Miscellany

August 17th, 2017

The IMF gets snooty: “At 46 percent of GDP, China’s national savings are 26 percentage points higher than the global average, largely due to the household sector, with consumption correspondingly low. This reduces the current welfare of Chinese citizens.” So they choose to save, but that lowers their welfare. Huh? Well, better to think about that than the current insanity. BTW, how many months will it take until they rename Yale and topple the Washington monument? Speaking of insanity, Spengler has an excellent piece about, among other things, how the tech billionaires have gone full uroboros in assuaging their consciences.

More numbers

August 16th, 2017

FT:

the IMF now expects China’s non-financial sector debt to exceed 290 per cent of GDP by 2022, compared with 235 per cent last year. The fund had previously estimated that debt levels would stabilise at 270 per cent of GDP over the next five years. In the aftermath of the global financial crisis, Chinese authorities unleashed a lending spree that more than quadrupled total debt to $28tn at the end of 2016. In its report, the IMF noted that China’s “credit efficiency” had deteriorated sharply over the past decade, with ever larger amounts of money needed to generate the same amount of growth. “In 2008, new credit of about Rmb6.5tn was needed to raise nominal GDP by Rmb5tn,” the fund said. “In 2016 it took Rmb20tn in new credit.”

Graphs here. Of course China is hard to analyze since, among other things, even with high debt and questionable WMP’s, its saving rate is 2x that of the US.

Interesting if true

August 15th, 2017

WSJ:

China is banning imports of North Korean coal, iron and seafood, starting Tuesday, in a move that could assuage U.S. demands while enforcing new United Nations sanctions targeting Pyongyang’s nuclear-arms program. China is by far North Korea’s biggest trading partner, accounting for more than 80% of North Korea’s external trade for the past five years.

It is said that until the 1970’s the economies of North and South Korea were similar. Now the South’s GDP is more than 100x larger.

More China numbers and analysis

August 14th, 2017

Stephen Roach:

China’s resilience during the Great Financial Crisis was equally telling. In the midst of the worst global contraction since the 1930s, the Chinese economy still expanded at a 9.4% average annual rate in 2008-2009. While down from the blistering, unsustainable 12.7% pace recorded during the three years prior to the crisis, this represented only a modest shortfall from the 30-year post-1980 trend of 10%. Indeed, were it not for China’s resilience in the depths of the recent crisis, world GDP would not have contracted by 0.1% in 2009, but would have plunged by 1.3% – the sharpest decline in global activity of the post-World War II era.

The latest bout of pessimism over the Chinese economy has focused on the twin headwinds of deleveraging and a related tightening of the property market – in essence, a Japanese-like stagnation. Once more, the Western lens is out of focus. Like Japan, China is a high-saving economy that owes its mounting debt largely to itself. Yet, if anything, China has more of a cushion than Japan to avoid sustainability problems.

According to the International Monetary Fund, China’s national savings is likely to hit 45% of GDP in 2017, well above Japan’s 28% saving rate. Just as Japan, with its gross government debt at 239% of GDP, has been able to sidestep a sovereign debt crisis, China, with its far larger saving cushion and much smaller sovereign debt burden (49% of GDP), is in much better shape to avoid such an implosion.

To be sure, there can be no mistaking China’s mounting corporate debt problem – with nonfinancial debt-to-GDP ratios hitting an estimated 157% of GDP in late 2016 (versus 102% in late 2008). This makes the imperatives of state-owned enterprise reform, where the bulk of rising indebtedness has been concentrated, all the more essential in the years ahead.

Moreover, there is always good reason to worry about the Chinese property market. After all, a rising middle class needs affordable housing. With the urban share of China’s population rising from less than 20% in 1980 to more than 56% in 2016 – and most likely headed to 70% by 2030 – this is no trivial consideration.

But this means that Chinese property markets – unlike those of other fully urbanized major economies – enjoy ample support from the demand side, with the urban population likely to remain on a 1-2% annualized growth trajectory over the next 10-15 years. With Chinese home prices up nearly 50% since 2005 – nearly five times the global norm (according to the Bank for International Settlements and IMF global housing watch) – affordability is obviously a legitimate concern. The challenge for China is to manage prudently the growth in housing supply needed to satisfy the demand requirements of urbanization, without fostering excessive speculation and dangerous asset bubbles.

