Tag: finance

Only Small Caps are green now as the fallout from Fischer’s inflation furore escalates…

 

via Zero Hedge http://ift.tt/1OXMItr Tyler Durden

Submitted by Ingrid Carlqvist via The Gatestone Institute,

Men and women, in a Swedish tradition, have swum together in public pools for over 100 years. Many people are now wondering if we will be forced to give up this practice — because young male asylum seekers have turned public swimming pools into ordeals of rape and sexual assault.

Mixed bathing in Sweden started in the small southern fishing village of Mölle. Around 1890, the "Sin of Mölle" gained notoriety. Men and women were swimming together! Out in the open and shamelessly flaunting their striped bathing attire. It was a sensation that echoed all over Europe, and people came from everywhere to partake in the exciting new activity. Danes poured in, and even the German Emperor Wilhelm II made his way to Mölle in July 1907.

It should come as surprise to no one that men from the Middle East and North Africa have quite a different view of women than Swedish men do. The only mystery is why Swedish politicians have got it in their heads that everyone who sets foot on Swedish soil will immediately embrace our values, our view of women and our traditions.

Now that it is finally beginning to dawn on them that many Afghan, Somali, Iraqi and Syrian men (the largest immigrant groups coming to Sweden now) think that women who run around scantily clad are fair game, the politicians are dumbfounded. Of course, they cannot admit that this — to Swedes — completely alien view of women has anything to do with Islam, because then they would become victims of their own claim that everyone who criticizes Islam is an "Islamophobe."

For many years, it was possible to cover up the abuse, not least because the mainstream media chose to call the perpetrators "youth gangs," and never mention that they were almost always immigrants from Muslim countries. In Malmö, one of the most immigrant-heavy cities in Sweden, and where Swedes have actually been a minority since 2013, the problems at public pools started at least 15 years ago.

In 2003, "youth gangs" were so disruptive to other guests at the indoor water park Aq-va-kul that on several occasions, the establishment was forced to close. Despite investing 750,000 kronor ($88,000) in taller entrance gates, a glass-enclosed reception desk, surveillance cameras, and an Arabic-speaking "pool host" to tackle the security problems, things just kept getting worse. In 2005, senior staff member Bertil Lindberg told the local daily newspaper, Sydsvenskan: "Things have escalated this year. Large gangs of 10-20 young people threaten and provoke other guests as well as the staff. They did not come here to swim; they are just looking for trouble."

One of the problems is that young Muslim men refuse to take a shower before bathing, and keep their underwear on under their swim trunks. For obvious reasons, this is not allowed, and when the staff call out the violators on this, trouble and threats ensue. On several occasions, gangs have ambushed staff members on their way home from work, and the company was forced to hire guards to make sure employees get home in one piece. Events reached a climax in 2013, when youth gangs smashed the interior, threw objects in the water and threatened other patrons. Aq-va-kul was closed, and the pool was drained and cleaned of shattered glass. A few days later the pool was reopened, but it closed permanently to the public in 2015. Now the facility has been renovated, but is only open to competitive swimmers and swim clubs.

In Stockholm, the Husbybadet pool in the heavily-immigrant suburb of Husby was the first public pool hit by trouble. In 2007, it was reported that the municipality was forced to build a separate sewage treatment facility, costing millions of kronor. The reason was unusually high levels of nitrogen in the water, because many young people insisted on bathing with their dirty underwear on. The municipality property director told daily newspaper, Dagens Nyheter:

"Nitrogen is food for bacteria and a high nitrogen level produces malodorous air and filthy water. The nitrogen comes from urine and sweat. Quite simply, we have a problem with people keeping their dirty underwear on under their swim trunks. And then they get in the 38-degree [100-degree Fahrenheit] water in the hot tub. It is like sitting in your washing machine's delicates cycle, and we use that water all the time. People should have swimwear on, not bathe in their regular clothes."

The attitude towards nudity in Scandinavia is very different from that in the Middle East. Sweden has many nude beaches, where men and women swim together without a stitch of clothing, without the slightest hint of sexual harassment. In the gender-separated changing rooms at public pools, there is no sign of shyness. Swedish men and women see it as a matter of course to shower and wash properly before getting in the pool, and a couple of decades ago stern overseers even patrolled the changing rooms to check the patrons' shower habits.

In Muslim countries, nudity is an extremely private thing, and one does not willingly take showers with others, not even with members of the same sex. All the public pool personnel with whom Gatestone has spoken confirm that Muslim men and women shower with their underwear on, and then keep them on under their swimwear. Many Muslim women bathe in a so-called burkini, a garment that covers the entire body, so when Muslim men see Swedish women in a bikini, many of them conclude that they must be "easy" women whom one is "allowed" to grope.

