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Europe Gives Up On Sound Money, Prepares To Join The Currency War

Europe Gives Up On Sound Money, Prepares To Join The Currency War

Not so long ago, Europe seemed to have its financial house more-or-less in order. German government spending was actually falling. Industries that had been nationalized in the socialist 70s were being privatized. The European Central Bank – run by sound money advocate Jean-Claude Trichet – was smarter and more cautious than the incoherently rambunctious Bernanke Fed. The euro, for a while, was actually preferred by many over the dollar. 

Then – gradually at first and now very quickly – everything went sideways.

Mario Draghi took over for Trichet at the ECB and promised to do “whatever it takes” to generate at least 2% inflation. Then he proceeded to deliver on that promise with massive asset purchases and negative interest rates. 

Inequality – which, we’re now coming to realize – is fed by low interest rates and easy money, rose to near-US proportions. Immigration was mishandled to the point that it became THE political issue. And populist parties opposed to the existing system attracted enough votes to rattle the mainstream parties. 

The entrenched political/financial class, shocked by the unwashed masses’ effrontery, are now responding exactly as you’d expect, with massive increases in social spending, promises of even easier money (Draghi actually claimed that there was “plenty of headroom” to cut rates from the current -0.4%) and, well, whatever else it takes to stay in power.

Here, for instance, is Germany’s government spending. Note the uptrend now that the Greens are contenders:

German government spending Europe currency war

From today’s Wall Street Journal

To win voters lost to an anti-globalization backlash, Europe’s mainstream parties are going back to the 1970s.

In Germany, the U.K, Denmark, France and Spain, these parties are aiming to reverse decades of pro-market policy and promising greater state control of business and the economy, more welfare benefits, bigger pensions and higher taxes for corporations and the wealthy. Some have discussed nationalizations and expropriations.

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

“Hell Is Coming” Dangerous Heatwave Strikes Europe

“Hell Is Coming” Dangerous Heatwave Strikes Europe

Most of Europe will be blanketed by an oppressive heatwave as the continent suffers unreasonable warmth this week, with officials across the European Union announcing severe warnings against dehydration and heatstroke. The heat wave will be centered from Spain into France and Germany.

AccuWeather said a storm stalling over the Atlantic Ocean and high pressure over central and eastern Europe will push hot desert air from Africa northward across Europe. This setup has triggered dangerous heat wave warnings across western and central Europe for the remainder of the week.

From Madrid to Paris, Belgium, Frankfurt, and Berlin, these metropolitan areas are likely to see a multi-day heat wave, with daily temperatures around 90F-100F.

Overweight Positions in the Pound Are Way Forward on Brexit, Says Legal & General’s Jeffery

High humidity in some areas could make it feel like 116F, experts warned. “El infierno [hell] is coming,” tweeted meteorologist Silvia Laplana in Spain.

Embedded video

El infierno is coming.

Officials in France have set up “cool rooms” in government buildings, opened community pools for extended hours, and installed water fountains across the city to prepare for the heat wave this week, reported The Guardian.

“I’m worried about people who are downplaying this, who are continuing to exercise as usual or stay out in the sun,” the health minister, Agnès Buzyn, said. “This affects all of us, nobody is a superman when it comes to dealing with the extreme heat we’re going to see on Thursday and Friday,” she told a press conference.

Emmanuel Demaël of Météo-France said the heat wave is so unprecedented that “we haven’t seen this since 1947.”

Record monthly and all-time highs are likely to be set across France this week, Demaël said, and overnight temperatures could stay above 70F.

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

No, Rate Cuts Were Not Discussed: ECB Insiders Out Draghi as Fabricator & Schemer, and Talk to Reuters

No, Rate Cuts Were Not Discussed: ECB Insiders Out Draghi as Fabricator & Schemer, and Talk to Reuters

Draghi’s shenanigans get hilarious, months before his term ends.

