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The FT Editorial Board has a problem with those who pretend to solve climate change. Who might they have in mind?

January 4, 2019

The FT Editorial Board has a problem with those who pretend to solve climate change. Who might they have in mind?

“The depressing reality about climate change is that we could solve the problem, at manageable cost, but are failing to do so.” So the Financial Times Editorial Board concluded on 26th December. “This failure is due to a mixture of blindness and self-deception. The blindness comes from those, such as US president Donald Trump, who deny the reality of climate change. The self-deception comes from those who accept the reality, but only pretend to solve it.”

Being diplomatic, the Board does not elaborate on those who are guilty of self deception and pretence. Let me offer a few examples for them.

I view this as rather more than a self-imposed academic exercise. The UN Secretary-General António Guterres spoke for many when he said, at the annual climate summit earlier this month, that those who do not wish to accelerate the decarbonisation goal of the Paris Agreement – knowing what climate scientists tell us of the dangers – are guilty of “immoral” and “suicidal” behaviour. Those with the most to lose, the young, spoke with anguished voices at that summit of a clear and present danger to the civilisation they hope to live in. Among the oldsters who see the stakes no differently, David Attenborough was an interesting new voice.

Anyone who has dipped into my compilations of the history will appreciate that I do not consider myself short of choice when it comes to those who are pretending when it comes to climate action. Let me limit myself to the pages of the FT this year, in the interests of brevity.

…click on the above link to read the rest of the article…

ECB Takes “Unprecedented” Step Of Putting Italy’s Banca Carige In Administration

January 2, 2019

ECB Takes “Unprecedented” Step Of Putting Italy’s Banca Carige In Administration

Investors who had hoped that the resolution of Italy’s budget showdown with the EU would mark an end to a volatile period for Italian bonds and stocks were disappointed Wednesday when fears about an Italian banking crisis reemerged after the ECB appointed a slate of temporary administrators to oversee troubled Italian lender Banca Carige after nearly its entire board resigned.

Earlier on Wednesday, Consob, Italy’s market watchdog, said it had suspended trading in shares of Banca Carige for the session following a request by the bank, according to Reuters.

European bank stocks dropped while bonds rallied as fears about softer-than-expected factory orders across the Continent were compounded by the developments in Italy (which proved an exception to the trend of weak PMIs).

Banca

Fabio Innocenzi, Pietro Modiano and Raffaele Lener have been appointed as temporary administrators while Gianluca Brancadoro, Andrea Guaccero and Alessandro Zanotti have appointed as members of the surveillance committee.

The “unprecedented” move – as Bloomberg called it – follows a failed attempt to raise some 400 million euros last month after the Malacalza family, the billionaire shareholders who control nearly one-third of Carige, abstained from a vote on a turnaround plan, which sought to fill the capital hole left by the fraud scandal.

Carige

…click on the above link to read the rest of the article…

Weekly Commentary: The Perils of Inflationism

December 15, 2018

Weekly Commentary: The Perils of Inflationism

December 13 – Financial Times (Chris Giles and Claire Jones): “When the European Central Bank switches off its money-printing press at the turn of this year and stops buying fresh assets, it will mark the end of a decade-long global experiment in how to stave off economic meltdowns. Quantitative easing, the policy that aims to boost spending and inflation by creating electronic money and pumping it into the economy by buying assets such as government bonds, is on the verge of becoming quantitative tightening. With the Federal Reserve slowly reducing its stocks of Treasuries, central banks are no longer in the buying business. Globally, only the Bank of Japan is left as a leading central bank that has not formally called time on expanding its stock of asset purchases. Arguments over how, or even if, the trillions spent by policymakers helped the global economy recover will rage for years to come. But as central banks step back, the initial view is that the purchases worked — whether through encouraging investors to hold more risky assets, easing constraints on borrowing, providing finance so governments could run larger budget deficits or just showing that central banks still had an answer to weak demand and low inflation.”
At this point, the prevailing view holds that QE “worked.” Moreover, central banks are seen ready and willing to call upon “money printing” operations as need. The great virtue of this policy course, many believe, is that there is essentially no limit to the scope and duration of “QE infinity.” The FT quoted Mario Draghi: “[QE] is permanent and may be usable in contingencies that the governing council will assess in its independence.” Melvyn Krauss, from the Hoover Institution, captured conventional thinking: “No one willingly walks into a room from which there is no exit. Because QE proved temporary, because it worked and because it has ended, it is likely to be used again.”…click on the above link to read the rest of the article…