In 2015, when roughly 163,000 asylum seekers came to Sweden, the problems at public pools increased exponentially. More than 35,000 young people, so-called "unaccompanied refugee children," arrived — 93% of whom are male and claim to be 16-17 years old. To prevent complete idleness, many municipalities give them free entrance to the public pools.

During the past few months, the number of reports of sexual assaults and harassment against women at public pools has been overwhelming. Most of the "children" are from Afghanistan, widely considered among the most dangerous places in the world for women. When the daily Aftonbladet visited the country in 2013, 61-year-old Fatima told the paper what it is like to be a woman in Afghanistan: "What happens if we do not obey? Well, our husbands or sons beat us of course. We are their slaves."

To expect men from a culture that views women as men's slaves to behave like Swedish men is not just stupid — it is dangerous. Mr. Azizi, the manager of a large hotel in Kabul, told Gatestone how an average Afghan man sees sexual attacks on women:

"What the Afghans are doing is not wrong in Afghanistan, so your rules are completely alien to them. Women stay at home in Afghanistan, and if they need to go out they are always accompanied by a man. If you want to stop Afghans from molesting Swedish girls, you need to be tough on them. Making them take classes on equality and how to treat women is pointless. The first time they behave badly, they should be given a warning, and the second time you should deport them from Sweden."

One of the first reported incidents occurred in 2005, when a 17-year-old girl was raped at Husbybadet, in Stockholm. The 16-year-old perpetrator started groping her in the hot tub, and when the girl moved to a cave with streaming water, he and his friend followed her. They forced the girl into a corner, and while the friend held her down, the 16-year-old pulled off the girl's bikini and raped her. During the trial, it emerged that some 30 people had witnessed the attack, but the teenagers continued the rape anyway.

The 16-year-old rapist was sentenced to three months in juvenile detention and his friend was acquitted. The victim was badly traumatized and had to be treated in a psychiatric care facility, after several failed suicide attempts.

Since then, virtually all public pools in Sweden have become dangerous places, especially to women. During the first two months of this year, reports of rape, sexual assault and sexual harassment came in rapid succession. A few examples:

In Stockholm, during the first week of January, Sweden's national swimming arena, Eriksdalsbadet, decided to separate men and women in the hot tubs. A controversial decision in Sweden, it came after several incidents in the pools had been reported to the police, mainly in November and December 2015. Conservative Anna König Jerlmyr (moderaterna), Stockholm city Commissioner in Opposition, did not believe that separating men and women was the right way to address the problems: "It is totally unacceptable for a public swimming pool to act this way. This is tantamount to giving in to the sexual harassment and sending signals in favor of a view of women that is utterly reprehensible. More staff, and banning offenders from the premises, would have been preferable," she told the daily, Dagens Nyheter.

Olof Öhman, head of the Sports Administration in Stockholm, told the paper: "There are similar problems at all the public pools in Stockholm, even if most complaints regard Eriksdalsbadet."

On January 14, officials at the Rosenlundsbadet water park in Jönköping reported that they would increase security. According to Operations Manager Gunnel Eriksson, the decision was mainly due to the behavior of a new group of bathers — unaccompanied refugee boys: "You can tell from their behavior that they come from a different culture; there is a cultural clash. We can see that they react to the undressed bit." The heightened security is also necessary because many of the young migrant men cannot swim, overestimate their abilities, and end up in dangerous situations.

On January 15, a local paper, Kungälvsposten, wrote that two girls had been sexually assaulted in an elevator at the Oasen public pool Oasen, in Kungälv. The two suspected perpetrators are "unaccompanied refugee children." Jonas Arngården, Municipal Director of Social Affairs, told the paper: "This shows that we need to step up the work concerning issues of equality and interaction among our new arrivals, in schools as well as at the asylum houses."

The attack caused members of the Nordic Resistance Movement (Nordiska motståndsrörelsen), a supposed neo-Nazi organization, to show up at Oasen on February 13. They put on green shirts with the word "Security Host" (Trygghetsvärd) printed on the back, and "patrolled" the facility.

The municipality had not reacted strongly to the sexual assault, but the visit by vigilantes scared the municipal management, and it immediately called the Oasen management to a meeting. Mayor Miguel Odhner told the daily, Expressen/GT: "It is completely unacceptable to have some kind of disguised vigilantes at municipal pools. It is very, very serious that we have violent extremism vying for greater foothold in our municipality."

The Eriksdalsbadet national swimming arena in Stockholm (left) has become infamous for the many incidents of migrants sexually assaulting women and children at the facility. At the Oasen pool in Kungälv (right), two girls were recently sexually assaulted by "unaccompanied refugee children." In response, members of the "Nordic Resistance Movement" showed up, wearing shirts bearing the label "Security Host" (Trygghetsvärd), and "patrolled" the facility.

