ground.

The French authorities’ struggle to maintain order during the weekend protests raises questions not just over policing tactics but also over how Macron responds, as he prepares to bring in stricter rules for unemployment benefits and cut thousands of public sector jobs. On Sunday evening, Macron wrote on Twitter: “Once again, the Republic was attacked with extreme violence – its guardians, its representatives, its symbols.” His administration had hardened its stance against the yellow vests after the protest movement appeared to have lost momentum over the Christmas holidays.

The government would not relent in its pursuit of reforms to reshape the economy, government spokesman Benjamin Griveaux said on Friday, branding the remaining protesters agitators seeking to overthrow the government. Twenty-four hours later, he was fleeing his office out of a back door as protesters invaded the courtyard and smashed up several cars. “It wasn’t me who was attacked,” he later said. “It was the Republic.”

“There is a Euro, which is a single currency in an incomplete monetary union, with a set of fiscal rules that are evidently economically illiterate..”

• The Euro: A Mindless Idea – Ashoka Mody (Spiked)

[..] most serious of all is the notion of common economic development as a basis for Europe. It was briefly true after the Treaty of Rome in 1957, which opened up the borders, but the momentum ran out within two decades. You open borders, but once they’re open, there’s not a lot more you can do. Even the gains from the so-called Single Market are very limited beyond a certain point. Every economist understands that. On the Euro, there was never any question that it was a bad idea. Nicholas Kaldor, an economist at Cambridge University, wrote in March 1971 that a single currency was a terrible idea, both as economics and as politics. And Kaldor has been proven right time and again.

But the entire European establishment just ignores every subsequent warning from well-regarded economists, and produces defensive counternarratives. For example, I often hear that Europe needs fixed exchange rates in order to have a Single Market. Why? Germany is trading a lot with Poland, Hungary and the Czech Republic, which are in the Single Market, but have different currencies. These fluctuate, but the trade continues apace. You don’t need a single currency for a Single Market.

spiked: When did your critique of the European project emerge? Was it during your involvement in the Irish bailout? Mody: When I finished at the IMF I planned to write a book on the Euro crisis. And I began writing it as an IMF economist would – what happened before the crash, the bubble, the bubble bursting, the panic, the fact it wasn’t well managed, and so on. But I soon realised that something wasn’t right here. And so I spent two years tracing the history of the Euro, and asking the question: what brought the Euro into existence in its current form? You see, it is not just that there is a Euro. There is a Euro, which is a single currency in an incomplete monetary union, with a set of fiscal rules that are evidently economically illiterate – and nobody questions the fact that they are economically illiterate, that they lack a necessary fiscal backstop and the necessary fiscal union. So why does it exist?

Debt Rattle November 14 2018

Nov 142018

November 14, 2018 Posted by Raúl Ilargi Meijer at 10:15 am Finance Tagged with: Amazon, Brexit, depression, Facebook, fertility, hate speech, IMF, Khashoggi, Lewinsky, Merkel, oil, Putin, yuan 4 Responses »

Pablo Picasso Still life 1917

• Britiain, EU Agree on Brexit Plan (G.)

• France and Facebook Announce Partnership Against Online Hate Speech (Pol.eu)

• Oil’s Unprecedented Slide Accelerates, Capitulates To Darkening Outlook (BBG)

• Major Markets Are All Flashing Warning Signs (Roberts)

• Trump’s Tariff Battle With China Spurs Record Dollar-Yuan Trading (CNBC)

• Goldman Sachs Is Implicated In History’s Largest Financial Con (Ind.)

• IMF Says Governments Could Set Up Their Own Cryptocurrencies (G.)

• Amazon’s ‘HQ2’ Headquarters Will Cost US Taxpayers $2 Billion (R.)

• Decoding The Hypersonic Putin On A Day Of Remembrance (Escobar)

• Angela Merkel Calls For Creation Of ‘Real, True’ EU Army (Ind.)

• Saudi ‘Kill Team’s’ Luggage Contained Syringes, Defibrillators, Scissors (AFP)

• Who Gets to Live in Victimville? (Monics Lewinsky)

• Social Media Increases Depression And Loneliness (TI)

• Heatwaves Can ‘Wipe Out’ Male Insect Fertility (G.)

At sort of the last moment, the long awaited deal is announced. Alas, all it really does is push forward any awkward decisions- and there are many. And even that can be voted down by the Cabinet, or parliament, or some other party involved, like the DUP. One thing seems certain: Theresa May will no longer be in charge when actual decisions are made. So why would she care? It’s about saving face by now.

