Thursday, June 16, 2016

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1---Why Global Capital Fears ‘Brexit’

Today, interlinked multinational banks and corporations constitute a de facto European government, determining economic activity through the ‘European market’. Their vast lobbying power has an overwhelming influence on the EU Commission and the secretive Council. In other words, corporations run Europe...

We hold that the relatively high standards in the EU have been a consequence of the integrity of the democracies in many of the constituent countries, not a consequence of creating a single market that benefits big business....

The answer, instead, is to decentralize the European economy. This will enable us to shape economic activity to reduce waste and resource consumption while providing meaningful livelihoods and restoring the environment. Through decentralization and relocalization we also reassert democratic control over our own destinies.

The Way Forward: Localization
There is an alternative to undermining our own people in order to enrich foreign corporations and banks. It’s called ‘localization’ and it involves moving away from ever more specialized production for export, towards prioritizing diversified production to meet people’s genuine needs; away from centralized, corporate control, towards more decentralized, local and national economies.

This means encouraging greater regional self-reliance, and using our taxes, subsidies and regulations to support enterprises embedded in society, rather than transnational monopolies.
A shift away from the global towards the local is the most strategic way to tackle our escalating social and ecological crises...

Localization, or decentralization, was central to the thinking of the people’s movements in the Nordic countries that have resisted full integration into the EU. In Norway, the economic and political elites twice tried to achieve EU-membership and were defeated, thanks to the campaigns for democracy and global responsibility for environment and justice.
In Denmark and Sweden, membership in the Eurozone has been rejected in several referenda after historic grassroots campaigns. In Iceland, the popular support for EU membership has always been weak.

2--CPI, US current account, Philly Fed, Housing market index, Wage data

(It's all bad)

The Philly Fed’s headline index, which is a measure of general sentiment based on a single question, can often read much differently than the assessment of actual conditions. And this is the case for the June report where the constructive looking 4.7 headline doesn’t match the details which are almost uniformly negative.

New orders, at minus 3.0, are contracting for a second month while contraction in unfilled orders, at minus 12.6, is deepening. At minus 2.1, shipments are in a third month of contraction. Employment, at minus 10.9, has been in contraction for the entire year. The sample appears to be destocking and delivery times are shortening, both indications of weakness.

The only signs of actual life in this report are in prices. Input costs are going up, a reflection of fuel and raw materials, while selling prices are edging higher.

Otherwise this report, including the 6-month outlook which continues to show less and less optimism, does not confirm the strength of Wednesday’s Empire State report and will not lift the outlook for what is a very flat factory sector.

3--Credit-Card Warning Sends Synchrony Shares Dropping

U.S. retail sales rose in May, building on a surge in April, a sign consumer spending remains healthy. But continued weakening in credit quality would present a new hurdle.
Defaults on general-purpose credit cards, which had been mostly declining since April 2010, have started to rise in recent months. April marked the fourth consecutive month of higher defaults, to 3.09%, according to the S&P/Experian Consumer Credit Default Indices.

Deteriorating performance is leading to more losses for lenders. U.S. credit-card net charge-offs among banks increased to 3.10% in the first quarter, from 2.97% a year earlier, the first year-over-year increase for the quarter since 2010, according to the Federal Reserve....Subprime auto loans account for a growing share of new auto loans, making up nearly 19% of auto-loan balances given out last year, up from 13% in 2009.

4--Watch the VIX: It Matters This Time

U.S. stocks have been looking a little shaky ahead of the “Brexit” vote, but not nearly as shaky as investors.

With Britain’s vote on quitting the European Union just a week away, the Chicago Board Options Exchange Volatility Index, or VIX, has been pushing higher. Since last Wednesday, the so-called fear gauge has climbed to 19.2 from 14.1. What makes the move so unusual is that for once, the VIX is actually telling us something.  

5--Fearful for Longer: Market’s Fear Gauge Signals Investors Expect Volatility to Last--VIX futures send an ominous signal as traders grapple with potential fallout of ‘Brexit’ vote

This flatness of the so-called futures curve is rare, underscoring the sense of panic that has set in this week as investors grapple with divided public opinion over Britain’s June 23 vote. Uncertainty over the outcome has roiled global markets.
If voters do choose to leave the EU, the uncertainty could last even longer. A British exit “could have repercussions for months to come,” said Ilya Feygin, a managing director at brokerage firm WallachBeth Capital.

6--French government threatens ban on protests against labor law

7--ICFI Secretary Peter Schwarz speaks in London on Brexit referendum

In  his remarks, Schwarz explained that the referendum “marks a major political watershed not only for Britain but for Europe as a whole.”The implications of a Leave vote by the second-largest economy in Europe, he said, were incalculable. “A Brexit [British exit] would speed up an international trend—the growth of economic nationalism, the break-up of the global economy into trade blocks, and the development of currency and trade wars.”
However, Brexit would not be the cause of these developments, but was itself a manifestation of underlying tendencies bound up with the breakdown of the capitalist profit system, which, just as in the 1930s, was the driving force for a new world war....

A Remain vote would not prevent these processes. While the repercussions might be less immediate, they would be no less dramatic. “The referendum will accelerate all the tendencies which have made the European Union the most hated institution on the continent,” he said, continuing and intensifying its role as the driving force of social attacks and deregulation, speeding up the transformation of EU into a police state and a military fortress. Indeed, the few benefits that the EU brought—the elimination of border controls, the possibility of working and studying in the country of one’s choice, a guarantee of certain democratic rights—are being done away with in the name of combating terrorism and deterring refugees.

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