en Plus ça change ? Oui ou Non? <p>Plus ça change ? No way! Up is now down. Black is now white. (Okay, black is still black; let’s not go overboard.) White, however, is whiter than ever, thanks in part to Darth Bannon and Stephen Miller-Himmler. The sans culottes now love gilded haute couture breeches. That Motel 6 thing called Versaille isn’t anywhere near ornate enough! Trumpistan makes Camelot seem like a hopeless rundown ghetto.</p> <p>One really needs a scorecard to make sense of the demographic shift---(a microcosm of which exists in the form of the vocal membership of Zerohedge)---that is Trump’s base. In a few months things have flipped 180 degrees. The head spins! Libertarians have become Statists, Anarcho-Capitalists have become jackbooted Stormtroopers. Autocracy is now the people’s best friend. The Constitution has become a Tweet, limited to around 140 characters and containing only a single Amendment (the 2nd), and all that other fluff that deals with stuff like speech and the press are Fake Rights. Superfluous nonsense! Dishonest!</p> <p>A while back, the threat of terrorism was ‘made up’, the odds less than a lightning strike. Today, only the Emperor can keep folks safe from the Muzzies, by refusing US entry to Sudanese basketball players and Somali auto workers headed to Detroit. Saudis and Emiratis are okay, as are Egyptians, however, because they have the good sense to let Trump build hotels and golf courses, or borrow a few hundred million dollars to fund his businesses. Maybe those three nations get a pass owing to confusion as to whether 9-11 was really a terror attack by Saudis, Emiratis and an Egyptian, or an inside job false flag limited hangout psy-op. So much cognitive dissonance! They was framed, I tell ya! Speaking of Truthers, and knowing how much faith Trump puts in alternative news, even Alex Jones and Infowars are members of the White House Press Corps, no doubt taking the seat once held by the dangerous Arab Helen Thomas.</p> <p>One wonders about things like Chemtrails in the now-welcome New World Order, because everybody’s newest favorite love muffin has his own 757, and he MUST have ordered it with the Chemtrail option installed. He is a billionaire, after all. A billionaire has to be an elite, and elites get the inside track on all the goodies. Maybe Chemtrails are not mind control substances after all, but actually a special kind of vitamin, good for young and old alike, so there’s nothing to fear? Trump would tell us, no doubt. He’s looking out for us. Our Father, who art in Mar-a-Lago, awesome be thy name!</p> <p>It’s odd that just last year government needed to be as small as possible, if it even needed to exist at all, with sufficient checks and balances to keep everybody slightly off guard. Now, the Judicial and Legislative Branches are impediments to the Dictator’s sole authority. Get rid of them! It’s one man rule, an all-knowing autocrat who can issue endless Proclamations, totally obviating Congress and the ‘so-called’ courts. A Medici Pope was more fallible than Tsar Trumpski.</p> <p>Didn’t TV used to be bad? Many used to express great pride not owning one of those silly things. Now that we have a Game Show Host as POTUS, however, TV might be making a comeback. Maybe we should load up on Best Buy stock.</p> <p>It’s not all bad, however. Jews are suddenly okay again, and if Donny Boo Boo wants to move the US Embassy to Jerusalem, damn if he shouldn’t do it. Bibi Netanyahu, once perhaps the third most hated man on Earth (after Soros and Obama) is Trump’s good buddy now, and Trump’s Orthodox Jewish son-in-law, another real estate developer, is going to finally put an end to a 2000- year old feud between Arabs and Jews. In Trumpistan everything is possible. Personally, I’m happy the Jewish people are finally getting a break, as they traditionally catch the blame for everyone else’s failures. Now we can comfortably just blame Muslims and Mexicans. </p> <p>Most surprising, perhaps, is that Goldman Sachs has gone from being the devil incarnate to actually doing God’s work the way Lord (sic) Blankfein once quipped, since Trump sprinkled his government with lots of former Goldman partners, from Gary Cohn to Steve Mnuchin to Steve Bannon. Billionaires and rich people, too, are now good, even if they inherited their wealth like Betsy DeVos, whose family ran a sort-of pyramid scheme called Amway. It’s all good. It seems like just yesterday, however, that the gang here was certain nobody made any kind of big money honestly, and many a boiled rope was supposedly prepared to be lopped around the necks of people now in the Cabinet. Today we expect that any day now Sean Spicer is going to be replaced by Robin Leach, and that’s all good, too. No, in Trumpistan nothing is good, because there are only superlatives. There is only ‘best’, ‘greatest’, and ‘unbelievable’. “Champagne wishes and caviar dreams” beats liberté, égalité, fraternité. In Trumpistan, places like Lake Wobegon, where ’everybody is above average’ are second rate. Slackers! Losers! In Trumpistan everybody is the best, like the meatloaf at Mar-a-Lago!</p> <p>Anyone who might have spent the last six months on a desert isle would look at Trump’s demo or visit ZH Comments today and think there had been a total housecleaning of the membership ranks, all replaced with Statist Toadies. Trump is a demigod, and the people scream Heil!</p> <p>But wait! Does all that flash have a purpose other than Trump’s self-aggrandizement? Is there a kind of compromise where Trump gets what he really wants (the stage), but no real power? Is Trump just for the masses, a slight of hand to capture the attention of those for whom style is way more important than substance? Bright lights and flash bang may have hidden the bloodless coup that took place since 8 November. Trump has the stage, but adults can now run the show. General Mattis is at Defense. Pompeo is at CIA. General Kelly is at Homeland Security. Lt General McMaster heads the NSC. Not a one of them is a yes man. Not a one of them will give way to Bannon or Miller. They will speak truth to power, even if it upsets Donny Boo Boo so much he exceeds 140 characters. Three of four know war, and don't want it, even if Trump insists on doing some big time killin' in Iran and playing 19th Century Imperialist by stealing Iraq's oil. Maybe they will just ignore the ostensible power and do the needful while Trump plays the Twiddle. There’s no need now for Alex Jones’ FEMA Camps, because the plebes have been hypnotized. They have their Game Show Host, which is all they really wanted.</p> <p>Maybe, behind all the glitter, it really is plus ça change.</p> Alt-right Best Buy Central Intelligence Agency Cognitive Dissonance Congress Detroit Donald Trump Donald Trump presidential campaign Federal Emergency Management Agency flash goldman sachs Goldman Sachs Iran Legal affairs of Donald Trump Political positions of Donald Trump Politics of the United States Real estate Steve Bannon Trump family US Embassy White House White House Press Corps Tue, 21 Feb 2017 12:16:38 +0000 chindit13 588647 at Frontrunning: February 21 <ul> <li>Global Stocks and Bond Yields Rise (<a href="">WSJ</a>)</li> <li>Despite Dissents on White House Policy, Mattis Holds Sway (<a href="">WSJ</a>)</li> <li>Trump’s Travel Ban Won’t Hit the U.S. Economy, At Least This Year (<a href="">BBG</a>)</li> <li>Pundit Brings ‘Global Jihadist Movement’ Theory to White House (<a href="">WSJ</a>)</li> <li>HSBC Plunges After Missing Profit Estimates on Revenue Drop (<a href="">BBG</a>)</li> <li>Euro-Area Economic Recovery Broadens as France Outpaces Germany (<a href="">BBG</a>)</li> <li>Oil rises towards top of recent trading range as OPEC cuts output (<a href="">Reuters</a>)</li> <li>PBOC to Cut Reserve Requirement for Qualifying Banks (<a href="">Caixin</a>)</li> <li>China adjusts yuan midpoint mechanism - sources (<a href="">Reuters</a>)</li> <li>Chinese Banks' Off-Book Wealth Products Exceed $3.8 Trillion (<a href="">BBG</a>)</li> <li>China Relaxes Curbs on Stock-Index Futures Trading (<a href="">Caixin</a>)</li> <li>Yield curve proves hard to steer for nervous BOJ (<a href="">Nikkei</a>)</li> <li>States Push to Raise Gasoline Taxes (<a href="">WSJ</a>)</li> <li>ECB Scouts for Forward Guidance Pitfalls on Road to Stimulus End (<a href="">BBG</a>)</li> <li>Kraft-Unilever Deal Is Off, but Warren Buffett’s Anomalies Live On (<a href="">WSJ</a>)</li> <li>France's Le Pen cancels meet with Lebanon grand mufti over headscarf (<a href="">Reuters</a>)</li> <li>Saudi Arabia Favors New York for Aramco IPO (<a href="">WSJ</a>)</li> <li>Samsung Heir, Seeking to Modernize Opaque Culture, Faces Scandal (<a href="">WSJ</a>)</li> <li>Burger King and Tim Hortons owner nears deal to buy Popeyes (<a href="">Reuters</a>)</li> <li>China opposes U.S. naval patrols in South China Sea (<a href="">Reuters</a>)</li> <li>Seoul Faces Dilemma Between U.S. Protection, China Trade (<a href="">WSJ</a>)</li> <li>The Next Financial Crisis Might Be in Your Driveway (<a href="">BBG</a>)</li> </ul> <p>&nbsp;</p> <p><strong>Overnight Media Wrap</strong></p> <p><em><span style="text-decoration: underline;">WSJ</span></em></p> <p>- Deal talks between Kraft Heinz and Unilever are dead, but both consumer-goods giants now find themselves under heightened pressure to make bold moves to accelerate growth. <a href="" title=""></a></p> <p>- President Trump selected Lt. Gen. H.R. McMaster, an active duty Army officer, now director of a key military integration and operations center, as his next national security adviser. <a href="" title=""></a></p> <p>- Defense Secretary Jim Mattis appears to be at odds with President Trump on Russia and other key issues, setting up potential discord but also helping to nudge the White House toward more conventional policy stances. <a href="" title=""></a></p> <p>- Russia's ambassador to the United Nations, Vitaly Churkin, died unexpectedly Monday, according to an announcement at the U.N. and Russia media reports. <a href="" title=""></a></p> <p>- Toys "R" US Inc recently laid off between 10 percent and 15 percent of its corporate employees, the latest retailer to cut jobs as shopping rapidly shifts from physical stores to online ones. <a href="" title=""></a></p> <p>- Uber Technologies Inc said it is investigating claims by a former employee that the company failed to discipline a manager who mistreated female employees and ignored complaints of sexual harassment. <a href="" title=""></a></p> <p>- Saudi Arabia &lt;IPO-ARMO.SE&gt; is leaning toward listing its giant, state-run oil company in New York, London or Toronto and has soured on the prospect of floating the firm on an Asian stock exchange. <a href="" title=""></a></p> <p>- China's suspension of coal imports from its ally North Korea gives Beijing more leverage to press the U.S. for fresh diplomatic efforts in curbing Pyongyang's nuclear ambitions. <a href="" title=""></a></p> <p>&nbsp;</p> <p><em><span style="text-decoration: underline;">FT</span></em></p> <p>Britain's business minister urged the government on Monday to seek guarantees that the Vauxhall workforce will be protected if the company is sold to Peugeot manufacturer PSA.</p> <p>Lloyd's of London, the world's biggest speciality insurance market, appointed Bruce Carnegie-Brown as chairman, it said on Monday, after his nomination was unanimously supported by its council.</p> <p>Volkswagen UK Managing Director Paul Willis told MPs on Monday that the carmaker had not deceived any UK customers who bought diesel cars fitted with cheating software, but the claim was branded "little short of ridiculous" by Transport Minister John Hayes.