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Markets are being Lulled into a False Sense of Accommodation

Markets are being Lulled into a False Sense of Accommodation

Those who take an interest in the actions of central banks will know that the advent of Brexit and Donald Trump’s presidency has seen the direction of monetary policy gradually change in both the UK and the U.S.

Since the EU referendum, the Bank of England have raised interest rates twice, after initially cutting them and implementing a new round of quantitative easing in the aftermath of the vote. The first rate hike in November 2017 came over a decade since the bank last increased rates in July 2007.

A month after Donald Trump was confirmed as the 45th American president, the Federal Reserve raised rates for only the second time in nine and a half years. Since Trump’s inauguration, they have gone on to hike a further seven times, and over the course of eighteen months (starting late 2017) the Fed have rolled off over $600 billion in assets from its balance sheet.

As the Fed continue to roll off assets until their balance sheet ‘normalisation‘ programme ends in September, the sentiment amongst traders is that the central bank will soon begin a course of rate cuts in order to stave off the threat of a recession as the prospect of a full blown trade conflict with China and other nation states gathers momentum.

A similar sentiment can be found in the UK over Brexit. With the British economy stagnant and manufacturing and construction sectors in decline, there exists an expectation that the Bank of England will ultimately reverse course if an economic downturn takes hold.

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

Italian Yields Jump As Salvini Threatens To Crash Government

Italian Yields Jump As Salvini Threatens To Crash Government

Clearly emboldened by the EU Parliamentary results, where the League won a plurality of the vote in Italy, Matteo Salvini on Thursday sent BTP yields higher by threatening to crash the Italian government if the Five Star Movement doesn’t back his tax-cut plan.

BTP

BTP yields have been moving higher over the past two weeks as Salvini has brushed off Europe’s threats to fine Italy up to €4 billion over its refusal to rein in its debt and deficit-spending plans. This would be the first time the European Commission has fined a member state over violations of its fiscal rules.

But Salvini, who is now indisputably the most powerful political figure in Italy, isn’t backing down. He has remained defiant, even as Italy braces for the EU to initiate another excessive debt proceeding on Wednesday, when reviews of member states’ fiscal compliance are expected.

As the Telegraph’s Ambrose Evans-Pritchard pointed out in a column yesterday, Salvini has revived threats to initiate an Italian parallel currency – the so-called “mini-BOT” Italian Treasury bills that a Forbes columnist once warned was the “biggest threat to the future of the eurozone.” 

And with Salvini adding to the political chaos by taking the first tentative steps toward ousting Five Star from the ruling coalition, Italian bond holders will have only themselves to blame if they don’t anticipate more market-rattling political chaos, and position accordingly.

EU Threatens to Legalize Human Harm From Pesticides

EU Threatens to Legalize Human Harm From Pesticides

ILSI-Europe Headquarters, Brussels. Photo: PAN Europe

Current EU regulations forbid human exposure to pesticides that are classified as mutagenic, carcinogenic, reprotoxic (toxic for reproduction), persistent or capable of disrupting endocrine systems. By virtue of these and other protective measures EU regulations are considered the gold standard in public protection.

However, experts who are closely linked to industry (or are part of anti-regulation pressure groups) have taken control of the EU’s new Science Advice Mechanism (SAM). These experts have contributed to a report commissioned to reevaluate the EU’s authorisation of pesticides. The report, called “EU authorisation processes of Plant Protection Products”, and published in late 2018, recommends dramatically weakening the EU regulatory system. Especially notable is the adoption of many ideas previously proposed by the chemical industry. For example, the EU currently deems the acceptable level of public exposure to mutagenic pesticides (those that damage DNA) to be zero. The new report recommends scrapping this standard of protection.

The history of the new SAM report is that it was requested by EU Health Commissioner Vytenis Andriukaitis. Its purpose was to determine how to act in cases of so-called ‘diverging views’; that is, when media and public interest groups get involved. The request follows a series of major controversies over EU regulatory decision-making. One such controversy was over the herbicide Glyphosate. A “European Citizens Initiative” delivered more than a million signatures to the EU Commission asking for a ban on Glyphosate. Several cities banned Glyphosate. Even a dairy company banned the use of Glyphosate by their farmers.

