Wednesday, April 23, 2014

Today's links

"If you want to understand the policy of a country, look at the map.”   Napoleon Bonaparte




1---China's Largest Manager Of Bad Debt On The Economy: "Grim And Complicated", zero hedge






As Bloomberg reports, new nonperforming loans amounted to more than 60 billion yuan ($9.6 billion) in the first two months of this year, compared with 100 billion yuan for all of 2013, China Business News reported on April 9, citing people it didn’t identify.


The economic indicators we’ve seen so far are quite disappointing and repayment risks are rising across sectors from property to small businesses due to weak demand,” Rainy Yuan, a Shanghai-based analyst at Masterlink Securities Corp., said by phone.

Banks will be hit in such an operating environment...
The business environment this year has been “grim and complicated” as lenders face pressures on asset quality, liquidity and lending margins...
China’s bad-loan ratio rose “significantly” in the first quarter, increasing risks for the nation’s banking industry...
2---Fed’s Wealth Effect: Richest 200 Moguls Made $13.9 Billion Today , Testosterone Pit


This is the Fed’s “wealth effect,” on a daily basis, as seen from the top. It’s a construct that the Greenspan Fed conjured up out of thin air and presented to the incredulous American people as a valid economic theory. Bernanke then promoted it to the Fed’s stated raison d’être. His theory: if we immensely enrich during years of bailouts, money-printing, and interest rate repression the richest few thousand people in the world, everyone would be happy somehow.


And so central bankers, with glowing support from the bondholder bailout organ, the IMF, inflated by hook or crook and for over five years the prices of assets that these chosen few were holding, and they gave them free money to acquire every asset insight and drive up values even further. It all worked out wonderfully and like clockwork for over five years, and the numbers of this “wealth effect” are truly impressive as we can see above. The only thing that Bernanke regretted not doing, based on his own admission, was to explain the whole noble construct to the American people.


3---Moving in with parents becomes more common for the middle-aged , LA Times


The number of Californians 50 to 64 who live in their parents' homes has surged in recent years, reflecting the grim economic aftermath of the Great Recession.


4--The Future of the Captured State, project syndicate


5---Deflation Is About to Wallop Europe, gary shilling


6--New Home Sales Collapse To 8 Month Lows, zero hedge


New Home Sales collapsed 14.5% month-over-month to its lowest since July 2013. A mere 384k versus 450k expectations is the biggest miss since July. So much for the Spring buying season... This is a 7 standard deviation miss against the smart economists' estimates! Whocouldanode that when the free-money sponsored fast money leaves the game that real people with real debt and real wages are simply priced out of buying a new home? Supply of unsold new homes jumps to 6 months, its highest since Oct 2011


7---California Foreclosure Starts Hover Near 8-Year Low, dataquick


8---Existing home sales fall three months in row, USA Today
Sales of existing homes slowest since July 2012


The housing market continued to sputter in March as adverse weather, low supplies and higher costs discouraged home buyers.
Existing home sales declined 0.2% to a seasonally adjusted annual rate of 4.59 million, the lowest level since July 2012, the National Association of Realtors said Tuesday. Home sales have fallen in seven of the past eight months.


Other factors are also holding down sales. The average 30-year fixed mortgage rate is at 4.27%, low by historical standards but up from about 3.4% a year ago. And higher home prices and a tight supply of homes for sale discouraged some buyers, NAR said.
There was a a 5.2-month supply of homes last month, up from a five-month supply in February, but six months is normal. Some of the tight inventory is welcome as the housing market recovers from the 2006 crash. Distressed homes, including foreclosures and short sales, accounted for 14% of sales in March, down from 21% a year ago.
Still, the market was a bit firmer than expected. Economists' median estimate was for an annual sales rate of 4.57 million, according to Action Economics' survey...


But tight supplies limit selection and push up prices, crimping sales. The median price of a single-family home was $198,200 last month, up 7.4% from March 2013.
Another obstacle is that first-time buyers are making up an unusually low share of purchases — 30%, down from 40% traditionally — largely because of strict credit standards.


9---Inequality in Well-Being, House of Debt


“The post-recession reality is that the customer base for businesses that appeal to the middle class is shrinking as the top tier pulls even further away. If there is any doubt, the speed at which companies are adapting to the new consumer landscape serves as very convincing evidence. Within top consulting firms and among Wall Street analysts, the shift is being described with a frankness more often associated with left-wing academics than business experts. ‘Those consumers who have capital like real estate and stocks and are in the top 20 percent are feeling pretty good,’ said John G. Maxwell, head of the global retail and consumer practice at PricewaterhouseCoopers.”....