• Britiain, EU Agree on Brexit Plan (G.)

Theresa May summoned her cabinet to an emergency meeting on Wednesday afternoon to sign off her long awaited final Brexit deal, prompting hard-Brexit Tories to call for senior ministers to stand up and block it. The critical meeting is the culmination of months of negotiations and will see May’s senior ministers consider whether they can personally endorse the agreement that the prime minister has been able to reach. Ministers were summoned to No 10 in the early evening and some met individually with May or her chief of staff, Gavin Barwell. They were given the chance to read the key documents, although they were not trusted to take any papers home.

Further one-on-one meetings were expected to take place on Wednesday. “Cabinet will meet at 2pm tomorrow to consider the draft agreement the negotiating teams have reached in Brussels, and to decide on next steps,” a No 10 spokesman confirmed. “Cabinet ministers have been invited to read documentation ahead of that meeting.” Key elements of the deal began to leak in the early evening. The UK was understood to have agreed that an independent arbitration committee will judge when a UK-wide customs backstop could be terminated, comprising an equal number of British and EU representatives plus an independent element.

There will be a review in July 2020, Brussels sources added, six months before the end of the transition period, at which it will be determined if the UK is ready to move to a free trade deal; transfer to the backstop; or extend the transition period, possibly by a year to 2021.

Scary. The leader of one political party seeks to decide with Silicon Valley, what constitutes hate speech. The main potential target of this is Marine le Pen, who’s already had her share of hate accusations. Thing is, Macron has fallen behind her in the -EU election- polls, his popularity has fallen to 23%. And now Zuckerberg gives him the tools to get rid of Le Pen.

• France and Facebook Announce Partnership Against Online Hate Speech (Pol.eu)

Emmanuel Macron just “friended” Mark Zuckerberg. The French president announced on Monday a six-month partnership with Facebook aimed at figuring out how the European country should police hate speech on the social network. As part of the cooperation — the first time that Facebook has teamed up with national politicians to hammer out such a contentious issue — both sides plan to meet regularly between now and May, when the European election is due to be held. They will focus on how the French government and Facebook can work together to remove harmful content from across the digital platform, without specifying the outcome of their work or if it would result in binding regulation.

The partnership, which will involve meetings in Paris, Dublin and California, may be broadened out to cover other as yet unnamed areas after six months. A French official who asked not to be named called the partnership an “unprecedented experiment” that would grant authorities insight into Facebook’s processes to formulate recommendations that are “concrete and operational.” The social networking giant is now trying to lobby national lawmakers on the perceived dangers of regulating the internet. “We are giving blind faith to our daily digital tools,” Macron told an audience in Paris. “Today, when I see our democracy, internet is much better used by the extremes … or by terrorist groups.”

Feeding on itself by now?!

• Oil’s Unprecedented Slide Accelerates, Capitulates To Darkening Outlook (BBG)

Oil’s unprecedented decline deepened as investors fled a market hammered by swelling excess supplies, a darkening demand outlook and U.S. President Donald Trump’s Twitter critique of the world’s biggest crude exporter. Futures plunged 7.1 per cent in New York on Tuesday for the biggest one-day drop in three years. OPEC’s dire forecast for 2019 demand came at a time of steadily rising American production and stockpiles. Trump admonished Saudi Arabia for planning to curb output and lamented prices that settled below US$56 a barrel for the first time in a year. “This tweet certainly did not help prices,” said Warren Patterson, a senior commodities strategist at ING Bank.

“Given the growing global surplus over the first half of 2019, OPEC will likely try to ignore President Trump’s call as much as possible.” West Texas Intermediate futures have fallen for a record 12 sessions on fears that a supply glut similar to the price-killing surplus of 2014 is redeveloping. In London, Brent futures have declined in 11 of the past 12 sessions. Money managers’ combined bullish positions in WTI and Brent sank to the lowest in 14 months as of Nov. 6, Commodity Futures Trading Commission data show, as long positions shrank and shorts increased.

“Today’s move is just capitulation,” said Nick Gentile, managing partner of commodity trading advisor NickJen Capital Management & Consulting LLC in New York. “You’re getting a combination of the systematic CTAs, the trend following guys, adding to the shorts and global macro guys liquidating longs.” WTI for December delivery dropped US$4.24 to end the session at US$55.69 a barrel on the New York Mercantile Exchange. Total volume traded Tuesday was about 90 per cent above the 100-day average.

