Month: July 2020

A routine training mission went horribly wrong late Tuesday after a General Dynamics F-16 Fighting Falcon crashed at Shaw Air Force Base in South Carolina.

Shaw Air Force Base officials announced early Wednesday morning that the pilot had died during the accident.

Base officials say an Air Force F-16CM Fighting Falcon assigned to the 20th Fighter Wing crashed around 2330ET while on a “routine training mission.” The crash is under investigation, and there was no official word on the cause. 

Emergency crews on the runway at Shaw Air Force Base after a F16 crashed Tuesday night. The pilot was taken to a nearby hospital for treatment. pic.twitter.com/umSpNMRV3G

— JR Berry WLTX 🇺🇸 (@JRBerryWLTX) July 1, 2020

A video surfaced on Facebook shows what appears to be the crash site within the airbase, presumably on the taxiway or runway. In the distance, emergency crews can be seen deploying water cannons to contain the fiery crash that engulfed the fighter jet. 

The airbase is located about 8.5 miles west-northwest of downtown Sumter. It’s home to the 20th Fighter Wing, which is always combat-ready. 

This isn’t the first costly (in terms of money and/or lives) training accident in recent months. Back in May, a Lockheed Martin F-35 Lightning II and Lockheed Martin F-22 Raptor were lost during two separate training missions in Florida that both went awry.

Authored by Huw van Steenis via The Financial Times,

The scandal at Wirecard has not only exposed a multibillion-dollar fraud in the accounts and profound failures of oversight. It has also raised fresh questions of whether payments regulation in Europe has kept pace with the huge changes in the industry.

Once a sleepy arm of heavily regulated banks, the payments sector is being transformed by technological innovations, new legislation, new players and shifts in customer habits. Little wonder technology and payment-processing companies and banks are all vying to grab a share of the large and fast-growing market for digital payments.

Modern payment chains consist of an increasing number of companies that are interdependent but do not always have shared interests. They may be under the supervision of various authorities or even under no supervision at all.

That’s why last year my review of financial services for the Bank of England argued for a cross-authority review of payments regulation to reflect the shifting risks and gaps. The Wirecard debacle makes urgent action essential. 

Technology and regulation have driven an unbundling of payments that historically were done under the roof of a regulated bank. The EU is especially vulnerable in this regard because it has been explicitly trying to break banks’ monopoly on payments. In addition, many European banks have raised capital by selling the parts of their businesses that work with retailers who want to accept cards.

This creates a challenge for policymakers who must decide which regulations should apply to those businesses while keeping a competitive system. Simon Gleeson of Clifford Chance argues in The Legal Concept of Money that a regulatory paradigm shift is needed; from an approach focused on entities to one based on activities.

A key lesson from the 2008 financial crisis was that some of the systemic importance of banks came from their function as payments providers to the real economy. If payments are systemic, then the largest payment companies must also be systemic once they exceed a certain size. Systemic companies must have appropriate oversight aimed at ensuring their resilience and operational continuity. It may not matter that a new payments company can get started with initial capital of just €50,000 and some insurance, but it does matter if additional oversight and systemic requirements do not kick in as the business becomes more important.   

Some jurisdictions are leading the way. Singapore has recently introduced a three-tiered regulation for payment companies, which encourages innovation in smaller businesses, but imposes appropriate oversight on larger ones. Since the crisis, regulators have started forcing banks and clearinghouses to write living wills to govern how they could be wound down in a crisis. That requirement should now be applied to payments companies that are deemed systemic, with clear segregation of funds to ensure smooth transitions and alternatives for businesses and consumers. 

In addition, the resilience of payments systems and their linkages should be tested with cyber penetration exercises. Such measures would make it easier for regulators to determine which companies are critical, and where there should be a pre-agreed plan in place of how they can step in for each other.

As payments data becomes increasingly valuable, we need to revise data-sharing rules. The EU’s second payments directive has created an unlevel playing field where banks are obliged to give customer data to unregulated businesses. Moreover, the liability when things go wrong can often rebound to the banks. Ana Botín, group chief executive of Santander, is right to argue that PSD2 should be amended to treat everyone involved in this activity the same way. 