France Takes The Lead In Protecting Iran Oil Trade From U.S. Sanctions

November 9, 2018

France Takes The Lead In Protecting Iran Oil Trade From U.S. Sanctions

Tank farm

France aims to lead the European Union (EU) efforts in defying U.S. sanctions on Iran, by supporting the creation of a payment mechanism to keep trade with Iran and making the euro more powerful, France’s Economy Minister Bruno Le Maire said in an interview with the Financial Times.

“Europe refuses to allow the US to be the trade policeman of the world,” Le Maire told FT, adding that the EU needs to affirm its independence in the rift between the EU and the United States over the sanctions on Iran.

The EU has been trying to create a special purpose vehicle (SPV) that would allow the bloc to continue buying Iranian oil and keep trade in other products with Iran after the U.S. sanctions on Tehran return.

The idea behind the SPV is to have it act as a clearing house into which buyers of Iranian oil would pay, allowing the EU to trade oil with Iran without having to directly pay the Islamic Republic.

As the U.S. sanctions on Iran snapped back on Monday, the SPV hasn’t been operational and reports have had it that the undertaking is very complicated and politically sensitive. The bloc is also said to be struggling with the set-up, because no EU member is willing to host it for fear of angering the United States, the Financial Times reported recently, citing EU diplomats.

On Monday, the Belgium-based international financial messaging system SWIFT said that it would comply with the U.S. sanctions on Iran and would cut off sanctioned Iranian banks from its network. This was a blow to the EU’s attempts to defy the U.S. sanctions.

…click on the above link to read the rest of the article…

UK Readies Apocalyptic Flotilla Of Emergency Supplies In Case Of “No-Deal” Brexit

October 24, 2018

UK Readies Apocalyptic Flotilla Of Emergency Supplies In Case Of “No-Deal” Brexit

UK authorities are drawing up plans to charter a flotilla of supply ships to ferry in emergency food and medicines in the event of a “no-deal” Brexit next March, according to FT, which reports that the move was “greeted with disbelief at a stormy meeting of Theresa May’s cabinet on Tuesday.”

The cabinet was told that the heavily used Dover-Calais route could quickly become blocked by new customs controls on the French side, forcing Britain to seek alternative ways of bringing in “critical supplies”.

The warnings about the consequences of a disorderly British exit from the EU came at a cabinet meeting which saw ministers divided into two camps over how to unlock a deal in Brussels. One witness said there was “an almighty row”.

The prospect of Britain facing shortages of perishable food and medicines provided a bleak backdrop to the cabinet discussions, as Mrs May urged her ministers to back her attempts to secure a breakthrough. –FT

Theresa May announced weekly cabinet discussions on preparations for Brexit, deal or no-deal, saying “The government’s priority is to secure a deal.”

May’s de facto deputy, David Lidington, told the cabinet that under a no-deal Brexit, the Dover-Calais route would be significantly crippled – running at just 12-25% of normal capacity for up to six months.

“Whatever we do at our end, the French could cause chaos if they carry out checks at their end,” said one UK official. “Dover-Calais would be the obvious pinch point. The French would say they were only applying the rules.”

If Britain left the EU under World Trade Organization rules, the UK and EU would be in different customs jurisdictions and would be expected to carry out checks on trade across the English Channel.

…click on the above link to read the rest of the article…

Natural Gas Inventories “Dangerously Low”

August 26, 2018

Natural Gas Inventories “Dangerously Low”

NatGas

Futures markets are suggesting the currently benign level of natural gas price volatility may not remain through the winter months.

According to the Financial Times, market volatility this year has been the lowest on record despite inventory levels falling 19.5 percent below average and by the time winter starts are set to be at their lowest in more than a decade.

(Click to enlarge)

Source: Bloomberg (via Financial Times)

The Financial Times puts this down to investors being lulled into complacency by a seemingly unstoppable wave of new supply from the shale market rising inexorably to meet rising demand. The government last week forecast 81.1 billion cubic feet per day in dry gas production for 2018 — a record high — and up by 7.5 billion cu ft/d from 2017, the Financial Times reports.