Master graphmaker Lance Roberts has some more. I picked a few.

• Major Markets Are All Flashing Warning Signs (Roberts)

[..] the failure of the market to hold the 200-dma also increases the downside risk of the market currently. There is an important point here to be made about “bull markets” and “bear markets. While there is no “official” definition of what constitutes a “bull” or “bear” market, the generally accepted definition is a decline of 20% in the market. However, since I really don’t want to subject my clients to a loss of 20% in their portfolios, I would suggest a different definition based on the “trend” of the market as a whole. As shown in the chart below: • If prices are generally “trending higher” then such is considered a “bull market.” • A “bear market” is when the “trend” changes from positive to negative.

[..] what is happening domestically should not be a surprise. The rest of the world markets have already confirmed bear market trends and continue to trade below their long-term moving averages. (The very definition of a bear market.) While it has been believed the U.S. can “decouple” from the rest of the world, such is not likely the case. The pressure on global markets is a reflection of a slowing global economy which will ultimately find its way back to the U.S.

(Note: we closed all international and emerging market positions in our portfolios at the beginning of this year.) Just as a side note, China has been in a massive bear market trend since 2015 and is down nearly 50% from its previous highs.

China’s foreign reserves are under severe pressure.

• Trump’s Tariff Battle With China Spurs Record Dollar-Yuan Trading (CNBC)

Market uncertainty tied to the ongoing U.S.-China trade war has spurred more transactions than ever before between the American dollar and the Chinese yuan in recent months. Much of that volume comes as businesses and investors with exposure to the Chinese market are looking to hedge their foreign exchange risk. Many of them are looking to buy into the strengthening dollar, and that’s stoked speculation that Chinese authorities are intervening in the market to defend their currency, boosting trading volumes to new highs in the process. On Tuesday, currency traders told Reuters major state-owned banks were selling dollars to defend the Chinese yuan, as the greenback climbed to a 16-month peak against a basket for currencies.

Most trading between the two currencies takes place on the spot market, where dollars and yuan change hands as soon as a deal is done. That sort of market has seen volumes surge this year for the currency pair. But futures trading — where the transaction is agreed to take place at a later date at a certain price — is also increasingly catching dollar-yuan traders’ interests, according to Benjamin Lu, an investment analyst with Singapore brokerage Phillip Futures. [..] ups-and-downs in the foreign exchange market have prompted a Singapore-based privately backed Chinese exchange to launch a new dollar-offshore yuan futures contract. “Nobody knows how the trade war will end. There’s a lot of fear and panic in the financial market and worries about trade,” said Eugene Zhu, CEO of the Chinese-backed Asia Pacific Exchange.

Malaysia should call Blankfein to testify in court. He knew, he was there. But Goldman is far more likely to just pay some huge fine.

• Goldman Sachs Is Implicated In History’s Largest Financial Con (Ind.)

Even by Wall Street standards of gouging customers this was one hell of a skim. In 2012 and 2013, the Malaysian government was raising $6.5bn (£5bn) from investors to establish a sovereign wealth fund and finance various domestic infrastructure investment projects. And the cut for Goldman Sachs – the most prestigious investment bank in the world – for arranging the fundraising from the global capital markets? Ten per cent, or $600m. Now we can have a guess as to why the Malaysian authorities were so insouciant about those extortionate fundraising costs: because they themselves were, apparently, going to loot the pot in one of the biggest frauds in history. Around half of the fund has gone missing.

According to the US Justice Department a fair amount has been pumped into luxury American real estate and shady art auction bids. Appropriately, some went into investing in Martin Scorsese’s The Wolf of Wall Street. At one stage $680m mysteriously appeared in the bank account of the former Malaysian prime minister, Najib Razak, who chaired the 1MDB advisory board, and who is now charged in his own country with corruption. Malaysian politicians, officials and financiers had effectively bought Goldman Sachs’ blue chip reputation to pull in naive investors to the “1MDB” state investment fund. Ten per cent probably seemed a reasonable cut in the circumstances. The question is: what did Goldman know about the theft?