Meanwhile the Chinese economy is also drawing support from strong sources of cyclical resilience in early 2017. The 11.3% year-on-year gain in exports recorded in June stands in sharp contrast with earlier years, which were adversely affected by a weaker post-crisis global recovery. Similarly, 10% annualized gains in inflation-adjusted retail sales through mid-2017 – about 45% faster than the 6.9% pace of overall GDP growth – reflect impressive growth in household incomes and the increasingly powerful (and possibly under-reported) impetus of e-commerce.

Regarding the last point, FedEx and its competitors have 850 freighters, and China has about 70. This will increase dramatically. The first day of a September mature aircraft conference in Beijing will be devoted to P2F, as passenger to freighter conversions really pick up steam. China’s largest aircraft leasing company predicts an increase from 2800 to 6000 aircraft in China’s airlines within a decade. Incredible.

Cutting capacity, restructuring, etc, as the 19th Congress approaches

August 13th, 2017

SCMP:

Longmay Coal Mining is expected to report a profit for 2017, the first since 2011, the China Business Journal reported, citing the National Development and Reform Commission. Longmay’s workforce had been trimmed to 154,000 by the end of 2016, a third less than the 224,000 in August 2015 when it started to cut jobs. The job cuts helped its financial position but, more importantly, it has benefited from the surge in coal prices under President Xi Jinping’s supply-side reforms. Unlicensed mines have been closed and coal prices in China nearly doubled in the last 20 months.

A similar process is taking place in steel and aluminium. The price of steel rebars, a product mainly used in construction sites, has rise to over 4,200 yuan (US$630) per tonne – the price was below 2,000 yuan at the end of 2015. China’s state steel plants have become money-making machines again with combined profits of 12.6 billion yuan in the first half of 2017 – a 427 per cent increase compared with the previous year

The price of aluminium, which is used in vehicles, home appliances and door frames, has gained 60 per cent as well in the last 20 months, as provincial governments across the country were pushed by Beijing to close down plants without sufficient licensing from the central government. The rally of coal, steel and other commodities, and the significant improvements in profitability for those remaining in the market, is fanning a heated debate among Chinese economists whether the world’s second biggest economy is entering a “new cycle”, a process aided by Beijing’s campaign in shutting down unlicensed facilities.

China’s supply-side restructure took place during a 54-month producer price deflation from 2012 to 2016, and Xi’s policies have accelerated the process by phasing out excessive capacity. As such, the overall profitability of the Chinese industrial sector will improve and economic activity will expand even though there is little sign of increased demand, according to Ren’s research notes posted on Chinese financial portal Sina.com.

Since he took power in 2012, Xi’s prescribed remedies to cure the illness in China’s economy can be summarised as reducing excessive capacity, lowering corporate debt, cutting the property inventory and slashing operational costs for businesses under the “supply-side reform” umbrella. While Xi has pledged to give the market a “decisive” role in allocating resources, his administration often relies on administrative power, or government orders, to achieve economic goals on the ground. Meanwhile, Xi has been putting more emphasis on state companies and the role of the Communist Party in economic activities.

Hongqiao Group, the country’s biggest private aluminium smelter, had been ordered by the Shandong provincial government to shut down 2.68 million tonnes of capacity, or 7 per cent of China’s total capacity. Analysts have argued that as the wings of players like Hongqiao are clipped, China’s aluminium industry, which has been in over-supply for the last 15 years, may shift to under-supply by the end of 2017 – a situation that will lead to further price rises and will enrich the state-owned smelting plants that remain in the market.

People’s Daily:

In the first half of 2017, about 16,000 new businesses were registered every day on average, more than two times before China’s business system reform, strongly driving innovation and entrepreneurship. In the second quarter, the prosperity index among small and micro enterprises reached 96.5 percent, the highest in the past two years. A 6.9 percent increase in above-scale industrial added value was registered, the best performance since 2015.

According to a report by the Boston Consulting Group (BCG), China’s consumer market is growing by 10 percent a year on average, faster than in any other country. China has already spent more on research and development, as a percentage of GDP, than the European Union, and it now produces as many scientific publications as the US and more PhDs in natural sciences and engineering.

So between the info above and the previous piece, things seem to be moving at a clip much faster than in recent years. The government is very publicly cracking down on some corporate giants and their managements. No doubt something similar is going on in the public sector as well. It is shuttering unlicensed businesses which cuts some jobs and increases prices. It appears to be doing some of the financial sector restructuring which has been long overdue. No doubt there’s a PR angle to all this as the 19th National Congress of the Communist Party approaches in November, which will re-elect Xi Jinping to a second term.

