Implode-Explode Heavy Industries news feed Tracking the many faces of the global credit implosion. en-us iehi-feed-60525 Thu, 25 Aug 2016 14:27:16 GMT French support for the EU project is crumbling on the Left and Right The former economy minister says France voted for a left-wing French manifesto four years ago and ended up with a "right-wing German policy regime". This is objectively true. The vote was meaningless.

"I believe that we have reached the end of road for the European Union, and that France no longer has any interest in it. The EU has left us mired in crisis long after the rest of the world has moved on," he said. Mr Montebourg stops short of 'Frexit' but calls for the unilateral suspension of EU labour laws. "As far as I am concerned, the current treaties have elapsed.''


The only practical way France can claw back competitiveness is through deeper deflation than in the rest of the eurozone, but this would prolong the slump and play havoc with nominal GDP and debt dynamics. It would be self-defeating.

There is no realistic possibility of genuine fiscal reflation in the eurozone, let alone a Keynesian New Deal. Mr Montebourg is right is concluding that France will remain paralyzed until it takes back its sovereign instruments.


Marine Le Pen is ahead of [Sarkozy] in the polls, drawing steady support near 30pc with a heady brew of Leftwing economics and Rightwing nationalism - straight out of the 1930s. She promised to "end the nightmare of the European Union" and this too tells as much about the populist calculus.


A Pew survey of Europe in June found that 61pc of French voters have an "unfavourable" view of the EU, higher than in Britain. These sorts of polls keep cropping up in France. They are invariably dismissed as rogue findings.

Professor Thomas Guénolé from 'Sciences Po' in Paris warns against wishful thinking. "Incredible as it may seem, a referendum on 'Frexit' would probably be lost by the European side. As in the UK, 'leave' would win," he said.

iehi-feed-60524 Thu, 25 Aug 2016 14:20:55 GMT 'It took on a life of its own': how one rogue tweet led Syrians to Germany But a year on, the long-term consequences of the tweet are gradually becoming apparent. In April, the European commission revealed a wide-ranging shake-up of the Dublin system, which has long been criticised by human rights lawyers for unfairly pushing the main burden of asylum applications to poorer countries on the periphery of the EU while protecting wealthier landlocked member states.

Yet sources close to BAMF insist the tweet had not been intended to torpedo the unloved law, but as an emergency decluttering measure, freeing the agency from additional bureaucracy before it was unable to cope.

According to Gerald Knaus, the initial architect of the EU-Turkey deal and the head of the European Stability Initiative thinktank, the tweet was not intended to signal a major policy change, and was not written by senior policymakers.

"It was seen as simply stating the obvious -- they had already stopped trying to send Syrians back -- and it wasn't considered how it would be perceived," said Knaus. "It took on a life on its own, because it confirmed that anyone who got to Germany could stay. It wasn't a new decision -- but it sent out a signal."

iehi-feed-60523 Thu, 25 Aug 2016 14:04:50 GMT Finding work proves harder for world's youth High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email to buy additional rights.

Global youth unemployment has started to worsen again after three years of modest improvement, with young people in emerging economies such as Brazil particularly badly hit.

The number of unemployed 15- to 24-year-olds in the world is set to swell by half a million this year to 71m, according to forecasts from the International Labour Organisation, the UN agency. As a result, the youth jobless rate will edge up from 12.9 per cent in 2015 to 13.1 per cent, close to its peak of 13.2 per cent in 2013.

Many young people have struggled to find a secure foothold in the labour market since the financial crisis, leaving them particularly exposed to the ups and downs of the slow and uneven global recovery.

.. In total, almost 38 per cent of working young people in the world are in poverty, compared with about a quarter of all working adults....

The ILO said the persistent lack of decent jobs in many regions was also one of the drivers of international migration among young people. Its figures show that a fifth of the global youth population was willing to move permanently to another country last year.

iehi-feed-60522 Thu, 25 Aug 2016 13:53:22 GMT U.S. raises concerns over European tax probe involving American companies (TRES IRONIQUE) The U.S. Treasury took the unusual step Wednesday of publishing a detailed critique of the European Commission's investigations into alleged tax avoidance schemes by a group of U.S. firms, including Apple, Starbucks and Amazon.

Treasury said the commission's probes into whether U.S. firms unfairly benefited from low corporate tax rates in Europe "undermine" agreements on international tax law and could hurt U.S. taxpayers.

The U.S. does not like the EU's tax imperialism (which is growing to rival the U.S.'s in scale and scope) -- oh, the delicious irony.

iehi-feed-60520 Thu, 25 Aug 2016 00:35:40 GMT Investors controlling $13tn call on G20 leaders to ratify Paris climate agreement A group of 130 institutions that control US$13tn of investments have called on G20 nations to ratify the Paris agreement this year and accelerate investment in clean energy and forced disclosure of climate-related financial risk.