With this pressure from all over Europe, the EU Commission had difficulty reaching a decision since many EU member states (Bulgaria, Denmark, Czech Republic, Estonia, Ireland, Spain, Cyprus, Latvia, Lithuania, Hungary, the Netherlands, Poland, Romania, Slovakia, Finland and the U.K) opposed a ban. Ultimately, a very unusual 5-years extension for glyphosate was agreed but soon the discussion will start again.

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

Can the EU Survive the Next Financial Crisis?

Can the EU Survive the Next Financial Crisis?

Despite the ECB’s subsidy of the Eurozone’s banking system, it remains in a sleepwalking state similar to the non-financial, non-crony-capitalist zombified economy. Gone are the heady days of investment banking. There is now a legacy of derivatives and regulators’ fines. Technology has made the over-extended branch network, typical of a European retail bank, a costly white elephant. The market for emptying bank buildings in the towns and villages throughout Europe must be dire, a source of under-provisioned losses. On top of this, the ECB’s interest rate policy has led to lending margins becoming paper-thin. 

A negative deposit rate of 0.4% at the ECB has led to negative wholesale (Euribor) money market rates along the yield curve to at least 12 months. This has allowed French banks, for example, to fund Italian government bond positions, stripping out 33 basis points on a “riskless” one-year bond. It’s the peak of collapsed lending margins when even the hare-brained can see the risk is greater than the reward, whatever the regulator says. The entire yield curve is considerably lower than Italian risk implies it should be, given its existing debt obligations, with 10-year Italian government bonds yielding only 2.55%. That’s less than equivalent US Treasuries, the global risk-free standard.

Government bond yields have been and remain considerably reduced through the ECB’s interest rate suppression and its bond-buying programs. The expansion of Eurozone government debt since the Lehman crisis has been about 50% to €9.69 trillion. This expansion, representing €3.1 trillion, compares with the expansion of the Eurosystem’s own balance sheet of €2.8 trillion since 2009. In other words, the expansion of Eurozone government debt has been nearly matched by the ECB’s monetary creation.

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

Blain: When This Insane Monetary Experiment Ends You Will Have Zero Chance To Exit

Blain: When This Insane Monetary Experiment Ends You Will Have Zero Chance To Exit

This is the day the UK isn’t exiting Europe. Surprised? Not really.

Think I’ll try something different this morning – a review of the week touching on some of the key themes we should be thinking about. Let me know what you think.

But firstly let me apologise for the lack of porridge this week. On Wednesday it was being unable to find anywhere to sit with a computer in London City Airport. Yesterday it was courtesy of Flybe from Edinburgh – I’d like to thank them for leaving us standing in a cold bus while they tried to rustle up a crew. The BA flight took off on time, although I wonder if it went to Duesseldorf?

Let me start with a rant:

Bond Yields and the END OF ABSALOOTLEY EVERYTHING…

While everyone is panicking about US curve inversion and the possibility it is signalling recession, is the real issue even simpler and more obvious? Should we be worried about tumbling global bond yields? Aside from it being impossible for funds to meet long term liabilities, what’s not to like about lower for longer? Actually – quite a lot. Even the ECB has noticed zero bond yields haven’t exactly stimulated growth and jobs across Europe and done nothing in terms of stimulating inflation.

Equities seem blithely unconcerned despite all the cack about trade-wars, rising political anarchy, and a distinct feel this business cycle is likely to wind-down into a slough of earnings downgrades and suchlike unpleasantness. The smart money is not worried, because they understand the truth – there is nothing to worry about BECAUSE A STOCK MARKET MELTDOWN IS ACTUALLY IMPOSSIBLE!

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

Can the EU Survive Its Own Censorship?

Can the EU Survive Its Own Censorship?

The EU’s new, comprehensive new Copyright Directive passed the European Parliament ensuring the way we use the Internet will change in the future.