Some frank talk about China’s gray rhinos

August 13th, 2017

SCMP

a herd of “grey rhinos” brazenly grew, charged around, and punched big holes, threatening to sink the system with a full-blown systemic crisis. Much has been written on the myriad challenges facing China’s financial sector since President Xi Jinping chaired a five-yearly financial conference late last month to address what the top leaders called a “financial mess” and urge for effective measures to guard against the systemic financial risks. Now Xi is on it and suddenly Chinese officials have owned up that there were indeed many grey rhinos in the system: local government debts, shadow banking, real estate bubbles, highly geared debt loads at state-owned enterprises, illegal fundraising through Ponzi and pyramid schemes rampant throughout the country, and the list goes on.

The sense of urgency comes only because the top Chinese leaders have little room to dither – the signs are piling up that China is on the verge of repeating Japan’s 1990s debt collapse or the Asian financial crisis of 1997 or the 2008 Wall Street crash (depending on whom one asks and how one interprets the signs). Given Xi’s strong leadership style and the fact that he is set to secure a stronger mandate for the next five years, hopes are rising that he will end a long era of what one Chinese economist called “a gang of villains running amok”, using privileges and power to fight for and divide financial spoils among themselves.

Some believe that Xi’s stark warning about financial excesses also signals the central government’s intent to truly curb the aggressive expansionary fiscal and financial policies which have been in place since former premier Wen Jiabao’s 4 trillion yuan (HK$4.68 trillion) fiscal stimulus policy in 2009, which temporarily lifted the Chinese economy out of the doldrums but had lasting negative repercussions. Since then, despite the mainland leadership’s repeated denials that they would again resort to the monetary taps, the reality is that the expansionary fiscal and financial policies have remained unchanged, setting the stage for the “financial mess” to take hold and fester.

Following the lead of the central government, local authorities had run up more than 20 trillion yuan worth of debts by the end of 2016 through legal and illicit platforms, ignoring risks and their abilities to repay.

Meanwhile, taking advantage of regulatory loopholes and their political connections to officials in high places, a small group of Chinese tycoons and speculators in the true sense of elite capitalism were able to “summon wind and rain” in the economy and capital markets, securing cheap loans and issuing high-risk financial products to finance their empire building at home and abroad. Some tycoons and speculators have colluded to ramp up share prices of their companies through insider dealing and raising massive amounts to finance their acquisitions while others, in the name of heeding the government’s call for “going out”, have moved huge amounts of money overseas by inflating their domestic assets and then pledging them to overseas branches of the Chinese banks for loans to finance their overseas purchases. This has greatly increased the risks for the Chinese banks in the event of a default.

Others have worked with banks and insurers to raise money in ways similar to Ponzi or pyramid schemes in which high-yield but high-risk wealth management products and derivatives of short maturities are sold to finance acquisitions of assets like overseas hotels and football clubs whose cash flows are not strong enough to cover the interest – let alone the principal loans – in the hope that those wealth management products and derivatives will continue to draw in more investors. All these irregularities occurred in plain sight of the country’s financial regulators, the central bank and the ministries in charge of securities, banking and insurance.

The securities regulator under its previous leadership openly advocated a bull market, contributing to the stock market meltdown in 2015. The banking regulator under its previous leadership paid little heed to the risks building in the banking system while the former head of the insurance regulator was investigated for peddling insurance licences for cash, among other irregularities. Those conglomerates that have emerged stronger and bigger out of the “financial mess” – including Anbang Insurance, Fosun International, HNA Group, and Dalian Wanda Group – are now in the eye of the storm, reportedly under closer scrutiny of the Chinese officials and foreign investors who do business with them.

The author is the former editor-in-chief of the newspaper and is based in Beijing. We don’t recall reading anything quite so straightforward about China’s debt situation and government and corporate excesses. Very interesting.

China’s e-commerce boom continues

August 12th, 2017

WSJ:

Alibaba predicts its revenue will increase by almost 50% this fiscal year on the backs of China’s swelling ranks of middle-class consumers. Its Nasdaq-listed shares have risen 80% since the beginning of the year. China’s e-commerce growth has slowed, but consultant McKinsey & Co. still expects an expansion of 19% this year—with much of that driven by more affluent consumers buying bigger-ticket items.