Aaron Cobet of the Bureau of Labor Statistics used information from the Consumer Expenditure Survey to plot the following chart, which measures the change in annual expenditures for the richest and poorest Americans between 2008 and 2012.

houseofdebt_20140420_1

As it shows, spending increased the most from 2008 to 2012 for the richest households in the United States. So stronger income growth for rich Americans from 2008 to 2012 has translated into stronger spending growth as well. A working paper by Barry Cynamon and Steve Fazzari shows similar results.
The chart above is consistent with this fantastic New York Times article written by Nelson Schwartz earlier this year. He reports that high-end hotels and casinos that target rich customers are doing much better than mid-scale hotels. Retailers aimed at the middle class, such as Sears and J.C. Penney, are suffering while high end retailers such as Nordstrom are doing great.


10---New home sales plummet 14.5% in March, HW

Spring buying season off with a whimper

Sales of new single-family homes in March plummeted 14.5% to a seasonally adjusted annual rate of 384,000, hitting the lowest level since July 2013, the U.S. Census Bureau reported Wednesday.
The March drop in new home sales was a year-over-year drop of 13.3%. The report showed there were drops in three of four U.S. regions.
The March results were well below analyst expectations. The report can be read here.
Home sales have been tepid in market facing rising interest rates, investor-driven home price increases, declining inventory, a rising affordability gap and the much tighter lending standards imposed on the industry


11---Bond Bubbles? Dean Baker


First, I was surprised to read that the size of the U.S. bond market is almost $40 trillion, which the piece rightly points out is considerably larger than the $28 trillion stock market or the $20 trillion housing market. When I checked the source for this number I discovered that the figure referred to the total size of the debt market, not just longer term debt that we would typically refer to as "bonds." The FiveThirtyEight figure includes 90-day T-notes and money market funds.


This is not just a question of semantics. Longer term debt (with a duration of five years or more) has large fluctuations in value in response to a change in interest rates. The price of shorter debt will also vary, but the size of the changes is trivial by comparison. This means that if we are worried about a bubble inflating bond prices, we should really only be looking at longer term debt. The size of this market would be roughly half as large, or less than $20 trillion. That's still big, but a considerably smaller basis for concern than the piece implies.


More importantly, the room for losses in this market is not nearly as large as it was in the case of the stock or housing bubbles. The stock market lost more than half of its value from its 2000 peak to its 2002 trough. House prices lost more than one third of their real value from the 2006 peak to the 2011 trough. By contrast, it is difficult to envision a scenario where the bond market loses even 10 percent of its value....


Lower interest rates certainly help the economy, but does anyone believe that investment would freeze up or that housing construction would plummet if the interest rate on long-term debt rose by a percentage point from current levels? In short, the only reason to be concerned about a bubble in the bond market is that influential people are apparently taking the risk seriously and could pressure the Fed to needlessly raise interest rates and cause more unemployment.


12---Kiev must immediately deescalate east Ukraine crisis, call back troops - Moscow, RT


Kiev authorities must “immediately” deescalate the situation in southeast Ukraine by withdrawing its troops from the region, Russia’s Foreign Ministry has said, adding that Kiev must start nationwide talks and stop “distorting” the Geneva agreement.
“The Russian side once again insists on an immediate deescalation of the situation in the southeast of Ukraine, the withdrawal of divisions of the Ukrainian Army and the start of a real inter-Ukrainian dialogue including all the regions and political entities of the country,” the Foreign Ministry said in a statement on its website.


Moscow is “surprised” by Kiev’s interpretation of the four-sided Geneva agreement adopted by Russia, Ukraine, the US and the EU on April 17, it added.
Despite the call for disarmament of “all the illegal armed groups” specified by the agreement, Kiev, Washington and a number of European leaders “keep harping on the necessity to ‘hand over weapons’ [referring] only to the Ukrainian citizens defending their rights in southeastern Ukraine.” With that, the Western powers “are turning a blind eye to the ongoing provocative actions of the gunmen of the far-right groups, including that of the so-called Right Sector.”


13---Lavrov: Kiev issued 'criminal order' allowing use of weapons against civilians, RT


The coup-appointed Kiev government’s order to use force against Ukrainian citizens is “criminal,” the Russian Foreign Minister told RT. He also denied claims that there is Russian military presence on Ukrainian territory.
In an interview with RT’s Sophie Shevardnadze, Sergey Lavrov called acting Ukrainian President Alexander Turchinov’s order to reinitiate an anti-terror operation in East Ukraine, a criminal act.
Referencing the four-sided talks between the EU, the US, Russia and Ukraine that took place in Geneva on April 17, Lavrov accused Kiev’s coup-appointed government of going back on its pledge to put a stop to all violence.

“In Geneva we agreed there must be an end of all violence. Next afternoon [interim Ukrainian President Aleksandr] Turchinov declared almost a state of emergency and ordered the army to shoot at the people.”
Turchinov announced the resumption of the anti-terrorist operation in eastern Ukraine on Tuesday. Moscow has decried the operation and urged the Ukrainian government to refrain from using force on civilians living in the region.
The Russian Foreign Minister said the buildup of troops on the border with Ukraine was within the bounds of international law and denied the presence of Russian troops in East Ukraine. Lavrov said the troops were participating in routine military drills, something that has been verified by international inspectors.
Describing a worst case scenario in the Ukrainian crisis, Lavrov said Russia would be forced to respond if it were attacked.

