Sunday, January 14, 2018

Today's links

1-- A significant tremor in the bond markets

In its Global Financial Stability Report of last April, the International Monetary Fund drew attention to the fact that, according to at least one measure, the ability of US companies to cover interest payments is at its weakest since the 2008 financial crisis. US corporations have taken on an additional $7.8 trillion in debt and other liabilities since 2010, with smaller firms, holding 22 percent of total assets, facing possible bankruptcy as a result of a sharp rise in interest rates.
The growth of debt, facilitated by ultra-low interest rates, is a global phenomenon. The ratio of global debt to GDP (gross domestic product) now stands at more than 330 percent, an increase of 56 percentage points since the financial crisis of 2008. Governments and corporations in less advanced countries that have taken out dollar-denominated loans are extremely vulnerable to even a small rise in global rates....

The sell-off was also fuelled by reports that the Bank of Japan (BoJ) is reducing its purchases of bonds in the Japanese market and the European Central Bank (ECB) may be moving to cut its purchases of financial assets in the wake of a strengthening European economy.
The wider concerns centre on the impact of moves by the world’s major central banks to back off from the historically unprecedented monetary policies initiated in the wake of the global financial crisis of 2008 and the ongoing stagnation in the world economy.
Massive purchases of bonds by the Fed, the ECB and the BoJ have kept interest rates at or near zero, and have been the central factor in the rise of equities and other financial assets to the benefit of the global financial oligarchy.
One measure of the extent of their intervention can be seen in the fact that in the past few years virtually all the new debt issued by governments in the major advanced economies has been purchased by central banks. Three key central banks hold a combined total of some $14 trillion in financial assets they have bought since 2009....

The Wall Street Journal said the bond market has received an “early alarm call” for 2018. It said the big threat lies in the resurgence of inflation, which would send bond prices lower and interest rates (yields) higher.
The Financial Times described the sell-off as “fierce,” while the New York Times said investors had been “spooked” at the spectre of central banks halting their bond-buying spree...

The Times also pointed to another concern in the financial markets--the resurgence of the class struggle, as workers, battered by years of falling living standards, start to push for higher wages.
The most immediate fear, it said, was that a sharp fall in bond prices would “rattle” equity markets that have been trading at record highs. “Beyond that, there is a looming concern that as the global economy heats up, inflation, a bond investor’s main worry, will start to inch up, fed by higher wage demands on the part of workers everywhere.”

5--Poll: Most Americans don’t want Oprah to run for president

A third of U.S. adults and registered voters alike said Winfrey should run in the 2020 presidential election. But more than half the country — 54 percent — said it wasn’t a good idea. And another 11 percent weren’t sure what Winfrey should do.

6-- The US and Israel reportedly signed a secret pact to take on Iran

7-- Why ‘Coercive Diplomacy’ is a Dangerous Farce

The great irony of the U.S. coercive diplomacy applied to Iran and North Korea is that it was all completely unnecessary. Both states were ready to negotiate agreements with the United States that would have provided assurances against nuclear weapons in return for U.S. concession to their own most vital security interests. North Korea began exploiting its nuclear program in the early 1990s in order to reach a broader security agreement with Washington. Iran, which was well aware of the North Korean negotiating strategy, began in private conversations in 2003 to cite the stockpile of enriched uranium it expected to acquire as bargaining chips to be used in negotiations with the United States and/or its European allies...

Vice President Dick Cheney and Secretary of Defense Donald Rumsfeld, whose primary interest was funding and deploying a very expensive national missile defense system, killed the unfinished Clinton agreement with North Korea. And after Secretary of State Condoleezza Rice got Bush’s approval to negotiate a new agreement with Pyongyang, Cheney sabotaged that one as well. Significantly no one in the Bush administration made any effort to negotiate with North Korea on its missile program.

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