On January 18, the management of the Fyrishov public pool, in Uppsala, revealed that in 2015, it there were seven reported cases of child molestation at the facility. According to Fyrishov, the suspected offenders are all newly-arrived migrants — teenage boys who do not speak Swedish. The facility increased security in August, hiring guards and giving the staff stricter monitoring instructions.

On January 21, there were reports that the number of sexual assaults had increased dramatically at the Aquanova adventure pool in Borlänge. In 2014, one case was reported; in 2015, about 20 cases were reported. The incidents involved women having their bikinis ripped off, being groped in the water slide and sexually assaulted in the restrooms. Ulla-Karin Solum, the CEO of Aquanova, told the public broadcaster Sveriges Television that many incidents "are due to cultural clashes."

Aquanova Staff member Anette Nohrén confirmed that all the suspects are born abroad, and complained that "it is a huge problem. It steals the focus from our primary task, which is safety concerns, when we are constantly forced to intervene to try and prevent assaults, and afterwards, to try and figure out what happened."

Aquanova now implemented new rules; among them, that young men from asylum houses need to have a responsible adult accompanying them — one adult for every three underage asylum seekers. The adult needs to stay with them in the changing room as well as in the pool area.

On January 25, the daily newspaper Expressen revealed that a girl was raped at the now infamous Eriksdalsbadet swimming arena at the beginning of the month. The police will now increase their presence at the facility, and will patrol inside regularly.

On January 26, there were reports that a woman and two girls had recently been sexually assaulted by a group of young men who spoke neither Swedish nor English, at the Storsjöbadet pool in Östersund. Despite the incident, the young men were not removed from the premises — a lapse the staff later admitted was a mistake.

On January 27, Växjö municipality announced that it plans to hire a security guard to patrol the local public pool. After two 11-year-old girls were sexually assaulted by a group of boys. The boys attacked the girls in an area hidden from the view of lifeguards. Mikael Linnander, father of one of the girls, told the daily, Kvällsposten: "Seven or eight guys attacked the girls. Two of them touched them between their legs and groped their breasts." The abuse did not stop until a woman swimming with her children reprimanded the boys. After the incident, the two boys were barred from the adventure pool area, but were allowed to stay at the facility.

On February 1, local media reported that at least five girls and women had been sexually assaulted at a public pool in Vänersborg during the previous few weeks. The victims were girls under 15, as well as women in their thirties. The police said they had no suspects, but stated that the case had high priority.

On February 25, another sexual assault was reported at the Eriksdalsbadet swimming arena in Stockholm. Police spokesman Johan Renberg told Expressen that a group of girls had found themselves surrounded by some 10 young men who tried to grope them. A staff member saw what was happening and called the police. The girls were able to identify the young men, whose ethnicity the paper did not report. The men were not arrested, but will be questioned at a later time.

Given the recent wave of sexual assaults at public pools, it is something of a mystery why the recently-opened Hylliebadet family adventure pool in multicultural Malmö has not reported any sexual assaults at all. Hylliebadet, which cost 349 million kronor (about $41 million) to build, had a chaotic opening week in August 2015. After only a few days, 27 "incidents" had been reported, but none involved sexual assaults.

"No, I have never heard of anything like that happening here," a Hylliebadet employee told Gatestone. However, when we spoke to other staff members off the record, they told us they had been given strict instructions not to report certain things, and above all, never to mention the ethnicity or religion of those who cause problems at the pool. Another employee told Gatestone:

"Of course we have had incidents here, particularly involving Afghan men groping girls. Not long ago, a man of Arab descent was caught masturbating in the hot tub. But we are not allowed to report things like that. These men understand that it is forbidden when we tell them, but they keep doing it anyway. They just smile and keep on doing it."

It seems unlikely that Swedish politicians will start deporting sex offenders. The politicians seem convinced that some education on "equality" will change the ways of men, who, since childhood, have been taught that it is the responsibility of women not to arouse them — and therefore the woman's fault if the man feels like raping her. Such a shift in attitude seems as likely as if a Swede visiting Saudi Arabia would suddenly renounce alcohol just because it is forbidden there. The Swede would follow the rules as long as somebody was watching, and then take every opportunity to drink his schnapps, because it is a thousand-year-old Swedish tradition, and something most Swedes feel is agreeable as well as just.

Another public pool employee told Gatestone that the refugee boys frighten away ordinary patrons and that more and more Swedes are now avoiding public pools altogether.

"Even Swedes who have bought expensive season tickets stay away now, because they think the mood is unsettling. Considering that they young asylum seekers get their entrance fee paid by the municipalities, one could rightfully say that tax money is being used to drive away those who would pay."

via Zero Hedge http://ift.tt/24MxNy8 Tyler Durden

David Cameron's "Project Fear" plan to scare the British people into accepting European rule (and denying Brexit) is being exposed by more than just the usual realists (e.g. Nigel Farage). Despite dozens of self-serving military and business leaders siding with Cameron, The Telegraph reports, the head of one of the UK’s leading business groups dramatically resigned last night, accusing David Cameron of peddling "highly irresponsible" scare stories to keep Britain in the European Union.