“If we are attacked, we would certainly respond. If our interests, our legitimate interests, the interests of Russians have been attacked directly, like they were in South Ossetia for example, I do not see any other way but to respond in accordance with international law,” he said.

“Russian citizens being attacked is an attack against the Russian Federation,” he told RT...


There is no reason not to believe that the Americans are running the show,” said Lavrov, referencing US Vice-President Joe Biden’s visit to Kiev and its coincidence with the renewed counter-terror operation on activists in eastern Ukraine.

“It’s quite telling they chose the moment of the Vice President of the US’ visit to announce the resumption of this operation because the launching of this operation happened immediately after [head of the CIA] John Brennan’s visit to Kiev,”
said Lavrov.
The situation in Ukraine is just another example of Washington trying to gain ground in the geopolitical fight, the minister said.
“Ukraine is just one manifestation of the American unwillingness to yield in the geopolitical fight. Americans are not ready to admit that they cannot run the show in each and every part of the globe from Washington alone,” said Lavrov, adding Washington’s “ready-made solutions” cannot remedy a crisis that it does not understand.


14---Ukraine President Vows New Offensive Against East , antiwar 


15---New York Times propaganda photos on Ukraine exposed, wsws


Today, the lies the Times is palming off as news could provoke a war with Russia, a nuclear-armed power. By fabricating evidence of Russian involvement in east Ukraine, the Times was providing political ammunition for calls in Ukraine and in the Western imperialist powers for a military crackdown against protests in east Ukraine, a region with a large Russian population. This could lead to a military intervention by Moscow in eastern Ukraine to break up the crackdown, and a clash between Russia and Ukraine drawing in the Western powers......


In publishing the false allegations, the Times worked closely with the US government, which received the photos from the unelected pro-US regime in Kiev and “endorsed” them before passing them on. At a press briefing, however, US State Department spokeswoman Jen Psaki, whom the New York Times quoted in its article, indicated that the administration was well aware that the photos did not constitute proof of what was being claimed.
Pressed about whether she was certain the pictures showed individuals linked to Russia, Psaki replied: “What we see in these photos that have been, again, in international media, on Twitter, and publicly available, is that there are individuals who visibly appear to be tied to Russia. We’ve said that publicly a countless number of times. I will let you draw all the conclusions yourself as to whether these are individuals who look similar or not to other events.”


A journalist at the briefing objected to calling this “evidence,” and asked, “Do you think this is evidence that would stand up in a court of law?”
Psaki replied, “I don’t think it’s a legal—we’re not making a court-of-law case here. We’re just showing that this is photographic evidence that indicates the connection we’ve been talking about for weeks now.”


The journalist asked, “You think it is proof of connection, or it’s just—or you’re just alleging that it’s another sign of this?”
Psaki replied, “It’s another sign.”
In fact, the Times has worked to mislead its readers, uncritically presenting concocted photos delivered by its contacts in the State Department.


16---Kiev regime orders crackdown as US steps up threats against Moscow, wsws


 the real motivation behind the US-backed coup in Ukraine: to escalate the military encirclement of Russia, bringing NATO to its borders and eliminating Moscow as an impediment to US geostrategic hegemony over the Eurasian landmass.....


Asked by the Post whether the regime was going “to fight the terrorists,” Avakov replied, “Tomorrow the holidays will be finished and the announced Easter truce will be finished… We will act… We will start liberating people from the terrorists.”


Turchynov claimed the resumption of the crackdown was triggered by the discovery in Slovyansk of the body of a local politician and member of his own right-wing Batkivshchyna, or “Fatherland,” party, who had been abducted earlier. Another body found in the town has yet to be identified. Turchynov charged that “these crimes are being committed with the full support and connivance” of Russia....


The Kiev regime initially launched its “antiterrorist” offensive early last week, seizing control of a military airfield in Kramatorsk and sending an armored column rolling toward Slovyansk. Halted by a crowd of local people, however, the Ukrainian soldiers refused to take action against them, instead turning over their armored vehicles and weapons to anti-Kiev militiamen.
It was in the aftermath of this humiliating fiasco that the Ukrainian regime’s foreign minister joined his counterparts from the US, Russia and the European Union in drafting an agreement in Geneva to halt all violence and de-escalate tensions by disarming illegal groups, ending occupations of public buildings and spaces, freeing political prisoners and initiating a dialogue between the regions.


Shortly afterwards, the regime in Kiev added that it was observing an “Easter truce.” It was during this supposed truce that a column of four cars carrying Right Sector gunmen attacked a roadblock on the outskirts of Slovyansk on Easter Sunday, killing three local men.
It is now apparent that the Kiev regime and its patrons in Washington were only playing for time with the negotiations in Geneva. It hardly seems a coincidence that the first abortive “counterterrorist” offensive was launched after a secret visit to Kiev by CIA Director John Brennan, while the second attempt was initiated immediately after Vice President Biden’s trip to the country.








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