And not for the better.

The controversial parts are Articles 11 and 13, the “link tax” and the “upload filter” requirements. For a good run down of how terrible these new rules are look anywhere on the internet but this article at Gizmodo (who I hope doesn’t charge me a link tax for doing so!) will do. 

I would also watch this video from Dave Cullen, a resident of Ireland, i.e. the EU, as to what he thinks this means.

Dave makes a number of fantastic points about the ramifications of Articles 11 and 13 which I will not dispute. 

The arrogance and pig-headedness of EU MEPs to push this through without even listening to arguments for Amendments speaks volumes as to how much this legislation was bought and paid for.

And you know who was doing the buying. The same folks currently behind destroying Brexit — The Davos Crowd. I don’t want to put too fine a point on this now, since I’ve covered all this recently (here) and in the past (here ).

Controlling The Wire

But there are very valid reasons why this push for control of information flow from the EU is yet another example of their desperations to keep control of what I’ve in the past called The Wire:

In short, The Wire is the main conduit through which we communicate with each other. Even money is The Wire. What are prices if not information about what we are willing to part with our money in exchange for?
Without The Wire modern society fails. So, government can’t shut it down but neither can it allow unrestrained access to it.

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

Blain’s Morning Porridge – March 18th 2019

Blain’s Morning Porridge – March 18th 2019


“It’s the edge of the world and all of western civilization, the Sun may rise in the East at least its settled in a fine location..” 

In the headlines this morning: https://www.morningporridge.com/stuff-im-watching

What a Saturday…Well done Wales on a well-deserved Grand Slam. But, I wonder if there is a hidden message in Scotland’s remarkable comeback being dashed as England clawed back an undeserved draw at Twickenham? The Scots haven’t won on English turf since 1983. They played a blinder second half.. while all the English could provide was a surly Farrell dodging a yellow card.  Perhaps it was a lesson in the tedious inevitability of modern life and a timely reminder it’s not a fairy-tale? (Shame… we wis robbed!) Perhaps Trump, Trade Wars, Income Inequality, the mis-match between asset prices and reality, and all the rest is just stuff that’s stupid, unfair and just the way it is..

Meanwhile, back on Planet Misery… what we got to look forward to? 

The Boeing saga rumbles on. It could be a month till we learn what caused the crash a week ago. The focus is not just upon the possibility Boeing has failed to correct and fully inform users of stall-prevention system problems on the B-737 Max, but now on the US FAA for its dithering and lack of clear action. The agency has been rudderless and leaderless for over a year, neglected by the administration after Trump wasn’t able to put his personal pilot at its head!  

And it’s another last chance for a Brexit deal with Theresa May going for third time lucky – apparently. The Westminster rumours say she’s still likely to lose with many of the Hard-Brexit crowd still hoping to achieve a No-Deal exit – justifying it as giving the UK a stronger post exit negotiating position with Europe.

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

Time Runs Out on U.S. Opposition to Nordstream 2

Time Runs Out on U.S. Opposition to Nordstream 2

The Nordstream 2 pipeline represents the last stand of U.S. influence over the internal affairs of Europe. 

Once finished it will stand as a testament to the fundamental split between the European Union and the United States.

Europe will this as its first successful defense of its newly-declared independence. And the U.S. will have to come to terms with no longer having control overseas.

This is a theme repeating itself all around the world right now. 

Your view of Nordstream 2 depends on who you are. 

If you are the U.S. it is a massive rebuke of the post-WWII institutional order mostly paid for by the U.S. to rebuild Europe and protecting it from the scourge of the U.S.S.R.

From Europe’s perspective it’s, “Job well done and all that but Russia isn’t a threat anymore and it is time for us to come out from underneath the U.S.’s shadow.”

And if you are Russia Nordtream 2 is the wedge driving these two adversaries apart while improving national security on your western border.

Europe has imperial ambitions of its own and Nordstream 2 is a very important part of that. Those ambitions, however, are not in line with those in the U.S., particularly under the “leadership” of Donald Trump. 