So here’s ECB President Mario Draghi, whose term ends in October, and he’s at the ECB Forum in Portugal, and in a speech on Tuesday titled innocuously, “Twenty Years of the ECB’s monetary policy” – so this wasn’t a press conference after an ECB policy meeting or anything, but a speech on history at an ECB Forum – he suddenly threw out a whole bunch of stuff…

How, “in the absence of improvement” of inflation, “additional stimulus will be required,” in form of “further cuts in policy interest rates” and additional bond purchases, and how “in the coming weeks, the Governing Council will deliberate how our instruments can be adapted commensurate to the severity of the risk to price stability,” and that “all these options were raised and discussed at our last meeting.”

Whoa! Wait a minute, said the good folks who were part of the ECB’s June meeting. These options were not discussed, they told Reuters on Tuesday.

Draghi had ventured out there on his own – apparently trying to push his colleagues into a corner single-handedly as his last hurrah.

His vision laid out on Tuesday was quite a change from the June 6 post-meeting announcement, which didn’t mention anything about even discussing rate cuts. It said that the ECB expects its policy rates to “remain at their present levels at least through the first half of 2020,” before the ECB would begin to raise them, with the bias still on raising rates, not cutting rates. That was less than two weeks ago, and there had not been another ECB policy meeting since then.

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

“The Countdown Has Begun:” Iran Warns It Will Breach Uranium Stockpile Limits In 10 Days

“The Countdown Has Begun:” Iran Warns It Will Breach Uranium Stockpile Limits In 10 Days 

Iran certainly isn’t planning on backing down in the face of Washington’s accusations about the country’s role in last week’s tanker bombings, and as a result, the possibility of a boots-on-the-ground military conflict in the Islamic Republic cannot yet be ruled out. Making an already tense situation infinitely more precarious, Iran on Monday reminded the world that it’s preparing to violate the terms of the Iran deal during the next ten days.

Iran

By increasing its stockpiles of enriched uranium, Iran is bound to elicit accusations that it’s once again working on a nuclear bomb. Tehran has always maintained that its nuclear program is for peaceful purposes, but American neocons like John Bolton have warned that this was merely a ruse, and that Iran could target American allies like Israel with a missile.

The Iranian government announced on Monday that it was set to breach the cap on enriched uranium, unless Europe finds a way to trade with Iran, or otherwise fulfill its financial obligations made under the deal.

European officials have been somewhat more skeptical of Iran’s role in last week’s tanker attacks, though many have acknowledged that if this were to be true, it could seriously complicate efforts to preserve the nuclear deal. German Foreign Minister Heiko Maas, who visited Tehran last week, said Germany is still looking at evidence on whether Iran was responsible for last week’s attacks. Meanwhile, the UK has decided to deploy 100 Elite Royal Marines to the region to serve as a “rapid reaction force” to protect British assets.

Behrouz Kamalvandi, a spokesperson for the Iranian atomic energy agency, said Iran has “already increased” uranium production at a nuclear research site in Natanz in the central Isfahan province, according to RT.

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

“Europe Will Not Be Europe”

“Europe Will Not Be Europe”

  • In the United Kingdom, the Brexit Party victory at 31.6% of the vote was a remarkable achievement that showed the persistent willingness of millions of Britons to leave the European Union. The “populist” positions — the defense of national sovereignty and European civilization, refusal of uncontrolled immigration and diktats of Brussels technocrats — have gained ground.
  • The parties that have ruled Europe for decades obtained weak results, but, with rare exceptions, did not collapse — and will continue to dominate the European Union.
  • The Greens may gain more influence – along with its consequences. To anyone who read the Greens’ programs, it is evident that they are essentially leftists with an environmental green mask. They support unrestricted immigration and multiculturalism. They are…resolutely hostile to any defense of Western civilization, to free enterprise and free markets. They are often in favor of zero growth. Most of them support an apocalyptic vision of climate change and say that the survival of humanity will be at stake around the corner if Europe does not take drastic measures to “save the planet”. All of them are in favor of authoritarian decisions imposed from Brussels to all of Europe.
  • A European parliament placed under the influence of the Greens will almost certainly accelerate the slide towards more power given to the unelected members of the European Commission, and a phasing out of nuclear energy and fossil fuels. Policies favorable to still more immigration already are in preparation.