Countries that ratified the Paris agreement early would benefit from better policy certainty and would attract investment in low-carbon technology, the signatories said in a letter before the G20 heads of government meeting in September.

They called for strong carbon pricing to be implemented, as well as regulations that encouraged energy efficiency and renewable energy. Plans for how to phase out fossil fuels also needed to be developed, they said.

iehi-feed-60518 Thu, 25 Aug 2016 00:12:10 GMT Forget "Brexit" - Referendum Looms in Italy; "Italeave" Increasingly Possible The possibility of a "No" vote in Italy's constitutional referendum come October or November is the biggest clear and present danger to the euro's survival. Both 5-Star and the Northern League are promising a plebiscite on euro membership should they come to power in a post-referendum election... in the event of a "No" vote in October, the only economic choice for Italy would be between continued stagnation, or a return to the old economic model of successive devaluations. The latter course would naturally mean exiting the eurozone anyway.


The chances of a "Yes" vote in the referendum have not been improved by the slump in Renzi's personal popularity following last year's attempt to reform the labor market, and a series of small bank restructurings that saw retail savers "bailed-in" -- forced to take losses -- under new European Union banking regulations. From 40% after Renzi entered office two years ago with optimistic promises of reform, the approval rating of the prime minister's PD party has fallen to little better than 30% today, much the same as that of the opposition 5-Star Movement. As a result, with two months to go the referendum is too close to call. Opinion polls indicate the "Yes" and "No" camps are running roughly equal, with a large proportion of voters still undecided.

iehi-feed-60517 Wed, 24 Aug 2016 19:28:42 GMT Four more mega-banks join the (Blockchain) anti-dollar alliance

Today, four of the world's largest banks announced a brand new joint venture to create a new financial settlement protocol built on blockchain technology.

Deutsche Bank from Germany, UBS from Switzerland, Santander from Spain, and Bank of New York Mellon have joined together to launch what they're naming the very un-sexy "utility settlement coin".

Like Ripple, Setl, Monetas, and several other competing technologies, Utility Settlement Coin has the potential to end the reliance on the US banking system for cross-border payments and financial transactions.

iehi-feed-60515 Wed, 24 Aug 2016 17:42:25 GMT Troika prompts ministry to tighten debt repayments iehi-feed-60512 Wed, 24 Aug 2016 00:37:46 GMT Deutsche Bank's $10-Billion Russian Scandal The counterparties were not owned by Russian oligarchs. They were brokerages run by Russian middlemen who took commissions for initiating mirror trades on behalf of rich people and businesses eager to send their money offshore. A businessman who wanted to expatriate money in this way would invest in a Russian fund like Westminster, which would then use mirror trades to move that money into an offshore fund like Cherryfield. The offshore fund then wired the money, in dollars, into the businessman's private offshore account. A middleman who formed one of the Russian counterparty funds told me that the cost of his services depended upon the Russian authorities' desire to stop the export of capital. In 2011, when controls were lax, the fee was 0.2 per cent. In 2015, when sanctions were strong, and Putin was determined to retain as much wealth as he could in Russia, the fee rose to more than five per cent.


Deutsche Bank has not commented on whose money was expatriated through the mirror trades, although John Cryan, the C.E.O., has said that the bank has not knowingly assisted Russians on the sanctions list. In the deadening argot of finance, Deutsche Bank's Russian fiasco has frequently been called a "failure of controls." In an interview in March, 2016, Cryan said, "To our knowledge, the individual transaction steps in themselves were innocuous. However, the case raises questions about how effective our systems and controls were, especially with regard to the onboarding of new clients, an area where we experienced difficulties in collecting sufficient information."

This passive language is hard to square with the blatant nature of the scheme. Roman Borisovich, a former investment banker at Deutsche Bank in London, who focussed on Russian businesses, told me, " ‘Fucking Obvious' is the middle name of Russian corruption."

iehi-feed-60502 Mon, 22 Aug 2016 21:28:17 GMT Revealed: ECB Secretly Hands Cash to Select Corporations Now it has been revealed by The Wall Street Journal that the ECB has also secretly been buying bonds directly from companies, thus handing them directly its freshly printed money.

It has been doing so via "private placements." These debt sales are not open to the broader market. There's no need for a prospectus. Only a small number of institutional investors participate. It allows companies to raise cash quickly, without jumping through the normal hoops. Private placements are not unusual. What's new is that the ECB used them to buy bonds...