Digital payments innovation brings huge benefits to customers and businesses. The pandemic is accelerating our use of electronic payments and digital wallets. As a result, an even larger proportion of payments is likely to take place outside the tightly regulated perimeter of financial services. Wirecard’s bankruptcy underscores the urgency of next-generation payments regulation.

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The writer, a former adviser to the governor of the Bank of England, chairs the sustainable finance committee at UBS

Global mergers and acquisitions activity fell to its lowest levels in more than a decade in 1H20, as paralyzed dealmakers were unwilling to explore new opportunities as uncertainty plagued capital markets. 

Data compiled by Bloomberg shows the value of M&A activity plunged 50% to $1 trillion in the first half from the year-earlier, marking the slowest period in dealmaking since 2012.

The first half in global capital markets was chaos – lockdowns and virus pandemic crippled supply chains and crushed consumers that will likely result in a recovery phase over several years. Sentiment shifted by mid-March, only after a rescue effort led by Fed, ECB, BOJ, and PBOC, slashing interest rates to zero and injecting trillions of dollars into global markets to arrest extreme volatility. 

During times of extreme volatility, dealmaking is usually sidelined as companies protect balance sheets to weather a downturn. 

The biggest plunge in M&A activity was seen in the Americas, where the value of deals collapsed 69% in 1H20. 

While every major industry has been hurt, the financial sector fared better than most. It was boosted by insurance brokerage Aon Plc’s $30 billion offer for Willis Towers Watson Plc and Morgan Stanley’s proposed $13 billion acquisition of E*Trade Financial Corp. The top three advisers on deals targeting the Americas so far in 2020 were Morgan Stanley, Goldman Sachs Group Inc., and JPMorgan Chase & Co. – Bloomberg.

 

M&A activity in Europe, the Middle East, and Africa was down 32% during the period. 

Large transactions that helped prevent a more dramatic drop include the $19 billion leveraged buyout of Thyssenkrupp AG’s elevator unit by Advent International and Cinven. There was also a recent flurry of activity in the Middle East, including Abu Dhabi’s sale of a $10.1 billion stake in its gas pipeline network that ranks as the biggest infrastructure transaction of the year. Goldman Sachs, JPMorgan and Rothschild & Co. were the busiest advisers on EMEA deals. – Bloomberg

 

The Asia Pacific region fared the best, M&A activity slipped 7%. 

The technology, media and telecommunications industry reported a 13% increase, helped by Indian billionaire Mukesh Ambani’s digital arm attracting $15 billion of investments from the likes of Facebook Inc. and KKR & Co. Another landmark transaction was Tesco Plc’s sale of Asian businesses to Thai billionaire Dhanin Chearavanont for more than $10 billion. The most active banks on deals in the region were Morgan Stanley, HSBC Holdings Plc and JPMorgan. – Bloomberg

Readers may recall, the global M&A bust was occurring well before the virus pandemic. As we noted in October 2020, “WeWork’s catastrophic failed IPO had damaged capital market sentiment” – likely the markings of an early top. 

We also said back then: “A slowdown in M&A deals is an ominous sign that Wall Street banks will see declining revenues in the quarters ahead.” 

With that being said, depressed M&A activity this year suggests a V-shaped recovery is not possible in the second half of the year. 

Authored by Paul Joseph Watson via Summit News,

More racist tweets by Cambridge University Professor Priyamvada Gopal have been unearthed, including one in which she spoke about her urge to “kneecap white men.”

Gopal caused controversy last week when she tweeted “white lives don’t matter,” prompting a petition demanding she be fired. However, Cambridge University responded by promoting her to a full professorship, despite the fact that the tweet was censored by Twitter for hate speech.

The media’s reaction was to portray Gopal as the victim of bullying while feigning infinitely greater outrage over a “white lives matter” banner that was flown over a soccer match in Manchester.

More hateful tweets have now been discovered, including one discussion where Gopal states, “I resist urges to kneecap white men every day. So, no **I** am the hero.”

Can @Cambridge_Uni please recognise that this is completely unacceptable and indefensible? How are her students supposed to feel safe? pic.twitter.com/Av6TPHWx0b

— Emma Webb (@Emma_A_Webb) June 29, 2020

“Can @Cambridge_Uni please recognise that this is completely unacceptable and indefensible? How are her students supposed to feel safe?” asked Emma Webb.