On the evening of May 26, Italian Deputy Prime Minister and Minister of the Interior Matteo Salvini commented on the results of the European elections, “A new Europe is born.” The party he leads, the League, had just won with 34.3% of the vote. Other parties defined in Europe as “populist” also won: in Hungary, the Fidesz-KDNP alliance (Hungarian Civic Alliance and the Christian Democratic People’s Party) received 52.3% of the vote.

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

The Center Isn’t Holding in Europe

The Center Isn’t Holding in Europe 

If there is one big takeaway from the recent European Parliamentary elections it is that centrist parties which stand for nothing in particular represent a lot fewer people. From both the ‘left’ and the ‘right’ the center lost ground across Europe.

The Euroskeptics got a lot of press in the run up to these elections and the final result was pretty much in line with expectations, with a couple of exceptions. The pro-EU left lost a lot more ground in Sweden than expected but the Dutch People’s Party were rejected thoroughly in the Netherlands.

Otherwise the polls were mostly in line with the results. And while the early spin tried to put a brave face on results in the U.K. and France Marine Le Pen outpolling sitting president Emmanuel Macron just two years after he beat her in the presidential election is notable.

The results in the U.K. were a microcosm of the trends we’re seeing across Europe. The major parties, both campaigning from the center, lost the confidence of the people on both sides of the divisive Brexit argument.

Those that want Brexit in no uncertain terms bolted to Nigel Farage’s Brexit Party while those fed up with Labour’s indecision on not only Brexit but a host of other issues bolted for the Liberal Democrats and the Greens.

And a lot of those seats that would have went to the Social Democrats via Labour in the European Parliament now belong to Guy Verhofstadt and ALDE.

But the U.K. isn’t alone in this splitting along ideological lines. Germany has seen the collapse of the Social Democrats give spark to the Greens there as well. The Greens outpolled Angela Merkel’s Grand Coalition partners by more than five points, coming in 2nd behind the CDU/CSU with 20.5%.

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

US Threatens Europe With “Loss Of Access To US Financial System” Over SWIFT-Evading Iran SPV

US Threatens Europe With “Loss Of Access To US Financial System” Over SWIFT-Evading Iran SPV

It’s going from bad to worse for Europe, whose currency had just hit session lows after Brussels confirmed that Italy faces a massive fine over its debt, when the Euro was hit with a double whammy after Bloomberg reported that the Trump administration is escalating its battle with “European allies” over the fate of the Iran nuclear accord, and is “threatening penalties against the financial body created by Germany, the U.K. and France to shield trade with the Islamic Republic from U.S. sanctions.

According to Bloomberg, the Treasury Department’s undersecretary for terrorism and financial intelligence, Sigal Mandelker, sent a letter on May 7 warning that Instex, the European SPV to sustain trade with Tehran, and anyone associated with it could be barred from the U.S. financial system if it goes into effect.

As a reminder, last September, in order to maintain a financial relationship with Iran that can not be vetoed by the US, Europe unveiled a “Special Purpose Vehicle” to bypass SWIFT. Back then we predicted that Washington would not be too delighted with this development seeking to undermine the dollar’s reserve status. We were right.

EU foreign policy chief Federica Mogherini alongside Iranian Foreign Minister Mohammad Javad Zarif

“I urge you to carefully consider the potential sanctions exposure of Instex,” Mandelker wrote in the letter to Instex President Per Fischer. “Engaging in activities that run afoul of U.S. sanctions can result in severe consequences, including a loss of access to the U.S. financial system.”

Germany, France and the U.K. finalized the Instex system in January, allowing companies to trade with Iran without the use of U.S. dollars or American banks, allowing them to get around wide-ranging U.S. sanctions that were imposed after the Trump administration abandoned the 2015 Iran nuclear deal last year.

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

Trust is On Trial in Europe and the World

Trust is On Trial in Europe and the World

“It seems that if there was any truth to our language, ‘trust’ would be a four-letter word.”

Joel – “Risky Business”

Trust is the most important aspect of human endeavor. Without trust there can be no interaction. No communication.

No friendship. No love.

No Commerce.

The key to understanding economics is understanding people. The basis for all human interaction is the basic trust that a trade once completed will be honored.

The global economy runs solely on trust. Without the trust that contracts signed today can be fulfilled tomorrow and disputes settled with a reasonable degree of amity, there can be no iPhones.