</p> <p>&nbsp;</p> <p><em><span style="text-decoration: underline;">NYT</span></em></p> <p>- Facebook's WhatsApp, unveiled a version of its 'Status' feature that takes a significant number of cues from Snap Inc's messaging app Snapchat. Mimicking Snapchat's Stories feature, WhatsApp's Status now lets people share images, GIFs and videos as a status update, all of which last for 24 hours before disappearing. <a href="" title=""></a></p> <p>- Kraft Heinz board, including Warren Buffett and the Brazilian-born billionaire Jorge Paulo Lemann, decided to walk away from a $143 billion takeover bid for Unilever . The alternative would have been to pursue a public and possibly costly fight against Unilever but instead, the two consumer goods giants said on Sunday that Kraft Heinz had withdrawn its takeover bid after an agreement on friendly terms. <a href="" title=""></a></p> <p>- Travis Kalanick, chief executive of Uber opened an internal investigation into claims of sexual harassment made by a former engineer at the company. The engineer, Susan Fowler, said in a blog post that she was sexually harassed by her direct supervisor during her time at Uber and that after she reported those claims to the human resources department, they were ignored. <a href="" title=""></a></p> <p>- Eurozone finance ministers agreed on Monday to begin negotiations in Athens as soon as next week over much-needed overhauls in exchange for bailout payments, with Greece appearing to win a reprieve from the crippling austerity that it has faced for years. The agreement fell short of an all-encompassing deal, with key questions unresolved over the shape of the changes to Greece's pensions, as well as its tax and labor rules. <a href="" title=""></a></p> <p>&nbsp;</p> <p><em><span style="text-decoration: underline;">Britain</span></em></p> <p>The Times</p> <p>Unilever Plc is facing calls to simplify its complex shareholder structure amid claims that its convoluted ownership could have helped scupper a proposed 115 billion pound deal with Kraft Heinz Co. <a href="" title=""></a></p> <p>The business secretary, Greg Clark, pledged the government's "unbounded commitment" to protect jobs at Vauxhall on Monday amid fears for the British workforce if the business is sold. <a href="" title=""></a></p> <p>The Guardian</p> <p>Greece's bailout inspectors are returning to Athens to seek changes to the country's tax, pensions and labour market laws in a sign that Greek Prime Minister Alexis Tsipras will give way to European pressure for deeper reforms. <a href="" title=""></a></p> <p>Bovis Homes Group Plc is to pay 7 million pounds ($8.72 million) to repair poorly built new homes sold to customers, raising fresh questions about the standards of new-build properties across the country and the regulation of the market. <a href="" title=""></a></p> <p>The Telegraph</p> <p>The European Commission wants Britain to be paying into EU projects for four years after it has signed a Brexit deal, with final payments continuing up until the end of 2023, the Daily Telegraph has learned. <a href="" title=""></a></p> <p>Volkswagen AG drivers affected by the "dieselgate" scandal have been left with no choice but to sue the company, according to lawyers acting for drivers. <a href="" title=""></a></p> <p>Sky News</p> <p>Executives at Anglo American Plc, the FTSE-100 mining group, face the prospect of forfeiting millions of pounds in share awards following an investor revolt last year which helped provide impetus for a wider government crackdown on boardroom pay. <a href="" title=""></a></p> <p>The Independent</p> <p>Global sales of UK food and drink have hit the 20 billion-pound mark for the first time in history, as the government prepares to ramp up its focus on international trade following UK's decision to leave the EU. <a href="" title=""></a></p> <p>&nbsp;</p> <p>&nbsp;</p> American brands Bank of Japan Bitly Bond Business Business China Economy European Central Bank European Commission European Union Eurozone Financial data vendors Food and drink France FTSE 100 mining Germany Global Jihadist Movement Greece Heinz Kraft Kraft Foods national security Nikkei Nomination North Korea Northfield, Illinois OPEC Organization of Petroleum-Exporting Countries People's Bank of China recovery Reuters Revenue Drop Saudi Arabia South China The Wall Street Journal Uber Unilever United Nations Volkswagen Warren Buffett White House White House Yield Curve Yuan Tue, 21 Feb 2017 12:08:47 +0000 Tyler Durden 588646 at Israeli Soldier Sentenced To 18 Months In Prison For Killing Wounded Palestinian Assailant <p>Over a month after clashes erupted outside of a court where an Israel soldier was convicted of manslaughter for executing a wounded Palestinian assailant, an act caught on video which stunned media around the globe, the saga <a href="">finally ended </a>on Tuesday when he was sentenced to 18 months imprisonment on Tuesday, far less than prosecutors requested, in one of the most divisive cases in Israel's history. </p> <p><a href=""><img src="" width="500" height="281" /></a></p> <p>The decision to court-martial Sergeant Elor Azaria, who shot the Palestinian after he had stabbed another soldier in the occupied West Bank last March, stirred controversy in Israel from the start, with opinion polls showing strong support for the army medic.</p> <p>As we <a href="">reported last month</a>, a military court found Azaria guilty of manslaughter, a crime that carries a top punishment of 20 years in jail. With the 50th anniversary of Israel's wartime capture of the West Bank approaching, the trial has generated debate about whether the military, long seen as a melting pot for Israelis, was out of touch with a public that has shifted to the right in its attitudes towards the Palestinians. The prosecution asked that Azaria be sentenced to three to five years behind bars, far below the maximum term, noting that he had shot a Palestinian who only minutes earlier had carried out an attack. </p> <p>Passing an 18-month sentence that Israeli media commentators described as lenient, the court said that Azaria had not expressed regret for his crime but it noted that his army record had been unblemished up until the shooting and that his arrest had caused his family deep distress. Palestinians had called for a life term. But there was little sign the sentencing would lead to any significant outbreak of violence by Palestinians. They have long accused Israel of using excessive force against lightly armed assailants and harbored few expectations soldiers would be held accountable.</p> <p>As <a href="">Reuters adds</a>, it was not immediately clear if Azaria's lawyers, who had said after the verdict last month that they intended to appeal his conviction, would still proceed along that path. Eleven months ago, Azaria, then 19, was serving in the town of Hebron when two Palestinians carried out the stabbing. Hebron has been a longtime flashpoint of violence, and the incident occurred during a wave of Palestinian street attacks on Israelis. </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>One of the two assailants was shot dead by troops. The other was shot and wounded. Eleven minutes later, as the wounded man, Abd Elfatah Ashareef, 21, lay on the ground incapacitated, Azaria shot him in the head with an assault rifle. </p> <p>&nbsp;</p> <p>At the trial, Azaria said he believed the Palestinian, though motionless, still posed a danger because his knife was nearby, and that he might have been carrying explosives. "He deserves to die," Azaria was quoted in the verdict as telling another soldier after pulling the trigger. At the sentencing, Chief Judge Maya Heller said that Azaria "took upon himself to be both judge and executioner". </p> <p>&nbsp;</p> <p>Surveys detected significant popular support for Azaria, and Netanyahu took the unusual step of calling the soldier's parents to express his sympathy after he was arrested. In one poll, nearly half of Israeli Jews said any Palestinian who carries out an attack should be killed on the spot. </p> <p>&nbsp;</p> <p>Rallies for Azaria, some backed by rightist politicians and pop singers, gathered momentum as the trial progressed.</p> </blockquote> <p>Members of Israel's military establishment argued that the shooting violated rules stating that soldiers can open fire only in life-threatening situations, and the three-judge panel rejected Azaria's argument. "One cannot use this type of force, even if we're talking about an enemy's life," the court said in its verdict. </p> <p>Video footage of the shooting, taken by a Palestinian human rights activist, showed the knife was not within Ashareef's reach, and no bomb was found. The video was distributed to news organizations, ensuring that the incident drew international attention.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="701" height="394" alt="" src="" /> </div> </div> </div> army Hebron shooting incident Israel Israel Israeli–Palestinian conflict Issa Amro Law Palestinian territories Reuters State of Palestine UN Court War Tue, 21 Feb 2017 11:55:52 +0000 Tyler Durden 588645 at US Futures, European Stocks Rise Despite HSBC Plunge; Dollar, Oil Jump <p>European stocks rose again with S&amp;P futures higher, while Asian stocks were mixed. The dollar rose jumped on hawkish comments by Philly Fed's Harker, oil rose following optimistic OPEC comments, while gold dropped. Markets have largely ignored the negative result by financial heavyweight HSBC, which posted its largest fall since mid-2015 after reporting a 62% plunge in pretax profit, weighing on UK financials, with the FTSE 100 modestly underperforming.</p> <p>The Bloomberg Dollar Spot Index rose the most in more than three weeks after a Federal Reserve policy maker reinforced the chances for a U.S. interest-rate increase as soon as next month. The U.S. currency advanced against most of its major peers after Philly Fed President Patrick Harker told MNI in a Friday interview he “would not take March off the table at this point.” Recent comments from policy makers have leaned on the hawkish side. A voting member of the rate-setting Federal Open Market Committee this year, Harker had said Feb. 15 that he sees three 25-basis point rate increases as appropriate for 2017.</p> <p><a href=""><img src="" width="500" height="281" /></a></p> <p>In Europe, mining stocks climbed as surging commodities prices boosted corporate earnings even as HSBC fell the most since August 2015 after its profit missed estimates. Gold slumped and oil climbed toward $54 a barrel. As a result the Stoxx 600 climbed 0.2% as gains in mining companies overshadowed HSBC Holdings Plc’s results. Financial heavyweight HSBC has posted its largest fall since mid-2015 after <strong>reporting a 62% fall in pretax profit, </strong>weighing on UK financials, with the FTSE 100 modestly underperforming. Elsewhere, mining names have seen a lift with BHP returning to profitability while Anglo American results beat analyst expectations. However, despite the early softness, equities saw a turnaround amid better than expected PMI figures for the Eurozone and Germany. Germany’s DAX rose 0.5 percent, with automakers including Daimler AG and Volkswagen AG among the top gainers. </p> <p>A closer look at HSBC Holdings which today reported a 62% slump in annual pre-tax profit that fell way short of analysts' estimates as the British bank took hefty writedowns from restructuring and pointed to brakes on revenue growth. For the quarter, HSBC reported a $3.4 billion fourth-quarter loss, against analysts' expectations for a profit, on a $3.2 billion impairment in its private banking business as the lender's accounting valuation of the unit caught up with years of declining performance. HSBC CEO Stuart Gulliver said the restructured private bank is now viable as a slimmed-down operation providing advice to wealthy clients referred from the lender's other business lines. </p> <p>"What this doesn't mean is that we are selling the private bank... it means we have restructured the private bank and that's now behind us," <a href="">Gulliver told </a>Reuters. </p> <p>As a result, HSBC shares slid more than 6 percent after the company reported revenues fell by a fifth from 2015, underscoring the challenge it faces to boost returns amid low global interest rates and slowing economic growth in its core markets of Britain and China. Europe's biggest bank by assets <strong>generated profit before tax of $7.1 billion in 2016 compared to $18.87 billion for the previous year</strong>, well below the average analyst estimate of $14.4 billion. HSBC also announced a new $1 billion share buy-back, as the lender continued to return cash to shareholders from the sale of its Brazilian business. The bank signaled a number of factors that would pressure its revenues in 2017, including a $500 million increase in regulatory capital costs, lower interest rates in Britain and adverse foreign exchange rates. </p> <p>"We think weak income trends and significant guided headwinds mean consensus downgrades today," Jason Napier, analyst at UBS, wrote in a research note on Tuesday.</p> <p>Also in Europe we got the latest PMI data which showed that the Eurozone private sector and manufacturing growth unexpectedly accelerated to near a six-year high in February and job creation reached its fastest since August 2007, propelled by strong demand and optimism about the future, the surveys found. IHS Markit's eurozone flash composite Purchasing Managers' Index, seen as a good overall growth indicator, rose sharply to 56.0, the highest since April 2011, from 54.4 in January, reversing expectations for a slight dip to 54.3. The broad-based acceleration, which showed France's momentum getting close to Germany's, suggests that if sustained, economic growth could hit 0.6 percent in the first quarter, according to Markit.</p> <p>"The increased momentum is due to demand growing at a stronger rate, but also that upturn becoming more broad-based," said Chris Williamson, chief business economist at IHS Markit. "Importantly, what we now have is France joining the party. It's been a laggard in the region, and a drag on the euro zone upturn for a few years ... and there are finally signs the drag is easing."</p> <p>Also of note in Europe, we saw Greek bonds rally, with 2y yield dropping 115bps to 8.31%, while 10y falls 25bps to 7.25%.&nbsp; The positive sentiment emerged after creditors agreed on Monday for auditors to resume talks in Athens over steps needed to continue bailout of nation. The Greek government accepted to legislate reforms that will be implemented starting 2019 under the prerequisite that they are fiscally neutral, a Greek govt official said in e-mail to reporters, speaking on condition of anonymity. Greek bond strip, the most liquid bundle of the country’s government bonds issued after its last restructuring, is up 1.39c to 68.27c</p> <p>Asian stocks rose, with South Korea’s benchmark climbing 0.9 percent to the highest level since July 2015. Hong Kong’s Hang Seng slipped 0.8 percent, the most in more than a month. Japan’s Topix index, which reached a peak at the start of the year, is trading within a range of about three percentage points over the past 49 days -- the narrowest since 1988.