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.


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