Month: June 2016

Moments ago, in a move that will infuriate Turkey, the German parliament withstood a barrage of pressure from the Turkish government, and approved a symbolic resolution that declares the 1915 massacre of Armenians by Ottoman Turkish forces a ‘genocide’, a step widely viewed as a tacit escalation against Turkey.  The vote was almost unanimous in supporting the resolution with just one MP voting against and another abstaining. The move was largely expected and was supported by German Chancellor Angela Merkel. That said, the German leader was “forced” to skip the vote due to prior commitments.

The parliamentary vote was originally scheduled to take place a year ago to mark the centenary of the genocide, but due to concerns over the fallout with Turkey, Merkel’s allies postponed the move.

The news was greeted with delight by dozens of Armenian supporters who had gathered outside the parliament building carrying banners commemorating the genocide.

Armenian clergy men and activists react after law
makers voted to recognise the Armenian genocide.

According to the Christian Democratic Union’ Albert Weiler, Germany had a “historical duty” to recognize the mass killings of Armenians. “Without this admission there cannot be forgiveness and reconciliation. Suffering does not know temporary boundaries. Genocide will never remain in the past. By recognizing the genocide, it will force the Turkish government to take a brave step and look into its own history,” he said.

Gregor Gysi, a politician from The Left Party who was critical of Turkey’s treatment of the Kurds who were doing an excellent job in fighting Islamic State, was quoted by RT in saying that that “Germany was a historical accessory” and has a duty to recognize the mass killings of Armenians in the First World War. “We need to call this what it was – a genocide,” he told the parliament. “The Bunderstag should not allow itself to be blackmailed by Turkey’s threats.”

Meanwhile, as expected Turkey responded in an angry fashion: the ruling AK Party in Turkey responded by saying that the decision taken by the German parliament has seriously damaged relations between the two countries. The Turkish Deputy Prime Minister Numan Kurtulmus was equally scathing, calling the resolution a “historic mistake.”

In one last bid on Thursday to try and sway German opinion, Turkish Prime Minister Binali Yildirim said it would be “irrational” for the German parliament to approve such a resolution, while it would test the friendship between the two countries.

Turkish President Recep Tayyip Erdogan had already warned that relations between Ankara and Berlin would suffer if Germany was to recognize the mass killings of Armenians as genocide. Ankara had launched a high-profile campaign of intimidation in the build-up to the vote, which even included the Turkish community sending out thousands of emails to German MPs. However, some emails crossed a line, intimidating politicians and threatening the lives of journalists .

The German media is concerned about what impact the decision by the parliament to recognize the genocide could have on the migrant deal between Turkey and the EU, which has been championed by Merkel.

Many note that keeping Turkey friendly is necessary to stem the tide of migrants heading towards Europe. Some 1.1 million refugees settled in Germany last year. In return, Ankara will receive billions of euro from the EU, while its citizens would also be given visa free travel to the Schengen zone, which encompasses most of Europe. 

For now, it remains to be seen if Turkey will unleash the millions of refugees held in its borders, although as TV24 reports, Turkey has already recalled its Ambassador to Germany,Huseyin Avni Karslioglu,  back to Turkey. We expect an even more angry response by Erdogan in the hours to come, perhaps culminating with the voiding of the refugee agreement.

 

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Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke.

 

Most press reports about Zimbabwe’s fantastic hyperinflation are off the mark – way off the mark. Even our most trusted news sources fail to get the facts right. This confirms the “95 Percent Rule”: 95 percent of what you read in the financial press is either wrong or irrelevant.

When it comes to the reportage about hyperinflation, there are no excuses. All 56 of the world’s hyperinflations have been carefully documented in “World Hyperinflations”. This record is available in the Routledge Handbook of Major Economic Events in Economic History (2013) and has been available online since 2012 at the Cato Institute.

The International Monetary Fund (IMF) is the main culprit, a prominent source of the faulty data. Even The Economist magazine has fallen into the trap of uncritically accepting figures pumped out by the IMF and further propagating them. It’s no wonder that there is a massive gap between the public’s perception and economic reality. A gap that, ironically, The Economist reports on this week. 

The Economist’s most recent infraction on Zimbabwe’s hyperinflation appeared in the May 2016 issue. The magazine claimed that the hyperinflation peaked at an annual rate of 500 billion percent. Where did this figure originate? You guessed it. That figure is buried in the IMF’s 2009 Article IV Consultation Staff Report on Zimbabwe. 

In reality, Zimbabwe’s annual inflation rate in September 2008 was 471 billion percent, not 500 billion percent. More importantly, Zimbabwe’s hyperinflation peaked in November, not September. It was then that Zimbabwe recorded the second-highest hyperinflation in history: a whopping 89.7 sextillion percent. This is 179 billion times greater than the IMF’s figure.

That said, the IMF did attempt to cover its backside from questions about its hyperinflation guestimate. 2009 Article IV Staff Report on Zimbabwe states clearly that “data have serious shortcomings that significantly hamper surveillance due to capacity constraints.” Despite the red flag, The Economist continues to blindly propagate a figure that is neither reliable nor replicable. I stress the word “continues”.

It turns out that The Economist is a serial propagator of inaccurate IMF figures. The magazine has cited IMF’s incorrect figure of 500 billion percent before, in June 2009 and October 2015.

For accurate estimates of Zimbabwe’s fantastic hyperinflation that are used in the professional literature – estimates that are reliable and replicable – the IMF and the financial press corps should take a look at the following table from “On the Measurement of Zimbabwe’s Hyperinflation”, which was published in The Cato Journal, (2009): 

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As expected, at least based on its less informative press release, the ECB remains in “wait and see” mode by keeping all three interest rates unchanged. The ECB also said that on 8 June the Eurosystem will start making purchases under its corporate sector purchase programme (CSPP). It adds that starting on 22 June, it will conduct the first operation in its new series of targeted longer-term refinancing operations, and will share more details in the press conference.

Full statement:

Monetary policy decisions

 

2 June 2016 

 

At today’s meeting, which was held in Vienna, the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively.

 

Regarding non-standard monetary policy measures, on 8 June the Eurosystem will start making purchases under its corporate sector purchase programme (CSPP). Moreover, starting on 22 June, it will conduct the first operation in its new series of targeted longer-term refinancing operations. Further information on implementation aspects of the CSPP will be released after the press conference on the ECB’s website.

 

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.

More in 45 minutes when Draghi speaks.