&nbsp; Bourses in Japan are riding high perhaps reflecting the decent flash manufacturing PMI print in the country which saw the reading bounce 0.8pts to 53.5 and to the highest since March 2014. Elsewhere the Hang Seng and Kospi rose while in China the Shanghai Comp is +0.4%. There’s a story going around on Bloomberg suggesting that Chinese authorities may be considering easing limits on foreign ownership of life insurers, which may also be helping the positive tone. </p> <p>Global equities continue to trade near a record as hopes the Trump rally will continue to generate optimism in economic growth amid signs of an inflation pickup. Yet there remains caution in the markets, with the dollar trading below this year’s highs and investors clamoring for detail on spending plans under Trump’s administration.</p> <p>In global rates, the yield on 10-year Treasuries advanced four basis points to 2.45 percent. German 10-year yields rose three basis points after better-than-expected PMI euro- area manufacturing data. The yield on the equivalent French benchmark climbed four basis points. Default insurance on HSBC’s subordinate bonds increased one basis point to 140. The smaller-than-expected buyback could boost the bank’s senior bonds as it implies a less-leveraged balance sheet.</p> <p>The Fed releases minutes this week from its most recent meeting, giving investors a look into how members see Trump’s policies. Data should show the U.S. housing market perking up at the start of the year. The PMI is expected to rise slightly. It’s International Petroleum Week in London and top OPEC, government and company officials are attending.</p> <p><strong>Market Snapshot</strong></p> <ul> <li>S&amp;P 500 futures up 0.2% to 2,353.00</li> <li>STOXX Europe 600 up 0.2% to 371.90</li> <li>MXAP up 0.01% to 145.16</li> <li>MXAPJ down 0.05% to 466.90</li> <li>Nikkei up 0.7% to 19,381.44</li> <li>Topix up 0.6% to 1,555.60</li> <li>Hang Seng Index down 0.8% to 23,963.63</li> <li>Shanghai Composite up 0.4% to 3,253.33</li> <li>Sensex up 0.4% to 28,773.36</li> <li>Australia S&amp;P/ASX 200 down 0.07% to 5,791.03</li> <li>Kospi up 0.9% to 2,102.93</li> <li>German 10Y yield rose 1.8 bps to 0.314%</li> <li>Euro down 0.6% to 1.0552 per US$</li> <li>Brent Futures up 0.9% to $56.68/bbl</li> <li>Italian 10Y yield fell 0.6 bps to 2.184%</li> <li>Spanish 10Y yield rose 0.8 bps to 1.617%</li> <li>Brent Futures up 0.9% to $56.68/bbl</li> <li>Gold spot down 0.6% to $1,230.84</li> <li>U.S. Dollar Index up 0.5% to 101.40</li> </ul> <p><strong>Top Overnight News from BBG:</strong></p> <ul> <li>HSBC Shares Fall After Missing Profit Estimates on Revenue Drop</li> <li>Burger King Owner Said in Advanced Talks to Buy Popeyes Chain</li> <li>Buffett Takes His Own Advice in Walking Away From Unilever Bid</li> <li>Fed’s Harker Not Taking March Rate Rise Off the Table, MNI Says</li> <li>Fed Minutes May Show Inflation Confidence, Discuss Balance Sheet</li> <li>Telefonica to Sell Telxius Stake to KKR for $1.35 Billion</li> <li>InterContinental Hotels Rises After Announcing Special Dividend</li> <li>Qualcomm Says Samsung Scandal Weakens Korea Antitrust Ruling</li> <li>Trump Picks Outspoken Army ‘Rebel’ as National Security Adviser</li> <li>China Said to Draft Rules to Rein in Asset Management Risks</li> <li>Canadian Court Approves InterOil Transaction With Exxon Mobil</li> <li>Uber Taps Eric Holder to Investigate Discrimination Claims</li> <li>Iron Futures Extend 2017’s Rally to 33% as BHP Warns on Outlook</li> <li>BlackRock Says Space Images Can Help Monitor Chinese Companies</li> </ul> <p><strong>Asia equity markets traded mixed </strong>with Wall Street closed the day prior, with Nikkei 225 (+0.7%) outperforming amid a weak JPY with USD/JPY holding firmly above 113.00. ASX 200 (-0.1%) recovered most of its early losses after declines seen in the gold and utilities sectors weighed the index. Shanghai Comp. (+0.4%) was boosted by retail names and the telecoms sector, despite a weak CNY 100bIn liquidity injection by the PBoC, while Hang Seng (-0.8%) underperformed after HSBC reported disappointing FY16 earnings and index heavyweight Tencent shares saw losses of over 1%. Finally, 10yr JGBs were flat despite a strong enhanced liquidity auction, while the 40yr yield printed 11-month highs</p> <p><em>Top Asian News</em></p> <ul> <li>China Said to Mull Easing Foreign Stake Limits in Life Insurers</li> <li>Chinese Banks’ Off-Book Wealth Products Exceed $3.8 Trillion</li> <li>Ambani’s Jio to Start Charging for Services as Rivals Cry Foul</li> <li>China Retailers Surge as CICC Lauds Alibaba’s ‘New Retail’ Model</li> <li>China Said to Mull Easing Limits on Foreign Life Insurers</li> <li>Over Twinkies and Tweets, China Seeks Clues on Trump Policy</li> <li>Hong Kong Developers Advance Ahead of City’s Budget Speech</li> </ul> <p><strong>European bourses rose after a soft start with </strong>price action dictated by the latest batch of earning updates. Financial heavyweight HSBC has posted its largest fall since mid-2015 after reporting a 62% fall in pretax profit, consequently weighing on UK financials, with the FTSE 100 modestly underperforming. Elsewhere, mining names have seen a lift with BHP returning to profitability while Anglo American results beat analyst expectations. However, despite the early softness, equities saw a turnaround amid better than expected PMI figures for the Eurozone and Germany. Across fixed income markets, peripheral debt is outperforming led by Greece with markets somewhat positive over talks between Greece and its creditors yesterday with the 2-yr yield falling 140bps. Elsewhere, GE-FR spread has dropped back below 80bps after yesterday hitting its highest level since mid-2012 following the continued narrowing between Le Pen and her opponents in the French Presidential polls.</p> <p><em>Top European News</em></p> <ul> <li>Euro-Area Economy Picks Up Speed as Orders and Optimism Surge</li> <li>Le Pen Advances in French Polls as Security Concerns Sway Voters</li> <li>Citigroup Agrees $5.4 Million Fine to Settle Rand Collusion</li> <li>Rosneft to Buy Crude Oil From Kurdistan Amid Expansion in Iraq</li> <li>U.K. Posts Record Surplus in Pre-Budget Boost for Hammond</li> <li>Brent Oil Holds Gain as Citigroup Lifts Short-Term Price Outlook</li> <li>Vucic Clears Hurdle to Serb Presidency as Incumbent Steps Aside<em><br /></em></li> </ul> <p><strong>In currencies, the USD is pushing higher, </strong>but the drivers are a little mixed as UST yields show modest gains on the day as yet. The key 10yr rate is still around 2.45%, still well inside the recent 2.30-2.55% range, but the modest gains have been enough to put USD/JPY back in the upper 113.00's. The Bloomberg Dollar Spot Index gained 0.5 percent as of 10:30 a.m. in London. The greenback rose after Market News International cited Harker, who votes on policy this year, saying a rate move next month is not “off the table at this point.” That followed hawkish congressional testimony last week from Fed Chair Janet Yellen. The moves look tentative as yet, but with the equity markets on a stable footing, near term JPY weakness may well extend a little further before the selling intensifies. The BoJ is showing no signs of letting up on its reinflation process, maintaining 'the line' that the exchange rate is not the target of policy measures currently in play. For EUR/USD, the downside is just as much a consequence of the gaining popularity of Le Pen as it is the broader USD view, with French-German yields widening to the detriment of the EUR across the board. The lead spot rate is now refocusing on the lows seen last week, when we hit a 1.0521 base, but EUR/JPY and EUR/CHF now also pressured as sellers target all currencies.</p> <p><strong>In commodities,&nbsp; oil advanced </strong>as Citigroup Inc. raised its short-term price outlook, citing good OPEC compliance with its output-cut agreement and growing demand in Asia. West Texas Intermediate gained 0.6 percent to $54.04 a barrel and Brent added 0.7 percent to $56.85. Oil prices continue to hold familiar ranges - notably WTI inside USD50.00-55.00. Growing inventory levels offset by strong cooperation with the OPEC agreed cuts, but ongoing scepticism keeps the upside contained despite hedge funds holding significant long positions in both WTI and Brent. Copper prices lead the way for base metals, fighting against USD based weakness near term as supply concerns emanating from the industrial action in Chile support. Industrial metals dropped, partially reversing their biggest gain in a week as funds were seen selling. Aluminum fell 0.4 percent to $1,893 a metric ton and copper lost 0.4 percent.&nbsp; Gold declined 0.7 percent to $1,229.65 an ounce as the dollar advanced before the U.S. Federal Reserve releases minutes that may give indications of the pace of interest-rate increases. The yellow metal has tested back down to USD1230.00, this from pre USD1245.00 highs. Support remains into USD1,200 in the near term, as the risk perspective maintains an element of caution. Buyers of Silver partially reflects this. U.S. natural gas extended its decline into a third day due to forecasts for warmer-than-normal weather across the east coast. Futures fell 2.4 percent to $2.765 per million British thermal units, the lowest level in three months.</p> <p><strong>In the US calendar </strong>we’ll also get the flash PMI’s where the consensus is for a 0.3pt pickup in the manufacturing print and 0.2pt pickup in the services reading. Away from that there’s some Fedspeak due today with Kashkari (8.501m GMT), Harker (12.00pm) and Williams (3.30pm) all scheduled. </p> <p><strong>US Event Docket</strong></p> <ul> <li>8:50am: Fed’s Kashkari Speaks on Economy in Golden Valley, MN</li> <li>9:45am: Markit US Manufacturing PMI, est. 55.3, prior 55</li> <li>9:45am: Markit US Services PMI, est. 55.8, prior 55.6</li> <li>9:45am: Markit US Composite PMI, prior 55.8</li> <li>12pm: Fed’s Harker to Speak on Economic Outlook</li> <li>3:30pm: Fed’s Williams Speaks to Students in Boise, Idaho</li> </ul> <p><strong>DB's Jim Reid concludes the overnight wrap</strong></p> <p>One of the reasons why volatility remains so low in the face of increasingly elevated political risk is that global growth numbers have held up so well in recent weeks and months. Well today's flash PMI numbers in the face of fresh supportive polls for Le Pen in France are a good test of this stand-off. Indeed yesterday’s OpinionWay poll in France revealed that support for Le Pen in the first round of the presidential election has crept up 1% to 27% with support for Macron and Fillon unchanged at 20%. More significantly though, the second round polling revealed that Macron would defeat Le Pen by a score of 58% versus 42%, a tighter margin than the 60% versus 40% in results from the same pollster just four days ago. In fact if you go back to the start of February, the gap was actually as wide as 65% versus 35%. Yesterday’s poll also revealed that a second round contest between Fillon and Le Pen would have the former coming out on top at 56% versus 44%, a tighter gap compared to 57% to 43% four days ago and 61% versus 39% at the start of the month.</p> <p>Those results did come prior to the news yesterday that Le Pen’s Party headquarters was raided over the probe concerning whether Le Pen had used European Parliament funds to pay for fictitious jobs, so we may have to see if that has an impact at all, but the positive momentum in the polls for Le Pen is significant nonetheless. While the polls are also suggesting a tightening in support in favour of Le Pen versus Macron and Fillon, the implied probabilities based on bookmaker odds tell a similar tale. In the PDF today we show a graph showing the recent trend in the implied probabilities with the main takeaway being&nbsp; that the range between the 3 candidates is hovering around the lowest – at 8% - over the last month. Indeed the implied probabilities stand out 37.8% for Macron, 34.2% for Le Pen and 29.5% for Fillon. That probability for Le Pen is up from 25.5% about a month ago while the probability for Macron has fallen from a high of over 50%. It's fair to say that these numbers reflect a weight of money staked and that the market sees nowhere near as high a probability of a Le Pen victory. Nevertheless it's the recent trend that's interesting.</p> <p><img src="" width="500" height="322" /></p> <p>In what was an otherwise quiet day in markets given the US holiday it was the underperformance in French assets which stood out. In equities the CAC ended with a modest -0.05% decline but that compared to a decent +0.60% bounce for the DAX while the Stoxx 600 finished +0.22%. It was the moves in bonds which caught most investors’ eyes though. While 10y Bund yields edged down -0.5bps to 0.293%, 10y OAT’s finished the day up +2.3bps at 1.051% but, more notably, were up as much as +10.0bps at one stage following the poll, touching a high of 1.129% and coming close to the high mark this year of 1.156%. The spread between Bunds and OATs finished at 76bps (and just off the 4 and a bit year high of 77bps) but did blow out as wide as 84bps intraday at one stage and the most since August 2012.