But is the market safe to assume shale gas will supply regardless of demand?

Natural gas producers are systematically hedging their sales throughout next year, often a sign they plan to continue an aggressive policy of drilling and expansion. That activity has contributed to a dipping of forward prices, as there are more sellers in the futures market than buyers.

But inventory levels are low — some would suggest dangerously low — after a high summer demand due to hot weather increasing demand for air conditioning. Natural gas “power burn” surged to a record 37.7 billion cubic feet per day during July, the Financial Times reports.

Such strong demand comes after a cold winter depleting stocks to unusually low levels. Inventory levels were low at the end of the summer and have not managed to be replaced during the normally slacker summer months. High demand is not helped by exports of natural gas and distillates running at record levels, aided by strong international demand and low U.S. domestic prices relative to global markets.

…click on the above link to read the rest of the article…

America Is Overdue for Another Economic Disaster

August 21, 2018

America Is Overdue for Another Economic Disaster

A trader monitors screens on the New York Stock Exchange. (Lucas Jackson/Reuters)

Underneath the current economic boom, there are some truly worrying signs.Eric Sevareid (1912–1992), the author and broadcaster, said he was a pessimist about tomorrow but an optimist about the day after tomorrow. Regarding America’s economy, prudent people should reverse that.

This Wednesday, according to the Financial Times‘ Robin Wigglesworth and Nicole Bullock, “the U.S. stock market will officially have enjoyed its longest-ever bull run” — one that rises 20 percent from its low, until it drops 20 percent from its peak. And September 15 will be the tenth anniversary of the collapse of Lehman Bros., the fourth-largest U.S. investment bank. History’s largest bankruptcy filing presaged the October 2008 evaporation of almost $10 trillion in global market capitalization.

The durable market rise that began March 6, 2009, is as intoxicating as the Lehman anniversary should be sobering: Nothing lasts. Those who see no Lehman-like episode on the horizon did not see the last one.

Economists debate, inconclusively, this question: Do economic expansions die of old age (the current one began in June 2009) or are they slain by big events or bad policies? What is known is that all expansions end. God, a wit has warned, is going to come down and pull civilization over for speeding. When He, or something, decides that today’s expansion, currently in its 111th month (approaching twice the 58-month average length of post-1945 expansions), has gone on long enough, the contraction probably will begin with the annual budget deficit exceeding $1 trillion.

The president’s Office of Management and Budget — not that there really is a meaningful budget getting actual management — projects that the deficit for fiscal year 2019, which begins in six weeks, will be $1.085 trillion. This is while the economy is, according to the economic historian in the Oval Office, “as good as it’s ever been, ever.

…click on the above link to read the rest of the article…

Stock markets look ever more like Ponzi schemes

July 4, 2018

Stock markets look ever more like Ponzi schemes

The FT has reported this morning that:

Debt at UK listed companies has soared to hit a record high of £390bn as companies have scrambled to maintain dividend payouts in response to shareholder demand despite weak profitability.

They added:

UK plc’s net debt has surpassed pre-crisis levels to reach £390.7bn in the 2017-18 financial year, according to analysis from Link Asset Services, which assessed balance sheet data from 440 UK listed companies.

So what, you might ask? Does it matter that companies are making sense of low-interest rates to raise money when I am saying that government could and should be doing the same thing?

Actually, yes it does. And that’s because of what the cash is being used for. Borrowing for investment makes sense. Borrowing to fund revenue investment (that is training, for example, which cannot go on the balance sheet but still adds value to the business) makes sense. But borrowing to pay a dividend when current profits and cash flow would not support it? No, that makes no sense at all.

Unless, of course, you are CEO on a large share price linked bonus package and your aim is to manipulate the market price of the company. It is that manipulation that is going on here, I suggest. These loans are being used to artificially inflate share prices.

The problem is systemic. In the US the problem is share buybacks, which I read recently have exceeded $5 trillion in the last decade, meaning that US companies are now by far the biggest buyers of their own shares. That is, once again, market manipulation.

And this manipulation does matter.

People think their savings and pensions are safe because of rising share prices. They do not realise it is all a con-trick.