Trump has this strange idea that the U.S. has gotten nothing in return for our running the world these past seventy-odd years. Our massive trade deficit is wealth stolen by our trade partners in Trump’s simplistic mind.

He refuses to see the wealth we’ve ‘lost’ as squandered by decades of corruption, sloth, regulatory over-reach, etc. 

And so, to Trump, Nordstream 2 is an abomination because he’s funding NATO to protect Europe from Russia but they then are increasing the amount of gas they buy from that very same ‘enemy.’

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

EU is Steadily Moving Towards Creation of 1984-Style Ministry of Truth

EU IS STEADILY MOVING TOWARDS CREATION OF 1984-STYLE MINISTRY OF TRUTH

EU Is Steadily Moving Towards Creation Of 1984-style Ministry Of Truth

The European Parliament passed a recommendation calling  Russia “the main source of disinformation in Europe” and appealing for increased funding for the EU’s East StratCom Task Force, which already got 1.1 million euros in 2018.

HINT: The East StratCom Task Force is a EU body focused on so-called proactive communication of EU policies and activities in the Eastern neighbourhood (Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine) and beyond (Russia and further).

The passed document says that East StratCom Task Force as well as its two task-force subdivisions dealing with the southern neighborhood and Western Balkans, should get “adequate financial and personnel resources which are still required, aimed at the significant increase of their potential, effectiveness, professionalism, institutional continuity and quality of work, as well as safeguarding them against political meddling by officials and countries that back Russian disinformation.

Furthermore, it called on EU member states “to ensure that electoral laws take into account possible threats stemming from disinformation campaigns” and urged them to “adapt their electoral rules on online campaigning and to monitor and evaluate the transparency features in relation to political advertising introduced by the online platforms.”

The suggestions also include support for “independent and diverse Russian-language media in the countries of the Eastern Partnership and beyond” and “to focus on the EU accession countries and partners in the EU neighborhood by assisting them in their efforts to counteract hostile propaganda and disinformation activities.”

The formal justification of the moves suggested in the document is based on the mainstream media narrative that Russia every day carries out disinformation campaigns and cyber attacks, aimed at increasing tensions within the EU and its member states.

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

EU: Telling Europeans What to Think

EU: Telling Europeans What to Think

  • The above initiatives, of course, exist in addition to all the other measures that the EU has put in place to “guide” Europeans onto the path of proper thinking… which the untransparent and unaccountable online tech giants — Facebook, Google, Twitter and Mozilla — signed in October 2018, and their 2019 “Code of Conduct on countering illegal online hate speech online.”
  • In the same vein as China’s “reeducation camps” or the former Soviet Union’s “rehabilitation centers” that abused psychiatry for political purposes, Marine Le Pen in September was ordered to undergo psychiatric tests for tweeting the pictures, ostensibly to establish whether she “is capable of understanding remarks and answering questions”.
  • It is probably safe to say that the first victims of the EU’s media literacy policies will be diversity of opinion and free speech.
Marine Le Pen (pictured at podium), the leader of France’s Rassemblement National (National Rally) party, posted tweets condemning the Islamic State terrorist group, including photos of their murdered victims. For this, she was charged with the crime of “disseminating violent images,” and ordered by a court to undergo a psychiatric evaluation to determine whether she “is capable of understanding remarks and answering questions.” (Photo by Sylvain Lefevre/Getty Images)

The first European Media Literacy Week, an initiative of the European Union, will take place March 18-22 in various European cities. The week is a new initiative by the European Commission, putatively “to underline the societal importance of media literacy and promote media literacy initiatives and projects across the EU”. The European Commission explains its policy of strengthening ‘media literacy’ within the EU — which could have been a noble and useful initiative — the following way:

“With the rapid rise of digital technology and its increasing use in business, education and culture, it is important to ensure everyone can understand and engage with digital media.