More: “Alibaba has signed an agreement with its home city government in Zhejiang province to use the company’s technology to create an online system for house rentals.” What a world.

A genius by comparison

August 12th, 2017

Everyone at DHS and otherwise who is involved in giving Somalis special guided tours of secured airport areas, and particularly those who redact memos re same should be fired ASAP. Your tax dollars not at work. Ditto for anyone associated with the half dozen or more studies about how climate change will destroy Guam and everything else. Total idiots; we’ve seen the climate of Central Park change by 110 degrees in a single year! Fire them all!!! Oh yes, and as for the title above, the idiot/fools at the NYT who wrote the Guam piece make the congressman fearing Guam’s capsizing look like a genius by comparison.

More media wisdom here.

Charming

August 11th, 2017

Via GP:

North Korea is a serious thing. You have this guy making bellicose threats against somebody else who has very little to lose over there. Kim Jong Un? The world thought he was not a responsible leader. Well, he’s acting more responsible than this guy is

Oh well. As we said the other day, more Eskimos in the NBA.

Oh snap

August 10th, 2017

So in the five months that Snap has been trading, its market cap has been cut in half. We saw that coming at the outset. In other news, we see other idiocy ending fairly soon. Until then we renew our call that 74% of NBA players be Jews and Eskimos, and that 92% of Nobel Prize winners in physics be gals under 21. Larry Summers, call your office.

S.O.P. 2

August 9th, 2017

S.O.P.1. And now S.O.P.2. Stay tuned because this pattern will be repeated over and over again until, in our opinion, they get one of the family. That’s the goal folks.

Snowflake Meltdown

August 8th, 2017

Via PL:

Sentenced to death for the critical roles they played in retarding any meaning action to mitigate climate change in the United States were as follows: Sen. James Inhofe, Marc Morano (CFACT), Chris Horner (CEI), Myron Ebell (CEI), Steve Milloy (CEI), Patric Michaels (Cato Institute), Bjorn Lomborg (CCC), Matt Ridley (CWPF), Christopher Monckton, Fred Singer, Roy Spenser. Lamar Smith (R-Texas), Donald Trump (President 2017-19), Mike Pence (President 2019-21), Ken Blackwell (Head Domestic Issues (2017-21), Ben Carson (HUD), Myron Bell (EPA), Michael Flynn (was already in prison), Nikki Haley UN Ambassador), Mike Pompeo (CIA), Rick Perry (Secretary of Energy), Reince Priebus (Chief of Staff Trump admin briefly), Scott Pruitt (EPA Admin), Thomas Pyle (DOE), Jeff Sessions (Attorney General under Trump), Rex Tillerson (Secretary of State-Trump), Ryan Zinke (Sec of Interior). You may note here that the death sentences handed down were heavily weighted towards the Trump/Pence Administration 2017-21 but there was a cogent reason for this. It was determined that after the ratification of the Paris Accords in December of 2016 that the new Trump Administration withdrew the United States from them in May of 2017. This act at this most critical juncture with little or no Carbon Budget left cemented in Abrupt Climate Change for the whole planet

They’ve gone ouroboros and it’s happening all over the place. The luckiest guy today may be James Damore if he can find something, anything, to sue Google for and keep matters in the news for some time. (Extra special fun if he sues and you do a search and the company messes with the results.) Ka-ching! The gentlemen (ah, professors!) who portrayed mild mannered Dennis Prager as an ogre in the NYT did him a favor too, since it is they who look like fools and they probably increased turnout for his Haydn Symphony. The default response to any PC narrative, no matter how nuts, used to require being very quiet. But things have changed a lot in the last 18 months.

Update: the Go-Go Google Girls get the vapors, ha ha!

Update 2: who was elected president in the National Union Party? Ignorance used to be bliss.

How to make hysteria boring

August 7th, 2017

NYT:

The report concludes that even if humans immediately stopped emitting greenhouse gases into the atmosphere, the world would still feel at least an additional 0.50 degrees Fahrenheit (0.30 degrees Celsius) of warming over this century compared to today. A small difference in global temperatures can make a big difference in the climate: The difference between a 1.5 degree Celsius and a 2 degree Celsius rise in global average temperatures, for example, could mean longer-lasting heat waves, more intense rainstorms and the faster disintegration of coral reefs. Among the more significant of the study’s findings is that it is possible to attribute some extreme weather to climate change. The field known as “attribution science” has advanced rapidly in response to increasing risks from climate change. The report finds it “extremely likely” that more than half of the global mean temperature increase since 1951 can be linked to human influence. In the United States, the report finds with “very high” confidence that the number and severity of cool nights has decreased, while the frequency and severity of warm days has increased since the 1960s. Extreme cold waves, it says, are less common since the 1980s, while extreme heat waves are more common. The study examines every corner of the United States and finds that all of it was touched by climate change. It said the average annual rainfall across the country has increased by about 4 percent since the beginning of the 20th century. Parts of the West, Southwest and Southeast are drying up, while the Southern Plains and Midwest are getting wetter. The government scientists wrote that surface, air and ground temperatures in Alaska and the Arctic are warming at a frighteningly fast rate — twice as fast as the global average. “It is very likely that the accelerated rate of Arctic warming will have a significant consequence for the United States due to accelerating land and sea ice melting that is driving changes in the ocean including sea level rise threatening our coastal communities,” the report says. Human activity, it goes on to say, is a primary culprit.

Funny thing, this MWP looks warmer that that MWP. Oh, who cares? What nonsense.

DM: “Unseasonably chilly August ahead for the eastern two-thirds of the US with 60F lows lasting up to TWO WEEKS.” Bleh.

The short run and the long run

August 6th, 2017

In the PC short run, we’re all dead, since if you think, for example that XX and XY are defining terms, you’re now some kind of a bigot, or something worse. Look at the silliness when it comes to movies, for goodness sake. Or Google, where someone very, very, very secretly is trying to fight back a tiny bit. Roger Simon discusses some related issues. To continue in the world of the silly, some think weather is catastrophic, which mostly identifies people being paid off or having too much time on their hands. (OTOH, Sharknado could be real, couldn’t it?) War is catastrophic, the streets of Miami Beach are not. Anyway, PC will end someday in the long run, since bad events have always ruined peace, ease, and prosperity periodically in all of human history. In the PC short run, we’re all dead, and in the long run…..oops!

Update: speaking of dead, the Google guy was just fired. PC, Go Go Go!!!

Woof!

August 5th, 2017

UCLA

In the US, there are more than 163 million dogs and cats that consume, as a significant portion of their diet, animal products and therefore potentially constitute a considerable dietary footprint.

Here, the energy and animal-derived product consumption of these pets in the US is evaluated for the first time, as are the environmental impacts from the animal products fed to them, including feces production. In the US, dogs and cats consume about 19% ± 2% of the amount of dietary energy that humans do (203 ± 15 PJ yr-1 vs. 1051 ± 9 PJ yr-1) and 33% ± 9% of the animal-derived energy (67 ± 17 PJ yr-1 vs. 206 ± 2 PJ yr-1). They produce about 30% ± 13%, by mass, as much feces as Americans (5.1 ± Tg yr-1 vs. 17.2 Tg yr-1), and through their diet, constitute about 25–30% of the environmental impacts from animal production in terms of the use of land, water, fossil fuel, phosphate, and biocides.

Dog and cat animal product consumption is responsible for release of up to 64 ± 16 million tons CO2-equivalent methane and nitrous oxide, two powerful greenhouse gasses (GHGs). Americans are the largest pet owners in the world, but the tradition of pet ownership in the US has considerable costs. As pet ownership increases in some developing countries, especially China, and trends continue in pet food toward higher content and quality of meat, globally, pet ownership will compound the environmental impacts

How much? — “13.6 million cars driving for a year.” What else, via MIT: Vast areas of South Asia – covering 75% of the area’s population – would endure at least one heatwave of 31C WBT. This is already above the level deemed by the US National Weather Service to represent “extreme danger”, with its warning stating: “If you don’t take precautions immediately when conditions are extreme, you may become seriously ill or even die.” — Doomed, Doomed!!!

Of course you could put on a hat, sit in the shade, chill out with a nice iced tea and spend 5 minutes with another view from MIT. Oh yeah, turn on the AC too.

August 4, 2007 — the beginning of the end: the Bear Stearns conference call

August 4th, 2017

Original here. One of the features of the Fed’s and the US government’s management of the capital markets over the last several decades has been their acting at appropriate times to prevent or swiftly correct panics or other major market dislocations. Many financial “crises” have come and gone over the last twenty years with few lingering deleterious effects.

