Thursday, June 30, 2016

Special Links

1---Deutsche Bank teetering on the brink....

Deutsche Bank hit headlines two years ago. Since then significant share of its assets were cashed in, few thousands of employees were sacked and the problems were gone. Gone or only forgotten? One is for sure, they did not disappear.
Deutsche Bank is the second largest investment bank in the world. Cumulatively its assets are worth 2 trillion EUR and deposits peak over 570 billion EUR.

The real problem of Deutsche Bank is its exposure on derivative market. The sum of just under 55 trillion EUR is 20 times bigger than the GDP of Germany. Majority – 70% - of all derivatives are interest rate derivatives and they are secured with government bonds.
Problems with huge pool of derivatives (only JP Morgan is ahead by small margin) were soothed in the last two years by the hike of government bond prices which are the pillar of securities of the derivatives. In February this year government bonds reached their top price (with yield close to zero). Afterwards prices started to fall and with them value of securities that hold together the whole pyramid of derivatives.....

Will Deutsche Bank be next Lehman?
No one knows that but risk is high. The DB employs nearly 100 thousand people worldwide and value of its derivatives is higher than global GDP.
What is worse is that the main security used here is government bonds that are losing its value continuously. Prices of bonds of the biggest countries lost 10-12% in just three months. For years interest rate market was being successfully manipulated but it seems that market forces finaly are breaking through.

Market of bonds is big enough that there is no way for everyone to escape its consequences without creating a crisis. Today’s situation is operating on the first come, first served basis. Knowing that there is no liquidity (demand) in the market and with this scale central banks cannot save the day anymore.
It is worth remembering that financial crises are happening once per 7 years, give or take. We had ‘black Monday’ of 1987. The Great Bond Massacre in 1994. The burst of NASDAQ bubble in 2000 is remembered by everyone just like the collapse of Lehman Brothers which nearly ended up dragging whole financial system down with it.

The Deutsche Bank problem is serious because of many reasons. The DB is way bigger than the Lehman Brothers thus, scale of the potential damage is incomparable. Modern global financial sector resembles a system of communicating vessels. The interconnectedness is very strong.
Problems of one bank nearly immediately creates domino effect onto other banks. Not only banks but also countries themselves are affected. What is more, central banks already exhausted opportunities to smooth out crises. Every single time in the past the quantitative easing (pumping money into the markets) was used and lowering interest rates to prevent credit crunch.

2--Deutsche Bank Poses Greatest Risk to Global Financial System, IMF Says

Deutsche Bank AG is the riskiest financial institution in the world as a potential source of external shocks to the financial system, according to the International Monetary Fund...

The importance of Deutsche Bank emphasizes the need for risk management, intense supervision and monitoring cross-border exposure as well as the ability of globally systemic banks to carry out new resolution regimes, IMF said.

Germany needs to examine whether its resolution plans for banks are operable, including a timely valuation of assets to be transferred, continued access to financial market infrastructures, and whether authorities can ensure control over a bank if resolution actions take a few days, if needed, by imposing a moratorium, the IMF said.

3--Soros in huge bet against Deutsche Bank

Soros Fund Management, an American firm, and Marshall Wace, a British hedge fund, both took big bets against Deutsche Bank last Friday, the day after the UK's referendum vote on leaving the European Union.
The funds each took short positions equivalent to 0.5 percent of Deutsche Bank's share capital, according to a German filing published on Monday, June 27. German newspaper "Die Welt" was the first to report the sale.

In short sales, investors agree to sell shares they don't own yet, in the belief they will be able to buy them later at a lower price. The difference in price is their profit - or loss, if the bet goes wrong.
According to news agency Bloomberg, the short positions were worth about 100 million euros each, based on Deutsche Bank's highest share price on Friday.
When markets closed on Monday, Deutsche Bank shares had lost about 20 percent of their value. Since then, the stocks have recovered somewhat, climbing almost four percent on Tuesday.

4--Treasuries' Brexit Rally Has Bill Gross Eyeing Record-Low Yields

Bill Gross says the Treasury 10-year note’s record-low yield level is in danger of being breached after Britain’s historic vote to leave the European Union amplified risks to global economic growth.
Gross joins money managers from Deutsche Bank AG’s Private Wealth Management unit, Eagle Asset Management and Sage Advisory Partners in saying 10-year note yields may fall to 1.25 percent, below the record 1.38 percent reached in July 2012. The predictions come as confidence dwindles that the U.S. economy is strong enough for the Federal Reserve to raise interest rates this year amid a growing roster of worldwide risks.

5---Big banks dial up buybacks after stress-testing win

Bank of America Merrill Lynch increased its dividend by 50 percent, to $0.075 per share, and authorized a $5 billion stock buyback.
PNC Financial Services increased its dividend by 4 cents, to 55 cents a share, and announced a share repurchase program of $2 billion.
JPMorgan Chase announced a buyback plan for $10.6 billion in stock and will continue its current common stock dividend of 48 cents a share

6--World's Most Systemically Dangerous Bank Crashes Back To Record Lows  --Deutsche Bank continues its downward plunge

7--Why is America so alarmed by a Brexit vote

The demographic parallels between those backing Brexit and Mr Trump’s supporters are too close to ignore — almost eerily so. Their motives are equally simplistic. Leaving Europe is to Brexiters what building a wall with Mexico is to Trumpians — a guillotine on the cacophonous multiculturalism of 21st-century life. From an empirical point of view, Mr Trump’s beautiful wall is no different to the splendid isolation of Boris Johnson, the leading Brexit campaigner: both are reckless illusions. From a poetic standpoint, however, they offer a clean solution to the alienations of the postmodern society. Winston Churchill joked that Britain and America were divided by a common language. Today blue-collar whites on both sides of the Atlantic are speaking in the same idiom. They both yearn for the certainties of a lost age.

8--Across the postindustrial world, the populist right is excelling in the old bastions of the left....

If there is a lesson for the United States in the decision by British voters to exit the European Union, it is the importance of the emerging split between the beneficiaries of multicultural globalism and the working-class ethno-nationalists who feel left behind. These issues have the potential to overcome longstanding partisan ties, even in the United States....