The bank claims today that it was completely oblivious. But the senior Goldman banker on the ground in Malaysia, Tim Leissner, certainly knew. He pleaded guilty in New York to financial crimes related to 1MDB last week, including bribery of officials to ensure Goldman was the sole fundraiser. What’s even more problematic for the bank is that Leissner told the court there was a “culture” at Goldman Sachs of bypassing internal compliance. That’s backed up by US prosecutors, who say Goldman’s business culture in the region was “highly focused on consummating deals, at times prioritising this goal ahead of the proper operation of its compliance functions”.

And then let the IMF control them all.

• IMF Says Governments Could Set Up Their Own Cryptocurrencies (G.)

Governments should consider offering their own cryptocurrencies to prevent the systems becoming havens for fraudsters and money launderers, Christine Lagarde, head of the International Monetary Fund said referring to the fast-growing fintech industry. Lagarde said central banks had to work quickly to establish digital cash for burgeoning networks of private financial transactions or risk their mushrooming into trading networks that were inherently unstable. A system regulated by central banks could become the basis for a rapid expansion of financial services to developing world countries and the poorest people in western societies without the risks associated with privately managed digital currencies, she said.

[..] Speaking at a fintech conference in Singapore, Lagarde said central banks would take over the processing of transactions while private-sector providers offered innovative services to customers. “The advantage is clear. Your payment would be immediate, safe, cheap, and potentially semi-anonymous. And central banks would retain a sure footing in payments. In addition, they would offer a more level playing field for competition, and a platform for innovation. Meanwhile your bank or fellow entrepreneurs would have ensured a friendly user experience based on the latest technologies,. “Putting it another way. The central bank focuses on its comparative advantage – back-end settlement – and financial institutions and start-ups are free to focus on what they do best – client interface and innovation. This is public-private partnership at its best.”

Because Bezos is barely scraping by. Everywhere you look, Amazon gets rewarded for destroying communities.

• Amazon’s ‘HQ2’ Headquarters Will Cost US Taxpayers $2 Billion (R.)

Amazon.com picked America’s financial and political capitals for massive new offices on Tuesday, branching out from its home base in Seattle with plans to create more than 25,000 jobs in both New York City and an area just outside Washington, D.C. The world’s largest online retailer plans to spend $5 billion on the two new developments in Long Island City and Arlington, Virginia, and expects to get more than $2 billion in tax credits and incentives with plans to apply for more. The prize, which Amazon called HQ2, attracted hundreds of proposals from across North America in a year-long bidding war that garnered widespread publicity for the company. Amazon ended the frenzy by dividing the spoils between the two most powerful East Coast U.S. cities and offering a consolation prize of a 5,000-person center in Nashville, Tennessee, focused on technology and management for retail operations.

[..] At the outset of its search last year, Amazon said it was looking for a business-friendly environment. The company said it will receive performance-based incentives of $1.525 billion from the state of New York, including an average $48,000 for each job it creates. It can also apply for other tax incentives, such as New York City’s Relocation and Employment Assistance Program that offers tax breaks potentially worth $900 million over 12 years. What benefit the company would actually get was unclear. In Virginia, Amazon will receive performance-based incentives of $573 million, including an average $22,000 for each job it creates. These rewards come on top of $1.6 billion in subsidies Amazon has received across the United States since 2000, according to a database from watchdog Good Jobs First.

“We don’t have any defense that could deny the employment of such a weapon against us.”

• Decoding The Hypersonic Putin On A Day Of Remembrance (Escobar)

A battle of ideas now rages across Europe, epitomized by the clash between the globalist Macron and populism icon Matteo Salvini, the Italian interior minister. Salvini abhors the Brussels system. Macron is stepping up his defense of a “sovereign Europe.” And much to the horror of the US establishment, Macron proposes a real “European army” capable of autonomous self-defense side by side with a “real security dialogue with Russia.” Yet all these “strategic autonomy” ideals collapse when you must share the stage, live, with the undisputed stars of the global show: President Donald Trump and President Vladimir Putin.

So the optics in Paris were not exactly of a Yalta 2.0 conference. There were no holds barred to keep Trump and Putin apart. Seating arrangements featured, from left to right, Trump, Chancellor Angela Merkel, Macron, his wife Brigitte and Putin. Neither Trump nor Putin, for different reasons, took part in a “walking in the rain” stunt evoking peace. And yet they connected. Sir Peter Cosgrove, the governor general of Australia, confirmed that Trump and Putin, at a working lunch, had a “lively and friendly” conversation for at least half an hour. No one better than Putin himself to reveal, even indirectly, what they really talked about. Three themes are absolutely key.