John Longworth quit as director general of the British Chambers of Commerce after he was suspended by the board on Friday after he breached the BCC’s policy of neutrality on the June 23 referendum.

Setting out his personal view, he told members in his speech that "the very best place for the UK to be is in a reformed EU" but "I have come to the conclusion that the EU is incapable of meaningful reform, at least in the foreseeable future".

His supporters have claimed that Downing Street "bullied" the BCC to discipline him last week over his Eurosceptic stance – an allegation that Number 10 has denied.

Speaking exclusively to The Telegraph, he launched a scathing attack on the Prime Minister’s campaign to keep Britain in the EU.

He accused the government of attempting to “scare” voters into staying in Europe in the June referendum with misleading claims about the risks of leaving.

 

“It is highly irresponsible of the government of the country to be peddling hyperbole,” he said. “It is alright for the campaign groups to do it because they are promoting a particular position.

 

“But the government has to be responsible. And the fact of the matter is that there is a chance that the country will vote to leave.

 

“If the government keeps peddling the line that it will be a disaster if we leave, which it actually won’t be, they are going to put the country in a position where it will be damaged if we do.”

 

He said ministers would not be able to stop stock markets and currency markets reacting badly to a Leave vote because they have spent so long warning of the dangers of Brexit.

 

"It may work that by scaring people that we don’t leave and they will succeed. But if we do leave, that will be very irresponsible of the government.”

 

Mr Longworth said the government should be neutral in the referendum.

Tory MP David Davis MP, the former shadow Home secretary, said: “John Longworth is the first Brexit martyr.

“It is frankly disgraceful that in the most important democratic decision in a generation that a man of his caliber should be forced to lose his career simply because he stood up for what he thought was a national interest.

 

“If it is proved that the Government has had any role in this whatsoever, this will be beyond scandalous.”

via Zero Hedge http://ift.tt/1p2POr5 Tyler Durden

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

China never had an actual economic model or growth model. It simply printed an obscene amount of money, especially after 2008, and used it to build factories, 30-story see-through apartment blocks and highways into nowhere cities, without giving much if any thought to where this would lead when their formerly rich western customers had less to spend on its ever increasing amount of ever more useless products, or when its workers would stop spending ever more on apartments as investments, or when no more roads and bridges were needed because nowhere was already in plain sight. Or all of the above. It was ‘to infinity and beyond’ from the start, but that’s a line from a kids’ fantasy story, not a 5-year plan or an economic model.

Going into its 10-day, 3,000 delegates National People’s Congress opening on Friday, China was facing -and very much still is- two major and interconnected problems. Both are problems that the country has never faced before -not a minor point to make. The first is a giant debt load, one that could easily be as high as $40 trillion, or 350% of GDP, once one includes the shadow banking system (watch the shadows!). The second is the Communist Party’s -economic- credibility.

The debt problem is impossible to solve without very far-reaching restructurings of both the debt itself and of the entire Chinese economy. There appears to be a problem within the problem, however: the Party neither looks prepared to truly tackle the debt nor does it seem to know how.

As for the credibility issue, the very fact that a 5-year plan will be unveiled is the perfect in-a-nutshell illustration of what’s ailing Beijing. Not only does it hark back to communist days of old, not exactly a confidence booster, but trying to look 5 years ahead in today’s global economy is in itself not credible. It forces the Party to make statements nobody in their right mind will believe. And to compound the issue, that is something the leadership doesn’t really seem to take seriously. President Xi Jinping, more than anything else, looks like a man in the tradition of ‘what I say is true because I say so”.

That may have worked for a long time inside the country, but the desire to be part of the global economy means the ‘because I say so’ attitude is now being questioned by people Xi can neither bully nor bend into submission. Something he doesn’t seem to have clued into yet. Surrounded as he will be over these ten days by people who’ll say Yes at any appropriate and inappropriate instance, and laugh at anything he says that might be construed as a joke, Xi won’t come out any the wiser. He’d probably be better off spending those days with someone like Kyle Bass, but he’s not doing that.

Everybody, including most NPC delegates, knows that China’s grossly overleveraged, overproducing and overcapacitated economy needs another round of mass layoffs. Some initial numbers relating to job losses have been ‘leaked’ prior to the Congress. First, it was 1.8 million jobs cut in the coal and steel sectors, and a few days later that became 6 million. But that can only possibly be just a start.

It’s all in the numbers. China has something in the order of a billion workers, give or take 100 million or so. Even with the largest mass migration in human history, in which 100s of millions moved from the countryside to the cities, there are still an estimated 300 million people working in agriculture. That’s the entire US population. It’s also 30% of the Chinese workforce. In the US just 2 or 3% work in farming.