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

EU: Going Full Orwell

EU: Going Full Orwell

  • The problem is that this professedly noble initiative comes from an organization that has already for several years been censoring free speech in Europe.
  • The handbook guidelines state that journalists should “Take care not to further stigmatize terms such as ‘Muslim’ or ‘Islam’ by associating them with particular acts… Don’t allow extremists’ claims about acting ‘in the name of Islam’ to stand unchallenged. Highlight… the diversity of Muslim communities… where it is necessary and newsworthy to report hateful comments against Muslims, mediate the information.” In other words, the guidelines ask journalists to disinform the public.
  • This is the same European Commission that most recently expressed its disapproval of the withdrawal of Austria from the UN’s “Global Compact for Safe, Orderly and Regular Migration.” The Compact stipulates that media outlets that do not support the UN’s migration agenda will not be eligible for public funding. How is that for “fully respecting Europe’s fundamental principles of freedom of expression, a free press and pluralism”?

The EU has launched a comprehensive Action Plan against Disinformation. Its purpose, according to a recent press release from the European Commission, is apparently to “protect its democratic systems and public debates and in view of the 2019 European elections as well as a number of national and local elections that will be held in Member States by 2020”.

In June 2018, leaders of EU member states had met in the European Council and invited the European Commission “to present… an action plan by December 2018 with specific proposals for a coordinated EU response to the challenge of disinformation…” It is this action plan that the Commission presented to the public on December 5.

The Action Plan focuses on four areas:

  1. Improved detection of disinformation (the European Commission dedicated 5 million euros toward this project and seemingly expects Member states to contribute on a national level, as well).

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

UK vegetable and fruit supplies at risk

UK vegetable and fruit supplies at risk

Potatoes on the wing – and thin pickings for all as UK crops wilt. Image: By Lucas Sankey on Unsplash

Britons’ familiar and well-loved fish and chips could become scarcer as politics and climate change imperil UK vegetable and fruit supplies.

LONDON, 5 February, 2019 − A combination of Brexit − Britain’s move to leave the European Union − and climate change is threatening UK vegetable and fruit supplies for its 66 million people.

Brexit-associated delays at ports could result in widespread shortages of a range of imported vegetables and fruit such as lettuces and tomatoes, particularly if the UK crashes out of Europe at the end of March this year with no deal in place.

Now there’s more bad news on the British food front; a just-released report says climate change and resulting abnormal weather conditions are causing significant decreases in the UK’s own vegetable and fruit harvests.

The study, produced by the Climate Coalition in association with the Priestley International Centre for Climate at the University of Leeds in the UK, says about 60% of food consumed in Britain is domestically produced.

The unusually warm summer in 2018 – the hottest ever in England since records began in 1910, according to the report – led to a drop in the onion harvest of 40% and a decline of between 25% and 30% in the carrot crop.

In 2017 the UK’s apple growers lost 25% of their produce due to unseasonably warm weather followed by an unusually late series of frosts.

“It’s really hard work growing fruit and vegetables, but erratic and extreme weather pushes you over the edge”

The study says climate change-related extreme and unpredictable weather is putting at risk future supplies of potatoes – a staple of the British diet.

“The UK could lose almost three-quarters of the area of land currently well-suited for potatoes by the 2050s under climate projections”, says the report.

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

Will Iran Sanctions Herald the Fall of the Imperial Dollar?

Will Iran Sanctions Herald the Fall of the Imperial Dollar?

When the Trump administration unilaterally pulled out of the Iran nuclear agreement in May 2018 and announced it would reimpose sanctions against Iran, the European Union (EU) declared its commitment to preserving the agreement and finding ways for its companies to circumvent U.S. sanctions. Now, eight months later, the Europeans finally announced the creation of INSTEX (Instrument In Support Of Trade Exchanges) as an alternative payment system so that European firms can do business with Iran. This mechanism might be too little and too late to salvage the Iran nuclear deal but it marks a milestone in an inevitable transition of epic proportions: the end of the global hegemony of the dollar.