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• Global stocks struggle as ECB and OPEC meetings loom (Reuters)
• Iran Resists Saudi Gesture for Unity as OPEC Fractures Reappear (BBG)
• Clinton to blast Trump on North Korea, NATO in foreign policy speech (Reuters)
• Hillary Clinton Shifts to California as Race Tightens There (WSJ)
• Puerto Rico’s U.S. Rescue Won’t Come Soon Enough to Halt Default (BBG)
• U.S. to Curb Payday Lenders (WSJ)
• BOJ’s Sato Is Pessimistic on Economy, Central Bank’s Strategy (BBG)
• PIMCO sees ‘significant’ chance of Brexit vote in UK (Reuters)
• Internet Boom Times Are Over, Says Mary Meeker’s Influential Report (BBG)
• Gigonomics: The Dismal Science Behind Today’s On-Demand Jobs (BBG)
• Labor Fears Partisan Defections Toward Donald Trump (WSJ)
• Alibaba Details Price for Buying Back Stock From SoftBank (BBG)
• Apple Plans to Raise up to $4 Billion From Bond Sales in Asia Pacific (WSJ)
• Use it or lose it: Occasional Ohio voters may be shut out in November (Reuters)
• German Farmer Left Cold by Beer With Obama Shows TTIP in Trouble (BBG)

 

Overnight Media Digest

WSJ

– The Obama administration will announce Thursday the federal government’s first move to regulate high-interest, low-dollar “payday loans,” a $38.5 billion market currently left to the states. (http://on.wsj.com/1TKWRh1)

– Uber Technologies Inc raised $3.5 billion from the investment arm of Saudi Arabia, part of an arms race over the future of transportation that is attracting the world’s largest technology companies and auto makers. (http://on.wsj.com/1TKWqmO)

– Alibaba Group Holding Ltd has agreed to repurchase 27 million shares from SoftBank Group Corp for $74 each, for a total of $2 billion, while the company’s partnership of founders and managers has agreed to purchase 5.4 million shares for the same price, for a total of $400 million. (http://on.wsj.com/1TKX3Nh)

– Hong Kong’s largest family-controlled bank, Bank of East Asia Ltd, said Thursday it will close its brokerage outlets and lay off staff as profits falter and activist investor Elliott Management maintains its call for the bank to sell itself. (http://on.wsj.com/1TKWJ0X)

 

FT

Overview

Munich Re’s insurance business Ergo unveiled a deep restructuring on Wednesday in a bid to return to profit, cutting 13 percent of its German workforce and setting out plans to launch a digital insurer and a revamped product line.

London Stock Exchange Group said its planned $30 billion merger with German rival Deutsche Boerse could initially cut 1,250 jobs across the combined group and should eventually lead to 250 million euros ($279.68 million) in extra revenue a year.

Consumers may need tougher protection against “inherently higher” risks from investing in online platforms that offer loans, a senior British lawmaker, Andrew Tyrie, said on Wednesday.

Uber has raised $3.5 billion from Saudi Arabia’s sovereign wealth fund, the U.S. ride-hailing service said on Wednesday, gaining a crucial partner in its expansion into the Middle East.

 

NYT

– At least four automakers – Toyota, Volkswagen , Fiat Chrysler and Mitsubishi – continue to sell new vehicles with defective Takata airbags that will need to be recalled, according to a Senate Commerce Committee report released on Wednesday. (http://nyti.ms/1r3mTnA)

– Uber said on Wednesday that it had raised $3.5 billion from Saudi Arabia’s Public Investment Fund, in one of the largest-ever investments into a privately held start-up. (http://nyti.ms/1P7UgM5)

– The European Central Bank is not expected to make any changes to monetary policy when it meets Thursday. In fact, with the region trapped in a period of economic stasis, it may not do much of anything for many months to come. (http://nyti.ms/1TQTCKg)

– Steve Mosko, the chairman of Sony Pictures Television, has left the studio. The departure of Mosko, 60, came a day after NBC Entertainment pushed out Bela Bajaria as president of Universal Television, which suffered a sharp decline in orders for the fall season. (http://nyti.ms/22zf9HF)

 

Canada

THE GLOBE AND MAIL

** Fresh warnings are being issued about the Vancouver and Toronto real estate markets as a growing chorus urges further action from Ottawa amid a continual rise in housing prices. (http://bit.ly/1r3w0o3)

** A federal spy agency inadvertently shared logs of Canadians’ phone calls and internet exchanges with intelligence allies such as the United States for years, a newly disclosed report says. (http://bit.ly/1O6velB)

** Saudi Arabia is arming Yemeni forces led by a controversial military commander accused of using child soldiers, a leading human-rights researcher is warning Parliamentarians. Ottawa must suspend sales of Canadian-made combat vehicles to Riyadh if it fails to obtain guarantees that they won’t become embroiled in this, Belkis Wille, of Human Rights Watch told a Senate committee. (http://bit.ly/1O6tMiV)

NATIONAL POST

** Vantage Airport Group Ltd began work Wednesday on a $4 billion makeover of New York’s rundown LaGuardia Airport, and said the massive contract will significantly raise its profile in the United States. (http://bit.ly/1sqzzWR)

** The NDP is planning to force debate on a special committee on Canada’s electoral system Thursday, proposing a new model that would put the Liberals in a minority position. (http://bit.ly/1ZfA6VW)

** Bombardier Inc announced Wednesday that WestJet Encore has converted its remaining options into firm orders to beef up the Calgary company’s fleet of 45 Q400s. Bombardier says the cost of the transaction – nine new planes – is about C$293 million ($223.60 million). (http://bit.ly/1sqze6y) (

 

Britain

The Times

– British manufacturers are putting decisions on hold in the build-up to the European Union referendum, causing activity to slow, according to a closely followed survey. (http://bit.ly/1Y3klTz)

– The chancellor has accused Boris Johnson and Michael Gove of “making up” plans that would damage the economy. (http://bit.ly/1Y3kOVT)

The Guardian

– George Osborne, the chancellor, and ministers from the UK’s extensive network of tax havens are among key witnesses that Members of the European Parliament intend to call as part of a major inquiry set to be launched into the Panama Papers. (http://bit.ly/1Y3kFSv)

– Marks and Spencer is to switch off background music in stores in response to feedback from customers and staff. The new music-free policy will be implemented over the next few weeks at 300 clothing and home branches across the UK. (http://bit.ly/1Y3kEOv)

The Telegraph

– The father and son property tycoons who helped Dominic Chappell to fund his doomed acquisition of BHS have been called to appear before the two House of Commons select committees investigating its collapse. (http://bit.ly/1Y3kEhf)

– Ryanair has come under attack for deciding to close its base near Oslo – a move that is expected to result in the loss of 1,000 jobs – after Norway introduced a new tax on air passengers. (http://bit.ly/1Y3kFlx)

Sky News

– A vote to leave the European Union would have “substantial negative consequences” for the UK and the global economy, the Organisation for Economic Co-operation and Development (OECD) says. (http://bit.ly/1Y3keYm)

– Administrators to BHS are racing to finalise a rescue of the high street chain even as recriminations over the company’s past financial management deepen as part of a parliamentary probe into the affair. (http://bit.ly/1Y3kSFa)

The Independent

– Deutsche Boerse’s proposed acquisition of London Stock Exchange Group may result in about 1,250 job cuts across the companies. (http://ind.pn/1Y3kXJ0)

 

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With the ECB announcement due in a few minutes, followed by Draghi’s press conference, today’s ECB meeting should be a relatively dull affair as they are currently in ‘wait and see’ mode with regards to previous policy actions. As RanSquawk notes, general consensus among analysts is that the ECB are to keep rates on hold this month and avoid added stimulus.

