Implode-Explode Heavy Industries news feed Tracking the many faces of the global credit implosion. en-us iehi-feed-59662 Fri, 29 Apr 2016 13:24:58 GMT Puerto Rico Risks Historic Default as Congress Chooses Inaction Nearly 10 months after Governor Alejandro Garcia Padilla said the commonwealth was unable to repay all its obligations, Puerto Rico has failed to reach an accord on a broad restructuring deal presented to bondholders. During that time the administration has delayed payments to suppliers, postponed tax refunds, grabbed revenue originally used to repay other bonds and missed payments on smaller agency debt. With its options drying up, no bondholder agreement in sight and Congressional action delayed, defaulting may be the next step for Puerto Rico.


The island's Government Development Bank, which lent to the commonwealth and its municipalities, is in talks with creditors to avoid defaulting on the $422 million that's due May 1. The commonwealth may use a new debt moratorium law if it cannot defer that GDB payment, Jesus Manuel Ortiz, a spokesman for Garcia Padilla, said Wednesday during a press conference in San Juan.

While a GDB default would be the largest yet by Puerto Rico, a missed payment on its general obligations would signal to investors that the commonwealth is finally executing on its warnings that it cannot pay its debts. Puerto Rico and its agencies owe $2 billion on July 1, including a $805 million payment on its general-obligation bonds, which are guaranteed under the island's constitution to be paid before anything else.

A general-obligation default would be the first by a state-level borrower since Arkansas missed payments on its bonds in 1933. That would likely trigger a restructuring of the commonwealth's $13 billion of general obligations, which would be the largest-ever in the tax-exempt bond market.

iehi-feed-59660 Fri, 29 Apr 2016 03:30:16 GMT Volume Collapses As China Commodity Exchanges Ordered To "Curb Speculation" iehi-feed-59654 Thu, 28 Apr 2016 15:12:57 GMT Japan consumer prices fall at fastest in 3 years before BOJ meeting iehi-feed-59653 Thu, 28 Apr 2016 15:10:20 GMT The European Union always was a CIA project, as Brexiteers discover Brexiteers should have been prepared for the shattering intervention of the US.  The European Union always was an American project... Nor are many aware of declassified documents from the State Department archives showing that US intelligence funded the European movement secretly for decades, and worked aggressively behind the scenes to push Britain into the project.

As this newspaper first reported when the treasure became available, one memorandum dated July 26, 1950, reveals a campaign to promote a full-fledged European parliament. It is signed by Gen William J Donovan, head of the American wartime Office of Strategic Services, precursor of the Central Inteligence Agency.

The key CIA front was the American Committee for a United Europe (ACUE), chaired by Donovan. Another document shows that it provided 53.5 per cent of the European movement's funds in 1958. The board included Walter Bedell Smith and Allen Dulles, CIA directors in the Fifties, and a caste of ex-OSS officials who moved in and out of the CIA.

iehi-feed-59648 Wed, 27 Apr 2016 21:38:51 GMT Fed leaves rates alone, signals confidence in economy (LOOK AT WHAT WE SAY, NOT WHAT WE DO!!) iehi-feed-59647 Wed, 27 Apr 2016 21:10:55 GMT More Greece "Uncertainty": Default Looms in July, EU Rejects Greek Emergency Summit The creditors demand still more austerity but Tsipras said "no". Instead, Tsipras seeks an emergency meeting, but European Commission president Donald Tusk said "no" to that proposal.


Greece is fast running out of cash to pay salaries and pensions in May because of lagging tax receipts. To cover the gap Mr Tsipras's government has been strong-arming state entities, from the cash-strapped health service to the profitable water utility, to empty their bank accounts and place the funds with the central bank in a short-term loan arrangement.

iehi-feed-59646 Wed, 27 Apr 2016 14:39:50 GMT ECB likely to decide next week to scrap 500-euro bill iehi-feed-59637 Tue, 26 Apr 2016 14:21:37 GMT The Euro's Next Existential Crisis So long as at least one of the four rating agencies judges Portugal to be worthy, its government debt remains eligible to participate in the ECB's bond-buying program. But if the country drops to sub-investment grade at all four, the ECB's own rules forbid it from buying any more Portuguese government securities -- purchases which have ballooned to almost 15 billion euros ($17 billion) in the program's one-year lifetime... if DBRS lowers the nation's grade... it could trigger a renewed crisis in the euro area.

