Thursday, February 13, 2014

Today's Links

1--EC drafts plan to confiscate personal deposits, zero hedge

The Commission will ask the bloc's insurance watchdog in the second half of this year for advice on a possible draft law "to mobilize more personal pension savings for long-term financing", the document said."
Mobilize, once again, is a more palatable word than, say, confiscate.

And yet this is precisely what Europe is contemplating:

Banks have complained they are hindered from lending to the economy by post-crisis rules forcing them to hold much larger safety cushions of capital and liquidity.

The document said the "appropriateness" of the EU capital and liquidity rules for long-term financing will be reviewed over the next two years, a process likely to be scrutinized in the United States and elsewhere to head off any risk of EU banks gaining an unfair advantage....

And topping it all off is a proposal to address a global change in accounting principles that will make sure that an accurate representation of any bank's balance sheet becomes a distant memory:

More controversially, the Commission will consider whether the use of fair value or pricing assets at the going rate in a new globally agreed accounting rule "is appropriate, in particular regarding long-term investing business models".

To summarize: forced savings "mobilization", the introduction of a collective and involuntary CapEx funding "savings" account, the return and expansion of securitization, and finally, tying it all together, is a change to accounting rules that will make the entire inevitable catastrophe smells like roses until it all comes crashing down.

2---China's Trust Companies Expand , WSJ
(What could go wrong?)
'Shadow-Banking' Lenders' Managed Assets Rose to 10.9 Trillion Yuan Last Year

China's key shadow banking institutions have aggressively ramped up funding to the property sector, a marked shift in strategy at a time when lenders face increased risk that older loans they have made won't be repaid.
According to data issued Thursday by the China Trustee Association, a government-back industry group, China's trust companies had 10.9 trillion yuan ($1.8 trillion) worth of assets under management at the end of 2013, up 46% from 7.5 trillion yuan a year earlier. ...

In China, trust companies take money from investors to make loans, buy stocks and invest in assets ranging from bonds to aged wine. They have played a vital role in driving China's economy in recent years, providing tens of billions of dollars' worth of funding to local government infrastructure projects and mining firms and other ventures hard-pressed to tap credit. Regulators have warned banks to limit their exposure to such borrowers for fear they will struggle to generate the cash needed to repay their loans.
Trusts are contending

Source: BMO

Banks are no longer just financing heavy industry. They are actually buying it up and inventing bigger, bolder and scarier scams than ever

40th consecutive month of declines annually

Monthly foreclosure filings — including default notices, scheduled auctions and bank repossessions — reversed course and increased 8% to 124,419 in January from December, according to the latest report from RealtyTrac.  
This marks the 40th consecutive month where foreclosure activity declined on an annual basis, with filings down 18% from January.

“The monthly increase in January foreclosure activity was somewhat expected after a holiday lull, but the sharp annual increases in some states shows that many states are not completely out of the woods when it comes to cleaning up the wreckage of the housing bust,” said Daren Blomquist, vice president at RealtyTrac....

Opposite of the national trend, this month’s foreclosure starts increased from a year ago in 22 states, including Maryland (up 126%), Connecticut (up 82%), New Jersey (up 79%), California (up 57%), and Pennsylvania (up 39%).

7---Payday Lending, Conversable Economist

James R. Barth, Priscilla Hamilton and Donald Markwardt tackle a different side of the question in
"Where Banks Are Few, Payday Lenders Thrive," which appears in the Milken Institute Review, First Quarter 2014. The essay is based on a fuller report, published last October, available here. They suggest the possibility that banks and internet lending operations may be starting to provide short-term uncollateralized loans that are similar to payday loans, but at a much lower price. In setting the stage, they write: :

"Some 12 million American people borrow nearly $50 billion annually through “payday” loans – very-short-term unsecured loans that are often available to working individuals with poor (or nonexistent) credit. ... In the mid-1990s, the payday loan industry consisted of a few hundred lenders nationwide; today, nearly 20,000 stores do business in 32 states. Moreover, a growing number of payday lenders offer loans over the Internet. In fact, Internet payday loans accounted for 38 percent of the total in 2012, up from 13 percent in 2007. The average payday loan is $375 and is typically repaid within two weeks...

In short, the high fees charged by payday lenders may be excessive not just in the knee-jerk sense, but also in a narrowly economic sense: they seem to be attracting competitors who will drive down the price.

8--EU confiscation plan?, RT

The EU is examining ways to use the personal savings of its half a billion people to fill gaps the 2007 financial crisis created. Tougher regulations means there is less credit available from banks, and this money could bridge the divide.

According to an unpublished EU document seen by Reuters the Commission plan is to ask the European watchdog "to mobilize more personal pension savings for long-term financing".
"The economic and financial crisis has impaired the ability of the financial sector to channel funds to the real economy, in particular long-term investment," says the document.