• ECB’s rates are currently: Refinancing 0.00%, Deposit -0.40% and Marginal Lending 0.25%
• General consensus among analysts is that the ECB are to keep rates on hold this month and avoid added stimulus, given the significant nature recent action
• The recent uptick in energy prices is expected to be reflected in the ECB staff projections but Draghi will need to be careful not to dampen market expectations for further easing with overtly bullish inflation expectations

Heading into the meeting, expectations are for the ECB to stand pat on existing policy with no changes to rates or further additional stimulus measures. This is largely as a result of rates already residing in firm negative territory (a particular concern raised by many participants and figureheads) and some of the measures announced in March yet to come into effect with corporate bonds purchases to commence this month and further TLTRO allotments. Furthermore, the recent uptick in energy prices are likely to be used by the central bank as a reason to be optimistic for the Eurozone outlook and is also expected to be reflected in the latest ECB staff projections . More specifically, the ECB staff projections for inflation are expected to receive an upgrade for the first time since 2015 with Citi looking for the ECB to lift their 2016 inflation outlook from 0.1 % to 0.3%, 2017 to 1.5% from 1.3% and 2018 to 1.8% from 1.6%. On the growth front, Morgan Stanley suggest we are likely to see an upgrade in growth forecasts due to strong performance at the start of the year, however, also warn that Eurozone growth shows some signs of slowing down compared to the first quarter.

Although it is highly unlikely that we will see further measures unveiled at this meeting, there are expectations for the ECB to ease at some point this year with JP Morgan suggesting the 2018 inflation forecast could set the backdrop for eventual further measures in September. In terms of measures that may be discussed at this meeting (although no agreement/announcement will likely be made), one avenue the ECB could explore and has often been touted as a potential course of eventful action is ‘Helicopter Money’ . Note, that this is an option which has been touted by a minority of market commentators and not the ECB themselves with ECB’s Draghi, Coeure, Villeroy and Weidmann stating that this option has not been discussed and is not being considered and therefore any participants looking for helicopter money to have been discussed this time round are likely to be left disappointed. However, it is possible that Draghi could be questioned on the matter during the Q&A as a potential mechanism to soften the EUR and help revive inflation if necessary. .

One item that has been touted to be on the agenda is the possibility of reinstating the waiver on Greek bonds as collateral by the ECB (removed in Feb 2015). This comes in the wake of Greece striking a deal with creditors to release EUR 10bIn in bailout funds and contemplate methods to restructure the nation’s debt pile. Last year, ECB’s Constancio said that the waiver would be reinstated if the central bank viewed their programme to have been credibly implemented; a premise which many feel has been met. The main benefit for this would be that Greek banks would not have to seek funds from more costly emergency loans and instead could access cheaper loans like other nations in the monetary unions . However, the most recent source reports suggest that Greece is unlikely to have the waiver reinstated due to a snag in negotiations between Greece and their creditors . Furthermore, even in the event that the waiver was reintroduced, this would not immediately make Greek bonds eligible for ECB QE purchases as previous purchases exceed limits imposed by the ECB.

This meeting will likely also centre on some of the technical aspects of current stimulus measures such as corporate bond buys with recent source comments suggesting the pace of ECB corporate bond purchases will start at a slow pace with the pace to eventually pick-up to EUR 5-10bIn.

Market Reaction

In terms of a market reaction, many analysts have touted that this meeting is likely to provide fewer fireworks than some of those seen in the past year given that rates are expected to remain on hold and no new measures are expected to be announced. Attention instead, will likely centre on what potential measures could lie ahead with potential clues coming from the latest ECB staff projections. If the projections are seen as overtly bullish then this could dampen expectations for future ECB measures and as such provide some support for EUR , while weighing on equites and fixed income markets, with the converse expected if the forecasts underwhelm the market. Furthermore, if Draghi is particularly dovish in the press conference by suggesting the ECB could consider Helicopter Money further down the line or hammer home the point that the ECB will do whatever is necessary in order to fulfil its inflation mandate, then this could weigh on EUR while supporting equities and fixed income markets.
* * * 

Finally, here is the somewhat more skeptical take from Bloomberg’s Richard Breslow:

When the European Central Bank discusses the outcome of its June meeting it’s pretty much accepted that the level of negative rates and size of asset purchases will stay unchanged. Thanks for small favors.

There’ll be plenty of important ancillary issues, such as staff projections, Greek bonds as collateral and plans for corporate bond purchases. Plenty of opportunity to spin marginal victories and progress.

What he’s unlikely to do is the one thing that has a hope of getting the council closer to its inflation mandate and the sclerotic European economy out of its perpetual malaise: actively talk down the currency.

There’s more likely to be the “where’s fiscal policy” complaint. A well-worn substitute for doing something that would be an extraordinary monetary policy that’d do some good.

We all know the lack of structural reform and infrastructure spending has been a sin. Deaf ears hear no lecturing.

There’ll be the usual insistence that negative rates have been having an effect. Truth is, it’s been a bad one. Further crippling already weak banks and insurers is not going to get them to lend and underwrite.

New staff projections could read bullish by not lowering, yet again, the inflation outlook. There’s nothing in the numbers that suggests upward pressure from wages or corporate pricing power. Real signs of progress. Higher oil prices are window dressing to the headline number. Core CPI has had one print above 1% in close to three years.

The growing percentage of European corporate bonds with negative yields is staggering. This is all down to the ECB’s purchases. The fantasy that it would provoke real corporate investment is laughable. It’s also exporting asset market distortions globally.

Germany aside, Europe must become more competitive. Look at the latest OECD projections on global trade and ask how much longer we can stand an unhealthy union.