According to Apostolos Gkoutzinis, head of European capital markets at law firm Shearman & Sterling, cited by The Wall Street Journal: because there is no prospectus or the other formalities required in a normal bond offering, "there won't be any transparency, there won't be a press release. It's all done discreetly."


Now, the race is on for eligible companies to wet their beaks in this new, much more discreet free-money fountain, while so-called "investors" scramble to divine what the biggest fish in the pond is about to buy next. If they're lucky they may even get a heads-up straight from the horse's mouth.The ECB's favorite banks will also get juicy fees underwriting the deals. The Journal reported that Credit Suisse has already "reshuffled its coverage of national central banks" in an attempt to tap into the new market.

...According to The Journal, Citigroup figured "that bonds eligible for ECB purchases have already outperformed ineligible bonds by roughly 30% since the bond-buying program was announced in March."

It's Financial Darwinism writ on a heretofore unimaginable scale. Thanks to ECB intervention, Europe's biggest companies with the strongest finances -- including some that are majority state-owned such as French energy giant EDF -- are gaining access to funds (many of them public) quicker, more easily, and at cheaper rates than anyone else in the market. From now on, they may even get the money in secret.

So... isn't the ECB now potentially tripping WTO anti-subsidy prohibitions?

iehi-feed-60501 Mon, 22 Aug 2016 21:19:12 GMT China Is Grappling With Hidden Unemployment iehi-feed-60498 Mon, 22 Aug 2016 16:03:03 GMT Stephanie Pomboy: A Grim Outlook for the Economy, Stocks What ignited and supported the entire era of globalization was the spendthrift U.S. consumer; economies have been totally reliant on trade to U.S. consumers. This once-in-a-generation asset deflation will fundamentally change behavior, just as the Depression changed an entire generation's attitude about spending and saving.

Obviously, the burden of proof is on me, because for 20 years the consumer has reliably borrowed from China to buy their tube socks. Post-crisis, the consumer has clearly pulled back. How many months did we have disappointing retail sales numbers that no one could explain? They'd say it's too hot, too cold, there's Brexit. But what's really causing this slowdown in spending is that the post-crisis consumer is determined to save, and do it the old-fashioned way. Historically, when rates go down, people save less. In this cycle, things have completely reversed. Over the same stretch of time that the two-year note has gone from 4% to 1%, the savings rate has doubled. There are mountains of evidence to support my thesis. But every Wall Street analyst and the Fed is using the pre-crisis analytical framework to look at an economy that is fundamentally challenged.


Q: Where, when, and how will helicopter money begin?

Japan is the most natural place for it to start, but Japan isn't dramatically different from the U.S., the U.K., or Europe. We're all dealing with an aging population. This is another great flaw in the logic of monetary-policy makers. They've pushed rates to and below zero in an effort to boost growth. But they did so against a population that is aging and needs more than ever to get returns on what they've set aside. By lowering rates, they've actually intensified the saving urge.

The statistics bear this out. Over the last four years, U.S. nominal GDP growth has gone from 4.3% to 4.1% to 3% to 2.4%. The deflator, the inflation we are supposed to be targeting, went from 1.9% to 1.6% to 1.5% to 1.1%. What greater proof do you need that lower rates aren't helping and, to the contrary, are making things worse? Growth and inflation are slowing, and it has to do with this aging demographic. Add the emotional and financial scares from the housing-bubble bust, and policy makers have really got it ass-backwards. They're taxing the economy, not stimulating it.


Q: Is it possible that you're too negative? Stocks are hitting new highs and recent economic data seem reasonably sturdy.

The July payroll number was a barnburner on the upside. But that report is the exception. Jobless claims, the NFIB small business survey, the employment component of both the ISM manufacturing and nonmanufacturing surveys--they all suggest things are rolling over [getting worse]. Importantly, the No. 1 input into hiring--corporate profits--has posted five consecutive quarterly declines, which suggest employment growth will follow. Employment is going to look a lot softer over the next six months.


Q: So what are you positive about?

Because economic growth won't be a catalyst to push rates higher, I continue to like government bonds. Look for a re-pricing of credit risk with the spreads between investment-grade and junk bonds widening out. We'll also have a renewal of QE in the U.S. and are seeing it elsewhere. And as Fed tightening goes out the window and the dollar sells off, we'll have another meaningful leg up in gold.

iehi-feed-60497 Mon, 22 Aug 2016 15:56:22 GMT Japan Inc unenthused over Abe's stimulus, BOJ easing (WHICH MEANS IT HAS ALREADY FAILED!!) Prime Minister Shinzo Abe this month unveiled a 13.5 trillion yen (£102.6 billion) fiscal package of public works projects and other measures, vowing a united front with the BOJ to revive the economy and raising speculation of a surge in government spending essentially financed by the central bank.