</p> <p>The other notable price mover yesterday was Greek bonds. 2y yields rally nearly 70bps and dropped to a one-week low after the Eurogroup meeting yesterday to discuss Greece’s bailout suggested some progress was being made. Eurogroup president Jeroen Dijsselbloem said that the meeting was “very positive and a good step” and that the EU and IMF will soon return to Athens to continue with discussions, including laying out the more specific details around reforms. Greek finance minister Tsakalotos also confirmed that important progress had been made yesterday and sufficient for bailout auditors to continue talks.</p> <p>Aside from that there wasn’t a huge amount more to report in markets yesterday. Gilts (+1.7bps) and the FTSE 100 (0.00%) also underperformed a bit yesterday. The House of Lords draft law debate kicked off with Bloomberg reporting that 30 amendments have so far been proposed. That’s far less than the 250 submitted by the House of Common’s but the lack of a Conservative majority in the upper house does raise some risks for PM May. The general debate is due to continue today but the more substantive discussions are not expected until next week.</p> <p>This morning in Asia we’ve seen most markets get off to another positive start. Bourses in Japan in particular are riding high (Nikkei +0.68%) perhaps reflecting the decent flash manufacturing PMI print in the country which saw the reading bounce 0.8pts to 53.5 and to the highest since March 2014. Elsewhere the Hang Seng is +0.12% and Kospi is +1.06% while in China the Shanghai Comp is +0.26%. There’s a story going around on Bloomberg suggesting that Chinese authorities may be considering easing limits on foreign ownership of life insurers, which may also be helping the positive tone. Meanwhile US equity index futures are up about +0.20%.</p> <p>Moving on. There wasn’t much to report on the data front yesterday. In the UK the CBI industrial trends survey for February revealed an increase in the output diffusions index by 7pts to 33 which is a level matched only once in the last 16 years. The proportion of firms expecting selling prices to rise increased further too with the index up 4pts to 32 and to the highest since April 2011. Elsewhere in Germany PPI in January was up a much higher than expected +0.7% mom (vs. +0.3% expected) while the flash consumer confidence reading for the Euro area in February fell 1.4pts to -6.2 (vs. -4.9 expected) and so putting it back at November levels. Finally we also got the latest CSPP holdings data at the ECB. Total holdings as of last Friday totalled €64.97bn which implies net purchases settled last week of €2.05bn or an average daily run rate of €409m, which is a little bit more than the average €367m since the program started.</p> <p>Looking at the day ahead, this morning in Europe the main focus will be on the release of the February flash PMI’s which the market is expecting to remain relatively stable compared to the January figures. Also due out will be the final CPI revisions in France as well as public sector net borrowing data in the UK. In the US this afternoon we’ll also get the flash PMI’s where the consensus is for a 0.3pt pickup in the manufacturing print and 0.2pt pickup in the services reading. Away from that there’s some Fedspeak due today with Kashkari (1.50pm GMT), Harker (5.00pm GMT) and Williams (8.30pm GMT) all scheduled. BoE Governor Carney and Chief Economist Andy Haldane will speak at a Treasury Select Committee hearing on the UK February inflation report.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1200" height="675" alt="" src="" /> </div> </div> </div> ASX 200 Bank of Japan Bloomberg Dollar Spot BOE Bond Business CAC 40 China Citigroup Consumer Confidence Copper CPI Creditors Crude Crude Oil Daimler DAX 30 default East Coast Economy Equity Markets European Central Bank European Parliament European Union Eurozone Exxon federal government Federal Open Market Committee Federal Reserve Finance fixed flash France FTSE 100 Futures contract Germany Gilts Greece Greek government Hang Seng 40 Hedge House of Lords Housing Market HSBC International Monetary Fund Janet Yellen Japan Jim Reid KKR Le Pen’s Party Markit Markit Money national security Natural Gas Nikkei Nikkei 225 OPEC Organization of Petroleum-Exporting Countries pdf People's Bank of China Philly Fed Price Action Purchasing Managers' Index Reuters S&P 500 S&P/ASX 200 Stoxx 600 Testimony Topix Treasury Select Committee Trump’s administration US Federal Reserve Volatility Volkswagen West Texas Tue, 21 Feb 2017 11:31:17 +0000 Tyler Durden 588644 at Meanwhile, Rioting Breaks Out In Sweden <p>It would appear the <a href="">mainstream media (along with several celebrities and Swedish politicians)</a> is going to be apologizing to President Trump once again.</p> <p>Having spent the entire new cycle trying to ignore the immigrant crisis facing Sweden, and pin the ignorant tail on Trump, both <a href="">Dagbladet </a>and <a href=";tl=en&amp;js=y&amp;prev=_t&amp;hl=en&amp;ie=UTF-8&amp;;edit-text=">Expressen reports</a> riots breaking out in the highly immigrant concentrated Stockholdm borough of Rinkeby, Sweden with police firing warning shots as 100s of young people throw stones and burn cars.</p> <p>During the evening hundreds of young people gathered in the center of Rinkeby, well known for its high concentration of immigrants and people with immigrant ancestry.</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 365px;" /></a></p> <p>In June 2010, Rinkeby was the scene of riots and attacks against the local police station and <strong>Rinkeby is the region in which the &#39;60 Minutes&#39; crew were attacked in 2016.</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><a href=""><strong>The problems Sweden faces integrating large numbers of Muslim immigrants is a subject on which Nordstjernan columnist Ulf Nilson has written many times.</strong></a> His warnings of increasing radicalization among Sweden&rsquo;s Muslims &ndash; warnings he started to broadcast a decade ago &ndash; now seem eerily prophetic in light of an Associated Press investigation that found Stockholm to be a breeding ground for jihadists among Swedish Somalis.</p> <p>&nbsp;</p> <p>According to the AP report, which first ran Jan. 24, <strong><a href="">an al-Qaida-linked group is busy recruiting anti-government fighters among Somali youths living in Rinkeby. </a></strong>A suburb of Stockholm, <strong>Rinkeby has earned the nickname of &ldquo;Little Mogadishu&rdquo;</strong> because of the number of Somalis living there. Rinkeby is also the center of the recruiting efforts of al-Shabab, a group with ties to al-Qaida.</p> </blockquote> <p>Rinkeby is a known problem area in Stockholm. It was here NRK journalist Anders Magnus was attacked with stones last spring, and here the police never go in the evenings without reinforcements from other patrols according to <a href="">Dabladet</a>. A freelancer the newspaper spoke to, described the situation as serious.</p> <blockquote class="twitter-video" data-lang="en"><p dir="ltr" lang="en">BREAKING: Massive riots happening now in Sweden. Stockholm in flames. Trump was right again!<a href=""></a> <a href=""></a></p> <p>&mdash; Tennessee (@TEN_GOP) <a href="">February 21, 2017</a></p></blockquote> <script async src="//" charset="utf-8"></script><p>&quot;I&#39;ve been in some turmoil, but this is something extra. It looks like a war zone here&quot;, he was quoted as saying .</p> <p><img alt="" src="" style="width: 600px; height: 360px;" /></p> <p>Freelance Photographer Janne Åkesson has also been at the site Monday night and early Tuesday. &quot;They threw stones at police and police fired warning shots. I got out when it was at its worst&quot; he said to Dagbladet. He added that there were many youths with hoods and hats on.</p> <p>&quot;It was very chaotic. I have seen much in Rinkeby: they burn cars all the time - unfortunately this was beyond the ordinary.&quot;</p> <p>* * *</p> <p><em><a href=";tl=en&amp;js=y&amp;prev=_t&amp;hl=en&amp;ie=UTF-8&amp;;edit-text="> As Expressen reports (via Google Translate):</a></em></p> <p>The alarm came to the police at 20:18 on Monday evening. A police patrol should then have been in the area for disposing of a wanted person.</p> <p>&nbsp;</p> <div style="position:relative;padding-bottom:56.25%;padding-top:0;height:0;overflow:hidden;"><iframe allowfullscreen="" frameborder="0" scrolling="no" src=";external=true" style="position:absolute;top:0;left:0;width:10px;min-width:100%;height:100%;"></iframe></div> <p>&nbsp;</p> <p>In connection with this began several people at the subway throwing stones at police.</p> <p>There appeared a <strong>number of young people threw stones at the police patrol.</strong> I do not know how many it concerned, but there will be several people anyway, says Lars Bystrom, spokesperson at the Stockholm police, told Expressen TV.</p> <p><a href=""><img height="349" src="" width="600" /></a></p> <p><strong>Police patrol on the site must have felt so constricted that they were forced to fire warning shots in connection with the stoning. The police will then have withdrawn from the location.</strong></p> <p>Photos of the site, one can see how many cars are on fire, and<strong> emergency services are on site to extinguish them.</strong></p> <p><a href=""><strong><img alt="" src="" style="width: 600px; height: 325px;" /></strong></a></p> <p><strong>7-8 cars have been burned in the area</strong>. We move back and forth, it never stands still at such incidents but we have good resources in place, says Lars Bystrom.</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 380px;" /></a></p> <p>According to information are about the emergency services have requested reinforcements from Sollentuna and Brännkyrka.</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 336px;" /></a></p> <p><strong>At 22:20 the police attacked a second time by the youth gang.</strong> It was about a planned, concerted attack where the young people rushed towards the police and threw stones.</p> <p>A police officer was hit by a stone on his arm, but it is unclear how seriously injured he was.<strong> Police headlining the event as assaulting a police officer and rioting. </strong>No person should even have been arrested in connection with the stoning.</p> <p>Police EMS Units have been blocked from entering...</p> <blockquote class="twitter-tweet" data-lang="en"><p dir="ltr" lang="en">EMS Units are blocked and unable to get in to render assistance to the injured<a href="">#RInkeby</a><a href=""></a> <a href=""></a></p> <p>&mdash; TrumpTracker (@DaveNYviii) <a href="">February 21, 2017</a></p></blockquote> <script async src="//" charset="utf-8"></script><p>*&nbsp; *&nbsp; *</p> <p>&nbsp;</p> <p>How long before Schumer starts crying for the poor immigrants of &quot;little Mogadishu&quot;? And how long before CNN manages to <strong>blame</strong> Trump for tonight&#39;s riots?</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="387" height="245" alt="" src="" /> </div> </div> </div> al-Qaeda Crime Expressen Geography of Europe Government of Sweden Justice Newspaper Race riots Republican Party Rinkeby Rinkeby riots Stockholm Stockholm police Stockholm riots Stoning Twitter Twitter Violence War Tue, 21 Feb 2017 10:19:11 +0000 Tyler Durden 588640 at Alan Greenspan: Ron Paul Was Right About The Gold Standard <p>As <a href="">John Rubino eloquently puts it, </a>"when the history of these times is written, former Fed Chair Alan Greenspan will be one of the major villains, but also one of the greatest mysteries. This is so because he has, in effect, been three different people." Greenspan started his public life brilliantly, as a libertarian thinker who said some compelling and accurate things about gold and its role in the world. An example from 1966: "<em>This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard</em>."</p> <p>Yet everything changed a few decades later when Greenspan was put in charge of the Federal Reserve in the late 1980s, instead of applying the above wisdom, for example by limiting the bank's interference in the private sector and letting market forces determine winners and losers, he did a full 180, intervening in every crisis, creating new currency with abandon, and generally behaving like his old ideological enemies, the Keynesians. Predictably, debt soared during his long tenure.</p> <p><a href=""><img src="" width="500" height="304" /></a></p> <p>Along the way he was also instrumental in preventing regulation of credit default swaps and other derivatives that nearly blew up the system in 2008. His view of those instruments:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The reason that growth has continued despite adversity, or perhaps because of it, is that these new financial instruments are an increasingly important vehicle for unbundling risks. These instruments enhance the ability to differentiate risk and allocate it to those investors most able and willing to take it. This unbundling improves the ability of the market to engender a set of product and asset prices far more calibrated to the value preferences of consumers than was possible before derivative markets were developed. The product and asset price signals enable entrepreneurs to finely allocate real capital facilities to produce those goods and services most valued by consumers, a process that has undoubtedly improved national productivity growth and standards of living.