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With the OPEC meeting having started a little under two hours ago, it appears that the premature optimism raised yesterday about yet another imminent production freeze deal may have been mostly hot air. Indeed, yesterday’s bounceback in oil was driven by the various reports of a potential reintroduction of a ceiling on production after the previous ceiling was scrapped in December. The WSJ ran a story suggesting that the willingness is shared by Saudi Arabia as well as smaller producers in Nigeria, Qatar, Algeria and Venezuela. However, like in Doha, Iran appears to be against a wholesale supply cap after its oil minister said late on Wednesday he’d prefer individual national output quotas rather than an overall production ceiling, and added that he doubted a deal is possible. Meanwhile, Saudi Arabia is willing to live with either outcome.

This is a recap of what oil ministers said just before they entered a close door session which is expected to conclude at 10 am Eastern:

• Saudi Arabia’s minister said OPEC’s current strategy was working and that group should reestablish a production ceiling “when necessary”; click here for summary
• Iran says an OPEC output ceiling without country quotas means nothing; Iran aims to pump 4.8m b/d in 5 yrs
• Kuwait doesn’t think a ceiling is necessary
• Iraq says OPEC will consider 32.4m b/d ceiling, which is same as April’s output level, according to secondary sources

Like in Doha, while Iran will be the scapegoat for any lack of deal, the question is what Saudi Arabi’s strategy is. For the answer, we go to Saudi Arabia’s new Energy Minister Khalid Al-Falih who spoke to reporters at start of OPEC’s ministerial conference in Vienna.  This is what he said via BBG:

On OPEC strategy, market balancing:

• Sees supply and demand coming into balance
• Mkt is not oversupplied; just inventory that needs to be absorbed
• We will be gentle with our approach
• Demand is robust; non-OPEC supply declining
• Everybody is satisfied w/ mkt
• OPEC strategy is succeeding
• Saudi Arabia would welcome non-OPEC coordination
• When supply exceeds demand it isn’t sustainable
• Saudi Arabia doesn’t want over-investment in oil supply

On prices:

• Market will rebalance at a higher oil price than today
• Saudis could withstand a longer period of lower prices
• Oil supply disruptions are supporting mkt recovery
• Nobody can know what is equilibrium price of oil mkt
• We think prices are on the way up
• Saudi Arabia is concerned about effect of low prices

On production ceiling:

• Saudi doesn’t want to see reduction in OPEC output
• OPEC should go back to production ceiling when necessary

On Saudi capacity:

• Saudi Arabia oil production capacity is 12.5m b/d
• Saudi will respond to oil mkt if there’s a shortage
• Will have enough spare capacity to meet any demand

* * *

As noted above, while Saudi Arabia remains the most important OPEC player, the market’s focus will be on what Iran does, and as Bloomberg reports, the middle-eastern nation resisted overtures from OPEC’s largest producer Saudi Arabia to restore a production target scrapped at the group’s last meeting in December.

“I don’t agree with an overall output ceiling for OPEC,” Iranian Oil Minister Bijan Namdar Zanganeh said Thursday, before a meeting of the group in Vienna. Zanganeh wants the organization to return to a country-quota system, which he said might be difficult to achieve at today’s gathering. This happens after Saudi Arabia signaled on Wednesday it’s ready to consider a surprise deal with fellow OPEC members, attempting to mend divisions that had grown so wide many dubbed the group as good as dead. Then again, Saudi Arabia did the same in Doha, only to scuttle a last minute deal excluding Iran, as a result of a last minute change of heart. Furthermore, not only the UAE and Kuwait, but even some of the poorer nations realize that chances are virtually nil of a deal emerging today:

• KUWAIT ACTING OIL MIN: NO NEED FOR OUTPUT CEILING
• IRAQ’S DEP OIL MIN: DOESN’T EXPECT DECISION ON OUTPUT FREEZE
• ECUADOR DOESN’T EXPECT DEAL ON INDIVIDUAL, GROUP OUTPUT LIMITS

Even Nigeria was skeptical:

• NIGERIA DOESN’T EXPECT DEAL TODAY ON OUTPUT CEILING: MINISTER

The silver lining would be if instead of ending in acrimony, the Vienna meeting showed some tentative warming among the competing former carlet members: although OPEC regularly ignores its own output targets and there was no suggestion anyone would cut production, even token gestures could show a renewed unity and lift prices. Options under discussion included a new ceiling of 32 million barrels a day, said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. That’s close to the 32.4 million barrels a day the group estimated it produced in April.

Here the focus will be on Saudi Arabia: Bloomberg adds that while any deal will depend on Iran, which until now has rejected any cap on its production, while Saudi Arabia appears to once again be shifting its tone.
Despite the obstacles to a deal, Riyadh’s change of tone is striking and may reflect the desire of Khalid Al-Falih, who last month became Saudi Arabia’s first new oil minister in more than 20 years, to start his tenure with a successful meeting.

Should the meeting end in an actual deal, it would be a major breakthrough, as introducing a ceiling would show that “OPEC is still important to the oil market,” Gary Ross, chairman of PIRA Energy, a New York-based oil consultant, said. It would signal that “despite political differences, they can work together to achieve similar economic interests — this is certainly a more positive outcome than the market expected.”
That said, a deal would be a shock. Last month, only one of 27 analysts surveyed by Bloomberg said they expected an output target from OPEC’s meeting.

The conciliatory message is an attempt to end a dark period for OPEC in which some analysts declared the organization effectively dead. In 2014, Saudi Arabia and its Gulf Arab allies decided to ditch production constraints in favor of a market-share strategy and prices crashed, bringing financial pain to many members and causing several rancorous meetings.

Even without a deal, OPEC will take solace in substantially higher oil prices than those seen in December, or even the Doha round, which has been pushed constantly higher from 12 year lows on precisely the expectations of supply cuts, which become even more improbable with every rise in oil prices. This week’s diplomatic maneuvering coincides with an oil price flirting with $50. “From the beginning of the year until now, the market has been correcting itself upward,” U.A.E. Oil Minister Suhail Al Mazrouei told reporters in the Austrian capital on Tuesday. “The market will fix itself to a price that is fair to the consumers and to the producers.”

* * *

Finally, here is the take of Bloomberg oil strategist Julian Lee on what today’s non-announcement would mean. For him, OPEC oil ministers need to agree overall output target for group’s 13 members when they meet later today in order to convince mkt participants of OPEC’s continued relevance.