The New Democrats and New Labour did not embrace “free trade.”  They embraced deals that gave CEOs exceptional leverage to prevent effective environmental, financial, and safety regulation and increased leverage against their workers.  Those deals were drafted and negotiated largely by corporate CEOs for the benefit of corporate CEOs.  The key to the deals is not “trade,” much less “free trade,” but the kangaroo, non-judicial arbiters that can bankrupt smaller nations that dare to protect their citizens and workers’ health and safety through law and regulation.
The New Democrats did not embrace “lower taxes,” they embraced greatly reduced government services and protections and an eroded safety nets

Today, Nate Cohn warned Democrats that “Right-Wing Populism Is Prevailing in Left-Wing Strongholds Around the World.”  Cohn’s warning repeats Frank’s warnings, but ignores entirely the reasons for Frank’s warnings, the fact that he made the warnings, the New Democrats’ scorn for his warnings.  Cohn vaguely references the fact that the workers have been on the losing side of a policy of rigging the financial system to favor the wealthiest and most immoral financial leaders for three decades of rule by Republicans and New Democrats, but ignores the tie between those the anti-labor policies, the rigging of the system, and the resultant losses to the working class while the wealthy grow far richer.  This is deliberate, for Cohn writes from the policy perspective of the New Democrats and the Republicans on these issues.  He cannot, therefore, address Frank’s analysis of the nature and horrific results of the New Democrats’ anti-worker policies and contempt.

Cohn’s article makes the broader point that the same dynamic put in place in the U.S. by the New Democrats and the Republicans has occurred in the UK with the BREXIT vote, but fails to explain that Tony Blair consciously modeled “New Labour” on the Clinton’s “New Democrats” and adopted a broad range of the Tories’ policies.  New Labour’s adoption of the same contempt for labor and anti-labor policies pioneered by the Clintons produced the same horrific results for the working class in much of the UK that the New Democrats’ policies produced in the U.S.  It also produced the same smoldering rage in much of the working class and resulting loss of support of the working class for the Labour Party that the New Democrat’s produced in the U.S

9--Why NIRP doesn't work--Why Negative Interest Rate Policy (NIRP) is Ineffective and Dangerous

NIRP is quickly becoming a consensus policy within the economics establishment. This paper argues that consensus is dangerously wrong, resting on flawed theory and flawed policy assessment. Regarding theory, NIRP draws on fallacious pre-Keynesian economic logic that asserts interest rate adjustment can ensure full employment. That fallacious logic has been augmented by ZLB economics which claims times of severe demand shortage may require negative interest rates, which policy must deliver since the market cannot. Regarding policy assessment, NIRP turns a blind eye to the possibility that negative interest rates may reduce AD, cause financial fragility, create a macroeconomics of whiplash owing to contradictions between policy today and tomorrow, promote currency wars that undermine the international economy, and foster a political economy that spawns toxic politics. Worst of all, NIRP maintains and encourages the flawed model of growth, based on debt and asset price inflation, which has already done such harm

10--The world thinks americans are violent, greedy and arrogant...Uh, huh

A worldwide survey found that majorities of people in the U.K., Canada, Spain and Australia think of Americans as violent, greedy and arrogant.
The poll, conducted by the Pew Research Center, found that a median of 54 percent of people in countries surveyed associated the negative trait of arrogance with Americans. Fifty-two percent associate greed, and 48 percent say Americans are violent....

Americans themselves don’t deny these attributions: Fifty-five percent said Americans are arrogant, 57 percent said they are greedy and 42 percent said they are violent. Those views vary by political affiliation, with Democrats associating Americans with those characteristics more than Republicans do

11--UK survey confirms that "Leave" driven by class war

Of 4,300 people asked, over three-quarters thought the class gulf was either “very” or “fairly” wide, while nearly three in four thought that it was “fairly” or “very” hard to move up in class.
The study says this is a rise of 65 percent over the last 11 years.
The investigation also found that people often remain attached to a working class identity even if they are in managerial roles.

Report author Miranda Phillips told the Independent newspaper on Thursday that what they found “chimed with some of the [post referendum] discussions on social division.
People find it harder to move between classes than they used to feel and people with working class identity are more likely to feel that.
On the critical question of immigration, she argued: “We know how people feel about their class correlates to how they feel about immigration....

However, anti-immigration feeling is also mixed up with a sense that public funding should not be cut and, by four out of every 10 people polled, a feeling that more should be spent on benefits – the highest support for welfare since 2003.

12--Obama Administration Offers Russia Deal on Military Cooperation in Syria

Obama tries to create defacto "no fly zone" in Syria

The Obama administration has offered Russia a deal to increase military cooperation on carrying out airstrikes against terrorist targets in Syria

The offer, which was sent to Moscow on Monday, proposes to share targets and coordinate in an extended bombing campaign against the Nusra Front militant group, The Washington Post newspaper reported, citing a source in the Obama administration.....

Given the difficulties involved in identifying separate rebel groups and separating al-Nusra Front from other groups, the Obama administration proposed designating entire geographic areas as off-limits for the Syrian air force, according to the Washington source.

13---Death toll in Istanbul airport attack rises to 41--(It looks like the Turkish gov knew attacks were coming)

Thirteen of the dead were foreign, including five Saudis, two Iraqis, a Tunisian, a Jordanian, a Ukrainian, and two people of Central Asian origin. CNN Türk identified one of the Central Asian victims as a “person of East Turkestan origin,” apparently a reference to the Xinjiang Autonomous Region in western China....

(Turkish gov complicit in attacks?)

Turkish, Israeli and Russian intelligence agencies had all given advance warnings of the attacks to the Belgian authorities, identifying the terrorists as Islamist fighters and the Brussels airport and subway as targets. Nonetheless, the attackers were not stopped, nor was security stepped up at the targeted locations. Protocols were manifestly in place for the attackers, as members of Islamist networks playing a central role in NATO foreign policy, to travel unhindered.

Significantly, initial reports have emerged to suggest that Turkish officials also had forewarning of Monday's terror attacks in Istanbul. Yesterday, Doğan TV's Ankara representative, Hande Firat, reported: “Intelligence units sent a warning letter to the top of the state and all its institutions in early June, around 20 days ago, about Istanbul.” The subject of the warning was ISIS, Firat indicated, and Ataturk Airport was mentioned as a possible target.

Turkish opposition politicians publicly questioned the role of the security services and of Erdoğan's Justice and Development Party (AKP) in the attacks. İdris Baluken, deputy parliamentary group leader of the Peoples’ Democratic Party (HDP), said: “When bombs are going off in a place such as Atatürk Airport, we wonder what this country’s government, interior minister, intelligence and police are doing,” he said....