</p> </blockquote> <p>In the aftermath of the dot com crisis Greenspan cut interest rates to near-zero in the early 2000s, igniting the housing bubble, which neither he nor anyone else at the Fed was able to detect along the way. He even made it into the dictionary, as the "Greenspan put" became the term for government bailing out its Wall Street benefactors. From this the leveraged speculating community learned that no risk was too egregious and no profit too large, because government - that is, the Fed - had eliminated all the worst-case scenarios. Put another way, under Greenspan profit was privatized but loss was socialized.</p> <p>Then, another metamorphosis took place: after Greenspan retired from the Fed in 2006 he began morphing back into his old libertarian self. A cynic might detect a desire to avoid the consequences of his past actions, while a neurologist might suspect senility. But either way the transformation has been breathtaking. </p> <p>Consider Greenspan's latest public address. In an extended interview published in the World Gold Council’s Gold Investor February issue, Greenspan repeated his now standard warning about the risk of coming stagflation, which would send the price of gold higher: "The risk of inflation is beginning to rise...Significant increases in inflation will ultimately increase the price of gold." As such, "investment in gold now is insurance. It’s not for short-term gain, but for long-term protection.” </p> <p>Going back to his libertarian roots, it was the idea of returning to a gold standard that Greenspan focused on: a gold standard that he said would help mitigate risks of an “unstable fiscal system” like the one we have today. </p> <p>“Today, going back on to the gold standard would be perceived as an act of desperation. But if the gold standard were in place today, we would not have reached the situation in which we now find ourselves,” he said.“[T]here is a widespread view that the 19th Century gold standard didn’t work. I think that’s like wearing the wrong size shoes and saying the shoes are uncomfortable! <strong>It wasn’t the gold standard that failed; it was politics.</strong>”</p> <p>And the punchline: “<span style="text-decoration: underline;"><strong>We would never have reached this position of extreme indebtedness were we on the gold standard, because the gold standard is a way of ensuring that fiscal policy never gets out of line</strong></span>.”&nbsp;</p> <p>To be sure, this is something we discussed exactly two years ago, when we showed a chart showing the sudden end of prosperity for the "bottom 90%" of US earners at the time Nixon ended the US Gold Standard in August 1971, unleashing what ultimately would be the "Great Moderation", an unprecedented increase in US debt, and the stagnation of real incomes and net worth for all but the "top 1% of earners."</p> <p><a href=""><img src="" width="498" height="341" /></a></p> <p>As we said then, in retrospect it is no wonder "<a href="">why the 1% hates the gold standard</a>" and added that the chart above, "<em>should also clarify just why to the "1%", including their protectors in the "developed market" central banking system, their tenured economist lackeys, their purchased politicians and their captured media outlets, the topic of a return to a gold standard is the biggest threat conceivable.</em>"</p> <p>As for Greenspan's repeated attempts to undo the past by admitting his mistakes, the jury is out. As Rubino concludes, "one of the nice things about the information age is that public figures leave long paper trails and can't therefore easily escape their pasts. Greenspan's past, being perhaps the best documented of any central banker in history, will haunt him forever."</p> <p>That said, at least Greenspan is going out a gold bug.</p> <p>* * * </p> <p><em>Below are the key excerpts <a href="">from his Gold Investor interview</a>:</em></p> <p><em><strong>Q. In recent months, concerns about stagflation have been rising. Do you believe that these concerns are legitimate? </strong></em></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>We have been through a protracted period of stagnant productivity growth, particularly in the developed world, driven largely by the aging of the ‘baby boom’ generation. Social benefits (entitlements in the US) are crowding out gross domestic savings, the primary source for funding investment, dollar for dollar. The decline in gross domestic savings as a share of GDP has suppressed gross nonresidential capital investment. It is the lessened investment that has suppressed the growth in output per hour globally. </p> <p>&nbsp;</p> <p>Output per hour has been growing at approximately ½% annually in the US and other developed countries over the past five years, compared with an earlier growth rate closer to 2%. That is a huge difference, which is reflected proportionately in the gross domestic product and in people’s standard of living. </p> <p>&nbsp;</p> <p>As productivity growth slows down, the whole economic system slows down. That has provoked despair and a consequent rise in economic populism from Brexit to Trump. <strong>Populism is not a philosophy or a concept, like socialism or capitalism, for example. Rather it is a cry of pain, where people are saying: Do something. Help! </strong></p> <p>&nbsp;</p> <p>At the same time, the risk of inflation is beginning to rise. In the United States, the unemployment rate is below 5%, which has put upward pressure on wages and unit costs generally. Demand is picking up, as manifested by the recent marked, broad increase in the money supply, which is stoking inflationary pressures. <strong>To date, wage increases have largely been absorbed by employers, but, if costs are moving up, prices ultimately have to follow suit. If you impose inflation on stagnation, you get stagflation.</strong></p> </blockquote> <p>* * * </p> <p><em><strong>Q. As inflation pressures grow, do you anticipate a renewed interest in gold?</strong></em></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Significant increases in inflation will ultimately increase the price of gold. Investment in gold now is insurance. It’s not for short-term gain, but for long-term protection. </p> <p>&nbsp;</p> <p><strong>I view gold as the primary global currency. It is the only currency, along with silver, that does not require a counterparty signature. </strong>Gold, however, has always been far more valuable per ounce than silver. No one refuses gold as payment to discharge an obligation. Credit instruments and fiat currency depend on the credit worthiness of a counterparty. Gold, along with silver, is one of the only currencies that has an intrinsic value. It has always been that way. No one questions its value, and it has always been a valuable commodity, first coined in Asia Minor in 600 BC.</p> </blockquote> <p>* * * </p> <p><em><strong>Q. Although gold is not an official currency, it plays an important role in the monetary system. What role do you think gold should play in the new geopolitical environment?</strong></em></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The gold standard was operating at its peak in the late 19th and early 20th centuries<strong>, a period of extraordinary global prosperity, characterised by firming productivity growth and very little inflation. </strong></p> <p>&nbsp;</p> <p><strong>But today, there is a widespread view that the 19th century gold standard didn’t work. I think that’s like wearing the wrong size shoes and saying the shoes are uncomfortable! It wasn’t the gold standard that failed; it was politics. </strong>World War I disabled the fixed exchange rate parities and no country wanted to be exposed to the humiliation of having a lesser exchange rate against the US dollar than it enjoyed in 1913. </p> <p>&nbsp;</p> <p>Britain, for example, chose to return to the gold standard in 1925 at the same exchange rate it had in 1913 relative to the US dollar (US$4.86 per pound sterling). That was a monumental error by Winston Churchill, then Chancellor of the Exchequer. It induced a severe deflation for Britain in the late 1920s, and the Bank of England had to default in 1931<strong>. It wasn’t the gold standard that wasn’t functioning; it was these pre-war parities that didn’t work</strong>. All wanted to return to pre-war exchange rate parities, which, given the different degree of war and economic destruction from country to country, rendered this desire, in general, wholly unrealistic. </p> <p>&nbsp;</p> <p><strong>Today, going back on to the gold standard would be perceived as an act of desperation. But if the gold standard were in place today we would not have reached the situation in which we now find ourselves. We cannot afford to spend on infrastructure in the way that we should. </strong>The US sorely needs it, and it would pay for itself eventually in the form of a better economic environment (infrastructure). But few of such benefits would be reflected in private cash flow to repay debt. Much such infrastructure would have to be funded with government debt. We are already in danger of seeing the ratio of federal debt to GDP edging toward triple digits. <span style="text-decoration: underline;"><strong>We would never have reached this position of extreme indebtedness were we on the gold standard, because the gold standard is a way of ensuring that fiscal policy never gets out of line.</strong></span></p> </blockquote> <p>* * * </p> <p>Finally, buried at the very end of the interview was perhaps the most interesting statement by Greenspan : the former Fed Chair's implicit admission that Ron Paul was right all along: </p> <p><em><strong>Q. Against a background of ultra-low and negative interest rates, many reserve managers have been large buyers of gold. In your view, what role does gold play as a reserve asset?</strong></em></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>When I was Chair of the Federal Reserve<strong> I used to testify before US Congressman Ron Paul, who was a very strong advocate of gold. We had some interesting discussions. I told him that US monetary policy tried to follow signals that a gold standard would have created</strong>. That is sound monetary policy even with a fiat currency. In that regard, <strong>I told him that even if we had gone back to the gold standard, policy would not have changed all that much.</strong></p> </blockquote> <p>For those unfamiliar, here is Ron Paul 's explanation of his plan for monetary freedom and a return to a gold standard. </p> <p> <iframe src="" width="500" height="281" frameborder="0"></iframe></p> <p> Full Greenspan interview below<br /> (<a href="">link</a>)<iframe src=";view_mode=scroll&amp;access_key=key-AjFrLt1o3GVxMNvLf0iK&amp;show_recommendations=true" width="100%" height="600" frameborder="0" scrolling="no"></iframe></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="854" height="532" alt="" src="" /> </div> </div> </div> Alan Greenspan Alan Greenspan Bank of England Bank of England Business Credit Default Swaps default Deficit Spending Economy Federal Reserve fixed Freemen of the City of London Gold standard Greenspan put Gross Domestic Product Housing Bubble Inflation Libertarians Macroeconomics Monetary Policy Monetary policy Money Supply Ron Paul Stagflation Stagflation Unemployment US Federal Reserve World Gold Council Tue, 21 Feb 2017 10:04:16 +0000 Tyler Durden 588625 at France's Muslim Demographic Future <p><a href=""><em>Submitted by Yves Mamou via The Gatestone Institute,</em></a></p> <ul> <li><strong>France&#39;s Muslim population could quickly grow to close to 15-17 million, but no one can know precisely unless the law prohibiting the official collection of ethnic data is changed.</strong></li> <li>These figures do not take into consideration the Muslim population that immigrated to France from North Africa in the 1960s and early 1970s. There are a few million of them -- nobody knows how many exactly. For demographers, their grandchildren and great-grandchildren are not regarded as immigrants anymore. These Muslims are, rather, integrated into statistics as French citizens born of French parents. They are Muslim, but under the statistics radar.</li> </ul> <p><strong>From time to time, France&#39;s National Institute of Statistics and Economic Studies (Insee) offers a glimpse of the ethnic composition of French society. </strong>The <a href="" target="_blank">study</a>, &quot;Being born in France to an immigrant parent&quot; (<em>Être né en France d&#39;un parent immigré</em>), published in February 2017, is one of them.</p> <p>Like few other glimpses, the Insee study offers a partial view of the ethnic composition of the French population. A statistical breakdown -- with the answer to the perennial question: how many Muslims in France? -- would be perceived as discriminatory and outrageous. Given France&#39;s &quot;integration model,&quot; nobody should dare identify people by their origins, religion, color of skin and so on. A Frenchman is a Frenchman, whatever the color of his skin or his religion, and any measurement of the sub-Saharan population -- for example, their level of education, that of their children, the type of jobs their parents are doing, how many times they go to mosque or if they have spent time in prison -- is illegal, discriminatory and racist. Sub-Saharan populations must disappear in aggregate data about French people.