[..] Vast sectors of the US Deep State are in denial, but Putin may have been able to impress on Trump the necessity of serious dialogue due to an absolutely key vector: the Avangard. The Avangard is a Russian hypersonic glide vehicle capable of flying over Mach 20 – 24,700km/h, or 4 miles per second – and one of the game-changing Russian weapons Putin announced at his ground-breaking March 1 speech. The Avangard has been in the production assembly line since the summer of 2018, and is due to become operational in the southern Urals by the end of next year or early 2019.

In the near future, the Avangard may be launched by the formidable Sarmat RS-28 intercontinental ballistic missile and reach Washington in a mere 15 minutes, flying in a cloud of plasma “like a meteorite” – even if the launch is from Russian territory. Serial production of Sarmat ICBMs starts in 2021. The Avangard simply cannot be intercepted by any existing system on the planet – and the US knows it. Here is General John Hyten, head of US Strategic Command: “We don’t have any defense that could deny the employment of such a weapon against us.”

“This is one of the scariest speeches I have heard as an MEP in my nine years. Merkel is an out-and-out European federalist and we should not be pandering to her as if she is on our side. She is on the side of the superstate.”

• Angela Merkel Calls For Creation Of ‘Real, True’ EU Army (Ind.)

Angela Merkel has called for the creation of a “real, true” European army, echoing a similar call by her French counterpart. The German chancellor’s backing for the force comes amid a spat with US president Donald Trump, who took offence to a suggestion by Emmanuel Macron that such an army could ensure Europe’s security in the shadow of the United States. Ms Merkel endorsed the creation of the army while addressing MEPs at the European parliament in Strasbourg. “We should work on a vision of one day establishing a real, true European army,” Ms Merkel said. The French president made his call during a radio interview last week: “We have to protect ourselves with respect to China, Russia and even the United States of America.

“We will not protect the Europeans unless we decide to have a true European army.” He added: “When I see President Trump announcing that he’s quitting a major disarmament treaty which was formed after the 1980s Euro-missile crisis that hit Europe, who is the main victim? Europe and its security.” [..] Ms Merkel’s intervention is significant because France has historically been the strongest and most vocal proponent of an EU army, with its neighbour tentatively endorsing proposals for a joint command structure for military interventions. Eurosceptics reacted angrily to the speech. Conservative MEP David Campbell Bannerman said: “This is one of the scariest speeches I have heard as an MEP in my nine years. Merkel is an out-and-out European federalist and we should not be pandering to her as if she is on our side. She is on the side of the superstate.”

Bone saw was a local purchase. As was the acid.

• Saudi ‘Kill Team’s’ Luggage Contained Syringes, Defibrillators, Scissors (AFP)

Luggage carried by a 15-member Saudi team dispatched to Istanbul included scissors, defibrillators and syringes that may have been used against journalist Jamal Khashoggi, who was murdered in the Saudi consulate, a pro-government Turkish daily said Tuesday. X-ray images of the luggage were published in the Sabah newspaper as the New York Times reported that a member of the team at the consulate had told a superior by phone to “tell your boss”, suspected to be Crown Prince Mohammed bin Salman, that the operation was accomplished. Turkish media has published gruesome details of the murder of 59-year-old Khashoggi who according to a Turkish prosecutor was strangled and dismembered soon after he entered the Istanbul consulate on October 2.

After repeated denials, Saudi Arabia finally admitted Khashoggi, a Washington Post columnist and Riyadh critic, had been murdered at the mission in a “rogue” operation. Turkish President Recep Tayyip Erdogan has said the 15-member Saudi team travelled from Riyadh to Istanbul to kill Khashoggi. The luggage carried by the team was loaded into two planes that left for Riyadh at 1520 GMT and 1946 GMT on October 2, Sabah newspaper said. The luggage contained 10 phones, five walkie-talkies, intercoms, two syringes, two defibrillators, a jamming device, staplers, and scissors, the paper reported. [..] Khashoggi’s body has never been found, but Sabah reported on Saturday that his killers poured his remains down the drain after dissolving them in acid.