The attacks came as the AKP was trying to carry out a broad shift in its foreign policy, setting it on course for a confrontation with ISIS, just as ISIS also faces serious setbacks in Iraq after the loss of Fallujah to Iraqi government forces. Until recently, Turkey was locked in a bitter confrontation with Russia, having recklessly shot down a Russian warplane last year over Syria, where Russian forces allied with the Syrian government were attacking jihadist militias. Moscow also accused Turkey of complicity with ISIS.
In recent weeks, however, Turkey has been moving closer to Russia and also trying to deepen its ties with Israel.

The day before the attack, Yıldırım announced that a “normalization process had begun” with Russia, after Erdoğan wrote a letter to Russian President Vladimir Putin to apologize for the shooting down of the Russian jet. At the same time, Turkey was preparing initiatives to improve ties with both Israel and Egypt, whose military dictator Abdel Fattah al-Sisi came to power in a putsch that toppled a Muslim Brotherhood government allied to the AKP.

It appears likely that, with this latest bloody attack, ISIS was sending a signal to the Turkish regime that ISIS and its regional allies still can do considerable damage to Turkey, should the AKP government turn on them

14---Sanders’ “political revolution” revealed: Nationalist reaction and support for Clinton

In his speech in Monessen, Trump at one point indicated the pro-corporate reality behind his posture of concern for the plight of workers. “We will make America the best place in the world to start a business, hire workers, and open a factory,” he declared. “This includes massive tax reform to lift the crushing burdens on American workers and businesses. We will also get rid of wasteful rules and regulations which are destroying our job creation capacity…”

In other words, his “America First” program means the removal of whatever remains of corporate taxes and restrictions on the capitalists’ ability to exploit the working class.

It also means the intensification of the confrontation with China, Russia and other rivals of American imperialism; the escalation of the drive toward world war; the adoption of torture as a legitimate policy; and a massive buildup of the repressive powers of the state. These policies are openly proclaimed by Trump, but they follow as well from the nationalism promoted by Sanders.
They are the policies of the most reactionary sections of the ruling class in the face of mounting economic crisis, proliferating geo-political conflicts and a resurgence of working class struggle...

The outcome of Sanders’ “political revolution” is not only his own total integration into the Democratic Party, but his emergence as spokesman for its most nationalist wing. As he justifies his support for Clinton as necessary to stop Trump, Sanders adopts Trump’s economic program.

Those who believed Sanders’ claims to be a socialist and were lured on that basis into supporting his campaign are getting a serious lesson in politics. The consequences of the subordination of social opposition in the working class and among young people to the Sanders campaign are being revealed.

The answer to the relentless assault on the living standards of the working class is not economic autarky and the strengthening of national borders, but the revolutionary struggle to place the corporations and banks under the democratic control of the working class, and the unification of workers across all national lines in opposition to all of the capitalists and all of their governments

15--Clinton Email: Assad Must Be Toppled to Protect Israel

16--71% of Americans Think the Economy is “Rigged”

17--Seven Years Into the U.S. Recovery and It's Finally Starting to Feel Good (Author is clearly out of touch)

The thing is, that labor-market improvement hasn't always felt great: in some cases, people who lost well-paying, skilled jobs have found themselves in lower-paying positions that don't fit their qualifications. For people who graduated into the early years of the recovery, the still-tough job market may have left permanent scars.

Participation is lower, but mostly due to demographics

One trend that took some shine off of falling joblessness was the simultaneous drop in labor force participation. While much of the decline probably owes to demographic changes, many economists think that at least part of the drop was caused by discouraged job seekers throwing in the towel...

Wages are starting to pick up

Wages are another factor that has kept economic growth from feeling great to many Americans. They stagnated in the wake of the recovery. But recently, they've begun to creep up....

Globalization has led to stagnant incomes for middle-class workers worldwide as lower-income people who mostly live in developing countries like China and India and the very rich advanced.

18--Bubble Finance is a giant engine of reverse Robin Hood redistribution.

...It embodies a sweeping fiscal intervention in the natural flows of the free market that punishes savers, laborers, self-funded main street entrepreneurs and the retired populations in favor of speculators, the holders of existing financial assets and the dealers in money.
Bubble Finance is an affront to both democratic governance and true capitalist prosperity. The Trump voters, the Brexit voters, the masses rallying to the populist banners throughout Europe above all else represent a reactivation of the political machinery in a last ditch campaign to stop the financial elites and their regime of Bubble Finance

As on observer put it, the geography of the vote said it all:
“If you’ve got money, you vote in,” she said, with a bracing certainty. “If you haven’t got money, you vote out.” We were in Collyhurst, the hard-pressed neighbourhood on the northern edge of Manchester city centre last Wednesday, and I had yet to find a remain voter.
Look at the map of those results, and that huge island of “in” voting in London and the south-east; or those jaw-dropping vote-shares for remain in the centre of the capital: 69% in Tory Kensington and Chelsea; 75% in Camden; 78% in Hackney, contrasted with comparable shares for leave in such places as Great Yarmouth (71%), Castle Point in Essex (73%), and Redcar and Cleveland (66%). Here is a country so imbalanced it has effectively fallen over.
The rise of Trumpism in the US reflects the same social and economic fracture. To wit, Bubble Finance has also drastically unbalanced the US as between the bicoastal zones of prosperity it has enabled and the fly-over zones its has effectively left behind.

19--What could go wrong--Corporations boost debt by $15 trillion since financial crisis

"Figure 1 looks at global non-financial corporate debt/GDP based on the BIS dataset and definitions. Whilst it’s not always easy to categorise debt into various buckets and whilst we have some issues with slightly different results across different data providers it’s fair to say that the BIS data is the best way of looking at the global debt picture.

So non-financial debt has increased significantly in this cycle. On this measure the increase is of the magnitude of around $15 trillion since the lows after the financial crisis." - source Deutsche Bank

20--Dems oppose leftward push from Camp Bernie--The Party eleites conceded nothing to Bernie supporters

Anyone who thinks the Democratic Party’s left will stand down soon should consult his statement Sunday about the party’s platform. He criticized the platform committee for voting down planks opposing the Trans-Pacific Partnership trade deal, supporting a $15 an hour federal minimum wage, and proposing a carbon tax and a fracking ban.

Having already criticized the existence of Democratic superdelegates and the Clintons’ dependence on Wall Street largess, Mr. Sanders is laying down more markers that could serve as rallying points for an insurgent movement to disrupt the Democratic Party after November, win or (especially) lose.
American politics is being convulsed, and neither party is immune. 