No Amazon.

No oil.

When politics become toxic, when the sides refuse to cooperate on the very basic functions of government, uncertainty reigns. And uncertainty filters down to the people getting up everyday, going to work and providing a home for themselves and their families.

It’s like that great scene in the classic movie “Trading Places” where Eddie Murphy talks about the guy who’s worried he won’t be able to buy his kid that “G.I. Joe with the Kung Fu Grip” for Christmas.

That guy was the barometer for the market. That guy knew something about trust.

I had one of those G.I. Joe’s as a kid. My dad rarely let me down in supplying the most important things on my Christmas list.

It’s part of the reason why I loved him and trusted him completely. He was very human, but he kept his promises and I always knew where the boundaries were.

He and mom did what they could without making promises they couldn’t keep.

That example, despite the heartbreaks and the setbacks, shaped my approach to being a husband and a father. I don’t make promises to my daughter or my wife I can’t keep.

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

Tainted Russian Oil Crisis May Drag On For Months

Tainted Russian Oil Crisis May Drag On For Months

Crude Oil

It’s been a month since Russian oil flows through the Druzhba pipeline were suspended due to contamination, and despite Russia’s assurances that clean oil will resume flowing through the pipeline westward to Europe in the second half of May, analysts and traders say the progress is very slow while costs could be very high.

Last month, Russia halted supplies via the Druzhba oil pipeline to several European countries due to a contamination issue, which the Russians say was deliberate

Refineries in Belarus, Poland, Hungary, Slovakia, the Czech Republic, and Germany have been impacted by the contamination issue as clean Russian oil is not flowing normally yet, while Western refiners and Russian companies are in a dispute over who’s paying for the clean-up and when.

Western oil traders tell Bloomberg’s Javier Blas that the contamination issue and the subsequent clean-up, blending of dirty oil, and restart of normal deliveries via the pipeline will be much costlier than initial estimates and could take much longer than anticipated.

The cost could be as high as US$1 billion, according to traders and executives at refiners in Moscow, Geneva, and London, who spoke to Bloomberg. Traders also believe that the contaminated oil volume could be as high as 40 million barrels, double the 20 million barrels that Russian officials are claiming

Earlier this week, Russia said that it is already sending clean within-standards crude oil via the Druzhba pipeline toward Hungary and Slovakia, with first clean oil expected to arrive at the metering stations in those countries within a week.

A spokeswoman for Czech pipeline operator Mero told Reuters on Friday that clean Russian oil via the pipeline is expected to reach the Czech Republic on Monday afternoon. Russian oil reached Slovakia on Wednesday evening.

The now month-long suspension of Russian oil supply to several European countries comes as global supply outages mount with Venezuela and Iran, and with increasing supply disruption risks in Libya and the Middle East.  

Sanctions or Sucking Up? US Grovels in Ukraine

Sanctions or Sucking Up? US Grovels in Ukraine 

The US sent Energy Secretary Rick Perry to the inauguration of the new Ukrainian President, Volodymyr Zelenskiy, to announce the sanctions bill on Gazprom’s Nordstream 2 pipeline would pass.

I can’t tell what’s more pathetic at this point, the neocons in Trump’s administration thinking that sanctions actually achieve their goals or using them to suck up to a new president they don’t actively control yet.

Think about this. Perry goes to Kiev for nothing more than a photo op to assure Zelenskiy that the US won’t abandon the struggle stick it to the Russians. He does this with no sense of shame or irony after spending five years destroying Ukraine with an ill-advised coup which ushered in the chaos that brought Zelenskiy to power.

The hypocrisy of it all is stunning.

Outgoing US puppet Petro Poroshenko was such a disaster that Ukrainians voted 3 to 1 to get rid of him in favor of a political neophyte and television comic.

That’s how badly the US has mismanaged Ukrainian post-coup affairs. And the Russians are supposed to be the bad guys in this scenario?

And now Perry is going to virtue signal that the US will sanction Nordstream 2 to keep their access to Ukraine’s highest office? Zelenskiy may be a neophyte but he’s not stupid either.