“..with the false narrative that my mouth was merely a receptacle for a powerful man’s desire”

• Who Gets to Live in Victimville? (Monics Lewinsky)

The process of this docuseries led me to new rooms of shame that I still needed to explore, and delivered me to Grief’s doorstep. Grief for the pain I caused others. Grief for the broken young woman I had been before and during my time in D.C., and the shame I still felt around that. Grief for having been betrayed first by someone I thought was my friend, and then by a man I thought had cared for me. Grief for the years and years lost, being seen only as “That Woman”—saddled, as a young woman, with the false narrative that my mouth was merely a receptacle for a powerful man’s desire. (You can imagine how those constructs impacted my personal and professional life.)

Grief for a relationship that had no normal closure, and instead was slowly dismantled by two decades of Bill Clinton’s behavior that eventually (eventually!) helped me understand how, at 22, I took the small, narrow sliver of the man I knew and mistook it for the whole. The process became meta. As the project re-examined the narratives, both personal and political, surrounding the events of 1998, so did I. I revisited then-President Bill Clinton’s famous finger-wagging Oval Office interview from early 1998, in which I was anointed “That Woman,” and was transported to my apartment in the Watergate apartment complex.

Sitting on the edge of my grandma’s bed and watching it unfold on TV, 24-year-old me was scared and hurt, but also happy that he was denying our relationship, because I didn’t want him to have to resign. (“I didn’t want to be responsible for that,” I thought at the time, absolving anyone else of responsibility.) Forty-five-year-old me sees that footage very differently. I see a sports coach signposting the playbook for the big game. Instead of backing down amid the swirling scandal and telling the truth, Bill instead threw down the gauntlet that day in the Oval Office: “I did not have sexual relations with that woman, Miss Lewinsky.” With that, the demonization of Monica Lewinsky began. As it so often does, power throws a protective cape around the shoulders of the man, and he dictates the spin by denigrating the less powerful woman.

Just like alcohol and cocaine do.

• Social Media Increases Depression And Loneliness (TI)

Ever since sites like Facebook and Instagram became part of daily life, scientists have wondered whether they contribute to mental health problems. In fact, research has hinted at a connection between social media use and depression for several years. A new study, published in the Journal of Social and Clinical Psychology, has added more evidence to the theory. [..] “Here’s the bottom line,” said Melissa G. Hunt, a psychologist at the University of Pennsylvania and lead author of the study. “Using less social media than you normally would leads to significant decreases in both depression and loneliness. These effects are particularly pronounced for folks who were more depressed when they came into the study.”

She added 18-to-22-year-olds shouldn’t stop using social media altogether, but cutting down might be beneficial. “It is a little ironic that reducing your use of social media actually makes you feel less lonely,” she said. “Some of the existing literature on social media suggests there’s an enormous amount of social comparison that happens. When you look at other people’s lives, particularly on Instagram, it’s easy to conclude that everyone else’s life is cooler or better than yours.”

Mammals too. Semen is temperature sensitive.

• Heatwaves Can ‘Wipe Out’ Male Insect Fertility (G.)

Heatwaves severely damage the fertility of male beetles and consecutive hot spells leave them virtually sterilised, according to research. Global warming is making heatwaves more common and wildlife is being annihilated, and the study may reveal a way in which these two trends are linked. The scientists behind the findings said there could also be some relevance for humans: the sperm counts of western men have halved in the last 40 years. Researchers studied beetles because their 400,000 species represent about a quarter of all known species. Insect populations are plunging worldwide as temperatures rise, falling by about 80% in 30 years in Puerto Rico’s rainforest and by 75% in German nature reserves.

Insects are such an integral part of life, as pollinators and prey, that scientists say their decline could lead to “ecological Armageddon”. Little is known about the precise causes of the decline, though climate change, habitat destruction and global use of pesticides are considered probable factors. The research, published in the Nature Communications journal, found that exposing beetles to a five-day heatwave in the laboratory reduced sperm production by three-quarters; females were unaffected. “Beetles are thought to constitute a quarter of biodiversity, so these results are very important for understanding how species react to climate change,” said Kris Sales, at the University of East Anglia, who led the work.

Other research has shown that heat can damage male reproduction in humans as well as cows, sheep and other mammals. “There could be relevance for human fertility,” said Prof Matt Gage, co-leader of the UEA research group. “The paradox is that one of the reasons the climate is warming up and we are having more heatwaves is there are too many humans. So maybe this is a leveller.” Stuart Wigby, of the University of Oxford, who was not involved in the study, said: “Given what we already know about the generality of the sensitivity of sperm to heat, there is every reason to expect that similar effects would be seen in other insects and also in mammals including humans.”

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