21--What Really Drives Anti-Immigration Feelings       --National identity and border control, not economic worries, drive anti-immigrant sentiment, suggesting ways to combat it ((A shameless attempt to pull the wool over peoples eyes to achieve the corporate objective of cheap labor)

Countering the backlash against immigration and globalization will require not just correcting misinformation sown by opponents, but controlling the number and composition of immigrants so citizens believe immigration policy is in the country’s best interests, not the immigrants’...

This is what Australia and Canada do. They award points based on ability to speak English (and, in Canada, French), education, job skills and family sponsorship. This is one reason more than half of Canada’s immigrants are selected for economic reasons and just a quarter for family reasons; in the U.S., the proportions are roughly reversed. Australia and Canada have both extremely high foreign-born population shares and lofty levels of public support for immigration. (Cherry picking immigrants can help reduce opposition)...

How might Britain and the U.S. learn from such policies? Britain, post-Brexit, could cap in some way the number of immigrants from the EU. The U.S. could introduce a point system to screen people who seek to come to the country, take more steps to legalize and assimilate the current illegal population, and do more to prevent illegal immigration. Thus far, grass-roots Republicans have largely stymied such compromises.
This is a move away from the ideal of open borders that globalization advocates and the European Union have long dreamed of. But by turning back the tide of populist-fueled grievance, such measures could actually cement support for open borders in the long run (A shameless attempt to pull the wool over peoples eyes to achieve the corporate objective of cheap labor)

22--Fed "greenlights" another voracious round of financial engineering---Big banks dial up buybacks after stress-testing win

("banks were not doing well even before Brexit---and post Berxit the unknowns are even larger as far as global growth expectations and the yield curve ...the spread between 2s and 10s is at a 9 year low. So why be positive now?"...Banks are expected to retyrn $80 bil to shareholders via buybacks and dividends within the next year)
A number of banks are ratcheting up buybacks and dividends after passing stress tests, which marks good news for their investors in a difficult year.

The announcement of dividends and buybacks comes in a year where big banks in the U.S. and abroad have seen their share values hammered by market volatility and decreasing expectations that the Fed will raise interest rates this year, which is expected to have a substantial impact on their revenue and forward-looking projections

23--Why Do People Hate John Maynard Keynes? (archive)

Some people seem to infer from this that output and income can be raised by increasing the quantity of money. But this is like trying to get fat by buying a larger belt. In the United States to-day your belt is plenty big enough for your belly. It is a most misleading thing to stress the quantity of money, which is only a limiting factor, rather than the volume of expenditure, which is the operative factor (Money supply is irrelevant if no one is spending)

Keynes could see that monetary policy alone could not restore confidence or put the economy back on track. He also knew that interest rates and credit easing did not provide an effective transmission mechanism for increasing demand, which is why the government needs to provide fiscal support when businesses slash investment and consumers are forced to increase their savings. Here’s Keynes again from Chapter 12 of The General Theory:
“For my own part I am now somewhat skeptical of the success of a merely monetary policy….. I expect to see the State, which is in a position to calculate the marginal efficiency of capital-goods on long views and on the basis of the general social advantage, taking an ever greater responsibility for directly organizing investment.”

This is what fiscal stimulus is all about; helping the economy to recover by generating activity (eg. government spending) when consumers are on the ropes and businesses refuse to invest. The alternative is higher unemployment, lower revenues, falling prices, soaring defaults, slower growth and a reinforcing downward spiral. That said, we could see deflationary pressures reemerge as early as next month when Bernanke’s QE2 ends and the flaws in the Fed’s strategy become more apparent. Here’s Keynes on the topic:
“The way to keep economies booming was by maintaining a high volume of investment and increasing the propensity to consume ‘by the redistribution of incomes…so that a level of employment would require a smaller volume of current investment to support it.” (Robert Skidelsky, “Keynes; The Return of the Master”, page 68, Public Affairs, New York)
So Keynes supported redistribution? You bet. He had the foresight to realize that gross inequality leads to flagging demand. When workers no longer have sufficient wherewithal to keep the economy growing via consumption, then the system has to be rejiggered to shore up demand. It’s not a question of Big Government “soaking the rich” to create a socialist Utopia. That’s bunkum. It’s a matter of recognizing the inherent shortcomings of the system and finding ways to make it operate more efficiently...

Keynes, “apart from the necessity of central controls to bring about an adjustment between the propensity to consume and the inducement to invest, there is no more reason to socialize economic life than there was before” (“John Maynard Keynes”, The Library of Economics and Liberty)....

Obama’s American Recovery and Reinvestment Act (ARRA), on the other hand, was clearly Keynesian. It provided fiscal relief directly to the economy and–according to the CBO—it substantially lowered unemployment, narrowed the output gap, and increased growth. The ARRA stopped the financial crisis from turning into another Great Depression, which proves that Keynesian stimulus works.
But there’s more to Keynes than just fiscal stimulus. The man had a keen grasp of investor psychology, human nature and the workings of markets. Here’s a clip from The General Theory that gives a sample of his thinking:

“Our desire to hold money as a store of wealth is a barometer of the degree of our distrust of our own calculations and conventions concerning the future….The possession of actual money lulls our disquietude; and the premium we require to make us part with money is the measure of the degree of our disquietude.”

That’s brilliant, and it explains why a sudden downturn in the market can quickly turn into a full-blown crash. Investors get scared, withdraw their money and hunker down. Pretty soon, the equity share supporting the markets vanishes and a bank run ensues thrusting the economy into a protracted swoon. And it’s all because people lose confidence in their ability to anticipate what will happen in the future. Investment is all about anticipation; anticipation and confidence. Here’s how Keynes summed it up:

“It would be foolish, in forming our expectations, to attach great weight to matters which are very uncertain. It is reasonable, therefore, to be guided to a considerable degree by the facts about which we feel somewhat confident, even though they may be less decisively relevant to the issue than other facts about which our knowledge is vague and scanty. For this reason the facts of the existing situation enter, in a sense disproportionately, into the formation of our long-term expectations; our usual practice being to take the existing situation and to project it into the future, modified only to the extent that we have more or less definite reasons for expecting a change.