The US’s opposition to Nordstream 2 is mainly for its own purposes. Just like its interest in Ukraine is purely selfish. President Trump wants the gas volumes slated for Nordstream 2 to go to US LNG exporters first. Ukraine isn’t all that important in the end to him.

Stopping Nordstream 2 is supposed to do two things. Force Russia to the bargaining table with Naftogaz, the Ukrainian state gas transit company, and cut a new deal since the old one is expiring at the end of this year.

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

Will The U.S. Slap Sanctions On Nord Stream 2?

Will The U.S. Slap Sanctions On Nord Stream 2?

Nord Stream 2

There is a growing push in the U.S. Congress to slap sanctions on the Nord Stream 2 pipeline.

The pipeline under construction would carry Russian natural gas to Germany, and has been a lightning rod of controversy both in Europe and across the Atlantic. Many governments and officials from Eastern Europe fear deeper dependence on Russia for gas supplies, a sentiment echoed by the U.S. government. Meanwhile, many in Western Europe are less concerned, viewing Russia as a rather reliable low-cost supplier of gas.

The U.S. has long tried to pry away Europe from Russia for geopolitical ends, and Nord Stream 2 is merely the latest chapter in this Cold War-era calculus. But, increasingly, the pipeline has commercial implications for the United States. The U.S. has become a major exporter of LNG, a position that will only grow over time with several gas export terminals along the Gulf Coast. The flood of shale gas is finding its way around the world.

At first, when U.S. LNG exports began in 2016, shipments were going to a smattering of countries in Latin America and the Caribbean. Soon, top importers included South Korea, Japan and China. Only a handful of countries in Europe have imported U.S. LNG in any significant way.

But that is starting to change with more U.S. shipments arriving in European ports. U.S. Secretary of Energy Rick Perry has likened U.S. gas to American soldiers liberating Europe from the Nazis. “The United States is again delivering a form of freedom to the European continent,” he told reporters in Brussels earlier this month. “And rather than in the form of young American soldiers, it’s in the form of liquefied natural gas.”

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

Debt is the Hidden Issue in The European Elections

Debt is the Hidden Issue in The European Elections

The citizens of the European Union are called to vote this week for the European Parliament. It is not a real parliament, and it lacks prospects for becoming one, since all important decisions are taken by the unelected heads of the European Commission and the European Central Bank, dubbed “the worst-run Central Bank in the world”.

These elections capture however the general mood of exasperation with current policies. Conservative and extreme Right parties will rise, reflecting widespread scepticism as to the economic course of the EU and its lack of benefits for the common people. The mainstream Left unfortunately neglects these issues, and it will pay the price.

The conservatives generally blame the weak and scapegoat the refugees, the immigrants, the women, and the poor, while promising to save the middle class from the onslaught of big capital. They create false hopes of easy reform, and they never denounce the exploitation inherent in today’s system. History shows however that small owners manage to resist financial stranglehold only when they make common cause with workers and the poor, and they are not afraid to fight.

The economy looks ever more frail. In all, the Eurozone’s nominal GDP stagnates, shrinking 12% in its six largest economies in 2008-2017. The European Union remains indifferent to the peoples’ needs, while it caters for every whim of the corporations. Even so, Quantitative Easing and other crony capitalist schemes promoted by the ECB, such as the Private-Public Partnerships (PPPs) or the new Targeted Long-term Refinancing Operations (TLTRO-III) cannot save the day.

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

Blain’s Morning Porridge – May 22 2019 – Tesla and Yoorp worries

Blain’s Morning Porridge – May 22 2019 – Tesla and Yoorp worries


“When the bough breaks…”

Have you ever watched a house of cards collapse? Sometimes a corner or a side comes down, and it can be sort of fixed… Sometimes the whole thing just gets blown away.  My Spidey Senses are all a-tingle this morning, triggered by 2 factors:

  1. Telsa: The spike in negative commentary on Tesla suggests THE moment is coming: a downgrade by a previous bull to $10 target price, doubts on the trajectory of sales, the realisation the Solar Tiles project is complete tosh (and a bail out of Musk’s cousins), the crash in its debt and recent convertible price,      and loads more, has led to the rather obvious conclusion Tesla will struggle to fund ongoing capital burn. Peak-Musk was some time ago. Many now think the orchestra is about to strike up Gotterdammerung. A loss of confidence in Tesla and Musk triggers all kinds of consequences.. (Links to stories will be posted here.)
  2. Europe: If you think UK politicians have embarrassed themselves trying to agree on how to exit Europe, wait till next week and ponder how such a disparate, populist hodge-podge of populist well-intentioned Euro-philes and Euro-phobes are going to agree on how to reform and continue European integration. I see two big market threats: i) The bond market, ii) and especially the bond market. (And Brussels!)