The ECB's purchases are arguably responsible for keeping Portugal's 10-year borrowing cost at an average of a bit less than 3 percent in the past six months. Compare that with Greece, which doesn't qualify for ECB assistance and has had an average yield of almost 9 percent since October, and it becomes clear how valuable ECB eligibility is -- and how financially damaging it might be for Portugal if it was shut out after a downgrade.

iehi-feed-59636 Tue, 26 Apr 2016 14:18:35 GMT ECB pushes for saver protection, at odds with Germany iehi-feed-59634 Tue, 26 Apr 2016 02:04:04 GMT Lessons from Japan: Decades of Decay, Unavoidable Collapse Not only are some problems immune to printing/borrowing more money, the reliance on printing/borrowing vast sums of money year after year creates a new set of intractable problems. Just to give one example of many: over 80% of Japan's farmers are over 60 years of age and are poised to retire in the next decade. Printing money hasn't printed new young eager farmers, nor has it changed the perverse incentives and political imbalances that are exacerbating the problem.

Decades of borrowing money in a futile attempt to avoid structural reforms has crippled Japan's fiscal future. Even at effectively zero rates of bond yields, Japan now spends roughly a quarter of its government budget on debt service--and servicing of existing debt now consumes 41% of all tax revenues.

iehi-feed-59633 Tue, 26 Apr 2016 01:47:02 GMT China's fresh boom nears peak just as amateurs pile in "While the mini-recovery is likely to last another 3-4 months, our economists expect a renewed slowdown in the second half of the year, as stimulus efforts fade," said Morgan Stanley.


The mini-boom has caught hedge funds and Western asset managers on the wrong side of some very large trades. The fiscal and monetary stimulus began in the second half of last year and has been building towards a climax ever since - with an accelerating growth of the money supply that invariably precedes a burst of growth -  yet some funds continued to bet on the narrative that China was hurtling towards imminent crisis. They played the "short China" trade through proxies such as the Australian dollar or commodity futures.

The most spectacular casualty has been Crispin Odey. His flagship European Fund has lost 31pc so far this year, following a painful streak for his stable of funds late last year. 

He called the end of the global cycle as far back as January 2015, eyeing the greatest "shorting opportunity" since the Lehman crisis. "We used all our monetary firepower to avoid the first downturn in 2007-09, so we are really at a dangerous point to try to counter the effects of a slowing China," he said.

While 2015 was indeed a wild year in China, he misjudged the ability of the authorities to keep the game going, and missed the early warning signals of a monetary rebound.  

Kyle Bass from Hayman Capital, who won the jackpot shorting US subprime debt, has had less luck venturing into the complexities of Asia. He bet prematurely on bond meltdown in Japan, later admitting that he was "dead wrong".

He has since bet on a 30pc yuan devaluation of the Chinese yuan, warning last September that the country faces a banking crisis five times larger than the subprime failures, with over $3 trillion of losses. The yuan has risen against the dollar so far this year.

Financier George Soros has issued his own such warnings, noting an "eerie resemblance" between China's bubble and the build-up to the Lehman crisis. "China re-lit the furnaces. Stimulus can buy you additional time but it makes the problem that much bigger," he said.