The state of long-term expectation, upon which our decisions are based, does not solely depend, therefore, on the most probable forecast we can make. It also depends on the confidence with which we make this forecast — on how highly we rate the likelihood of our best forecast turning out quite wrong. If we expect large changes but are very uncertain as to what precise form these changes will take, then our confidence will be weak.

The state of confidence, as they term it, is a matter to which practical men always pay the closest and most anxious attention.”

24--Santalli video: "If globalization pushes down prices in good times and bad, wouldn't tariffs help to raise prices (thus ending deflationary pressures)?

The unassailable logic of Tariffs.

Countering the backlash against immigration and globalization will require not just correcting misinformation sown by opponents, but controlling the number and composition of immigrants so citizens believe immigration policy is in the country’s best interests, not the immigrants’world/world/article86751152.html#storylink=cpy

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Wednesday, June 29, 2016

Today's Links

1--Draghi Wishes for a World Order Populists Will Love to Hate

(Draghi thinks we need more globalization not less) Mario Draghi has just pushed the boundaries of central banking further into the realm of globalization, at a time when globalization is on the run....

“We have to think not just about whether our domestic monetary policies are appropriate, but whether they are properly aligned across jurisdictions,” Draghi said at the ECB’s annual policy forum in Sintra, Portugal. “In a globalized world, the global policy mix matters.”...

At the Group of 20 nations meeting in Shanghai in February, states agreed to “consult closely” on foreign-exchange markets. That happened against the backdrop of the introduction of negative interest rates by the Bank of Japan that regional peers saw as representing a fresh salvo in a currency war intended to drive down the yen.
Draghi and others may struggle to find the right balance. (Hmmm? The "right balance" in a free market is allowing the market to decide.)

2--Germany to Oppose Shielding Investors in Italian Bank Plan

Germany opposes any attempt to shield investors from losses if Italy pushes ahead with plans to recapitalize lenders, according to a person with knowledge of the government’s stance.

Chancellor Angela Merkel’s government says that European Union rules on handling struggling banks should apply in any rescue effort, including forcing losses on shareholders and some creditors before public money can be injected, the person said, declining to be identified because the deliberations are private. (Were German investors forced to share losses? No)

The government does, however, want to ensure that private investors are tapped before any public money is put into the banks. EU state-aid rules normally require shareholders and junior creditors to share losses.

3--Biderman: 'Entering global recession'  Important

4--The Brexit and Article 50: CNBC Explains

5--European Unification Divides Europeans: How Forcing People Together Tears Them Apart

you cannot convince millions of people that their only prospect in life must be to sacrifice themselves for the glory of the World Market.

Since the EU’s eastward expansion ended immigration controls with the former communist countries, hundreds of thousands of workers from Poland, Lithuania, and other Eastern European nations have flooded into Britain, adding to the large established immigrant population from the British Commonwealth countries. It is simply a fact that mass immigration brings down wage levels in a country. A Glasgow University study shows statistically that as immigration rises, the level of wages in proportion to profits drops – not to mention the increase in unemployment.....

Unification of Europe has brought about radical new divisions within Europe. The most significant split is between the people and their political leaders.
The June 23 British majority vote to leave the European Union has made strikingly evident the division between the new ruling class that flourishes in the globalized world without borders and all the others who are on the receiving end of policies that destroy jobs, cut social benefits, lower wages and reject as obsolete national customs, not least the custom of democratic choice, all to make the world safe for international investment capital....

The trouble is that the mainstream caricature of the Brexit voters as narrow-minded racists, if not protofascists, has not been balanced by any articulation of the strong underlying rejection of the EU as a denial of democracy, as the authoritarian rule by a self-satisfied globalizing elite with total contempt for what the people might really want. 

6--Turkish Stream project ready to go after Erdogan apology

7--Obama's promises to Islamic world turned out to be a fraud

"I have come here to seek a new beginning between the United States and Muslims around the world; one based upon mutual interest and mutual respect; and one based upon the truth that America and Islam are not exclusive, and need not be in competition. Instead, they overlap, and share common principles — principles of justice and progress; tolerance and the dignity of all human beings," Obama said as quoted by the New York Times.

"The people of the world can live together in peace. We know that is God's vision. Now, that must be our work here on Earth," Obama underscored, thus far distancing himself from the Bush-era belligerent foreign policy in the Middle East.

NATO's bombing operation in Libya, the Syrian turmoil, the US-backed Saudi intervention in Yemen and a string of "color revolutions" during the so-called Arab Spring have marked yet another epoch of Washington's meddling into foreign affairs of the Arab world. 
"It's now a recognized fact that Washington's 'vision' of US relations with Middle East has been completely detached from reality, since the White House remains still a ruthless aggressor," Berger emphasizes.

But the Obama administration has taken it a step too far, going from simply intervening in the affairs of sovereign Muslim states to creating a dreadful reality, where civil institutions are now not simply undermined in the Middle East, they are replaced by brutal terrorist groups," the journalist stresses.
Berger quotes Marc Thiessen of Newsweek who noted in his opinion piece entitled "Obama Retreat From War Made Matters Worse":
"When Obama took office, there were no major al Qaeda training camps in Afghanistan. Now they are back… and-bringing the whole sad spectacle full circle-ISIS [Daesh] has expanded from Iraq and Syria and established a presence in Afghanistan, taking over villages and imposing rule so brutal it is actually making Afghans long for the days of Taliban rule."

Berger suggests that at the time Obama delivered his famous speech he and his team could have already embraced the idea that the Muslim Brotherhood was a popular Arab movement and that it would bring a "change" to the countries of the region, making them more "democratic."
However, the so-called Arab Spring aimed at "transforming" the Middle East and North Africa, has resulted in chaos and the emergence of radical Islamism.

"The only good thing American analysts can say now about Obama's 'new beginning' is that by 2020, the Clinton presidency most likely will make us all feel much better about Barack Obama's failures in comparison," Berger remarks

8--Tensions erupt at Brussels summit on British exit from EU

Reporting on the working dinner he had had with Cameron and Juncker, EU Council President Tusk confirmed that the EU aimed to inflict serious economic damage on Britain, even at the cost of provoking a global recession, in order to make an example of Britain for voting to leave the bloc. EU officials at the dinner made clear, Tusk said, “that Brexit means substantially lower growth in the UK, with a possible negative spillover all over the world.”...

The EU’s vindictive policy toward Britain and the escalating conflicts between British and EU officials shed light on the deep divisions that have built up throughout the EU, especially since the 2008 financial crisis and the austerity policies imposed in its aftermath. Now, tensions are exploding not only between Britain and Brussels, but throughout the EU.