Since anyone can read all the Tesla stories and draw their own conclusions as to what happens next, lets stick to the consequences. The obvious one is what does it do to confidence in the Modern Disruptive Tech (“MDT”) price model: “We don’t have to pay dividends or make profits because we are a disruptive company thats triggered a paradigm in demand and made ourselves a monopoly – therefore it’s all in our stock price” ? 

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

When Deutsche Bank’s Crisis Becomes Our Crisis

When Deutsche Bank’s Crisis Becomes Our Crisis

Our friends in Europe seem totally incapable of addressing their failing financial sector. And that’s not good for anyone.

By anandoart/Shutterstock

Americans generally think of Europe first as a wonderful place to visit. They rarely ponder the economic and financial ties between the United States and European Union, but in fact these ties are extensive and significant to the stability of both economies. One area of particular connection involves the large banks and companies that provide services on both sides of the Atlantic. It is this area of commercial finance that risks are actually growing to the United States—in large part due to political gridlock in Europe stemming from the 2008 financial crisis.

Credit market professionals have been aware of problems among the European banks for many years. Their lack of profitability, combined with high credit losses and a lack of transparency have created a minefield for global investors going back decades. Whereas the United States has a bankruptcy court system to protect investors, in Europe the process of resolving insolvency is an opaque muddle that leans heavily in favor of corporate debtors and their political sponsors.

When we talk about true mediocrity among European banks, one of the leading example are, surprisingly, German institutions. Germany, after all, has a reputation for being the economic leader of Europe and a global industrial power, thus the continued failures in the financial sector are truly remarkable.

The biggest example, Deutsche Bank, Germany’s largest bank, has had problems with capital and profitability going back decades. But Deutsche Banks’s problems are not unique. What is troubling and indeed significant for American policy makers, however, is the nearly complete failure of our friends in Europe to address their banking sector, either in terms of cleaning up bad assets or raising capital to enable the cleanup.

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

New money meets the cost of change: how local currencies save economies and communities, and help them flourish

New money meets the cost of change: how local currencies save economies and communities, and help them flourish 

In times of crisis and other upheavals, local communities have discovered that one answer to being failed by the mainstream economy is to print your own currency. Responses also range from age-old barter systems to time-banking and modern digital currencies. They demonstrate the kind of re-imagining of the economy needed for rapid transition, and show how people and communities can reveal their greatest strengths when times are hardest and most uncertain.

Spurred by lessons from successful initiatives, now some major cities and regions are seeing permanent benefits from having their own money or exchange system. Local currencies can strengthen neighbourhood ties and allow people to make friends – they are a focal point for the community-minded. In the US, for example, California alone has 19 city currencies, many formed after the financial crisis of 2007 – 2008. Lending to small businesses plummeted, with impacts particularly hitting African Americans, women and Latinos – people from historically marginalised groups. Community currencies empowered people to have more say over where money circulated, giving them a greater stake in their economic future. A different approach, Time Credits in the UK – a national network of time banks – has been effective in addressing many different types of need, from eldercare and schools to drugs and alcohol misuse.

But with financial crises becoming seemingly more frequent and extreme, the speed with which communities in one European country devised its own solution during the Eurozone crisis, stands testimony to the potential for rapid economic reinvention. When trouble hit Greece, in the port city of Volos, people turned their backs on the failed mainstream economic system to grow their own parallel economy. In 2011, eggs, milk and jam could be bought at market using a new, informal barter currency, a Local Alternative Unit, or TEM as it is known domestically.

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

Olduvai IV: Courage
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Olduvai II: Exodus
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