But that still leaves 700 million Chinese in other jobs. Many of these jobs were ‘invented’ in the past 20 years, as China’s ‘miracle growth’ transformed it first into the world’s no. 1 trinket producer, then into a kind of powerhouse that built highways to nowhere cities, and today a powerhouse with a fast plummeting global consumer base.

Many millions of Chinese workers produce things that can’t be sold. This is by no means confined to just coal and steel. The sharply dropping Chinese import and export numbers, as well as the purchasing indices, tell a bleak story. It’s evident that China must re-invent itself. And while that may be exactly what it claims it’s doing, the -alleged- transition to a service- and/or consumer economy may sound good, but its practical success is far from guaranteed.

Transforming a factory worker into a service sector employee is not a matter of flicking a switch. Repeating this 10 million times over, or 20 or 30 million, is a nightmare in an economy that is seeing its growth rates plummet while at the same time needing to deleverage its debt levels.

What are all these people going to do that produces actual economic value? And what will be the character of the companies they produce this value at? China is still dominated by state-owned enterprises, with workers relying on the faith that Beijing will always make everything right that goes wrong.

Losing that faith may have far-reaching consequences. At the same time, China cannot get the international economic status it so desperately seeks if so many de facto work for the government.

Though most tend to forget this, China was in a similar situation not so long ago:

In the late 1990s, China drastically restructured its state-owned enterprises, privatizing some and shutting down others. The result: from 1995 to 2002, over 40 million jobs in the state sector were cut, along with nearly 30 million jobs lost in the manufacturing, mining, and utilities sectors.

 

Although many of these workers were able to pick up jobs in the newly-growing private sector, the societal and cultural shift entailed in the restricting should not be underestimated. Prior to that wave of reforms, state sector employees (the vast majority of China’s workforce) enjoyed the benefits of an “iron rice bowl,” absolute job security along with social benefits (such as healthcare and pensions) provided by the state.

70 million – unproductive- jobs cut in 7 years. An average 10 million per year. A problem the country ‘solved’ by throwing tens of trillions (in US dollars) into overleveraged overproduction at exports-driven manufacturing enterprises. And by moving hundreds of millions of people into the cities that housed the enterprises.

15 years later, many of these newly created jobs have in their turn become unproductive. And the country may have to start the same process all over again. With probably tens of millions more jobs to replace. Question is, how will it fare this time around? Will people accept it as obediently as 15 years ago?

The reforms of the 1990s resulted in massive lay-offs. Overnight, tens of millions of workers lost their “iron rice bowls.” There were people who didn’t want to accept it, even those who actively resisted, but the government ruled with an iron fist and eventually the reforms went through. Even today, some of these people have grown old on the edge of poverty. On a certain level, we sacrificed them in exchange for huge reforms to the economic system.

But before wondering about civil obedience, let’s ask again: what are all these people going to do that produces actual economic value? Service economy? Consumer economy? There is no move available this time into another giant and overleveraged export industry. They’re at the end of the -debt- line.

Those people that had some money have lost a lot -and will lose much more- in equities and housing markets. Moreover, the government’s attempts to make them feel more secure about their old age would take decades to convince the people. So those who have something to save will do just that. So.. what consumer economy?

Service economy? Much of that in China is in financial services. Which has no future. So what else is there? How about the US model of burger flippers? That looks like a winner…

See, here’s a depiction of Chinese debt:

And here’s what they plan to do about it:

It looks like subprime derivatives on steroids: China hopes to bundle together billions of dollars worth of non-performing loans and eventually sell them to global investors Such a massive securitisation programme would represent the latest tactic in China’s campaign to lift one of the biggest shadows cast over its slowing economy -a debt pile that is as big as 230% of GDP. It would whittle back debts at Chinese banks and move some of the risk outside the domestic financial system.

 

According to official figures, such debts at the banks have reached Rmb1.27tn ($194bn), while analysts estimate the real number is likely to be many times higher. Chinese media has reported that the regulator has granted a total of Rmb50bn for the first wave of products. Demand for the scheme, however, is expected to be significantly more modest than supply. “How many global investors have been interested in the traditional [bad debt in China]?” asked one Hong Kong-based investor with experience buying distressed debt in Asia. “Not many.. is a more complicated version of this going to change that soon? No.”

This’ll be great, as great as the western approach to drowning in debt. Mind you, the Chinese haven’t even started talking about ‘recovery’ like we have, they’re still thinking -or propagandizing- that they’re on an ever upward trail. Well, they’re not. One of the early notes coming out of the People’s Congress was this: “China Says Will Keep Yuan Basically Stable Against Basket Of Currencies ..”

That’s not happening. They know it, we know it, and Kyle Bass knows it. Perhaps once the Congress is over, they’ll come clean? Hard to say. What’s certain is that global markets WILL force a substantial re-adjustment of the yuan, and there’s nothing Xi or the entire Communist Party can do to prevent it. And then, after a 30% readjustment, take another look at that dollar-denominated debt!