9--The Syria 'dissent' memo and US bureaucratic pressure strategy

The supposed dissenters knew very well, moreover, that Kerry has been advocating the essentially the same policy they were articulating for years. Kerry began making the case for sending large-scale, heavy weapons to armed opposition groups and carrying out cruise missile strikes against the Assad regime’s air force in 2013. He continued to advocate that military option in meetings with the president, only to be rebuffed, according to the account by The Atlantic’s Jeffrey Goldberg published in April. Obama became so irritated by Kerry’s recommendations for cruise missile strikes in Syria that he decreed that only the secretary of defence would be permitted to recommend the use of force.

10--Japan Inc.’s Yen Nightmare Looms at Large Exporters: Chart

11--Brexit exports deflation:

12--Brexit Effect Ripples Through Emerging Markets  

Gains in the dollar are consequential for emerging markets. As domestic currencies fall, dollar-denominated debt becomes more expensive to service and pay back. As of the first quarter of 2016, the Bank for International Settlements estimates, there was nearly $1.15 trillion in dollar-based bonds outstanding from nonbank emerging-market companies, up from $254 billion in the same quarter of 2006.
The rising dollar is making commodities more expensive for holders of other currencies, threatening to dent demand in everything from oil to copper. Emerging markets, particularly in Africa and South America, are big commodities exporters.

Investors avoid risk and move to perceived haven assets....

Britain’s vote to leave the European Union continued to hurt emerging markets on Monday, sending currencies and stocks falling from Mexico to Poland as investors fled riskier assets.

The declines highlight how Brexit is causing ripple effects across the world, raising uncertainty about global growth and pushing investors into assets they see as safe, such as the U.S. dollar. The dollar’s gains then feed back into concerns about emerging markets, making their greenback-denominated debt and the commodities they sell more expensive...

The turbulence comes as emerging-market economies already were showing signs of strain. Export growth from emerging economies fell this year to the lowest levels since the financial crisis, according to UBS Group AG. After Thursday’s U.K. referendum, analysts have cut global growth forecasts, and slower economic expansion will inevitably reverberate back through the emerging world. ...

Bank of America Merrill Lynch predicts gross domestic product in the European Union will grow 1.1% next year, down from a forecast of 1.6% before the Brexit vote....

Europe’s recovery is at risk [and the uncertainty] could easily push the eurozone back into stagnation or even recession,” said Larry Hatheway, multiasset portfolio head at GAM Holding. “In that case, the fallout [for emerging markets] could be considerable.”

13--The Presidential Stakes Keep Climbing

After listening to a day of passionate debate about the future of Europe at the annual meeting of the European Council on Foreign Relations on Monday, I realized that the stakes in the U.S. presidential election are even higher than I had thought. The fate of the entire postwar order hangs in the balance, and with it the prospects for democracy world-wide. Without vigorous American leadership, the prospects are not bright.

Like many other peoples, Americans are turning inward, preoccupied with economic and social divisions. This is understandable, and the next president will have to address these concerns boldly and persistently. Effective international leadership always depends on a solid foundation of domestic support.

But the next president won’t have the luxury of setting foreign concerns aside until the economy is fixed. Europe is in crisis. Liberal internationalism is back on its heels; ethno-nationalist populism is on the march...

the next president must abandon the rhetoric of a “pivot” to Asia, which Europeans inevitably interpret as diminished American concern for their fate. The next administration can give Europe its due without abandoning East Asia to the tender mercies of an increasingly aggressive China.
U.S. complaints about insufficient European military and diplomatic burden-sharing are a hardy perennial of trans-Atlantic relations. The complaints have proved ineffectual in the past, and now is the very worst time to press them again. ...

Whatever the merits of the accusation that the TPP would accelerate the outsourcing of American jobs to low-wage countries, no such charge can be leveled plausibly against TTIP. If negotiations aren’t completed during the current administration, the next president should accelerate the talks, aiming for an agreement by next spring....

none of this can succeed unless the American people are persuaded that outward-facing military, diplomatic and economic arrangements are consistent with their own well-being. Increased defense spending, which enhances job-creation as well as national security, may well be needed. New measures to cushion vulnerable Americans against the wage and employment shocks created by trade are essential.
Given current circumstances, robust internationalism is inconsistent with the fiscal austerity imposed by budget sequestration, let alone Paul Ryan-style proposals for retrenchment in the social programs that working Americans rely on for what is left of their security. Whatever its proponents may say, a smaller government at home means retreat abroad. This is the road to disaster, and we must not take it (Summary: We must spend more to maintain our control of the world....and the people must be persuaded that it is in their interests.)

14--Trump calls NAFTA one of the "worst legacies" of the Clinton years.

Trump said he saw no way to fix the TPP, calling it a "death blow" for American manufacturing. Although China is not part of the agreement, Trump said Beijing might try to enter it "through the back door" later on.
Later, during a rally in St. Clairsville, Ohio, Trump said the deal was "just a continuing rape of our country."...

Trump has seized on the historic Brexit vote to bolster his argument that voters are rising up against establishment leaders, saying Americans would reject the "global elite" and support his presidential candidacy....

Trump criticized the North American Free Trade Agreement as a U.S. job killer, saying he would be willing to scrap the pact if Canada and Mexico were unwilling to budge. He also tried to link Democratic rival Hillary Clinton to the deal on the eve of a meeting in Ottawa of the "three amigos," the leaders of the three NAFTA signatories: the United States, Mexico and Canada.
In his most detailed speech on trade, the presumptive Republican nominee said he would pull the United States out of negotiations for a deal among 12 Pacific Rim nations and promised to use executive power to resolve trade disputes with China....

Trump has identified Pennsylvania as a state he believes he can wrest from the Democrats in the Nov. 8 election. He also campaigned on Tuesday in Ohio, which like Pennsylvania is a Rust Belt state.
Democratic President Barack Obama won both states in 2008 and 2012, but manufacturing job losses have led to voter anxiety in the region.
"I'm going tell our NAFTA partners that I intend to immediately renegotiate the terms of that agreement to get a better deal for our workers. And I don't mean just a little bit better, I mean a lot better," Trump said in Pennsylvania

15--Gov makes killing off student debtslavery; Who got rich off the student debt crisis?