Yet Mr Soros cautioned on timing, noting that the US bubble went on for two years after it was already clear to many that trouble was coming. "Since it feeds on itself, it can reach the turning point later than anybody expects," he said.

iehi-feed-59630 Mon, 25 Apr 2016 15:57:51 GMT The "Tokyo Whale" Is Quietly Buying Up Huge Stakes in Japan Inc (AND REGULATORS WILL NEVER SHUT IT DOWN!) They may not realize it yet, but Japan Inc.'s executives are increasingly working for a shareholder unlike any other: the nation's money-printing central bank. While the Bank of Japan's name is nowhere to be found in regulatory filings on major stock investors, the monetary authority's exchange-traded fund purchases have made it a top 10 shareholder in about 90 percent of the Nikkei 225 Stock Average, according to estimates compiled by Bloomberg from public data. It's now a major owner of more Japanese blue-chips than both BlackRock Inc., the world's largest money manager, and Vanguard Group, which oversees more than $3 trillion.


Under the BOJ's current stimulus plan, the central bank buys about 3 trillion yen ($27.2 billion) of ETFs every year. While policy makers don't disclose how those holdings translate into stakes of individual companies, estimates can be gleaned from publicly available central bank records, regulatory filings by companies and ETF managers, and statistics from the Investment Trusts Association of Japan. The BOJ declined to comment on Bloomberg's findings.

... "Of course, you can argue that we're in abnormal times so we have abnormal measures," said Ayako Sera, a Tokyo-based market strategist at Sumitomo Mitsui. "The biggest question in the future will be: What happens when the BOJ exits?"

iehi-feed-59628 Sun, 24 Apr 2016 22:43:15 GMT Austrian law-and-order presidential candidate wins 1st round The law-and-order candidate of Austria's right-wing party swept the first round of presidential elections on Sunday, winning over 35 percent of the vote for the party's best ever result. Government coalition contenders were among the five losers, signaling deep voter rejection and political uncertainty ahead...

With the candidates of establishment parties shut out of the office for the first time since Austria's political landscape was reformed after World War II, Freedom Party chief Heinz-Christian Strache hailed the "historic event" that he said reflected massive "voter dissatisfaction."

... voters were unhappy with the Social Democrats and the People's Party even before the migrant influx last year forced their coalition government to swing from open borders to tough asylum restrictions. Decades of bickering over key issues -- most recently tax, pension and education reform -- has fed perceptions of political stagnation.

iehi-feed-59627 Sun, 24 Apr 2016 22:42:38 GMT Why Juncker should worry about Panama Papers' Lux-links Juncker, who, lest anyone had forgotten, was finance minister of Luxembourg for a mere 20 years, from July 1989 to 2009, and (overlapping) prime minister from January 1995 to December 2013. In other words, for nearly a quarter of a century he played a leading role in the establishment and defense of Luxembourg as a center of financial services... What would worry me, if I was an adviser to Juncker, is the frequency with which Luxembourg is cropping up in the individual controversies. For instance, the transaction that seemed to have done for Iceland's Davíð was that his wife bought a company, Wintris, registered in the British Virgin Islands. She bought it from Mossack Fonseca using a Luxembourgish bank. Sweden's financial supervisor has announced that it will be investigating Nordea, a big Nordic bank, whose Luxembourg branch, according to the Panama Papers, had set up more than 400 offshore companies for its clients.

Or again, consider the embarrassment in Belgium, where the Panama Papers show that Dexia was helping clients to avoid tax by using Panamanian shell companies. The Franco-Belgian bank was in such difficulties during the financial crisis of 2008 that it was given Belgian state assistance of €6 billion plus various state-backed guarantees. But that was not enough to save it: The Belgian state had to intervene again with billions of euro in taxpayers' money in 2011, buying out the Belgian part and creating what is now Belfius. Yet the Panama Papers show that in 2008-09 this state-funded bank, chaired after its bailout by a former prime minister, the late Jean-Luc Dehaene, was helping its clients to avoid tax through its Luxembourg subsidiary Dexia-BIL.

iehi-feed-59625 Sun, 24 Apr 2016 14:05:47 GMT Brexit: A pro-EU 'study' straight from the Ministry of Truth ... this document could have been produced by Orwell's Ministry of Truth. Unusually for a newspaper pundit, perhaps, I'm a trained economist. And in all my many years of studying official economic documents -- budgets, comprehensive spending reviews and the like -- through all that sifting and weighing of fine-print, I've never come across methodology and assumptions so blatantly rigged.


