Monday, June 27, 2016

Today's Links

1---Brexit won’t shield Britain from the horror of a disintegrating EU, Vvaroufakis

I argued that its disintegration would unleash deflationary forces of the type that predictably tighten the screws of austerity everywhere and end up favouring the establishment and its xenophobic sidekicks....

despite the relative tranquility that will follow on from the current shock, insidious forces will be activated under the surface with a terrible capacity for inflicting damage on Europe and on Britain.Italy, Finland, Spain, France, and certainly Greece, are unsustainable under the present arrangements. The architecture of the euro is a guarantee of stagnation and is deepening the debt-deflationary spiral that strengthens the xenophobic right...

If I am right, and Brexit leads to the construction of a permanent austerian iron cage for the remaining EU member states, there are two possible outcomes: One is that the cage will hold, in which case the institutionalized austerity will export deflation to Britain but also to China (whose further destabilization will have secondary negative effects on Britain and the EU).

Another possibility is that the cage will be breached (by Italy or Finland leaving, for instance), the result being Germany’s own departure from the collapsing eurozone. But this will turn the new Deutschmark zone, which will probably end at the Ukrainian border, into a huge engine of deflation (as the new currency goes through the roof and German factories lose international markets). Britain and China had better brace themselves for an even greater deflation shock wave under this scenario....

Building bridges across Europe, bringing democrats together across borders and political parties, is what Europe needs more than ever to avoid a slide into a xenophobic, deflationary, 1930s-like abyss

2--A big "Fuck you" to Europe, Vincent Bevins

Since the 1980s the elites in rich countries have overplayed their hand, taking all the gains for themselves and just covering their ears when anyone else talks, and now they are watching in horror as voters revolt. It seems in both cases (Trumpism and Brexit), many voters are motivated not so much by whether they think the projects will actually work, but more by their desire to say FUCK YOU to people like me (and probably you).

3--A "New Deal" for all Europeans? Galbraith

The European Union has sowed the wind. It may reap the whirlwind. Unless it moves, and quickly, not merely to assert a hollow “unity” but to deliver a democratic, accountable, and realistic New Deal – or something very much like it – for all Europeans.

4--Erdogan apologizes to Putin over death of Russian pilot - Kremlin

This is huge. Erdogan must be afraid the US is creating a Kurdish homeland on the southern border.

5--Greenwald on Brexit  Absolutely "the best" on the topic

Elites can’t stop, or even affect, any of these movements because they are, at bottom, revolts against their wisdom, authority, and virtue....

As Chris Hayes warned in his 2012 book Twilight of the Elites, “Given both the scope and depth of this distrust [in elite institutions], it’s clear that we’re in the midst of something far grander and more perilous than just a crisis of government or a crisis of capitalism. We are in the midst of a broad and devastating crisis of authority.”...

Corrupt elites always try to persuade people to continue to submit to their dominance in exchange for protection from forces that are even worse. That’s their game. But at some point, they themselves, and their prevailing order, become so destructive, so deceitful, so toxic, that their victims are willing to gamble that the alternatives will not be worse, or at least, they decide to embrace the satisfaction of spitting in the faces of those who have displayed nothing but contempt and condescension for them....

(elites)  search and search in vain for some rationale that could explain something like Brexit, or the establishment-condemning movements on the right and left, and can find only one way to process it: These people are not motivated by any legitimate grievances or economic suffering, but instead they are just broken, ungrateful, immoral, hateful, racist, and ignorant....

Claiming that supporters of Brexit or Trump or Corbyn or Sanders or anti-establishment European parties on the left and right are motivated only by hatred but not genuine economic suffering and political oppression is a transparent tactic for exonerating status quo institutions and evading responsibility for doing anything about their core corruption....

Part of it is that — due to their distance from them — they have nothing to say to people who are suffering and angry about it other than to scorn them as hateful losers. Part of it is that journalists — like anyone else — tend to react with bitterness and rage, not self-assessment, as they lose influence and stature.But a major factor is that many people recognize that establishment journalists are an integral part of the very institutions and corrupted elite circles that are authors of their plight...

Instead of acknowledging and addressing the fundamental flaws within themselves, they are devoting their energies to demonizing the victims of their corruption, all in order to de-legitimize those grievances and thus relieve themselves of responsibility to meaningfully address them. That reaction only serves to bolster, if not vindicate, the animating perceptions that these elite institutions are hopelessly self-interested, toxic, and destructive and thus cannot be reformed but rather must be destroyed. That, in turn, only ensures that there will be many more Brexits, and Trumps, in our collective future...

In an interview with the New Statesman, the political philosopher Michael Sandel also said that the dynamics driving the pro-Brexit sentiment were now dominant throughout the West generally: “A large constituency of working-class voters feel that not only has the economy left them behind, but so has the culture, that the sources of their dignity, the dignity of labor, have been eroded and mocked by developments with globalization, the rise of finance, the attention that is lavished by parties across the political spectrum on economic and financial elites, the technocratic emphasis of the established political parties.” After the market-venerating radicalism of Reagan and Thatcher, he said, “the center left” — Blair and Clinton and various European parties — “managed to regain political office but failed to reimagine the mission and purpose of social democracy, which ­became empty and obsolete.”

 John Harris quoted a Manchester voter as explaining, “If you’ve got money, you vote in. If you haven’t got money, you vote out.” Harris added: “Most of the media … failed to see this coming. … The alienation of the people charged with documenting the national mood from the people who actually define it is one of the ruptures that has led to this moment.” Gary Younge similarly denounced “a section of the London-based commentariat [that] anthropologized the British working class as though they were a lesser evolved breed from distant parts, all too often portraying them as bigots who did not know what was good for them.” Ian Jack’s article was headlined “In this Brexit vote, the poor turned on an elite who ignored them,” and he described how “gradually the sight of empty towns and shuttered shops became normalized or forgotten.