Today, there is a student debt class like no other: more than 40 million Americans bearing $1.3 trillion in debt that’s altering lives, relationships and even retirement.
One of the winners in the profit spree behind this debt: the federal government. By the Department of Education’s own calculations, the government earns in some years an astounding 20 percent on each loan.
“The United States government turns young people who are trying to get an education into profit centers to bring in more revenue for the federal government,” Sen. Elizabeth Warren, D-Mass., said on the Senate floor in February. “This is obscene. The federal government should be helping students get an education – not making a profit off their backs.”..

.Privatization had a dramatic impact. While the Department of Education technically still oversaw student loans, the message out of Congress couldn’t have been clearer: Bureaucrats, step aside and let the private market run the loan program....

Under Lord, Sallie Mae grew by leaps and bounds. Free of government control, it emerged as the dominant company in the field.
Lord’s chief competition when he took over was the Education Department’s direct loan program created by Clinton. Since its adoption in 1993, the program had gained popularity steadily on college campuses and captured a third of the student loan market by the time Sallie Mae was privatized.

Sallie Mae undermined the federal program with sheer marketing muscle. The company paid colleges to drop out of the federal program and make Sallie Mae the campus student loan provider. It paid college financial loan officers to serve as consultants on Sallie Mae advisory boards. It paid a New Jersey agency $15 million to steer business to Sallie Mae.

It placed Sallie Mae employees in university call centers to field questions from students who thought they were getting advice from college loan officers. It sponsored trips and cruises for collegiate financial aid officers. Other student loan lenders engaged in similar practices. Needless to say, the Department of Education didn’t have a budget to entertain college aid officials with free cruises on the Potomac River.

Tuesday, June 28, 2016

1--Mario Draghi hints at global central bank intervention and helicopter money?

Both Janet Yellen and Mark Carney may have previously announced they would withdraw from the ECB's Forum in Sintra, Portugal (due to pressing market stabilization issues), but it was what Mario Draghi said here that has captured the market's attention this morning. The head of the ECB avoided mentioning the U.K.’s vote to leave the European Union but instead called for greater alignment of policies globally to mitigate the spillover risks from ultra-loose monetary measures

“We can benefit from alignment of policies,” Draghi said at the ECB Forum in Sintra, Portugal. “What I mean by alignment is a shared diagnosis of the root causes of the challenges that affect us all; and a shared commitment to found our domestic policies on that diagnosis...

Most didn't read between the lines, and assumed that "alignment of policies" was simple code for the ECB demanding another global intervention (More tinkering with the previously free market to produce the desired outcomes) ...

“We have to think not just about the composition of policies within our jurisdictions, but about the global composition that can maximize the effects of monetary policy so that our respective mandates can best be delivered without overburdening further monetary policy,” Draghi said. “This is not a preference or a choice. It is simply the new reality we face."
(What we're doing isn't working so we must all agree to coordinate a new policy together...This hints at fiscal stimulus provided by central banks?)

2--The all-encompassing gloom; Wolf Richter sounding as pessimistic as ever--How Vulnerable is the Shaky US Economy to Brexit Fallout and European Bank Meltdown?

the mood on Wall Street is suddenly souring.

“We have never seen a set of analysts’ notes as negative and scary as these,” Business Insider explained.” Before the Brexit vote, “economists at the major banks expected the UK to continue growing, albeit at a slower pace, into the foreseeable future.” But… “‘Recession,’ ‘contagion,’ and ‘stagflation’ are the words they’re using now.”

Here are some tidbits from BI’s report:
Barclays’ Fabrice Montagne figured that the UK “is likely to enter a period of stagflation,” and that Brexit would “exacerbate current elevated levels of uncertainty and thus amplify already slowing economic momentum.”

Barclays’ Philippe Gudin fretted that a “clear and coordinated strategy to safeguard the rest of the EU and the euro area does not look to be present.” So they expected “uncertainty to spread and euro area confidence and domestic demand to fall.”
Deutsche Bank’s George Saravelos wrote that the “extreme market reaction in GBP” – the crash of the pound – “is right” and that “a period of exceptional uncertainty now starts for the UK.”...

During the Financial Crisis, as the Fed was bailing out banks, Corporate America, and everyone holding assets, there was the notion that these asset bubbles would create demand. The “wealth effect,” it was called. This has never happened, and as a consequence, the Fed and other central banks that played the same game have lost their credibility: It’s now clear to everyone that central banks cannot create demand. All they can create are asset bubbles.

And even in that department, they’ve lost credibility, given the crash in European and Japanese stocks over the past year. Thus even more uncertainty.

With the Brexit vote, the veneer of confidence – what little remained – has come off the economy, globally. The uncertainties that have been beneath it all along have suddenly appeared on the surface. And given how lethargic the US economy has been for years, any loss of confidence and any increase in uncertainty are going to weigh on it, and on the markets.

3--("Must read") Israel should be deeply disturbed by the Brexit vote -

The UK’s exit from the EU is further evidence of the unraveling of an old order from which Israel has long prospered

Globalisation, on the other hand, is premised on a different and very narrow kind of internationalism: one that protects the rights of the super-rich to drive down wages and workers’ rights by demanding the free movement of labor, while giving this economic elite the freedom to hide away their profits in remote tax-havens.

Globalisation, in other words, switched the battlefield of class struggle from the nation state to the whole globe. It allowed the transnational economic elite to stride the world taking advantage of every loophole they could find in the weakest nations’ laws and forcing other nations to follow suit. Meanwhile, the working and middle classes found themselves defenseless, largely trapped in their national and regional ghettoes, and turned against each other in a global free market.

The old order is breaking down because it is so thoroughly discredited, and those who run it – a political and economic elite – are distrusted and despised like never before. The EU is very much part of the old order.

4--The neoliberal prison

The Brexit vote is a huge challenge to the left to face facts. We want to believe we are free but the truth is that we have long been in a prison called neoliberalism. The Conservative and Labour parties are tied umbilically to this neoliberal order. The EU is one key institution in a transnational neoliberal club. Our economy is structured to enforce neoliberalism whoever ostensibly runs the country.
That is why the debate about Brexit was never about values or principles – it was about money. It still is.

5--Reality Check: Does the UK have to trigger Article 50?

The UK does not have to start the formal process of leaving the EU until a time of its choosing.
Reality Check verdict: There is no legal limit on how long the UK can wait before it invokes the article. The article states that the exit negotiations would take up to two years but can be extended if all the EU countries agree unanimously that they need more time.