…click on the above link to read the rest of the article…

Why Mainstream Economics Consistently Fails to Explain the Occurrence of Recessions?

March 26, 2018

WHY MAINSTREAM ECONOMICS CONSISTENTLY FAILS TO EXPLAIN THE OCCURRENCE OF RECESSIONS?

In his article released on March 21 2018 – Economics failed us before the global crisis – Martin Wolf the economics editor of The Financial Times expressed some misgivings about macroeconomics.

Economics is, like medicine (and unlike, say, cosmology), a practical discipline. Its goal is to make the world a better place. This is particularly true of macroeconomics, which was invented by John Maynard Keynes in response to the Great Depression. The tests of this discipline are whether its adepts understand what might go wrong in the economy and how to put it right. When the financial crisis that hit in 2007 caught the profession almost completely unawares, it failed the first of these tests. It did better on the second. Nevertheless, it needs rebuilding.

Martin Wolf argues that a situation could emerge when the economy might end up in self-reinforcing bad states. In this possibility, it is vital to respond to crises forcefully.

It seems that regardless of our understanding of the key causes behind the crises authorities should always administer strong fiscal and monetary policies holds Martin Wolf.  On this way of thinking, strong fiscal and monetary policies somehow will fix things.

A big question is not only whether we know how to respond to a crisis, but whether we did so. In his contribution, the Nobel laureate Paul Krugman argues, to my mind persuasively, that the basic Keynesian remedies — a strong fiscal and monetary response — remain right.

Whilst agreeing with Krugman, Martin Wolf holds the view that, we remain ignorant to how economy works. Having expressed this, curiously Martin Wolf still holds the view that Keynesian policies could help during an economic crisis.

For Martin Wolf as for most mainstream economists the Keynesian remedy is always viewed with positive benefits- if in doubt just push more money and boost government spending to resolve any possible economic crisis. It did not occur to our writer that without understanding the causes of a crisis, administering Keynesian remedies could make things much worse.

The proponents for strong government outlays and easy money policy when the economy falls into a crisis hold that stronger outlays by the government coupled with increases in money supply will strengthen monetary flow and this in turn will strengthen the economy. What is the reason behind this way of thinking?

…click on the above link to read the rest of the article…

Weekly Commentary: Nobody Thinks It Would Happen Again

March 17, 2018

Weekly Commentary: Nobody Thinks It Would Happen Again

WSJ: “Ten Years After the Bear Stearns Bailout, Nobody Thinks It Would Happen Again.”

Myriad changes to the financial structure have seemingly safeguarded the financial system from another 2008-style crisis. The big Wall Street financial institutions are these days better capitalized than a decade ago. There are “living wills,” along with various regulatory constraints that have limited the most egregious lending and leveraging mistakes that brought down Bear Stearns, Lehman and others. There are central bank swap lines and such, the type of financial structures that breed optimism.

March 17, 2008 – Financial Times (Gillian Tett): “In recent years, bankers have succumbed to the idea that the credit world was all about numbers and complex computer models. These days, however, this assumption looks ever more of a falsehood. For as anyone with a classical education knows, credit takes its root from the Latin word credere (“to trust”) And as the current credit turmoil now mutates into ever-more virulent forms, it is faith – or, rather, the lack of it – that has turned a subprime squall into a what is arguably the worst financial ­crisis in seven decades. Make no mistake: what we are witnessing right now is not just a collapse of faith in one single institution (namely Bear Stearns) or even an asset class (those dodgy subprime mortgage bonds). Instead, it stems from a loss of trust in the whole style of modern finance, with all its complex slicing and dicing of risk into ever-more opaque forms. And this trend is not just damaging the credibility of banks, but the aura of omnipotence that has enveloped institutions such as the US Federal Reserve in recent years.”

Gillian Tett was the preeminent journalist during the waning mortgage finance Bubble period. She was seemingly alone in illuminating the degree of excess in subprime Credit default swaps and structured finance more generally. By March 2008, she had already recognized “the worst financial crisis in seven decades,” while Wall Street was trapped in denial. Ms. Tett also appreciated the damage being done to Federal Reserve credibility. Yet no one could have anticipated the evolution of policy measures adopted by the Fed and global central bankers over the following decade. Credibility’s New Lease on Life.