• Failure will deepen divisions between rich countries of Arabian Peninsula and other OPEC members who want higher prices
• Price hawks like Venezuela will see failure to agree target as sign that group doesn’t consider their needs
• Deal will signal ability of members to work together after failure to agree output freeze in Doha in April
• Overall target w/out individual country quotas will not restrict actual production
• Unlike Dec., there has been lots of pre-mtg shuttle diplomacy between various delegations in Vienna, suggesting that positions are being agreed in advance of formal mtg
• Saudi Arabia said to be considering reintroduction of target
• No firm proposal has been made, but matter has been raised by several countries
• Iran wants individual country targets, but doesn’t expect this to be agreed

No matter the final outcome, expect a volatile reaction when the OPEC headlines start hitting around 10am Eastern; we would not be surprise to see a dip lower in crude following another disappointing conclusion only to be followed by another mysterious levitation which pushes WTI above $50 later this morning.

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What does one hundred trillion dollars buy you?

How about a mansion in every country, an airplane at every airport and a private island in every ocean?

How about 3 eggs?

When Zimbabwe issued its infamous 100 000 000 000 000 dollar bill, it could buy 3 eggs on the day it was issued. A few days later, it could only buy one egg.

Hyperinflating Currencies

Unbacked fiat/paper/credit, and nowadays electronic currency, has a poor track record. After studying this list of 609 defunct currencies, out of which 153 died due to hyperinflation, it's obvious that every time fiat currencies are tried, they die through hyperinflation, war or political decrees.

Using the debt-based US Dollar as a store of value creates massive imbalances and misallocations globally. With an unprecedented debt bubble fuelling paper markets such as stocks and bonds, we stand on the cliff edge of a vertical drop.

Since the Nixon era, we have suffered under a fiat currency ponzi scheme wiping out most of the purchasing power of our currencies.

In MLM schemes, the idea is to recruit naive participants downstream to generate compensation for the recruiter.

This is exactly how the US Dollar and other fiat currencies work.

Early receivers of the MLM scheme such as the government, the banks and the central bank gain purchasing power whereas late receivers, such as us normal people, lose purchasing power.

Fiat paper currency is nothing but a cleverly designed MLM scheme to slowly over time steal and redistribute your private wealth.

Defend Your Assets

With the massive redistribution of wealth taking place through taxation and inflation, you have to defend your assets. Key self-defensive tactics include:

– Protect yourself by keeping your assets out of reach of the government and banks
– Minimize counter-party risks
– Ensure you are protected against currency collapses and bank runs
– Hold your assets in such a way that there's no reporting required to government
– Protect yourself against exchange and capital controls

Crooks can't help steal whether it's directly in broad daylight through a bail-in like in Cyprus in 2013, through taxation, through inflation or through confiscation such as the gold confiscation in the 1930's when the US president Roosevelt took the United States off the gold standard and confiscated private gold holdings.

How can you protect yourself? Gold is the natural answer as it resists inflation, maintains purchasing power and can be held confidentially.

Buying gold isn't enough though. What if your gold purchase is within reach of the government? If you buy gold in your home country, a tax agency such as the IRS in the United States can easily audit the bullion dealer to find out about your purchases. In addition, there's also reporting requirements for certain bullion transactions.

 

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There are just two drivers setting the pace for today’s risk mood: the OPEC meeting in Vienna which started a few hours ago, and the ECB’s announcement as well as Mario Draghi’s press statement due out just one hour from now. Both are expected to not reveal any major surprises, with OPEC almost certainly unable to implement a production freeze while the ECB is expected to remain on hold and provide some more details on its corporate bond buying program, although there is some modest risk of upside surprise in either case. So while we await the outcome of both key events, European stocks rose, U.S. index futures declined, oil held near $49 a barrel, and the yen gained notably for the third day in a row. 

Crude hovered near a seven-month high as OPEC tries to find a way to push the price even higher even as every member can produce as much as they want, with Saudi Arabia’s energy minister saying he sees supply and demand coming into balance. European equities halted a two-day losing streak and the euro advanced as investors awaited ECB President Mario Draghi’s press briefing for indications of the central bank’s policy trajectory. The ruble rose for the first time in three days. The yen advanced against all of its Group of 10 peers and a sale of 10-year sovereign debt in Japan drew the strongest demand in almost two years. Similar-maturity Spanish bonds led losses in Europe.

As Bloomberg summarizes, global markets have started June tentatively, with the OPEC and ECB meetings Thursday setting the stage for a month that will also see the U.K. vote on whether to remain in the European Union and a possible interest-rate increase by the Federal Reserve. Wednesday data showed the U.S. manufacturing sector grew more than economists forecast last month and American employment figures this week will help shape expectations for the timing of the next rate hike. Fed Funds futures indicate a 22 percent chance of a move at the June 14-15 meeting.

European stocks rose as investors awaited the European Central Bank’s rate decision and President Mario Draghi’s remarks. Euro rises to 1-week high as ECB stimulus seen on hold again. “The ECB meeting and the upcoming Fed decision are correlated – if the Fed does something with the rates this month, the euro will weaken, which is in favor of the ECB plan,” said Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany. “The ECB is in a more of a wait-and-see position with regards to what the Fed will do. The inflation forecast Draghi gives will be the main focus. The forecast has to be adjusted in a way that the market knows this a goal that can be achieved.”

In Asia, Japan was in the spotlight after BOJ member Sato dampened prospects for further easing when he said the central bank’s 2% inflation target will not be reach on time, adding the BOJ should make asset purchase operation more flexible and explore flexible approaches to monetary base target; he also admitted that negative interest rate policy has effect of monetary tightening, rather than an effect of easing. As such the market interpreted the words as an indication that any additional stimulus will not be coming soon: “There’s now less chance of more Japanese monetary policy particularly when Abe said he’s thinking about doing more fiscal initiatives,” said Tony Farnham, a Sydney-based analyst at Patersons Securities Ltd. “That should have the U.S. dollar on the back foot for a period of time. There’s certainly nothing in the Beige Book to say the Fed is cowering away from a rate increase.”

On OPEC, while the downside case is said to be priced in, a negative outcome may impact oil prices: “The economic situation in America may be solid, but there are still fears that the rest of the world won’t be able to withstand higher U.S. interest rates,” said Mitsushige Akino, a Tokyo-based executive officer at Ichiyoshi Asset Management Co. “If the OPEC meeting results in a negative outcome, we’ll see even more risk being taken off the table.”

The Stoxx Europe 600 Index added 0.3%, reversing a 0.2% loss, after capping its biggest two-day decline in four weeks. Banks and energy producers posted the best performances of the equity gauge’s 19 industry groups on Thursday.  Futures on the S&P 500 Index fell 0.1%. Stocks closed Wednesday little changed for a second session, as investors weighed better-than-expected factory data against sluggish global growth, and mulled the implications of a possible interest rate hike this month or next.  Japan’s Topix index tumbled 2.2 percent after Prime Minister Shinzo Abe held back a widely-expected fiscal stimulus package. He postponed a planned sales-tax hike until October 2019 and vowed to take “bold” economic steps in the autumn. Honda Motor Co. tumbled 4.2 percent and Toyota Motor Corp. dropped 1.5 percent after their U.S. sales fell last month by more than analysts estimated.