In his first public statement since the referendum result, Chancellor George Osborne said "Only the UK can trigger Article 50. We should only do that when there is a clear view about what new arrangements we are seeking with our European neighbours."

6--Six More Countries Want Referendums to Exit EU

7--"The Greatest Battle" Hassan Nasrallah

8--The Brexit and Article 50: CNBC Explains

9--Brexit: What does it mean?   trickle-down economics has betrayed many people.

The wilful ignorance of the affluent, educated and cosmopolitan on how divided and polarised British society has become is striking. The voting patterns mirrored divisions along the lines of class, economic standing, education, age, residence and ethnicity.
The debate was always between economics and sovereignty (in the guise of immigration and border control). Exaggerated claims of economic losses, based on macro-economic models which have failed repeatedly over recent years, to engender fear were rejected....

the vote against the EU was in part a protest vote against the long term changes in economic structure of the UK economy which has destroyed many working and middle class lives.
Insofar as the decision represents a retreat to economic nationalism and closed borders, it may highlight the diminishing appeal of globalisation. Free movement of goods and services, lowering of trade barriers and cheaper foreign labour has not benefitted everybody. Conservative American politician Pat Buchanan’s observation in Pittsburgh Post Gazette on 3 January 1994 remains uncomfortably accurate: “…it is blue collar Americans whose jobs are lost when trade barriers fall, working class kids who bleed and die in Mogadishu…the best and brightest tend to escape the worst consequences of the policies they promote…This may explain …why national surveys show repeatedly that the best and wealthiest Americans are the staunchest internationalists on both security and economic issues…”

history will have to decide whether the vote was simply a mutiny on H.M.A.S Britannia or an influential one on the shape of the modern world, the structure of society and values which resonates and leading to change in other countries. If the latter proves correct, then the event will prove truly significant..

The prospects of meaningful reform within the EU also seems remote...

In essence, for those who believe they are born to rule, Brexit signals the need to limit democracy to ensure that important decisions are left to self-certified experts. European Parliament President Martin Schultz was refreshingly clear: “It is not the EU philosophy that the crowd can decide its fate”.

10--How Brexit Threatens to Turn the UK Into “Borisland”

The referendum result reflects a deep-seated anger and anxiety amongst large sections of the population who are disenfranchised and feel ignored, and who can no longer bear the economic burden of living in the Thatcherite free-market wasteland (alternatively known as Cameron’s “Big Society”) that Britain has become – sadly reinforced by the New Labour governments that began with Tony Blair. Media-savvy and facts-free politicians like Boris Johnson and Nigel Farage have tapped into this anger and frustration, playing immigration and antagonism towards “Brussels-bureaucracy” as their trump cards. For many Leave-voters, if not most, Brexit was the only way to express and articulate their protest against a failed system that has left them behind....

The truly saddening denouement of the Leave vote, however, is that the sovereignty regained at the cost of deeply dividing the nation is unlikely to produce the more socially just and economically inclusive Britain that many voters sought – and that’s not because of a serious (or not so serious) recession being triggered by Brexit.
Rather, the hopes of progressives are likely to be betrayed as Britain is turned into “Borisland” – a deindustrializing nation dependent on trickle-down finance-led growth, but suffering from sluggish productivity growth, growing in-work poverty and rising inequalities and dualisms, and with government in permanent austerity mode...

The bigger threat from the Brexit referendum is not to Britain, however, but to the rest of the European Union. Across the continent, there is a very similar anger and anxiety about jobs, austerity economics, affordable housing, pensions and inequality, and a worryingly similar democratic disenfranchisement of large alienated and voiceless sections of society is creating fertile soil for populist-nationalist left-wing but mostly right-wing movements led by the likes of France’s Marine Le Pen, the Netherlands’ Geert Wilders, Austria’s Norbert Hofer, Finland’s Timo Soini, Belgium’s Filip Dewinter and Germany’s Frauke Petry. Brexit is just the most recent manifestation of the growing strength of Euroscepticism, which found earlier expression in the Dutch rejection of the Ukraine-European Union Treaty in April (by a margin of 61% against and 38%) and the narrow defeat of the right wing Freedom Party’s candidate in Austria’s presidential elections in May (Norbert Hofer’s final score was 49.7% against 50.3% for the Green Party’s Alexander van der Bellen).

Polls show that between one quarter and one third of citizens across the 28 member states are now deeply hostile to the E.U. project, and there is fear that Brexit will fuel similar Leave-Remain referenda elsewhere – there is serious talk about Nexit (in the Netherlands), Auxit (in Austria) and Frexit (in France), framed and pushed mostly by the anti-immigration, anti-Islam populist-nationalist extreme right. Regardless of whether these referenda will be held (which looks unlikely), the extreme right will capitalize on the anger, frustration, anxiety and anti-elitist resentment of voters who feel they cannot live in the current system.

It would be a tragic mistake to read this resentment against the E.U. as only anti-migrant, racist or bigoted, because the racism and bigotry have grown in conditions of economic austerity, artificial job scarcity and crisis, rising unemployment, rising job insecurity, and exploding inequalities as social protection for workers, pensioners and families have been scaled down in favour of an expanded social safety net for TBTF banks and corporations. Almost everywhere in the E.U. — as in Britain — there is a polarization of the income distribution into a large number of low-income households and a much smaller number of very rich, while the middle classes have shrunk. There is a segmentation of employment into low-wage, unprotected and precarious jobs, mostly in low-tech services, and high-wage and protected jobs in high-tech manufacturing, finance, legal services and government....

The responsibility for the economic and political mess in Britain, the E.U. and beyond weighs heavily on the shoulders of economists who insist there is no alternative to a globalized market economy (TINA!), with freedom for the rich and wealthy and unfreedom for the rest, and who out-of-hand reject serious progressive programmes to reform the system and make it more democratic and humane.

11--Europe’s Banking Bloodbath—–Shares Of Top 8 Banks Down 35%-70% In Past Year

12--Dining Out Falls Victim to Economy

Restaurant visit growth has completely stalled in the last three months, signaling that consumers, jittery over economic uncertainties, are retrenching.
Visits to fast-food restaurants had been growing at a quarterly clip of 2% since September 2015, but haven't grown at all in March, April or May, according to as-yet-unpublished data from market research firm NPD Group Inc.
When fast-food growth comes to a halt, “that’s a red flag because it’s been an area of growth and it’s 80% of the industry,” NPD restaurant analyst Bonnie Riggs said