And they’ll have to cut many millions of jobs, and try to ‘pacify’ the newly unemployed, and deleverage the insane debt levels they’ve created, and find a way to explain to their people where it all went so wrong.

China no longer lives in a kids’ fantasy Toy Story.

via Zero Hedge http://ift.tt/1p2NUGT Tyler Durden

With the S&P 500 trading back above 2,000, it appears The Fed needed to do something to tamp down the enthusiasm exhibited by this manic short squeeze. As Fed vice-chair unleashed the following: “We may be seeing the first stirrings of higher inflastion,” the short-squeeze ended and everything reversed…

• *FISCHER: WE MAY BE SEEING `FIRST STIRRINGS’ OF HIGHER INFLATION

Killing the short squeeze…

Sending gold higher and stocks and crude lower…

 

But:

• *FISCHER: LOWER OIL PRICES POSITIVE FOR U.S., ONCE MKT STEADIES

so which is it? Is $38 low enough?

via Zero Hedge http://ift.tt/1W3PyTu Tyler Durden

There’s a lot of talk going around these days about “helicopter money.”

For those unfamiliar, it’s billed as a kind of last Keynesian resort when ZIRP, NIRP, and QE have all failed to boost aggregate demand and juice inflation.

For instance, HSBC said the following late last month: “If central banks do not achieve their medium-term inflation targets through NIRP, they may have to adopt other policy measures: looser fiscal policy and even helicopter money are possible in scenarios beyond QE and negative rates.”

And here’s Citi’s Willem Buiter from Septemeber: “Helicopter money drops would be the best instrument to tackle a downturn in all DMs.”

So what exactly is this “helicopter money” that is supposed to provide a lifeline when all of central banks’ other forays into unconventional policy have demonstrably failed? Well, here’s Buiter to explain how it works in theory (this is the China example, but it’s the same concept everywhere else):

The first-best would be for the central government to issue bonds to fund this fiscal stimulus and for the PBOC to buy them and either hold them forever or cancel them, with the PBOC monetizing these Treasury bond purchases. Such a ‘helicopter money drop’ is fiscally, financially and macro-economically prudent in current circumstances, with inflation well below target and likely to fall further.

Now whether it’s “fiscally, financially and macro-economically prudent in current circumstances,” (or any circumstances for that matter) is certainly questionable, but what’s not questionable is that it is indeed feasible.

How do we know? Because we’ve been doing it for 8 long years.

If you think about what Buiter says above, it’s simply deficit financing. The government prints one paper liability and buys it from itself with another paper liability that the government also prints.

Sound familiar? It’s called QE.

The only difference is who the bonds are bought from. With QE, the central bank buys in the secondary market in an absurdly transparent attempt to pretend like there’s some degree of separation between the central bank and the government.

In so-called “helicopter money,” the central bank simply drops the bullshit facade (pardon the language) and buys directly from the government. But it’s all deficit financing. Need proof? Just compare changes in government deficits to the changes in bank reserves (i.e. where QE shows up) as shown in the table below.

Below, find a hilariously frank assessment from Deutsche Bank who basically asks, “why are we even talking about this as though we haven’t been financing deficits for years?”

*  *  *

From Deutsche Bank

The argument that monetary easing has run its course and it is time to enact fiscal stimulus is starting to be heard around the world. The most eye-catching of such views is a call to deploy ‘helicopter money’, which we define as monetary financing of fiscal deficit. However, this argument is misleading. Surely this has already been implemented in many developed countries through QE. Why bring it up now despite it has been already deployed?

Figure 16 compares the cumulative central government fiscal surplus/deficit of developed countries over 2008- 15 (A) and the cumulative increase in the bank reserves portion of the monetary base (= almost the equivalent of the BoJ current account; (B)) over the same period. In Japan, for example, the cumulative increase in fiscal deficit for this period reached ¥225trn, while bank reserves increased by a cumulative ¥239trn. Thus, the increase in bank reserves exceeded the total fiscal deficit and the degree to which monetary policy financed the fiscal deficit (B/A)*(-1)) reached 106% (more than 100%). All the other countries, excluding Australia, Canada, and Norway, are already implementing on a set scale monetary financing of fiscal deficit, albeit not on the same scale as Japan. The degree of monetary financing is 82% in Sweden, 60% in the UK, 35% in the US, 26% in Denmark, and 16% in the Euro area. The most extreme case is Switzerland, where despite a fiscal surplus, the central bank has increased bank reserves 13.7 times greater than its fiscal surplus. Helicopter money has already been deployed in many countries. The reason that inflation is not rising in these countries despite helicopter money is that the currency (or monetary) regime has changed from a fiat money regime to a de-facto quasi-hard currency regime, the latter of which does not allow credit creation. Naturally, expanding the scale of helicopter money is possible in most of the countries.