…click on the above link to read the rest of the article…

Don’t Confuse Peak Oil And The Peak Oil Debate

February 28, 2018

Don’t Confuse Peak Oil And The Peak Oil Debate

In the past five years of writing about energy one of my favorite observations has been that people get into trouble because they “confuse Peak Oil and the Peak Oil Debate.” In other words, they confuse what Peak Oil IS and what Peak Oil MEANS. Because the honest truth is that most people, even energy professionals, don’t actually know the proper definition of Peak Oil. And when they think about the “Peak Oil Debate,” they mistakenly believe that it refers only to those extreme pessimistic predictions of energy doom. The debate actually represents  a wide spectrum of discussions, beliefs, and positions related to oil depletion. In short, your view of Peak Oil is far too narrow if you only see it as a discussion with only two sides (energy doom vs. extreme abundance).

I wrote about this in a January tweetstorm copied below for your review. Feel free to read through the tweets in order first, and then return to view the additional comments I’ve included for each.

Ed Crooks, energy editor at the Financial Times, also penned a great response thread on Peak Oil Supply and Peak Oil Demand. You should also read his thread as well.

D. Ray Long@RayLongDC

(thread) Quick thread to expand on Chris’ point below. People always get into trouble because they confuse Peak Oil and the Peak Oil Debate. In other words, they confuse what Peak Oil IS and what Peak Oil MEANS. https://twitter.com/chrisnelder/status/953661525478092800 …

D. Ray Long@RayLongDC
Replying to @RayLongDC

On the former, there is and always was just one definition for Peak Oil Supply: the “max rate of oil production.” It’s not good, or bad, it’s a number. That’s all it is.

…click on the above link to read the rest of the article…

The Antidote to Optimism

January 27, 2018

The Antidote to Optimism

It is always brightest before they turn the lights out.

You can quote us on that, Dear Reader.

Just when you thought things couldn’t get better… guess what?

They don’t. They go dark as a dungeon.

Antidote to Optimism

Our task today is to show that however wonderful things may appear in today’s markets and economy, they may not be all that great.

We put our backs into this grim work neither for love nor for money, but simply out of a sense of stern duty.

If not us, who? If not now, when?

Someone must put forward an antidote to the optimism now raging through markets around the world.

Someone must make the case for cynicism, suspicion, and mockery.

Someone must take the other side of the trade.

And so… the work, like shucking oysters on a cold day, falls to us. We open them up… hoping to find a pearl.

Donald Trump, Davos ManInstead, we find claptrap.

“The elite gathering at Davos [including Donald Trump],” begins a Financial Timesarticle, “takes place against a backdrop of improving economic activity across the world.”

The IMF says it is the “broadest synchronized global growth upswing since 2010.”

The FT goes on to tell us that the world economy is supposed to grow a healthy 3.9% “this year and next” thanks, at least in part, to the sweeping tax reform measure just implemented in the U.S.

Well, well, well. Gosh, it looks as though we were wrong about everything. You can predict the future after all.

As for the tax cut, we didn’t believe that the tax measure would have any positive consequences other than giving us more money.

What economic benefit could be reaped by taking money from one pocket and putting it in another?

…click on the above link to read the rest of the article…

Can Wikipedia’s Jimmy Wales fix the news?

January 21, 2018

Can Wikipedia’s Jimmy Wales fix the news?

Traditional media is broken, the tech entrepreneur says. But will his new reader-funded service be any better?

Wikipedia founder Jimmy Wales stands in the doorway to his office Friday, Dec. 1, 2006 in St. Petersburg, Fla. — AP Photo/Steve Nesius

Jimmy Wales has already triggered one global information revolution. Now he is plotting a second.

As co-founder of Wikipedia, the online encyclopedia, Wales helped create one of the wonders of our digital world. Launched as an experimental project in 2001, Wikipedia sprouted into a global community of volunteer contributors who have produced more than 45 million articles in 288 languages. Now the fifth-most-visited website in the world, it has become the first refuge for schoolchildren looking to mug up on photosynthesis and for adults wanting to settle an argument about who won the 1973 World Series. It also stands out as the only one of the top 10 sites that is not a commercial enterprise.