The response to the Stock Market crash of 1987 (in which the DJIA shed 22% of its value in one day), the Mexico bailout of 1995, the bailout of Long Term Capital Management in 1998, the handling of the NASDAQ crash of 2000, and the mini-bailout of the airlines in the aftermath of 9-11, are arguably all good examples of the government doing its job effectively. The reason is that far worse could have happened in each case than actually occurred. In that sense, these are all dogs that did not bark.

On Friday, in the aftermath of S&P changing its rating of the debt of Bear Stearns from stable to negative because of its problems in the sub-prime mortgage market, executives at Bear Stearns responded with a conference call. In the conference call the CFO stated that conditions in the fixed-income markets are the worst since 1985, a period encompassing all the crises cited at the top of this piece. History will tell if the comments of Sam Molinaro prove to be memorable or not:
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memorable.gif

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Without question the stock market took this remark seriously. The call started at 2pm. As the WSJ put it: “the somber comments exacerbated the market drop, with Bear stock and the Dow industrials — which had been off about 50 points before the conference call — falling further…The index ended the session down 281.42 points, or more than 2%, at 13181.91″:

dow.gif

As the WSJ noted, the securities firm is going to some great lengths to fix things:

Bear, which employs 13,566 people, has seen its stock-market value shrink by more than one-third during 2007, bringing its total market value to about $12.5 billion…During morning trading, Bear shares fell nearly 8% to $106.55, a new 12-month low. At that price, Bear stock was trading below 1.2 times its book value…The cost of credit protection — or the amount investors bet against the chances that a company will default on its credit obligations — for Bear is more than seven times higher than what it was at the start of the year…

Bear said it reduced its short-term unsecured debt known as commercial paper to $11.5 billion from $23 billion in January. Treasurer Robert Upton said the company has unused committed secured bank lines that are “of over $11.2 billion, $4 billion of which is available to be drawn on an unsecured basis.” Over the past eight months, it has raised more than $11 billion of cash. Mr. Upton also said the firm has “unencumbered collateral” — or assets not underpinning loans — exceeding $18 billion…

The big securities firm also plans to oust Warren Spector, Bear’s powerful chief of stock and bond trading and one of the firm’s two presidents…

The market moves yesterday highlight just how jittery investors have become about the welfare of Wall Street’s biggest firms, which depend on a combination of goodwill and short-term financing to stay in business. “Everybody’s waiting for the second, third and twentieth shoe to drop,” said Mike Vogelzang, president of the money-management firm Boston Advisors.

So some things look dicey on Wall Street. Is that a big deal? We don’t know. As one wag put it, the stock market has predicted nine of the last five recessions. However, it is fair to note that the fear is palpable today. And it might be useful to remember that our greatest economic upheavals have not been caused by market crashes, but by the credit crunches that follow fear and panic, and it is a credit crunch that is the crux of today’s fears. Cramer, commenting on the conference call and Sam Molinaro’s remarks:

What we were hoping to hear him say, and we sure didn’t, was that Bear has traded in all kinds of markets, and this one will be no different, and when the time is right, it will buy back stock — or that it had started — and that the idea of liquidity issues is so ridiculous as to not even be worth mentioning. Nope. We got the opposite…

I think it is important that someone state in unequivocal terms that the Fed needs to act to avert a crisis. Is it Armageddon? No, if the Fed acts. But yes, if you are trying to keep your home and the Fed doesn’t act, I am sure there are plenty of people out there who aren’t trying to buy a home and are paying their mortgage and are sitting there thinking what the heck is this all about. But the banks can’t get the money they need, the brokers don’t have the liquidity they need, and the homebuyers and recent homebuyers who used debt are really hurting.

We don’t know that there is anything concrete that the Fed can do in this situation, but it would appear prudent for the Fed and chairman Ben Bernanke to acknowledge that there is in fact a problem, and that the Fed will act to provide all necessary liquidity to the banking system and financial markets. We recall his rosy comments earlier this year, which contrasted with a prediction of a 33% chance of recession advanced by Alan Greenspan at the same time. This situation is in some ways his first major challenge as Fed Chairman. It would be good if he does not make memorable the words of Bear Stearns CFO Sam Molinaro.

UPDATE: Half a year after this, Bear, which had traded at $172 a share in 2007, was sold to JP Morgan Chase in a Fed bailout for $10 a share. This was followed shortly thereafter by the government’s disastrous decision not to bail out Lehman Brothers, but let it fail.

S.O.P.