</p> <p>The study, however, provides some telling information. In 2015, 7.3 million people born in France had at least one immigrant parent (11% of the population). Of these 7.3 million people, 45% are of European origin, most of whom are children of immigrants who arrived in France from Spain (8%) or Italy (12%) as early as the 1930s, or from Portugal in the 1970s onwards. One can assume, although it is not written in the study, that these people are of Christian origin.</p> <p>Another group is composed of Africans. 42% of the 7.3 million children born in France to an immigrant parent are of African background, mainly North Africa. They came from Algeria (15%), Morocco (11%), Tunisia (5%) and sub-Saharan Africa (11%). Although it is also not specified in the study, it would seem that the great majority are Muslim.</p> <p>Another group, children from Turkish migrant families, represent 4% of the 7.3 million. These people are classified as Asian; they are not included in the African and Muslim group. Most of these Turks are also presumably Muslim.</p> <p>A conclusion therefore would assume that 46% of the descendants of immigrants are Muslim and 45% are Christian. The remaining 9% are from East Asia or the Americas.</p> <table align="center" border="0" cellpadding="0" cellspacing="0" style="margin-bottom: 5px; max-width: 600px;"> <tbody> <tr> <td style="max-width: 600px; border: 1px solid black;"><img border="0" height="335" src="" width="600" /><br /> <p style="font-size: 82%; margin: 4px 6px;">A new study from France&#39;s National Institute of Statistics and Economic Studies, &quot;Being born in France to an immigrant parent,&quot; provides some telling information on the ethnic composition of French society.</p> </td> </tr> </tbody> </table> <p>Criticizing the limited data of this study, Michèle Tribalat, a French demographer, <a href="" target="_blank">published</a> some personal conclusions in <em>Atlántico</em>, a news website. First, Tribalat expressed her regrets &quot;not to have the population figures of persons of foreign origin for two generations&quot;. But, she said, it is not so difficult to compile it one&#39;s self.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;If we add the two generations (immigrants and children of immigrants), this gives a total of 13.5 million, or 20.4% of the population. Thus, we have slightly more than one inhabitant out of five of foreign origin, across two generations, in 2015&quot;.</p> </blockquote> <p>Asked by Gatestone how she came to the 13.5 million figure, she replied:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;Very simple. I added the 2015 migrant population (6.2 million) to the Insee&#39;s 7.3 million children of immigrants, and it came to 13.5 million.&quot;</p> </blockquote> <p>In her <em>Atlántico</em> article, Tribalat maintains that more important than the 2015 data picture, is the growth-rate that led to the 2015 figure. Tribalat calculated her own estimates of this growth, with starting points in the years 1986, 1999 and 2011, coming up with figures of a stunningly fast growth for the number of migrants over two generations: the 13.2 million migrants of 2015 (20.5%; 300,000 that are &quot;missing&quot; are from French overseas territories), were 12.1 million four years earlier and 9.8 million in 1999. In other words, 19.2% in 2011 and 16.8% in 1999. The population of French persons of foreign origin would therefore have increased, when looking at two generations, by 9% between 2011 and 2015 alone.</p> <p>For the same period, French children born in France to parents born in France increased by only 2.6%, writes Tribalat.</p> <p>Consequently, France&#39;s population is increasing significantly only because of immigration. But which immigration? Christian or Muslim? Tribalat continues:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;I showed that the annual average rate of increase of immigrants was almost zero between 1975 and 1999. But it is not the same story from 1999-2015. ... <strong>The population of sub-Saharan origin is the one that grows more quickly. In four years (2011-2015), looking at two-generations (immigrants and children of immigrants), the sub-Saharan population seems to have increased by 43%.</strong> This population is extremely young. In 2015, 80% of the children of sub-Saharan immigrants are under 25 years of age&quot;. (Author&#39;s emphasis)</p> </blockquote> <p>These conclusions are confirmed by another <a>Insee study</a>, &quot;Demography of the descendants of immigrants&quot; (<a href="" target="_blank"><em>Démographie des descendants d&#39;immigrés</em></a>), published in 2014.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;The Turkish and sub-Saharan African population is growing at an extremely rapid rate (which could lead to a doubling in less than 10 years if this continues).... The total fertility rate of women born in Turkey is approximately 3, as it is for women born in sub-Saharan Africa. It is closer to 3.5 for women born in North Africa, while it is only 2 for women born in Europe, especially in France.&quot;</p> </blockquote> <p>In other words, if the Muslim population of France can be estimated at around 6 million today, it could grow to 12 million by 2020-2025.</p> <p>This figure does even not take into consideration the Muslim population that immigrated to France from North Africa in the 1960s and early 1970s. There are a few million of them -- nobody knows how many exactly. They became French very early, and for demographers, their grandchildren and great-grandchildren are not regarded as immigrants anymore. These Muslims are, rather, integrated into statistics as French citizens born of French parents. They are Muslim, but under the statistics radar.</p> <p>France&#39;s Muslim population could quickly grow to close to 15-17 million, but no one can know precisely unless the law prohibiting the official collection of ethnic data is changed.</p> <p><em><strong>These questions are not spoken about openly in the fierce pre-election presidential debate raging in France. The question is not politically correct. But in these times of expanding Islamism, they weigh silently in favor of Marine Le Pen.</strong></em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1157" height="572" alt="" src="" /> </div> </div> </div> Demographics of France Demography East Asia Europe France France France's National Institute of Statistics and Economic Studies French nationality law French people Gatestone Institute Immigration Immigration to France Islam in France Italy North Africa Portugal Social Issues Sub-Saharan Africa Sub-Saharan Africa Turkey World Tue, 21 Feb 2017 10:00:00 +0000 Tyler Durden 588620 at The Death Of Venture Capital? <p>Few business communities swing from boom to bust as reliably as Silicon Valley, but detecting shifts in this opaque world can be challenging. To help illuminate the field, <a href="">Bloomberg created the U.S. Startups Barometer,</a> a new weekly indicator that tracks the overall health of the business environment for private technology companies based in the U.S.</p> <p><em><strong>So how &#39;healthy&#39; is the American Venture Capital business? </strong></em></p> <p><a href=""><img height="384" src="" width="600" /></a></p> <p>The short answer is - <strong>not very!</strong></p> <p>Despite the still-low-rates, record small business optimism, and Trump-promised tax-cuts, <strong>deals, deal amounts, initial financings, and exits are down hard...</strong></p> <p><a href=""><img alt="" src="" style="width: 600px; height: 245px;" /></a></p> <p>&nbsp;</p> <p>Still we are sure the exceptional cash-burning abilities of Snap Inc. will reinvigorate the start-up business any day now.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="810" height="518" alt="" src="" /> </div> </div> </div> Bloomberg L.P. Business Economy Entrepreneurship Finance Money Private equity Silicon Valley Startup company Venture capital Tue, 21 Feb 2017 09:15:00 +0000 Tyler Durden 588619 at Oops! The Economy Is Like A Self-Driving Car <p><a href=""><em>Submitted by Gail Tverberg via Our Finite World blog,</em></a></p> <p>Back in 1776, Adam Smith talked about the &ldquo;invisible hand&rdquo; of the economy. <a href="">Investopedia</a> explains how the invisible hand works as, &ldquo;In a free market economy, self-interested individuals operate through a system of mutual interdependence to promote the general benefit of society at large.&rdquo;</p> <p>We talk and act today as if governments and economic policy are what make the economy behave as it does. Unfortunately, Adam Smith was right; there is an invisible hand guiding the economy. Today we know that there is a physics reason for why the economy acts as it does: the economy is a dissipative structure&ndash;something we will talk more about later. &nbsp;First, let&rsquo;s talk about how the economy really operates.</p> <p><strong>Our Economy Is Like a Self-Driving Car: Wages of Non-Elite Workers Are the Engine</strong></p> <p>Workers make goods and provide services.&nbsp;Non-elite workers&ndash;that is, workers without advanced education or supervisory responsibilities&ndash;play a special role, because there are so many of them.&nbsp;The economy can grow (just like a self-driving car can move forward) (1) if workers can make an increasing quantity of goods and services each year, and (2) if non-elite workers can<em> afford to buy the goods that are being produced</em>.&nbsp;If these workers find fewer jobs available, or if they don&rsquo;t pay sufficiently well, it is as if the engine of the self-driving car is no longer working. The car could just as well fall apart into 1,000 pieces in the driveway.</p> <p>If the wages of non-elite workers are too low, they cannot afford to pay very much in taxes, so governments are adversely affected. They also cannot afford to buy capital goods such as vehicles and homes. Thus, depressed wages of non-elite workers adversely affect both businesses and governments. If these non-elite workers are getting paid well, the &ldquo;make/buy loop&rdquo; is closed: the people whose labor creates fairly ordinary goods and services can also<em> afford to buy those goods and services</em>.</p> <p><strong>Recurring Needs of Car/Economy</strong></p> <p>The economy, like a car, has recurring needs, analogous to monthly lease payments, insurance payments, and maintenance costs. These would include payments for a variety of support services, including the following:</p> <ul> <li>Government programs, including payments to the elderly and unemployed</li> <li>Higher education programs</li> <li>Healthcare</li> </ul> <p>Needless to say, the above services tend to keep rising in cost, whether or not the wages of non-elite workers keep rising to keep up with these costs.</p> <p>The economy also needs to purchase a portfolio of goods on a very regular basis (weekly or monthly), or it cannot operate. These include:</p> <ul> <li>Fresh water</li> <li>Food of many different types, including vegetables, fruits, and grains</li> <li>Energy products of many types, such as oil, coal, natural gas, and uranium. These needs include many subtypes suited to particular refineries or electric power plants.</li> <li>Minerals of many types, including copper, iron, lithium, and many others</li> </ul> <p>Some of these goods are needed directly by the workers in the economy. Other goods are needed to make and operate the &ldquo;tools&rdquo; used by the workers. It is the growing use of tools that allows workers to keep becoming more productive&ndash;produce the rising quantity of goods and services that is needed to keep the economy growing. These tools are only possible through the use of energy products and other minerals of many kinds.</p> <p>I have likened the necessary portfolio of goods the economy needs to&nbsp;<a href="">ingredients in a recipe</a>, or to chemicals needed for a particular experiment. If one of the &ldquo;ingredients&rdquo; is not available&ndash;probably because of prices that are too high for consumers or too low for producers&ndash;the economy needs to &ldquo;make a smaller batch.&rdquo; We saw this happen in the Great Recession of 2007 to 2009. Figure 1 shows that the use of several types of energy products, plus raw steel, shrank back at exactly the same time. In fact, the recent trend in coal and raw steel suggests another contraction may be ahead.</p> <div class="wp-caption aligncenter" id="attachment_41617" style="width: 650px;"><a href=""><img alt="Figure 1. World Product Consumption, indexed to the year 2000, for selected products. Raw Steel based on World USGS data; other amounts based of BP Statistical Review of World Energy 2016 data." class="size-full wp-image-41617" src=";h=384" style="width: 600px; height: 360px;" /></a><br /> <p class="wp-caption-text"><em>Figure 1. World Product Consumption, indexed to the year 2000, for selected products. Raw Steel based on World USGS data; other amounts based of BP Statistical Review of World Energy 2016 data.