“The idea that, in your pocket, you’ve got this incredible storehouse of knowledge that’s completely free is kind of staggering, I mean, even today,” Wales says, as if he still cannot quite wrap his head around the phenomenon.

Setting up Wikipedia would count as a singular achievement in anyone’s career. But Wales is restless for more. From a cramped and anodyne office near London’s Paddington Station, the 51-year-old tech entrepreneur has spent the past few months planning a similar revolution in the news business. In a video announcing the formation of a new media organisation called WikiTribune, he grandly proclaimed: “The news is broken. But we’ve figured out how to fix it.”

Alarmed by the debasement of democratic debate and the proliferation of “clickbait crap” that helped Donald Trump win last year’s US presidential elections, Wales wants to bring the power of the Wiki community and the wisdom of crowds to bear on the media business by creating a hybrid model.

…click on the above link to read the rest of the article…

Mark Zuckerberg’s Long Litany Of Failings – Mainstream Media Turns On Social Media

November 17, 2017

Mark Zuckerberg’s Long Litany Of Failings – Mainstream Media Turns On Social Media

The mainstream media is a fickle beast beholden to the direction of the prevailing political winds. Unfortunately for Facebook, Google and Twitter, those winds have turned about face in recent weeks as the political establishment thrashes about in its misguided efforts to prove that – aided by social media – Russia changed the course of the 2016 presidential election. While Facebook’s share price has suffered very little so far, the mainstream media is going to work on the reputations of Facebook and its billionaire founder. For example, according to Vanity Fair last month.

“…the tech giant is broadly focused on repairing its reputation following revelations that its platform was weaponized by Russia in the 2016 election.”

“Weaponized” seemed a very strong word to use.

With the social media platform deemed “fair game” in the mainstream media, the Financial Times has lined up Mark Zuckerberg in its crosshairs. The FT journalist who penned the piece on Zuckerberg, Edward Luce, is cut from establishment cloth…and then some. Luce is the son of Richard Luce, now Baron Luce, the former MP, former Lord Chamberlain to the Queen and Knight of the Garter. Edward Luce read PPE at Oxford, took a sabbatical as a speech writer for Larry Summers and is the FT’s chief US commentator.

We are no fans of Zuckerberg and sympathise with some of it, but we recognise a hatchet job when we see it. In the article, Luce accuses Zuckerberg of…

Self-evident observation, or “stating the bleeding obvious”, to use the English vernacular:

…click on the above link to read the rest of the article…

Saudi Arabia Offers Arrested Royals A Deal: Your Freedom For Lots Of Cash

November 16, 2017

Saudi Arabia Offers Arrested Royals A Deal: Your Freedom For Lots Of Cash

Saudi Arabia just introduced a 70% wealth tax. It did so in a most original way…

As we noted shortly after the Crown Prince’s purge of potential rivals within Saudi Arabia’s sprawling ruling family, while the dozens of arrests were made under the pretext of an “anti-corruption crackdown”, Mohammed bin Salman’s ulterior motive was something else entirely: Replenishing the Kingdom’s depleted foreign reserves, which have been hammered for the past three years by low oil prices, with some estimating that the current purge could potentially bring in up to $800 billion in proceeds.

Furthermore, the geopolitical turmoil unleashed by the unprecedented crackdown helped push oil prices higher, creating an ancillary benefit for both the kingdom’s rulers and the upcoming IPO of Aramco.

Saudi Crown Prince Mohammed bin Salman

And, in the latest confirmation that the crackdown was all about cash, the Financial Times reports today that the Saudi government has offered the new occupants of the Riyadh Ritz-Carlton a way out…. and it’s going to cost them: In some cases, as much as 70% of their net worth.

Saudi authorities are negotiating settlements with princes and businessmen held over allegations of corruption, offering deals for the detainees to pay for their freedom, people briefed on the discussions say.

In some cases the government is seeking to appropriate as much as 70 per cent of suspects’ wealth, two of the people said, in a bid to channel hundreds of billions of dollars into depleted state coffers.

The arrangements, which have already seen some assets and funds handed over to the state, provide an insight into the strategy behind Crown Prince Mohammed bin Salman’s dramatic corruption purge.

…click on the above link to read the rest of the article…

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