A more extreme helicopter money argument is to request that the central bank altruistically not accept an equal value of financial assets (such as government debt) in exchange for central bank debt, which would in turn lower the net worth of the central bank, possibly into insolvency. However, this is mere academic theoretical brain-storming; in reality, we think a central bank that would seriously accept this does not exist.

*  *  *

So the next step isn’t “helicopter money”, where that means monetary financing of the deficit. That’s already happened.

The next step is pushing central banks into insolvency by making them fork over more cash to the government than the face value of the bonds they receive. While Deutsche doesn’t think such a central bank exists, we think otherwise, especially considering the fact that if the interest rate the banks pay on reserves rises while the average coupon on the banks’ bond holdings doesn’t, negative equity is already in the cards.

And besides, the ECB is buying bonds that guarantee losses if held to maturity. So please, don’t tell us about what central banks would “seriously consider.”

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Three weeks ago Morgan Stanley did something unthinkable: it admitted the truth that in this centrally-planned “bizarro world” its “Advice Has Been Horrendous” explaining this revelation as follows: “for those who follow our portfolio, we did quite well over the five years from 2011-2015. But, our portfolio just had its worst month in 61 months in January, and things have not improved in February. The market is down more than we thought it would be. Our biggest sector bet has been financials (particularly credit cards). As an investor recently said to us at a conference, “I am doing a lot of things, just nothing with confidence”. Doing the opposite of what we recommended would have been better. Bizarro World. Or at least hopefully not the real world.“

Condolences: when central banks managed to push markets higher, nobody complained, but now that things have… changed, everyone is suddenly utterly confused.

Today Morgan Stanley’s equity strategist Adam Parker follows up with “When You Think of Something, Do the Opposite.” This is what he says:

Risk management isn’t easy. Some investors we talk to do it extremely quantitatively, some investors do it in their head. Neither seems to be that successful lately. The new consensus market outlook is that we will chop around a lot, but end up nowhere over the next year. That’s assuredly an upgrade from where sentiment was on February 11, the market lows. It’s amazing how higher prices themselves so dramatically alter the consensus outlook.

Actually it’s not amazing at all: it is very well known to central bankers the world throughout. Parker goes on:

Today’s consensus seems to be that the market goes up and down mid-to-high single digit increments in short but pretty volatile spurts, and ultimately ends up relatively flat six to 12 months from now. That means that we should feel worse now than we did a few weeks ago – not better, because the underlying fundamentals haven’t really moved that much but the market has. On top of this perception of a choppy market headed to nowhere, the consensus is also that the probability of the bear case is greater than the probability of the bull case, meaning the probability of a downward slope to this choppy range is material. This is even more of a reason to be a bit more cautious than a few weeks ago. Yet, sentiment is clearly more positive. People are asking if they should take more risk now, but they were more negative last month. If the consensus is right that we will chop up and down – and we have some sympathy for this sentiment – then by the time we feel a little better, we should take off risk, not add some. Maybe you should do the opposite of what you think you should do. That’s the new risk management.

What is most ironic is that Parker appears to not have taken his own advice, and as he says “We are recommending that investors overweight utilities, health care, financials, and discretionary and underweight technology, staples, and energy.”

 

Of course, those who have been short energy since the bank’s earlier “epiphany” have been carted out feet first, as MS also admits: “Year-to-date, our portfolio has underperformed its benchmark by 240bps”

Yes Adam, one day the market may make sense, but not yet in the words of Gladiator: “Not yet.”

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So did the G-20 decide that coordinated buying of crude oil was “unequivocally good” for the world’s economy stock markets?

Tick-for-Tick…

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Submitted by Jeffrey Moore via GlobalRiskInsights.com,

In the 14^th century, the Medici family of Florence began its rise to prominence, investing profits from a thriving textile trade to fund what would become the largest banking institution in Europe.  The success of the legendary banking family helped to usher in the Italian Renaissance and thus change the world. Now, Italian banks seem poised to alter the world yet again.

Shares of Italy’s largest financial institutions have plummeted in the opening months of 2016 as piles of bad debt on their balance sheets become too high to ignore.  Amid all of the risks facing EU members in 2016, the risk of contagion from Italy’s troubled banks poses the greatest threat to the world’s already burdened financial system.

At the core of the issue is the concerning level of Non-Performing Loans (NPL’s) on banks’ books, with estimates ranging from 17% to 21% of total lending.  This amounts to approximately €200 billion of NPL’s, or 12% of Italy’s GDP.  Moreover, in some cases, bad loans make up an alarming 30% of individual banks’ balance sheets.

The red flags initially attracted the attention of the European Central Bank (ECB), prompting an official inquiry that investors viewed as a flashing ‘sell signal.’  Shares of Italian banking companies lost more than 25% in the first several weeks of the year.