“She’s racist. I think we need to stop this dumbass spiel that minorities cannot be racist because they absolutely can. She is racist and is getting away with because she’s not white. That’s just the fact of the matter,” remarked Dominique Samuels.

She’s racist. I think we need to stop this dumbass spiel that minorities cannot be racist because they absolutely can. She is racist and is getting away with because she’s not white. That’s just the fact of the matter.

— Dominique Samuels 🇬🇧 (@dominiquetaegon) June 29, 2020

Maybe these messages will lead to another petition demanding Gopal’s removal. The first one was deleted by Change.org after receiving over 20,000 signatures.

Cambridge University has stood by Gopal despite previously dismissing Noah Carl after 500 academics signed a letter challenging Carl’s research on race and intelligence.

The institution also previously rescinded its offer of a visiting fellowship to Jordan Peterson after a woke mob complained about his stance on political correctness and after he appeared in a photograph with a man wearing a t-shirt that said “I’m a proud Islamophobe.”

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It looked like the U.S. had reached the peak of its coronavirus infections on April 24 when it experienced 36,738 new daily cases, a figure that fell to 17,618 by May 11. Back then, it looked like the U.S. had put the worst of the pandemic behind it and President Trump consistently pressed for the economy to be reopened. While testifying in front of the Senate in mid May, Dr. Anthony Fauci, the top U.S. infectious disease expert, cautioned against reopening too early, stating that the virus could spiral out of control resulting in increased suffering and death as well as a setback on the road to economic recovery.

On June 26, the U.S. reported 45,300 new daily infections and at least 16 states have either paused of backtracked on reopening their economies. And as Statista’s Niall McCarthy notes, the push to reopen led to a debate about whether it was better to to save lives and incur economic damage or press on with reopening without taking precautions to keep people safe.

Most countries around the world adopted the former strategy with Italy, Spain, France and Germany among those waiting until the infection rate dropped substantially so that effective testing, contact tracing and isolation strategies could be implemented. All of those countries are now reaping the benefits of that approach, opening up their economies in time for the busy summer holiday season.

You will find more infographics at Statista

Edelman analyzed public attitudes to both approaches in a Spring Update to their Trust Barometer. Out of the 13,200 respondents polled across 11 countries, 67 percent agreed that the government should save as many lives as possible, even if it means the economy will sustain more damage and recover more slowly. 33 percent of respondents said it is becoming more important for the government to save jobs and restart the economy than to take every precaution possible to keep people safe from the virus.

On a country-by-country basis, Japan had the highest proportion of people valuing lives over economic recovery at 76 percent. Elsewhere, 66 percent of Americans say that saving lives should be the government’s priority while 34 percent think the government should focus on saving jobs.

In China, where the coronavirus intitially took hold, 56 percent of respondents said the authorities should focus on saving people while 44 percent want the economy reopened, regardless of the impact on citizens.

Authored by Yanis Varoufakis via Project Syndicate,

The European Union’s proposed recovery fund to counter the pandemic’s economic fallout seems destined to leave the majority in every member state worse off. Finance will again be protected, if badly, while workers are left to foot the bill through new rounds of austerity.

The euro crisis that erupted a decade ago has long been portrayed as a clash between Europe’s frugal North and profligate South. In fact, at its heart was a fierce class war that left Europe, including its capitalists, much weakened relative to the United States and China. Worse still, the European Union’s response to the pandemic, including the EU recovery fund currently under deliberation, is bound to intensify this class war, and deal another blow to Europe’s socioeconomic model.

If we have learned anything in recent decades, it is the pointlessness of focusing on any country’s economy in isolation. Once upon a time, when money moved between countries mostly to finance trade, and most consumption spending benefited domestic producers, the strengths and weaknesses of a national economy could be separately assessed. Not anymore. Today, the weaknesses of, say, China and Germany are intertwined with those of countries like the US and Greece.

The unshackling of finance in the early 1980s, following the elimination of capital controls left over from the Bretton Woods system, enabled enormous trade imbalances to be funded by rivers of money created privately via financial engineering. As the US shifted from a trade surplus to a massive deficit, its hegemony grew. Its imports maintain global demand and are financed by the inflows of foreigners’ profits that pour into Wall Street.