August 3rd, 2017

Please read in the voice of Vito Corleone: “This is not big deal, we know how to run a grand jury. You know, you’re in real estate. How many people did you have to pay off, one way or the other, in NYC? And then there’s international: in most every country, to do business there, you have to get an “agent,” and he’s supposed to abide by the FCPA, but you know the way of the world. Your agent, he pays you get, and if you’re asked about it, you tell them a story. Just keep asking questions until someone sleeps with the fishes talking to the Feds. Quattrone, Stewart, Libby: you’ll always get someone if you keep asking questions.” That’s what’s going on.

An AP reporter collides with reality

August 3rd, 2017

AP:

The government of President Nicolas Maduro blames the U.S. and right-wing business interests for the economic collapse, but most economists say it actually stems from government-imposed price and currency distortions. (Sigh: price controls equal supply and quality shortages and not control of prices.) There often seemed to be a direct line between economic policy and daily hardship. One week, the administration declared that eggs would now be sold for no more than 30 cents a carton. The next week, eggs had disappeared from supermarkets, and still have not come back.

Then true hunger crept into where I lived. People started digging through the trash at all hours, pulling out vegetable peelings and soggy pizza crusts and eating them on the spot. That seemed like rock bottom. Until my local bakery started organizing lines each morning, not to buy bread but to eat trash. People waited for their turn to hunt through black bags of bakery garbage. A young woman found a box of muffin crumbs. A teenage boy focused on finding juice containers and drinking whatever remained.

crime has become so pervasive that it fades into the background of even the swankiest places. One afternoon, I walked past two men in motorcycle helmets talking with customers on a restaurant patio. When I asked the cashier inside for a bottle of water, she gave me a funny look. Once the men left, she explained that they had just robbed everyone outside at gunpoint. Hadn’t I noticed? People rarely call for help, and with the murder rate surging to become the highest in the world, it’s easy to understand why. Thugs killed a young doctor at the end of my block when he accidentally dropped his cellphone during a daylight robbery.

Over the course of three years, I said good-bye to most of those friends, as well as regular long-distance phone service and six international airline carriers. I got used to carrying bricks of rapidly devaluing cash in tote bags to pay for meals. We still drove to the beach, but began hurrying back early to get off the highway before bandits came out. Stoplights became purely ornamental because of the risk of carjackings.

The first thing the muscled-up men did was take my cellphone. They had stopped me on the street as I left an interview in the hometown of the late President Hugo Chavez and wrangled me into a black SUV. Heart pounding in the back seat with the men and two women, I watched the low cinderblock homes zoom by and tried to remember the anti-kidnapping class I’d taken in preparation for moving to Venezuela. The advice had been to try to humanize yourself. “What should we do with her?” the driver asked. The man next to me pulled his own head up by the hair and made a slitting gesture across his throat.

Utterly predictable, Bernie. She’ll never win the Walter Duranty prize with writing like this. Hmmm, maybe more reporters should be sent to Venezuela for real re-education. Final point: imagine how much worse it is in North Korea with Fat Boy. HT: PL

The power of narrative

August 2nd, 2017

One of these things is not like the other. One goes up 23%, and the other goes down 23%. A propaganda machine is a very powerful thing.

As charming as Fat Boy

August 1st, 2017

WSJ:

Videos posted by family members showed officers armed with automatic weapons taking Leopoldo Lopez, the country’s most popular politician, and Antonio Ledezma, the elected mayor of Caracas, and shoving them into patrol cars. Mr. Lopez and Mr. Ledezma’s political parties said they don’t know where the politicians were taken. In a speech Monday morning, Mr. Maduro said he would jail opposition politicians who have accused him of electoral fraud. The government claims to have received more than eight million votes in Sunday’s uncontested election for a special assembly that will have absolute powers. Estimates by all major Venezuelan pollsters and the independent policy group Venezuelan Electoral Observatory, as well as an exit poll conducted by an investment bank, all put the turnout at less than half that figure. Governments from Switzerland to the U.S. said they don’t recognize the result. Diego Moya-Ocampos, political risk analyst with IHS, said the arrests show Mr. Maduro is worried about the country’s growing economic isolation and threat of new U.S. sanctions against the country’s vital oil industry. “The government is trying to secure more political prisoners to improve its bargaining position in an eventual negotiation in the U.S.,” he said.

Apparently Maduro needs to start a nuke program and kill his half-brother. Meanwhile, VDH has an interesting piece and David Brooks gets all weird.