So the extent to which we are "poorer", a "fact" wielded many times by the Chancellor and to be used many times again, is a bogus calculation of what is anyway a bogus concept. And, on top of that, it is driven by differing GDP projections that are, in themselves, deeply dishonest. It is just about credible, whatever the difficulties, to have a stab at a long-term GDP projection -- as long as it's not presented as "fact" of course.

... Those of us backing Brexit aren't "economically illiterate", Mr Osborne. This Treasury document, though, including no possible Brexit benefits, and entirely ignoring the growing prospect of another systemic eurozone crisis, is deeply disingenuous -- doing a disservice to our democracy.

iehi-feed-59624 Sun, 24 Apr 2016 13:47:01 GMT The Greek Bailout And The "Economic Consequences of the Eurozone" - Coppola The combination of the MOU with the new measures is brutal. No way can a fiscal tightening of 3% of GDP, plus a further tightening of 2% when (not if) Greece misses its fiscal targets, do anything but further economic damage. There is no monetary offset to soften the blow, since Greece is excluded from the ECB's QE. A fiscal tightening of this magnitude without central bank support is the equivalent of doing major surgery without anesthetic. The patient may survive the surgery, but the pain and shock will set back its recovery by years.


No doubt many of you are wondering now how the IMF can possibly participate in this "Carthaginian peace". But the IMF is a creditor too. It wants its money back. Neither the European creditors nor the IMF are fundamentally interested in restoring Greece. What they disagree over is how much sustenance Greece needs to stay alive enough to pay them back. They are all vampires.

As I write this, I find myself wondering what Keynes would think about all of this. The Bretton Woods institution that he and Dexter White created, turned bloodsucker: fighting for its share of the lifeblood of a European country. Germany, the victim turned aggressor, apparently intent on reducing an entire country to indentured servitude. And the European Union, on the verge of unraveling as nationalism reasserts itself and the ghosts of the past reawaken.

iehi-feed-59623 Sun, 24 Apr 2016 00:32:14 GMT Greece's debt crisis looks familiar, but consequences may be worse In fact, last summer's deal was less a cure-all for Greece's economic woes than a collective kicking of the can down the road. It avoided default by loaning Athens €13bn very quickly in exchange for a narrowly focused set of pension and tax reforms.

Even then, much of the heavy lifting was put off until the new programme's first quarterly review -- including the politically combustible issue of debt relief. As if to underline how ephemeral the deal was, the International Monetary Fund made clear it was not participating and would put off any decision on whether to join until it was certain Mr Tsipras, who had become the first leader of a developed country to default on an IMF payment, would live up to his commitments.

That first quarterly review has now stretched into two additional quarters, and the three-dimensional stand-off between Athens, Berlin and the IMF has only deepened.

While the IMF has demanded a restructuring of Greece's debts, Germany has suddenly decided that no debt relief is needed at all. Still, it has insisted the IMF participate anyway.

Meanwhile, the IMF has decided the agreement reached in July was badly constructed and should have lower budget surplus targets.

As for Mr Tsipras, he has returned to an angry, defensive crouch, railing against outside forces.

There is little political capacity in Athens to push through additional reforms or spending cuts even if Mr Tsipras wanted to.

"Europe's politicians have been distracted with other challenges and markets have become complacent about the inherent risks in Greece's new bailout," said Mujtaba Rahman, head of European analysis at the Eurasia Group risk consultancy. "But if Berlin doesn't revise its approach, this is going to blow up in everyone's faces."

iehi-feed-59618 Sat, 23 Apr 2016 17:18:23 GMT Albert Edwards Finally Blows Up iehi-feed-59617 Sat, 23 Apr 2016 17:01:24 GMT US-Saudi: Yesteryear days are gone forever iehi-feed-59616 Fri, 22 Apr 2016 23:58:33 GMT Has India Joined Russia and China to Form a "Big Three" on South China Sea Dispute?