</em></p> </div> <p><strong>The Economy Re-Optimizes When Things Go Wrong&nbsp;</strong></p> <p>If you have a Global Positioning System (GPS) in your car to give you driving directions, you know that whenever you make a wrong turn, it recalculates and gives you new directions to get you back on course. The economy works in much the same way. Let&rsquo;s look at an example:<strong>&nbsp;</strong></p> <p>Back in early 2014, I <a href="">showed this graph</a> from a presentation given by Steve Kopits. It shows that the cost of oil and gas extraction suddenly started on an upward trend, about the year 1999. Instead of costs rising at 0.9% per year, costs suddenly started to rise by an average of 10.9% per year.</p> <div class="wp-caption aligncenter" id="attachment_39791" style="width: 588px;"><a href=""><img alt="Figure 1. Figure by Steve Kopits of Westwood Douglas showing trends in world oil exploration and production costs per barrel. CAGR is &quot;Compound Annual Growth Rate.&quot;" class="size-full wp-image-39791" src="" style="height: 385px; width: 600px;" /></a><br /> <p class="wp-caption-text"><em>Figure 2. Figure by Steve Kopits of Westwood Douglas showing trends in world oil exploration and production costs per barrel. CAGR is &ldquo;Compound Annual Growth Rate.&rdquo;</em></p> </div> <p>When costs were rising by only 0.9% per year, it was relatively easy for oil producers to offset the cost increases by efficiency gains. Once costs started rising much more quickly, it was a sign that we had in some sense &ldquo;run out&rdquo; of new fields of easy-to-extract oil and gas. Instead, oil companies were forced to start accessing fields with much more expensive-to-produce oil and gas, if they wanted to replace depleting fields with new fields. There would soon be a mismatch between wages (which generally don&rsquo;t rise very much) and the cost of goods made with oil, such as food grown using oil products.</p> <p>Did the invisible hand sit idly by and let business as usual continue, despite this big rise in the cost of extraction of oil from new fields? I would argue that it did not. It was clear to business people around the world that there was a large amount of coal in China and India that had been bypassed because these countries had not yet become industrialized. This coal would provide a much cheaper source of energy than the oil, especially if the cost of oil appeared likely to rise. Furthermore, wages in these countries were lower as well.</p> <p>The economy took the opportunity to re-optimize. Part of this re-optimization can be seen in Figure 1, shown earlier in this post. It shows that world coal supply has grown rapidly since 2000, while oil supply has grown quite slowly.</p> <p>Figure 3, below, shows a different kind of shift: a shift in the way oil supplies were distributed, after 2000. We see that China, Saudi Arabia, and India are all examples of countries with big increases in oil consumption. At the same time, many of the developed countries found their oil consumption shrinking, rather than growing.</p> <div class="wp-caption aligncenter" id="attachment_41618" style="width: 650px;"><em><a href=""><img alt="Figure 2. Figure showing oil consumption growth since 2000 for selected countries, based on data from BP Statistical Review of World Energy 2016." class="size-full wp-image-41618" src=";h=383" style="width: 600px; height: 359px;" /></a></em><br /> <p class="wp-caption-text"><em>Figure 3. Figure showing oil consumption growth since 2000 for selected countries, based on data from BP Statistical Review of World Energy 2016.</em></p> </div> <p>A person might wonder why Saudi Arabia&rsquo;s use of oil would grow rapidly after the year 2000. The answer is simple: Saudi Arabia&rsquo;s oil costs are its <strong>costs as a producer. </strong>Saudi Arabia has a lot of very old wells from which oil extraction is inexpensive&ndash;perhaps $15 per barrel. When oil prices are high and the cost of production is low, the government of an &nbsp;oil-exporting nation collects a huge amount of taxes. Saudi Arabia was in such a situation. As a result, it could afford to use oil for many purposes, including electricity production and increased building of highways. It was not an oil importer, so the high world oil prices did not affect the country negatively.</p> <p>China&rsquo;s rapid rise in oil production could take place because, even with added oil consumption, its overall cost of producing goods would remain low because of the large share of coal in its energy mix and its low wages. The huge share of coal in China&rsquo;s energy mix can be seen in Figure 4, below. Figure 4 also shows the extremely rapid growth in China&rsquo;s energy consumption that took place once China joined the World Trade Organization in late 2001.</p> <div class="wp-caption aligncenter" id="attachment_41010" style="width: 650px;"><a href=""><img alt="Figure 3. China energy consumption by fuel, based on BP 2016 SRWE. " class="size-full wp-image-41010" src=";h=383" style="width: 600px; height: 359px;" /></a><br /> <p class="wp-caption-text"><em>Figure 4. China energy consumption by fuel based on BP 2016 Statistical Review of World Energy.</em></p> </div> <p>India was in a similar situation to China, because it could also build its economy on cheap coal and cheap labor.</p> <p>When the economy re-optimizes itself, job patterns are affected as well. &nbsp;Figure 5 shows the trend in labor force participation rate in the US:</p> <div class="wp-caption aligncenter" id="attachment_41612" style="width: 650px;"><a href=""><img alt="Figure 4. US Civilian labor force participation rate, based on US Bureau of Labor Statistics data, as graphed by" class="size-full wp-image-41612" src=";h=247" style="width: 601px; height: 232px;" /></a><br /> <p class="wp-caption-text"><em>Figure 5. US Civilian labor force participation rate, based on US Bureau of Labor Statistics data, as graphed by</em></p> </div> <p>Was it simply a coincidence that the US labor force participation rate started falling about the year 2000? I don&rsquo;t think so. The shift in energy consumption to countries such as China and India, as oil costs rose, could be expected to reduce job availability in the US. I know several people who were laid off from the company I worked for, as their jobs (in computer technical support) were shifted overseas. These folks were not alone in seeing their jobs shipped overseas.</p> <p><strong>The World Economy is Like a Car that Cannot Make Sharp&nbsp;Turns&nbsp;</strong></p> <p>The world economy cannot make very sharp turns, because there is a very long lead-time in making any change. New factories need to be built. For these factories to be used sufficiently to make economic sense, they need to be used over a long period.</p> <p>At the same time, the products we desire to make more energy efficient, for example, automobiles, homes, and electricity generating plants, aren&rsquo;t replaced very often. Because of the short life-time of incandescent light bulbs, it is possible to force a fairly rapid shift to more efficient types. But it is much more difficult to encourage a rapid change in high-cost items, which are typically used for many years. If a car owner has a big loan outstanding, the owner doesn&rsquo;t want to hear that his car no longer has any value. How could he afford a new car, or pay back his loan?</p> <p><strong>A major limit on making any change is the amount of resources of a given type, available in a given year.</strong> These amounts tend to change relatively slowly, from year to year. (See Figure 1.) If more lithium, copper, oil, or any other type of resource is needed, new mines are needed. There needs to be an indication to producers that<em> the price of these commodities will stay high enough, for a long enough period, to make this investment worthwhile</em>. Low prices are a problem for many commodities today. In fact, production of many commodities may very well fall in the near future, because of continued low prices. This would collapse the economy.</p> <p><strong>The World Economy Can&rsquo;t Go Very Far Backward, Without Collapsing</strong></p> <p>The 2007-2009 recession is an example of an attempt of the economy to shrink backward. (See Figure 1.) It didn&rsquo;t go very far backward, and even the small amount of shrinkage that did occur was a huge problem. Many people lost their jobs, or were forced to take pay cuts.&nbsp;One of the big problems in going backward is the large amount of debt outstanding. This debt becomes impossible to repay, when the economy tries to shrink. Asset prices tend to fall as well.</p> <p>Furthermore, while previous approaches, such as using horses instead of cars, may be appealing, they are extremely difficult to implement in practice. There are far fewer horses now, and there would not be places to &ldquo;park&rdquo; the horses in cities. Cleaning up after horses would be a problem, without businesses specializing in handling this problem.</p> <p><strong>What World Leaders Can Do to (Sort of) Fix the Economy</strong></p> <p>There are basically two things that governments can do, to try to make the economy (or car) go faster:</p> <ol> <li><strong>They can encourage more debt.&nbsp;</strong>This is done in many ways, including lowering interest rates, reducing bank regulation, encouraging lower underwriting standards or longer term loans, taking out greater debt themselves, guaranteeing debt of non-creditworthy entities, and finding new markets for &ldquo;recycled debt.&rdquo;</li> <li><strong>They can increase complexity levels. </strong>This means increasing output of goods and services through the use of more and better machines and through more training and specialization of workers. More complex businesses are likely to lead to more international businesses and longer supply chains.</li> </ol> <p>Both of these actions work like turbocharging a car. They have the possibility of making the economy run faster, but they have the downside of extra cost. In the case of debt, the cost is the interest that needs to be paid; also the risk of &ldquo;blow-up&rdquo; if the economy slows. There is a limit on how low interest rates can go, as well. Ultimately, part of the output of the economy must go to debt holders, leaving less for workers.</p> <p>In the case of complexity, the problem is that there gets to be increasing wage disparity, when some employees have wages based on special training, while others do not. Also, with capital goods, some individuals are owners of capital goods, while others are not. The arrangement creates wealth disparity, besides wage disparity.</p> <p>In theory, both debt and increased complexity can help the economy grow faster. However, as I noted at the beginning, it is the wages of the non-elite workers that are especially important in allowing the economy to continue to move forward. The greater the proportion of the revenue that goes to high paid employees and to bond holders, the less that is available to non-elite workers. Also, there are&nbsp;diminishing returns to adding debt and complexity. At some point, the cost of each of these types of turbo-charging exceeds the benefit of the process.</p> <p><strong>Why the Economy Works Like a Self-Driving Car</strong></p> <p>The reason why the economy acts like a self-driving car is because the economy is, in physics terms, a <a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=3&amp;cad=rja&amp;uact=8&amp;ved=0ahUKEwjYksbX9JDSAhXD5SYKHTh9C54QFggkMAI&amp;;usg=AFQjCNHxUqkrxax_Ij4NaQzkCqIsSvnoWg&amp;sig2=PAXyJL55Ye7MtlszTRf53A">dissipative structure</a>. It grows and changes &ldquo;on its own,&rdquo; using energy sources available to it. The result is exactly the same effect that Adam Smith was observing. What makes the economy behave in this way is the fact that flows of energy are available to the economy. This happens because an economy is an <a href="">open system</a>, meaning its borders are permeable to energy flows.</p> <p>When there is an abundance of energy available for use (from the sun, or from burning fossil fuels, or even from food), a variety of dissipative structures self-organize. One example is hurricanes, which self-organize over warm oceans. Another example is plants and animals, which self-organize and grow from small beginnings, if they have adequate food energy, plus other necessities of life. Another example is ecosystems, consisting of a number of different kinds of plants and animals, which interact together for the common good. Even stars, including our sun, are dissipative structures.</p> <p>The economy is yet another type of a dissipative structure. This is why Adam Smith noticed the effect of the invisible hand of the economy. The energy that sustains the economy comes from a variety of sources. Humans have been able to obtain energy by burning biomass for <a href="">over one million years</a>. Other long-term energy sources include solar energy that provides heat and light for gardens, and wind energy that powers sail boats. More recently, other types of energy have been added, including fossil fuels energy.</p> <p>When energy supplies are very cheap and easy to obtain, it is easy to ramp up their use. With <em>growing supplies of energy</em>, it is possible to keep adding more and better tools for people to work with. I use the term &ldquo;tools&rdquo; broadly. Besides machines to enable greater production, I include things like roads and advanced education, which also are helpful in making workers more effective. The use of growing energy supplies allows growing use of tools, and this growing use of tools increasingly leverages human labor. This is why we see growing productivity; <strong>we can expect to see falling human productivity if energy supplies should start to decline</strong>. Falling productivity will tend to push the economy toward collapse.