 

Market Snapshot

• S&P 500 futures down than 0.1% to 2095
• Stoxx 600 up 0.2% to 345
• FTSE 100 up 0.3% to 6212
• DAX up 0.2% to 10227
• S&P GSCI Index up 0.3% to 372.8
• MSCI Asia Pacific down 0.8% to 128
• Nikkei 225 down 2.3% to 16563
• Hang Seng up 0.5% to 20859
• Shanghai Composite up 0.4% to 2925
• S&P/ASX 200 down 0.8% to 5279
• US 10-yr yield up less than 1bp to 1.84%
• German 10Yr yield up 2bps to 0.16%
• Italian 10Yr yield up 3bps to 1.41%
• Spanish 10Yr yield up 4bps to 1.53%
• Dollar Index down 0.17% to 95.29
• WTI Crude futures up 0.3% to $49.17
• Brent Futures up 0.4% to $49.90
• Gold spot up 0.2% to $1,216
• Silver spot up 0.2% to $16.00

Top Global News

• Apple Gets Good News in Bid to Knock Out $533 Million Verdict: Two Smartflash patents in the case were found to be invalid
• Uber Receives $3.5 Billion Investment From Saudi Wealth Fund: Funding gives Uber the same valuation of $62.5b
• ALS Rejects A$2.67 Billion Takeover Offer From Bain, Advent: The A$5.30-per-share cash bid “significantly undervalues” the company, ALS said
• Iran Resists Saudi Gesture for Unity as OPEC Fractures Reappear: Saudi minister wants to show that OPEC isn’t dead, people say, no indication OPEC is seeking to change current production
• Weatherford Plans $1 Billion Bond Offering to Refinance Debt: Proceeds from the exchangeable notes will back a tender offer for four bonds maturing between 2017 and 2020
• Alibaba Details Price for Buying Back Stock From SoftBank: Paying $74 a share to buy back $2b of its own stock from SoftBank; in total, SoftBank is selling $8.9b of its stake
• Singapore Inc. Buys $1 Billion in Alibaba, Adding to China Bets
• P&G CEO Taylor to Succeed A.G. Lafley as Chairman Next Month: CEO David Taylor will add the title of chairman next month, succeeding longtime company leader A.G. Lafley.
• Sheryl Sandberg Removes Her Name From Disney CEO Speculation: Sandberg, Facebook’s chief operating officer, said she’s happy in her current position, speaks at Recode conference
• Airline Earnings to Near $40 Billion as Oil Beats Slowing Demand: IATA raises 2016 earnings estimate to record level
• Apple Returns to Aussie Debt Market With Two-Part Bond Offering: Marketing debt due in June 2020, January 2024, pricing expected Friday, follows A$1 billion Coca-Cola deal
• Apple Said to Consider Issuing Bonds in Japan, Singapore: WSJ
• Redstone Grandchild Plans to Take Legal Steps Against Shari: Keryn Redstone aims to work with Viacom directors in dispute; Redstone Ex-Girlfriend to Seek New Trial on Mental Capacity
• Payday Lenders Accused of Abusing Consumers Face U.S. Crackdown: CFPB to propose tough restrictions on issuing new loans
• Monsanto Said to Seal Deal With Argentina Over GMO Soybean Tests: Agreed to allow Argentina to help collect soybean royalty payments
• Costco May Comparable Sales Miss Est.; U.S. Ex-Fuel Beat Est.
• Google Raises About $219m Selling Lenovo Shares: Terms
• Amazon Invests Additional $200 Million in India Unit, ET Says
• Amazon to Open Fulfillment Centers in Illinois, Adds 1,000 Jobs
• McDonald’s Nears Deal to Move Headquarters to Chicago: Crain’s
• Nasdaq Sees Strong Chinese Interest for U.S. Listings: Reuters

Looking at regional markets, Asia traded mostly lower following a similar lead from Wall Street with sentiment cautious ahead of the ECB and OPEC meetings today, while Friday’s NFP also looms. Nikkei 225 (-2.3%) underperformed on further JPY strength following hawkish comments from BoJ’s Sato, while ASX 200 (-0.4%) was dampened by weaker commodities after WTI crude futures retreated back below USD 49/bbl. Shanghai Comp (+0.4%) and Hang Seng (+0.5%) outperformed on reports that the Shenzhen stock link will be announced in the near future. 10yr JGBs traded lower following hawkish comments from BoJ’s Sato, however losses were stemmed after a strong 10yr auction which saw a better b/c, a narrower tail in price and in which the lowest accepted price surpassed estimates.

Top Asia News

• Japan’s Debt Burden Is Quietly Falling by the Most in the World: Govt debt is shifting from private hands to central bank
• Bank of East Asia Closes Brokerage Outlets to Lower Expenses: Lender to shut all of securities unit’s retail branches
• China Stocks in Focus as Investors Prepare for MSCI Index Revamp: A-share inclusion in main indexes key issue in June review
• U.S. Closely Eyeing China’s Corporate Hacking Vow, Official Says: Russia, China both are seeking more state control of internet

Equities across Europe reside modestly in the green (Euro Stoxx 50 +0.3%), led by energy names amid the ongoing OPEC meeting dominating newsflow so far this morning. Elsewhere, defensive sectors Utilities and Healthcare names are among the worst performers. From a fixed income perspective, Bunds trade lower amid the upside in equities and head into the North American crossover around the 164.00 level. This morning saw supply from both Spain and France totalling -EUR 13b1n, while some participants remain on the side-lines ahead of the ECB meeting.