But less than 5 percent of companies believe the steps will boost the economy near-term or raise its growth potential, according to the Reuters Corporate Survey, conducted August 1-16.

"It's disappointing that the stimulus focuses on public works, and it lacks attention to promoting industry and technology that would lead to future growth," said a manager at a precision-machinery maker.

iehi-feed-60496 Sun, 21 Aug 2016 18:31:36 GMT Fed's Fischer Seemingly Kinda-Maybe-Possibly Lays Groundwork For Further Rate Rise In comments prepared for The Aspen Institute's "Program on the World Economy", Fischer said employment has "increased impressively" since a 2010 low after the national financial crisis, and the unemployment rate has hovered near 5% for the last year.


"So we are close to our targets," said Fischer, citing the Fed's dual mandate to seek maximum sustainable employment and an inflation rate of 2%.

... However, Fischer also used the speech to signal concern over what he characterized as "exceptionally slow" labor productivity growth.

Break out the goat entrails and incense; the game of Fedspeak-divination continues. Now, talking heads agree that the Fed's talking heads are talking up rates. Of course, the next inevitable crappy data point and the Fed will be avowedly back to "pausing" (even though the Fed funds rate doesn't even much anymore -- they can call us when they start reducing the Fed's balance sheet...) Ultimately, the Fed can't break too far from the global central bank herd which is locked in a trend of competitive-devaluation...

iehi-feed-60495 Sun, 21 Aug 2016 16:49:20 GMT The Fed Launches A Facebook Page... And The Result Is Not What It Had Expected iehi-feed-60494 Sun, 21 Aug 2016 15:34:38 GMT Another Billionaire Goes All In On Gold While Mainstream Media Remains Silent iehi-feed-60492 Sun, 21 Aug 2016 13:38:32 GMT Canadian Debt Slaves Pile it on iehi-feed-60489 Sat, 20 Aug 2016 16:54:39 GMT Things keep getting worse for EU banks Many of them are still slogging uphill to recoup share price losses incurred from the Brexit vote in the U.K. European investment banking revenue overall is down 23 percent this year compared with the same period in 2015, according to data tracker Dealogic. And all are lagging behind U.S. banks for wallet share, or how much revenue they take in from dealmaking compared to competitors.

JPMorgan Chase tops every bank in the EU for wallet share, with 7.3 percent of deals, according to data from Dealogic this week. It's followed by Goldman Sachs, which has 6.2 percent of deals, and only then, in third place, is an EU bank: Deutsche Bank has 5 percent of revenue on European mergers and acquisitions. But European banks (and their American counterparts) are fighting off a rising tide of boutique banks that have taken a growing percentage of M&A revenue from them over the last decade.


Around the world, M&A levels have declined from recent record highs. But the pain is exacerbated in Europe, where big banks experienced a steeper drop off in revenue. Dealogic data show that investment banking in Germany, for example, is down 45 percent. Globally, European deals account for just 22 percent of banking revenue, the lowest margin since Dealogic began tracking investment banking wallet share.

iehi-feed-60488 Sat, 20 Aug 2016 16:50:41 GMT Brexit Armageddon was a terrifying vision -- but it simply hasn't happened It was hard to avoid the doom and gloom, not just in the weeks leading up to the referendum, but in those immediately after it. Many of those who voted remain comforted themselves with the certain knowledge that those who had voted for Brexit would suffer a bad case of buyer's remorse.

It hasn't worked out that way. The 1.4% jump in retail sales in July showed that consumers have not stopped spending, and seem to be more influenced by the weather than they are by fear of the consequences of what happened on 23 June. Retailers are licking their lips in anticipation of an Olympics feelgood factor.


The financial markets are serene. Share prices are close to a record high, and fears that companies would find it difficult and expensive to borrow have proved wide of the mark...

Some caveats are in order. It is still early days. Hard data is scant. Survey evidence is still consistent with a slowdown in the economy in the second half of 2016. Brexit may be a slow burn, with the impact only becoming apparent in the months and years to come.

But it is obvious that the sky has not fallen in as a result of the referendum, and those who said it would look a bit silly. By now, Britain was supposed to be reeling from the emergency budget George Osborne said would be necessary to fill a £30bn black hole in the public finances caused by a plunging economy. The emergency budget is history, as is Osborne.

iehi-feed-60487 Sat, 20 Aug 2016 16:45:59 GMT The Saker on Russia-Turkey Rapprochement (Interview)