INSTEX is a complicated mechanism registered in France and headed by a German banker, with shareholders from the three European countries that were signatories to the Iran nuclear deal: France, Germany and the UK. It will initially be used for non-sanctionable trade, such as medicine, food and medical devices, and is also likely to only attract smaller businesses, not large companies with significant exposure to U.S. markets.It has had an 8-month difficult birth because no one country wanted to claim maternity rights for fear of a U.S. backlash. Indeed, the U.S. threatened to devour it before it was born.

While other countries use economic sanctions as weapons in international disputes, the U.S. is the only country that imposes secondary sanctions on third country citizens and institutions. The U.S. government uses the role of the dollar as an international reserve currency and the central role of U.S. banks and institutions in the international financial system to present third country firms with an insidious either/or choice: cut off business ties with Iran (or Russia, North Korea, Turkey, etc.), or lose far more lucrative business with the U.S. and risk financial penalties in U.S. courts. For most companies, the choice is clear.

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

The America Problem

The America Problem

Way back when the West was pressuring the apartheid government to commit suicide on behalf of its people, they did a remarkable thing. They sequestered their nuclear program, making sure the information and material would not fall into the hands of whatever came after apartheid. It was remarkable, because no other state has voluntarily abandoned its program for the good of the world. Governments just don’t do that, but the South Africans did and a huge potential problem down the line was averted.

The reason this is worth thinking about is there are other unstable states, with lots of military technology. Pakistan is an obvious example. There is a better than even chance they have sold nuclear technology to other Muslim governments. They have most certainly been working with North Korea. Israel has nuclear weapons and they have advanced delivery systems. These are two countries that could fall into chaos or have their government overthrown. It’s not likely at the moment, but it is possible.

A bigger concern is America. There’s no getting around the fact that America is in bad shape in many important ways. The wizards in the Federal Reserve have been able to use creative ways to maintain the debt bubble, but everything comes to an end eventually. The demographic changes going on in the country are creating very serious fissures regionally, ethnically and economically. Just look at how aggressive and radical the political talk is these days. America looks very brittle right now.

If you are doing long term planning for the EU or a European government, you have to be looking at America and thinking about the Crisis of the Third Century. It’s not a perfect analogy, but it is a pretty good one. Like the Roman Empire, the American Empire is militaristic, the dominant military power and politically fragile. Like the Romans, America appears to be critically short of intellectual firepower in its ruling elite. Who knows, maybe Washington has a lead pipe problem, but it does have an IQ problem.

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

Bailing Out Member States: The European (Dis)Union

Bailing Out Member States: The European (Dis)Union

Over the years, my good friends at Capitalist Exploits (I highly recommend subscribing) have put together a number of outstanding thought pieces on where they see things headed.

They recently came out with a great overview of where Europe is headed. The trends they highlight are both interesting and actionable for those willing to put the time into thinking through the consequences of the new “Strongmen of Europe.” The EU has now had a decade of economic crisis and is slowly moving from economic crisis towards a full-fledged political crisis which will be its ultimate undoing. There will naturally be many actionable trades along the way. Most important amongst these will be;

  • Increased inflation
  • Issues with energy security
  • Increased national sovereignty
  • Ultimate breakup of the EU

Having a roadmap, gives you the ability to stay a few steps ahead of events with your positioning. With that in mind, I suggest you read the roadmap from Capitalist Exploits. While I don’t agree with everything that they point out, it is those minor disagreements that make late night Skype calls so interesting…

What Lies In Store For 2019 –  Specific Focus: The European (dis)Union

There is so much going on that it can be hard to know where to look without throwing your hands up in the air and saying, “oh fuck it, I give up”. The problem is ignoring problems doesn’t make them go away, and if we get it wrong, we could end up seriously regretting decisions made today.

I’ll be honest with you, we’ve spent time reviewing much of what is taking place in the world at the moment. Not here with you, but with my team and often inside my wee head, hunched over my keyboard at 1AM after tossing and turning annoying my gorgeous wife and getting out of bed to look into something that’s bugging me and keeping me from sleep.

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

Olduvai IV: Courage
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