Top European News

• Deutsche Bank Sees Capital Hit as Basel Adds to Legal Woes: Will probably set aside even more capital or shrink businesses as global regulators tighten rules for how lenders measure risk
• European Banks Feel the Pinch From Draghi’s Negative Rates: A drop in net interest income, the first in 2 years, may worsen after the ECB lowered its deposit rate to minus 0.4% in March
• Midea Touts Kuka Deal as Chinese Offer Hits German Barrier: Said its offer for Kuka is in the best interests of Kuka, as German politicians explore ways to block the Chinese co.’s deal
• Bain Said Near Deal to Sell German Clutch Maker FTE to Valeo: French auto-parts maker could announce purchase this week
• Draghi Wants ECB Easing Solo Joined by Europe Reform Chorus: ECB expected to leave rates unchanged at 1:45 p.m. in Vienna

In FX, the yen strengthened once again, rising 0.5% to just under 109 per dollar, after surging 1.4% in the last two trading sessions. “This move in the yen is maybe more about a risk-off move, than sort of a positive sentiment,” Sassan Ghahramani, chief executive officer of SGH Macro Advisors, said on Bloomberg TV. “People got a little bit ahead of themselves and were expecting some sort of announcement on a supplementary budget. When that didn’t come, I think there was a bit of a disappointment trade.” The Bloomberg Dollar Spot Index fell less than 0.1 percent, after sliding 0.4 percent in the last session. Investors are paying close attention to U.S. data after Fed officials indicated a potential interest-rate hike as soon as this summer was contingent on continued improvement in the economy.  The euro strengthened 0.1 percent, after climbing 0.5 percent on Wednesday, and the British pound rose 0.2 percent from near a two-week low. The U.K. currency sank around 1.5 percent over the last two days as polls indicated growing support for the country to leave the EU. The MSCI Emerging Markets Currency Index added 0.3 percent as the ruble advanced 0.6 percent, buoyed by oil’s gains. India’s rupee advanced 0.3 percent, strengthening for the first time in four days. The currency erased gains and bonds declined on Wednesday after a local-language newspaper reported central bank Governor Raghuram Rajan doesn’t want an extension of his term. The Reserve Bank of India, the Prime Minister’s Office and the Finance Ministry all had no comment on the report.

In commodities, brent added 0.5 percent to $49.98 while West Texas Intermediate crude halted a four-day slide, climbing 0.5 percent to $49.24. Saudi Arabia was discussing ideas with fellow OPEC members including restoring a production target scrapped in December, according to delegates familiar with the situation. Still, no formal proposal has yet been made and Iran resisted overtures from Saudi Arabia to restore a production target scrapped at the group’s last meeting in December. Gold rose 0.2 percent, after falling on 10 of the last 11 trading days. Zinc climbed 0.8 percent to the highest since July on the London Metal Exchange, while copper and nickel retreated. Soybeans for July rose to the highest for a most-active contract since July 2014 on the Chicago Board of Trade amid speculation hot and dry weather will hurt U.S. crops.

On today’s economic calendar, away from the obvious focus on the ECB in Europe, data wise the only release of note will be the Euro area PPI data for April. In the US the ADP employment change print is the headliner, while last week’s initial jobless claims data is also due out along with the ISM NY reading. With regards to Central Bank speakers, Draghi’s press conference post ECB (scheduled for 8.30am) is the highlight, while over at the Fed we’ve got Powell (due to comment on the role of regulation in banking and Kaplan due to speak on the economy tonight. Of course away from the data we’ve also got the aforementioned OPEC meeting.

Bulletin Headline Summary From RanSquawk and Bloomberg

• OPEC has grabbed the limelight so far with comments from a number of oil ministers giving participants plenty to digest, as focus appears to be on whether Saudi Arabia and Iran can cooperate
• Equities trade higher led by energy names with Bunds in negative territory and trading around the 164.00 level
• Looking ahead, highlights include the ECB rate decision, US ADP, weekly jobs, EIA nat. gas, DoE inventories, ECB’s Draghi, BoE’s Carney, Fed’s Kaplan and Powell

US Event Calendar

• 7:30am: Challenger Job Cuts y/y May (prior 5.8%)
• 7:45am: ECB Decision
• 8:15am: ADP Employment Change, May, est. 173k (prior 156k)
• 8:30am: Initial Jobless Claims, May 28, est. 270k (prior 268k)
• 8:35am: Fed’s Powell speaks in Washington
• 9:45am: Bloomberg Consumer Comfort, May 29 (prior 42)
• 9:45am: ISM New York, May (prior 57)
• 10am: Freddie Mac mortgage rates
• 10:30am: EIA natural-gas storage change
• 11am: DOE Energy Inventories
• 1pm: Fed’s Kaplan speaks in Boston

DB’s Jim Reid Concludes the overnight wrap

The rollercoaster month of June kicks into gear today with an ECB and OPEC meeting likely to be the main focal points alongside the latest ADP which will be important ahead of tomorrow’s payrolls. The ECB should actually be a relatively dull affair as they are currently in ‘wait and see’ mode with regards to previous policy actions. However all new info on the CSPP will be gratefully received by corporate bond investors.

With regards to the OPEC meeting, the closed door talks are scheduled to take place in Vienna at 12pm local time with the press conference scheduled for a tentative 4pm local time (3pm BST). Yesterday was a fairly volatile session for Oil as a number of headlines did the rounds ahead of the meeting. WTI actually closed little changed around $49/bbl although it did bounce back from intraday lows of $47.75/bbl midway through the afternoon. It appears that the bounceback was driven by the various reports of a potential reintroduction of a ceiling on production after the previous ceiling was scrapped in December. Indeed the WSJ ran a story suggesting that the willingness is shared by Saudi Arabia as well as smaller producers in Nigeria, Qatar, Algeria and Venezuela. Like in previous talks, any outcome looks likely to hinge on the decision of Iran, whose Oil Minister was quoted last night as saying that he doesn’t believe that today’s meeting will reach an agreement. So all that to look forward to this afternoon.

Meanwhile, as a precursor to tomorrow’s payrolls number, market expectations for the ADP employment change reading today are 173k. Our US economists are a little lower than this at 160k which also reflects their below consensus payrolls forecast.

Yesterday’s data flow was largely focused on the factory sector with the overall outcome being one which made for a fairly mixed assessment. The much anticipated ISM manufacturing print for May actually rose unexpectedly last month to 51.3 from 50.8 after expectations were for a 0.5pt decline. That said the details were a bit more mixed with new orders (-0.1pts to 55.7) down, employment (49.2) unchanged and backlog of orders (-3.5pts to 50.5) down sharply. That was however offset by an increase in prices paid (+4.5pts to 63.5) to the highest level in 2011 and new export orders remaining unchanged but at a solid 52.5. Meanwhile the manufacturing PMI was revised up 0.2pts at the final look to 50.7, however construction spending was weak in April (-1.8% mom vs. +0.6% expected) which had the Atlanta Fed revising down their Q2 GDP forecast to 2.5% from 2.9% as a result.

In terms of how markets responded, US equities – in a similar move to Tuesday – were initially on the back foot at the open with the S&P 500 down as much as -0.60% although recovered into the close with the moves in Oil to finish +0.11% on the day. The USD was hard hit however with the Dollar index down close to half a percent, although in contrast 2y yields were up 2bps by the end of play. That said they have held around that 0.900% level for a good 2 weeks now.