6---"Jordan Bad," Officials Tell NYT - Pressure For A New Southern Front Attack?

There has been quite a bit of reporting that contradicts those fairy tales:
  • the international operations rooms to coordinate the Syrian rebels in Turkey and Jordan started in 2012
  • the CIA supervised smuggling of weapons from Libya to Syria in 2011/12
  • the Gulf countries depend in the U.S. for their intelligence and defense; they do not "go rogue" unnoticed and unchallenged unless it is in U.S. interests
  • no state, not even Jordan, will pamper officers who "stole" and sold weapons if these deeds were against orders and the interests of the state

7--We think Brexit will eventually speed up 'helicopter money' and one never knows, maybe a new UK government may be forced to spend more and we'll see the UK as an early adopter." Deutsche bank

8--Rising overnight funding rates signal bank jitters

(Uh oh) Banks have been more reluctant to lend cash to each other today as they cling to safe assets to brace for further volatility after the UK voted to leave the EU...Banks lend money to each other overnight in the repo market as a way of shoring up short-term funding, secured against collateral.

9--"Brexit is a victory of ordinary people, common sense and people who are prepared to take responsibility for the sake of freedom against a political and financial elite that only cares if stocks go up or down and does not care about the interests of the average British citizen." Said Faber, "We can only hope that more countries will opt out of the failed EU monster. I see only a good contagion." , Marc Faber

10--Standing on Backs of Global Poor, Filthy Rich Getting Even Filthier

'For every person with more than $30 million, there are over 4800 people living in extreme poverty'

11--After Brexit, mounting warnings of global slump and financial panic

The BIS warned that the response of global central banks to the crisis that erupted in 2008 had been dominated by the creation of asset bubbles through low interest rate policies. These conditions have weakened productive investment, fueled a global expansion of debt, making it near impossible for central banks to respond in an effective manner to the eruption of new crises.

“The global economy cannot afford to rely any longer on the debt-fueled growth model that has brought it to the current juncture,” warned the report, adding “we badly need policies that we will not once again regret when the future becomes today.”

The report, on technical grounds, rejected the use of the term “secular stagnation,” a concept developed in the 1930s to describe the Great Depression and used by former Treasury Secretary Lawrence Summers to refer to the current crisis. But the content of its analysis amounted in effect to the same thing.

“The crisis appears to have permanently reduced the level of output,” it said, adding, “given the almost unprecedented breadth and depth of the recent crisis, it would be unrealistic to think that output could regain its pre-crisis trend.”
The report pointed to the “persistent and otherwise puzzling” global slowdown in productivity growth. It tellingly attributed the slowdown to the effect of a massive series of booms and busts that have characterized the global economy in recent years as it has become increasingly dominated by financialization and speculative mania, fueled by virtually unlimited cash from global central banks.

The BIS warned that these policies facilitated “the persistence of exceptionally low interest rates, increasingly negative even in nominal terms.” The growth of negative interest rates, promoted by central banks seeking to reassure the markets, is a risk with “a long fuse, with the damage less immediately apparent and growing gradually over time. Such rates tend to depress risk premiums and stretch asset valuations, making them more vulnerable to a reversal by encouraging financial risk-taking.”

This refers to a situation where, because interest rates are pushed down on relatively secure assets, speculators have to undertake increasingly risky bets to secure the same rate of return as they did in the past.
In other words, all the actions taken by global central banks since the 2008 crisis, and stretching back as far as the US Federal Reserve’s response to the 1987 stock market crash, have only exacerbated the cancerous growth of financial parasitism. This is the “fuse” that triggered what the BIS calls the “Great Financial Crisis” of 2008, and threatens to blow up again.

The report pointed to the continuation of extraordinarily accommodative monetary policy, leading to an even further build-up of debt trading at negative yields, a phenomenon the BIS first warned about in last year’s annual report. In that period, “Inflation adjusted policy rates have edged deeper below zero, continuing the longest postwar period in negative territory.” It added that “the Bank of Japan has joined the ECB, Sweden’s Riksbank, Denmark’s Nationalbank and the Swiss National Bank in adopting negative nominal policy rates.

As a result, “at the end of May, close to $8 trillion in sovereign debt, including at long maturities, was trading at negative yields—a new record.”
Due to the continuous infusions of cash into world markets, “monetary policymakers have found it harder to push inflation back in line with objectives,” leading to economic slump. It added, “In the process, financial markets have grown increasingly dependent on central banks’ support and the room for policy manoeuvre has narrowed.” These facts are already “shaking public confidence in policymaking.”

Tellingly, however, the BIS had no solution to the ongoing crisis besides further austerity measures. It called for slashing government debt while improving the “quality of public spending… notably by shifting the balance away from… transfers.” In other words, too much is being spent on social services—such as Social Security, Medicare, and Medicaid in the United States—and not enough is being subsidizing business activity.

In reality, these types of fiscal austerity measures and labor market restructuring called for by the BIS have been brought forward in every major economy in response to the 2008 crisis. These range from the United States, where state education spending has been slashed by 25 percent, to Greece, Spain, Portugal, and, most recently, in France, with the implementation of the El Komri labor reforms by the Hollande government.

These policies have transferred ever-more wealth to the financial elite, who have proceeded to use their cash hoards for speculation and financial parasitism, fueling a vicious cycle of economic stagnation, rising inequality and financial crisis, in turn inflaming international antagonisms and the growth of protectionism.


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