</p> <p>One problem for economies is diminishing returns of resource extraction. Diminishing returns cause the economy to become less and less efficient. Once energy extraction starts to have a significant problem with diminishing returns (such as in Figure 2), it is like losing energy resources into a sinkhole. More work is necessary, without greater output in terms of goods and services. Indirectly, economic growth must suffer. This seems to be the problem that the economy has been encountering in recent years. From the invisible hand&rsquo;s point of view, $100 per barrel oil is very different from $20 per barrel oil.</p> <p>One characteristic of dissipative structures is that <strong>they keep re-optimizing for the overall benefit of the dissipative structure</strong>. We saw in Figures 3 and 4 how fuel use and jobs rebalance around the world. Another example of rebalancing is the way the economy uses every part of a barrel of oil. If, for example, our only goal were to maximize the number of miles driven for automobiles, it would make sense to operate cars using diesel fuel, rather than gasoline. In fact, the energy mix available to the economy includes quite a bit of gasoline and natural gas liquids. If we need to use what is available, it makes sense to use gasoline in private passenger cars, and save diesel for commercial use.</p> <p>Another characteristic of dissipative structures is that they are not permanent. They grow for a while, and then collapse. Later, new similar dissipative structures may develop and indirectly replace the ones that have collapsed. In this way, the overall system is able to evolve in a way that adapts to changing conditions.</p> <p><strong>What Are the Likely Events that Would Cause the Economy to Collapse?</strong></p> <p>I modeled the system as being like a self-driving car. The thing that keeps the system operating is the continued growth of inflation-adjusted wages of non-elite workers. This analogy was chosen because in ecosystems in general, <em>the energy return on the labor of an animal is very important</em>. The collapse of a population of fish, or of some other animal, tends to happen when the return on the labor of that animal falls too low.</p> <p>In the case of the fish, the return on the labor of the fish falls too low when nearby supplies of food disappear, and the fish must swim too far to obtain new supplies of food. The return on human labor would seem to be <em>the inflation-adjusted wages of non-elite workers</em>. We know that wages for many workers have been falling in recent years, because of competition from globalization, and because of&nbsp;replacement of human labor by advanced machines, such as computers and robots.</p> <div class="wp-caption aligncenter" id="attachment_41623" style="width: 579px;"><a href=""><img alt="Figure 6. Bottom 50% income share, from recent Piketty analysis. " class="size-full wp-image-41623" src="" style="height: 420px; width: 600px;" /></a><br /> <p class="wp-caption-text"><em>Figure 6. Bottom 50% income share, from recent <a href="">Piketty analysis</a>.</em></p> </div> <p>Besides the problem of falling wages of non-elite workers, earlier in this post I mentioned a number of other issues that make the wages of these workers go less far. These include growing government spending, and the growing costs of education and healthcare. I also mentioned the problem of rising debt, and the increased concentration of wealth, as we try to add complexity to solve problems.&nbsp;All of these issues make it hard for &ldquo;demand&rdquo;&ndash;which might also be called &ldquo;affordability&rdquo;&ndash;to be sufficiently great to allow commodity prices to rise to the level producers need for profitability.</p> <p><strong>Prices Play a Very Important Role in the Economy</strong></p> <p>The pricing system is the communication system of the economy, as a dissipative structure. One use of energy is to create &ldquo;information.&rdquo; Prices are a high level form of information.</p> <p>One big area where prices come up is with respect to the whole portfolio of products needed on a regular basis, which I mentioned earlier (water, food, energy products, and mineral products). In order for the system to continue working, the prices need to be both:</p> <ul> <li>Affordable by consumers</li> <li>High enough for producers to cover their costs, including a margin for taxes and reinvestment</li> </ul> <p>Now, in 2017, prices are &ldquo;sort of&rdquo; affordable for consumers, but they are <strong>not high enough for producers</strong>.&nbsp;<a href="">Oil companies will go out of business</a> if these low prices persist.</p> <p>Back in 2007 and 2008, we had the reverse problem. Prices were high enough for producers, but too high for consumers (especially non-elite workers). <a href=";theme_preview=true">This is a big part of what pushed the economy into recession</a>.</p> <p>We noticed back in Figure 1 that <em>quantities</em> of energy products/goods tend to move up and down together. A similar phenomenon holds true for prices: commodity <em>prices</em> tend to rise and fall together (Figure 7). &nbsp;The reason this happens is because when the world economy is moving swiftly forward (higher wages, more building activity, more debt), demand tends to be high for many different types of materials at the same time. When the economy slows, prices of all of these commodities tend to fall at the same time. Inflation tends to fall as well.</p> <div class="wp-caption aligncenter" id="attachment_41050" style="width: 650px;"><a href=""><img alt="Figure 6. Prices of oil, call and natural gas tend to rise and fall together. Prices based on 2016 Statistical Review of World Energy data." class="size-full wp-image-41050" src=";h=440" style="width: 601px; height: 413px;" /></a><br /> <p class="wp-caption-text"><em>Figure 7. Prices of oil, call and natural gas tend to rise and fall together. Prices based on 2016 Statistical Review of World Energy data.</em></p> </div> <p>If prices cannot rise high enough for producers, it is likely a sign that wages of non-elite workers are already too low. The affordability loop mentioned earlier is not being closed, so prices cannot stay up at a high enough level to maintain production.</p> <p><strong>Most Modelers Overlook the Fact that the Economy Is an Open System</strong></p> <p>Most energy models are based on one of two views of the world: (1) fossil fuel energy supply will eventually run short, so we must use it as sparingly as possible; or (2) we want to reduce the use of fossil fuels as quickly as possible, because of climate change. Because of these issues, we want to leverage the fossil fuel energy we have, to as great an extent as possible, with energy that we can somehow capture from renewable sources, such as the solar energy or wind.&nbsp;With this view of the situation, our major objective is to create &ldquo;renewables&rdquo; that use fossil fuel energy as efficiently as possible.&nbsp;The hope is that these renewables, together with the actions of governments, will allow the economy to gradually shrink back to a level that is somehow more sustainable.</p> <p>Implicit is this model is the view that the economy, and the world in general, is a closed system. Our current government and business leaders are in charge; they can make the changes they would prefer, without the invisible hand causing an unforeseen problem. Very few have realized that the economy cannot really shrink back very much; past history, as well as the nature of dissipative structures, shows that economies tend to collapse. The only economies that have at least temporarily avoided that fate have shifted toward less complexity&ndash;for example, eliminating huge government programs, such as armies&ndash;rather than yielding to the temptation to add ever more complexity, such as wind turbines and solar panels.</p> <p>The real situation is that we have a here-and-now problem of too low wages for non-elite workers. Commodity prices are also too low. Intermittent renewables such as wind and solar are thought to be solutions, but it is well-known that <a href="">intermittent renewables cause too-low prices for other types of electricity generation</a>, when added to the electric grid. Thus, <strong>they are likely part of the low-price problem, not part of the solution</strong>. Temporary solutions, if there are any, are likely in the direction of cutting back on government expenditures and reducing regulation of banks. In fact, with the election of Trump and the passage of Brevity, the economy seems to again be re-optimizing.</p> <p>We also know that dissipative structures do not shrink back well, at all. They tend to collapse, instead. For example, you, as a human being, are a dissipative structure. If your food intake were cut back to, say, 500 calories per day, how well would you do? If you could not get along on a very low calorie diet, how would you expect the economy to shrink back to a renewables-only level? Renewables that can be used in a shrunken economy are scarce; we don&rsquo;t have a huge number of trees to cut down. <a href=";theme_preview=true">We cannot maintain the electric grid without fossil fuels.</a></p> <p>The assumption that the economy is a closed system is pretty much standard when modeling our current energy situation. This occurs because, until recently, we did not understand that the self-organizing properties of inanimate systems were as important as they are. Also, modeling of the economy as a closed system, rather than an open system, makes modeling much easier. The problem is that closed system modeling doesn&rsquo;t really tell the right story.&nbsp;For a discussion of some of the issues associated with this mis-modeling, see the recent academic paper,&nbsp;<a href="">Is the increased use of biofuels the road to sustainability? Consequences of the methodological approach</a>.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="230" height="135" alt="" src="" /> </div> </div> </div> biofuels Bond BP Bureau of Labor Statistics Business Business China Copper Economy Futurology GPS India Mitigation of peak oil Natural Gas Peak oil Petroleum Petroleum industry Petroleum politics Recession Saudi Arabia Uranium US Bureau World Trade World Trade Organization Tue, 21 Feb 2017 08:30:00 +0000 Tyler Durden 588629 at Google Nation - Visualizing The World's Most Valuable Brands <p><strong>The world&rsquo;s most valuable brand is owned by a company that you likely interact with every day.</strong> In fact, you may have even gotten to this web page using it.</p> <p>That brand is Google &ndash; and it dominates the internet with a 64% market share in search, while generating&nbsp;<a href="">41% of all digital advertising revenue</a>&nbsp;globally. As<a href=""> Visual Capitalist&#39;s Jeff Desjardins notes</a>, according to Brand Finance&rsquo;s most recent&nbsp;<a href="">2017 list</a>, Google&rsquo;s brand value has recently increased to $109.5 billion, which is just enough to supplant Apple&rsquo;s $107.1 billion brand from the top of the list.</p> <p><u><strong>THE MOST VALUABLE BRAND IN EACH COUNTRY</strong></u></p> <p>Today&rsquo;s infographic comes from&nbsp;<a href=""></a>, a cost information site, and it breaks down Brand Finance&rsquo;s list of the top 500 brands in a different way. It <strong>shows the most valuable brand for each country, and has each country sized accordingly to the dollar value of that company.</strong></p> <div><a href=""><img src="" style="border-width: 0px; border-style: solid; height: 409px; width: 600px;" /></a></div> <div><em>Courtesy of: <a href="">Visual Capitalist</a></em></div> <p><strong>It&rsquo;s interesting to note the drop off in value from country to country.</strong></p> <p>Google is the world&rsquo;s most valuable brand at $109.5 billion &ndash; and it is followed closely by other U.S. brands like Apple ($107.1B) or Amazon ($106.4B). However, there are only two non-U.S. brands in the top 10, which are South Korean conglomerate Samsung ($66.2B) and Chinese bank ICBC ($47.8B).</p> <p>Two automakers also rank pretty high. Japan&rsquo;s Toyota and Germany&rsquo;s BMW both have significant valuations at $46.3 billion and $37.1 billion.</p> <p>After that, it&rsquo;s a pretty steep fall in value for most countries. The top brands in countries like Canada, Italy, Switzerland, Australia, Russia, India, and Spain don&rsquo;t crack $20 billion in value. On the entire South American continent, the most valuable brand is Brazil&rsquo;s Itaú, a bank with a brand worth only $6.9 billion.</p> <p><strong>By our count, a whopping 76 of the top 100 brands were based in either the United States, China, or Japan.</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1025" height="607" alt="" src="" /> </div> </div> </div> Apple Apple Inc. Australia Brand Brand Finance Brand management Brand valuation Brazil Business Business China Economy Germany Google Google India Industrial and Commercial Bank of China Italy Japan Market Share Switzerland Technology Technology Toyota Tue, 21 Feb 2017 07:45:00 +0000 Tyler Durden 588630 at