Refreshing our screens this morning, all of the focus is on the reaction in Japanese markets following the confirmation from PM Abe yesterday of the sales tax increase delay. The Yen has rallied 0.5% following a 1% rally yesterday and as a result the Nikkei and Topix have fallen -2.29% and -2.09% respectively. 10y JGB yields are up 1bp. Elsewhere in Asia moves have been more modest. The Hang Seng is +0.19% while the Shanghai Comp is unchanged and the Kospi +0.12%. The ASX (-0.80%) is down steeply again with banks and miners under pressure. Iron ore tumbled -3.49% yesterday and in dipping below $50/tn again, is at the lowest level in over 3 months.

Moving on. We’ve got another date for readers to add to what is already a very busy June. Fed Chair Yellen’s semi-annual testimony (previously known as the Humphrey Hawkins) has been scheduled for the 21st and 22nd of June which is unusually early given the event usually takes place midway through July. The timing is interesting however with the FOMC meeting due to conclude on the 15th and the UK EU referendum vote on the 23rd. So one would imagine that should the uncertainty surrounding the Brexit outcome weigh on the Fed Chief’s view at the FOMC meeting, then it’s likely little would change just a week later still pre-vote. A reminder that Yellen is due to speak this coming Monday evening also.

Back to markets yesterday, risk assets in Europe had a much weaker session than their US counterparts. Indeed the Stoxx 600 closed -0.96% for its second consecutive leg lower. European credit was under pressure too with Main a couple of basis points wider. It appeared to be a more peripheral led selloff however with Italian and Spanish equities down -1.19% and -1.30% (bond yields in these countries were also a couple of basis points higher while Bunds were flat on the day). The weakness appeared to stem from a poor session for Italian Banks with Italian press reports suggesting that the Bank of Italy may ask Italian lenders to inject an additional €1.5bn into Italy’s rescue fund.

Staying in Europe, the confirmation of the manufacturing PMI’s showed that weakness in the periphery which we’d expected last month. The final Euro area reading was unchanged at 51.5 while Germany was notched down to 52.1 (-0.3pts) but France revised up a touch to 48.4 (+0.1pts). In the periphery however there were notable monthly declines for Italy (-1.5pts to 52.4), Spain (-1.7pts to 51.8) and Greece (-1.3pts to 48.4). There was a more positive read-through for the UK where the PMI rose 0.7pts to 50.1 (vs. 49.6 expected) and back into growth territory again following that blip in April.

Wrapping up the data, the other release in the US yesterday was the latest vehicle sales numbers where total sales rose in May to an annualized rate of 17.37m (vs. 17.3m expected) from 17.32m in the month prior. Meanwhile, the Fed’s Beige Book didn’t offer a whole lot of new information. The main take away from the report showed that ‘employment grew modestly since the last report, but tight labour markets were widely noted’ and that ‘wages grew modestly, and price pressures grew slightly in most districts’.

Looking at the day ahead, away from the obvious focus on the ECB in Europe, data wise the only release of note will be the Euro area PPI data for April. In the US this afternoon the ADP employment change print is the headliner, while last week’s initial jobless claims data is also due out along with the ISM NY reading. With regards to Central Bank speakers, Draghi’s press conference post ECB (scheduled for 1.30pm BST) is the highlight, while over at the Fed we’ve got Powell (1.35pm BST) due to comment on the role of regulation in banking and Kaplan (6.00pm BST) due to speak on the economy tonight. Of course away from the data we’ve also got the aforementioned OPEC meeting.

via http://ift.tt/1ZfD50P Tyler Durden

A law in Kansas is creating chaos among voters, especially younger voters in the state. In 2013, Kansas passed a law that requires residents to provide proof of citizenship when registering to vote, and if it isn't provided, the registration is put in suspense, leaving residents unable to vote. While you must be a US citizen to vote in American elections, most states allow those who register to simply sign a statement affirming they are citizens and provide a driver's license number, Social Security number, or other proof of residence according to Reuters.

Of course the story is a bit more nuanced, as US District Court Judge Julie Robinson recently issued an order to put voters back on the rolls that had been suspended for not providing proof of citizenship, providing that the registration was done at a DMV. Those who did not register at a DMV, by mail for example, were not included in the order, and thus still had to provide proof of citizenship. And finally, as if the situation is not confusing enough, Robinson's order only applied to federal elections for the presidency and US Congress, it left out voting at the state and local levels, meaning in order to vote locally residents would still have to provide proof of citizenship.

Confused? So are a lot of younger voters in the state, who have been been suspended for not providing proof of citizenship.

Of the 16,774 people on a late-April suspense list obtained by Reuters, more than half were ages 17-21, and more than 60 percent were age 25 or under. Suspended voters were clustered in the high-population areas of Wichita, Topeka and the Kansas City suburbs, and the college towns of Lawrence and Manhattan.

About 41% weren't affiliated with a party, 35% were Democrats, 23% were Republicans, and 1% Libertarian.

"It's created a system that is needlessly complex and very discouraging, particularly for young people. Now people just say 'forget it, I'm not going to vote'." said Steve Lopes, head of the Johnson County Voting Coalition which helps register voters.

The man primarily responsible for the law, Secretary of State Kris Kobach, who is adamant that the law will help keep illegals from voting, despite little evidence of the problem even existing in the first place. In Judge Robinson's order, it was noted that Kansas could identify only three non-citizens who voted between 2003 and the onset of the law in 2013.

"The court cannot find that the state's interest in preventing non-citizens from voting in Kansas outweighs the risk of disenfranchising thousands of qualified voters" Robinson said.

To which Kobach retorted: "Every time an alien votes, it cancels out the vote of a US citizen. That's the real disenfranchisement, it's happening every election and it's happening in every state."

Unfortunately for Kobach, upon being given the power by the Kansas legislature in 2015 to prosecute voter fraud, Kobach has won just four misdemeanor illegal voting convictions, and none of them involved non-citizens.

Michael Smith, a professor at Emporia State University said that "younger voters, who are more likely to register as unaffiliated or Democrats, have a harder time getting the documents needed and have less patience with what has become an unwieldy process."

Kobach, who has been affectionately dubbed "the dark lord" by some of his colleagues, said "if you define barrier to voting as just having to do something before you vote, every state has that barrier, virtually every state requires proof of address."

For now, there is a chaotic two-tier system where some Kansans can vote in state elections and some cannot, some need to provide proof of citizenship and others do not, and many county election officials are uncertain how to proceed. "It's a complete mess" said Marge Ahrens, co-president of the nonpartisan Kansas League of Women Voters.

* * *

A complete mess indeed, although par for the course when it comes to the state of politics in America. Oh, and we forgot to mention that Kris Kobach has endorsed The Donald, citing his number one issue in the election as being… wait for it… immigration.

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