This strange recycling process is managed by the world’s de facto central bank, the US Federal Reserve. And maintaining such an impressive creation – a permanently imbalanced global system – necessitates the constant intensification of class war in deficit and surplus countries alike.

Deficit countries are all alike in one important sense: whether powerful like the US, or weak like Greece, they are condemned to generate debt bubbles as their workers helplessly watch industrial areas morph into rustbelts. Once the bubbles burst, workers in the Midwest or the Peloponnese face debt bondage and plummeting living standards.

Although surplus countries, too, are characterized by class warfare against workers, they differ significantly from one another. Consider China and Germany. Both feature large trade surpluses with the US and the rest of Europe. Both repress their workers’ income and wealth. The main difference between them is that China maintains huge levels of investment through a domestic credit bubble, while Germany’s corporations invest much less and rely on credit bubbles in the rest of the eurozone.

The euro crisis was never a clash between the Germans and the Greeks (shorthand for the fabled North-South clash). Instead, it stemmed from an intensification of class war within Germany and within Greece at the hands of an oligarchy-without-frontiers living off financial flows.

For example, when the Greek state went bankrupt in 2010, the austerity imposed on most of the Greek population did wonders to restrict investment in Greece. But it did the same in Germany, indirectly repressing German wages at a time when the European Central Bank’s money-printing was sending share prices (and German directors’ bonuses) through the roof.

Class warfare is arguably more brutal in China and the US than it is in Europe. But Europe’s lack of a political union ensures that its class war verges on being pointless, even from the capitalists’ perspective.

Evidence that German capitalists squandered the wealth extracted from the EU’s working classes is not hard to find. The euro crisis caused a massive 7% devaluation of the surpluses that the German private sector had accumulated from 1999 onwards, because capital owners had no alternative but to lend these trillions to foreigners whose subsequent distress led to large losses.

This is not only a German problem. It is a condition afflicting the EU’s other surplus countries as well. The German newspaper Handelsblatt recently revealed a notable reversal. Whereas in 2007, EU corporations earned around €100 billion ($113 billion) more than their US counterparts, in 2019 the situation was inverted.

Moreover, this is an accelerating trend. In 2019, corporate earnings rose 50% faster in the US than in Europe. And US corporate earnings are expected to suffer less from the pandemic-induced recession, falling 20% in 2020, compared to 33% in Europe.

The gist of Europe’s conundrum is that, while it is a surplus economy, its fragmentation ensures that the income losses of German and Greek workers do not even become sustainable profits for Europe’s capitalists. In short, behind the narrative of northern frugality lurks the specter of wasted exploitation.

Reports that COVID-19 caused the EU to raise its game are grossly exaggerated. The quiet death of European debt mutualization guarantees that the gigantic increase in national budget deficits will be followed by equally sizeable austerity in every country. In other words, the class war that has already eroded most people’s incomes will intensify. “But what about the proposed €750 billion recovery fund?” one might ask. “Is the agreement to issue common debt not a breakthrough?”

Yes and no. Common debt instruments are a necessary but insufficient condition for ameliorating the intensified class war. To play a progressive role, common debt must fund the weaker households and firms across the common economic area: in Germany as well as in Greece. And it must do so automatically, without reliance on the kindness of the local oligarchs. It must operate like an automated recycling mechanism that shifts surpluses to those in deficit within every town, region, and state. In the US, for example, food stamps and social security payments support the weak in California and in Missouri, while shifting net resources from California to Missouri – and all without any involvement by state governors or local bureaucrats.

By contrast, the EU recovery fund’s fixed allocation to member states will turn them against one another, as the fixed sum to be given to, say, Italy or Greece is portrayed as a tax on Germany’s working class. Moreover, the idea is to transfer the funds to national governments, effectively entrusting the local oligarchy with the task of distributing them.

Strengthening the solidarity of Europe’s oligarchs is not a good strategy for empowering Europe’s majority. Quite the contrary. Any “recovery” based on such a formula will short-change almost all Europeans and push the majority into deeper despair.