Though markets have pared losses in the last few weeks, March has brought renewed concern for the health of Italy’s financial sector.  Adding more worries to fuel the fire, on Friday the ECB demanded that one such troubled Italian bank, Banca Carige SpA, provide new strategic plans and additional funding in order to bolster its balance sheet and meet supervisory requirements by the end of the month.  The news sent bank shares on yet another swoon, prompting trading halts on several as the volatility triggered maximum loss ‘circuit breakers.’

A rock and a hard place

Initially, Italy proposed setting up a ‘bad bank’ solution, in which troubled institutions could off-load their NPL’s into a separate state backed entity that would manage the assets while insulating the sector at large from the damaging effects of non-performance.  However, in an effort to protect taxpayers from socialized losses, new European Union rules now ban the use of state aid to bail out banks.

Instead of an overt ‘bail-out’, the most recent agreement Italy has reached with the EU constitutes a ‘bail-in’.  In this agreement, banks will be allowed to cleanse their balance sheets by packaging the NPL’s and selling them to investors, along with enticing government guarantees for the least risky portions of the debt.  The catch?  The securities must be priced at market rates.

Mark-to-market rates for Italy’s NPL’s could be anywhere from 20%-50% below current listed value, representing steep losses for bondholders and uncomfortable write downs for the banks.  This solution already resulted in such losses for bondholders in a 2015 ‘bail-in’ of four small Italian banks.

Those losses are not limited to financial institutions either.  Rather, retail investors, or individual Italians, own significant portions of these debts as retirement savings.  Citizens depending on these investments don’t have the luxury of financial engineering to make ends meet.  Even the best ‘solution’ risks widespread financial suffering.

Italy is no Greece – it’s worse

Some have compared the risk of an escalating financial crisis in Italy to the seemingly perennial debt crisis in Greece that has ravaged European markets and tested European unity several times since 2008 as investors and EU members alike feared uncontrollable contagion. This has resulted in the multiple EU bail outs granted since then.

However, judging by the numbers it is clear that the financial risks posed by Italy are not comparable to Greece – they are far worse.

While Greece holds the top spot in the EU for the worst debt-to-GDP ratio, Italy comes in second place with a debt-to-GDP ratio greater than 132% according to Eurostat.

So what makes Italy so much worse?  While Greece has more than once brought the global financial markets to the brink, it is only the 44^th largest economy in the world.  Italy represents the 8^th largest economy in the world.

A deteriorating financial crisis in Italy could risk repercussions across the EU exponentially greater than those spurred by Greece.  The ripple effects of market turmoil and the potential for dangerous precedents being set by EU authorities in panicked response to that turmoil, could ignite yet more latent financial vulnerabilities in fragile EU members such as Spain and Portugal.

Such contagion should concern investors regardless of political assurances.  In 2008, then Federal Reserve Chairman Ben Bernanke infamously comforted inquiring congressmen when he stated that the crumbling subprime mortgage securities would be contained and posed no threat of contagion to markets overall.  The 2008 Financial Crisis, 50% market corrections, and the Great Recession ensued.

Could Italy represent the ‘subprime spark’ of 2016?  Currently, authorities assure the public that the banks are well capitalized and, though it may take some time, solutions will be realized.  Italian Prime Minister Renzi attempted to allay concerns after the recently struck deal with the EU, telling reporters that, “The situation is much less serious than the market thinks.”

If recent history is any indication, observers and investors should greet such statements by politicians with considerable caution.  In remarks during heightened concern over the Greek crisis in 2011, current European Commission President and then Prime Minister of Luxembourg, Jean-Claude Junker, stated “When it becomes serious, you have to lie.”

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Reports indicate that some of the stolen funds were traced to the Philippines, but given what we know about the “Cyber Axis of Evil,” we can only suspect it was Iranians, Chinese, or the criminal/military mastermind Kim Jong-Un who was behind the scam, but whatever the case, someone, somewhere, hacked into Bangladesh’s central bank on February 5.

According to Reuters, “some of the funds” have been recovered, but the bank didn’t initially say how much or how much was initially stolen. We suppose that theoretically it could have been a rather large sum, as the country has around $26 billion in FX reserves on hand:

But just moments ago we learned from the AFP that the amount lost was around $100 million. “Some of the money was then illegally transferred online to the Philippines and Sri Lanka, a central bank official told AFP on condition of anonymity.” 

“The bank reported that the USD 100 million was leaked into the Philippine banking system, sold to a black market foreign exchange broker and then transferred to at least three local casinos,” AFP continues, adding that “the amount was later sold back to the money broker and moved out to overseas accounts within days.”

And here’s the punchline: According to AFP, Chinese hackers have been blamed and the money was stolen from accounts held at the New York Fed…

(“They stole about this much, I’d say”)

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