Implode-Explode Heavy Industries news feed Tracking the many faces of the global credit implosion. en-us iehi-feed-60519 Thu, 25 Aug 2016 00:32:36 GMT Illinois governor's office warns of crippling pension payment hike Potential action this week by Illinois' biggest public pension fund could put a big dent in the state's already fragile finances, Governor Bruce Rauner's administration warned.

A Monday memo from a top Rauner aide said the Teachers' Retirement System (TRS) board could decide at its meeting this week to lower the assumed investment return rate, a move that would automatically boost Illinois' annual pension payment...

When TRS lowered the investment return rate to 7.5 percent from 8 percent in 2014 the state's pension payment increased by more than $200 million, according to the memo.

Illinois' fiscal 2017 pension payment to its five retirement systems was estimated at $7.9 billion, up from $7.617 billion in fiscal 2016 and $6.9 billion in fiscal 2015, according to a March report by a bipartisan legislative commission.

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-60516 Wed, 24 Aug 2016 18:33:03 GMT US Housing is "Comradely capitalism" (PROBLEMS STILL FESTERING; NOW NATIONALIZED) The trouble is that, in America, the banks are only part of the picture. There is a huge, parallel structure that exists outside the banks and which creates almost as much credit as they do: the mortgage system. In stark contrast to the banks it is very badly capitalised (see chart 2). It is also barely profitable, largely nationalised and subject to administrative control.


America's mortgage-finance system, with $11 trillion of debt, is probably the biggest concentration of financial risk to be found anywhere. It is still closely linked to the global financial system, with $1 trillion of mortgage debt owned abroad. It has not gone unreformed in the ten years since it set off the most severe recession of modern times. But it remains fundamentally flawed.


The supply of mortgages in America has an air of distinctly socialist command-and-control about it. Some 65-80% of all new home loans are repackaged by organs of the state. The structure of these loans, their volume and the risks they entail are controlled not by markets but by administrative fiat.

No one is keen to make transparent the subsidies and dangers involved, the risks of which are in effect borne by taxpayers. But an analysis by The Economist suggests that the subsidy for housing debt is running at about $150 billion a year, or roughly 1% of GDP. A crisis as bad as last time would cost taxpayers 2-4% of GDP, not far off the bail-out of the banks in 2008-12.

iehi-feed-60515 Wed, 24 Aug 2016 17:42:25 GMT Troika prompts ministry to tighten debt repayments iehi-feed-60514 Wed, 24 Aug 2016 17:38:11 GMT Aetna, Obamacare and health insurers' 10 dirty secrets 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-60511 Tue, 23 Aug 2016 21:47:23 GMT BIS and JP Morgan-led Gold Capping Cartel Has Miners Underwater iehi-feed-60509 Tue, 23 Aug 2016 21:41:56 GMT Rent at Trump Tower Surged After Donald Trump Stopped Self-Funding His Campaign In March, when Trump was still paying for his presidential run mostly out of his own pocket, his campaign spent $35,458 to rent its headquarters in Trump Tower. Last month, however, that figure surged to $169,758, even as the number of paid campaign employees and staff dropped from 197 to 172 over the same period, the Huffington Post reports. The sharp increase in campaign spending appears to correspond to a large infusion in cash from outside donors. According to the Huffington Post, the amount Trump Tower has charged the campaign for rent has steadily increased since May, the same month that Trump clinched the nomination and inked a deal with the Republican National Committee to fund his campaign. At the end of May the campaign doled out $72,800, followed by $110,684 in June, and $169,758 in July.

Trump Tower isn't the only Trump property to have benefited. Over the same period, the Huffington Post reports a number of Trump's namesake golf courses and restaurants have earned a total of $260,000, citing F.E.C. records. In July alone, the campaign spent $495,000 on Trump's air travel, which is operated by a company that he owns. The Washington Post estimated that the Trump clan has pocketed $7.7 million as a result of the campaign's expenditures.

Who is surprised? Once a con artist, always a con artist...

iehi-feed-60507 Tue, 23 Aug 2016 21:22:42 GMT Fed Admits Another $4 Trillion In QE Would Be Needed To Offset An "Economic Shock" iehi-feed-60505 Tue, 23 Aug 2016 14:11:27 GMT Clinton emails recovered by FBI to be released just before election day 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-60500 Mon, 22 Aug 2016 16:13:08 GMT Clinton not in the clear The Clinton Foundation has received more than $2 billion in contributions. More than 1,000 donors are foreigners. The foundation won't disclose their names or amounts donated.

Few of the funds raised have been spent on charitable works. In 2013, for instance, the Clinton Foundation took in $140 million, but spent just $9 million (6.4 percent) on direct aid. A typical charity devotes about 75 percent of receipts to aid.

Much more is spent on pay and benefits for staff, office rent, conferences and travel. Some of the highest-paid staffers are political operatives, such as Huma Abedin, who for a time was on the payrolls of both the Clinton Foundation and the State Department, and Sid Blumenthal, who ran a private intelligence network for Hillary in Libya.


Hillary turned over fewer than half her emails, Mr. Schweizer noted. The gaps in the email record coincided with meetings with shadowy foreigners who later gave to the Clinton Foundation. Dirt on the Clinton Foundation gleaned from public records is suspicious enough. What might a U.S. attorney armed with subpoena power find?

The FBI, the Justice Department and the Southern District refuse to comment on whether Mr. Bharara is investigating the Clinton Foundation. Former U.S. Attorney Joe DiGenova interprets these as non-denials.

Could Hillary Clinton be indicted before the election? Or might she win in November, only to be indicted in December? What a fine kettle of fish that would be.

iehi-feed-60499 Mon, 22 Aug 2016 16:06:41 GMT This U.S. Bank Is About to Relive the 2008 Derivatives Nightmare Citigroup Inc. already nearly destroyed itself with derivatives during the 2008 crisis, requiring the biggest taxpayer bailout in history in order to stay afloat. Strangely, it didn't learn its lesson the first time its stock fell below $1.

As rival banks see the writing on the wall and scramble to get rid of their derivatives, Citi is now cheerfully snapping up billions of dollars' worth.

Several weeks ago, Credit Suisse prudently sold $380 billion of derivatives to Citi, thereby reducing its own leverage exposure by $5 billion. Last year, Deutsche Bank palmed off $250 billion of credit default swaps on (guess who?) Citi, and is in talks to get rid of even more.

The result is that Citi now holds the most derivatives of any of its U.S. rivals. That's a staggering total exposure of nearly $56 trillion, according to the OCC's latest report...

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