9---Venezuela coup? Gunfire, clashes as 3 dead in violent Caracas protest , RT

Nicolas Maduro responded to the violence in a public statement, denouncing the unrest as an attempt to carry out a coup d’├ętat. He laid the blame at the feet of extremist fascist groups and said that those responsible for the violence would be prosecuted by the full weight of the law

10---In Ukraine, fascists, oligarchs and western expansion are at the heart of the crisis, guardian

The story we're told about the protests gripping Kiev bears only the sketchiest relationship with reality

Like Russia, Ukraine was beggared by the neoliberal shock therapy and mass privatisation of the post-Soviet years. More than half the country's national income was lost in five years and it has yet fully to recover.
But nor do the main opposition and protest leaders offer any kind of genuine alternative, let alone a challenge to the oligarchy that has Ukraine in its grip. Yanukovych has now made sweeping concessions to the protesters: sacking the prime minister, inviting opposition leaders to join the government and ditching anti-protest laws passed earlier this month

11---Australian car industry closure: A warning to workers internationally, wsws

The decision underscores the ruthless, irrational and socially destructive character of the capitalist system. Since the 1980s, revolutionary advances in technology, transport and communications have been utilised by the dominant corporations to develop global production networks, linking, to an unprecedented extent, the entire world into a single interdependent economic unit. Under capitalism, however, this vast productive capacity has produced profits for the financial aristocracy and social devastation for the working class.

The situation facing car workers in Australia is a devastating historical verdict on all national political programs, such as that of the Labor Party and the trade unions, which claimed that capitalism could be regulated within the nation-state and provide the framework for the advancement of the living standards of the working class. The carefully cultivated myth of Australian exceptionalism has proven a disaster for the working class.

Nothing about Australia, not its vast natural resources or geographical remoteness, provides any protection for the working class from the dictates of globally-organised capital. The prerequisite for any region remaining a site for industrial production is the imposition of poverty-level wages and the unfettered exploitation of workers. The role of the trade unions has been to pressure workers into accepting one round of cost-cutting after another on the false promise that this will defend jobs and maintain production in Australia.

For three decades, the process of globalisation under capitalism has seen job after job associated with manufacturing and other secondary industries systematically destroyed. As far as the capitalist class is concerned, both in Australia and internationally, the country is only useful as a site for regional business offices, as a supplier of cheap raw materials and as a gambling and tourist playground.

The moves to destroy the Australian car industry are a warning to the working class everywhere. Within Australia, the fate facing car workers is already being used to demand the end of “archaic” conditions like penalty rates and the overall slashing of wages and conditions. Internationally, it will be used to threaten and intimidate auto workers into bowing down to the next demands for cost-cutting that will be made against them

12---Retail sales drop unexpectedly in January, Reuters

.S. retail sales fell unexpectedly in January, and another gauge of consumer spending also slipped.
The Commerce Department said on Thursday retail sales fell 0.4 percent last month, led by a drop in automobile sales. Sales fell by a revised 0.1 percent in December.
Economists polled by Reuters had forecast retail sales would be unchanged in January after rising by a previously reported 0.2 percent in December.
Stripping out automobiles, gasoline, building materials and food services, so-called core sales fell 0.3 percent after rising by a downwardly revised 0.3 percent in December. Core sales correspond most closely with the consumer spending component of gross domestic product.
Economists had expected this category to advance 0.2 percent in January.

13---U.S. Economic Confidence at Lowest Level Since December, gallup
Americans' pessimism about economy's direction contributes to decline

14--Home sales down, household formation down, purchase applications down: Housing recovery?, oc housing

Anyone who objectively looks at the fundamental measures underpinning the housing recovery can only draw one conclusion: the entire housing recovery meme is a fabrication designed to provide unwarranted confidence in the nation’s homebuyers. There is no real recovery....

Why does the media, inside and outside the real estate industry, blindly believe that rising home prices are a prime indicator of a recovery? Given the obvious facts of Federal Reserve pumping of nearly 1 trillion dollars into the housing market annually, the complete lack of private capital in the secondary mortgage market, and the unprecedented growth of Wall-Street-funded buying of single family homes across the nation, it seems fairly obvious that this market is being supported not by fundamental growth in “end-user” demand, but rather it’s being sustained by artificial means that could turn on a dime, and cause an even bigger drop in home sales and values.

A Fundamentally healthy housing recovery and expansion requires sustained job and income growth. I don’t even think that I have to go to the trouble here to prove that neither one of these is currently strong enough to support a general recovery in the absence of QE and hedge fund cash sales. Just ask some of the millions of Americans who have been out of work for years now, or can only find a part-time job....

Rising house prices are the only recovery signal banks care about. If they can recover more on their bad loans, they consider it a recovery. The housing recovery is a bank-promoted pump-and-dump scheme.

Do investor home sales mask a sick housing market?

HVS reported annual household growth of just 448,800 in 2013. This represents a 48 percent drop in household growth relative to that from 2012 and marked the lowest annual household growth measure since 2008, in the depths of the Great Recession (Figure 1).

Source: US Census Bureau, Housing Vacancy Survey
In September we noted that the HVS was showing a disconcerting slowdown in household growth after finally having picked up in 2012.

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