Monday, 29 February 2016

Crash Coming.

Baltic Dry Index. 327 +02        Brent Crude 35.53

LIR Gold Target in 2019: $30,000.  Revised due to QE programs.

Brexit odds checker.

Brexit Quote of the Day.
“Cameron: Don't be so humble, you're not that great.”

With apologies to Golda Mier.

There are lies, damned lies, and lying fiat money. Fiat money, communist money, isn’t real money at all. It has no “store of value.” It was a scam back in 1971, when President Nixon devalued the world into it, in the Great Nixonian Error of fiat money, August 15, 1971. It’s still a scam now, only now the Great Nixonian Error is breaking down. The Great American Ponzi Scheme is in the final act. The benefits of fiat money were all front loaded, and long ago dissipated in never ending war, socialist bribes to voters, special interests, and political contributors. On fiat money, the whole world ran up unrepayable debt that is now coming to an end. The final country to go “all-in” was China with its massive malinvestment building boom in the last decade and up to last year.

But tomorrow will not be like today, which was like yesterday. The Great Nixonian Error is about to end in a massive bust.  Leveraged Casino Capitalism has already started to fail, and our panicky central banksters know that they’re all out of ideas, road and talent. Leverage works against the casino gamblers on the way down. Not for nothing has wobbly Deutsche Bank suddenly decided it’s time to head for the hills and buy gold. In this case getting in early beats getting in late. Unlike electronic dollars, there is only so much gold in the world and much of it has been illegally hypothecated. “Corzined” if you prefer.  In disconnect from reality stock markets, getting out early always beats getting carried out last.

Below, when the Great Nixonian Error of fiat money, house of cards, seriously started to fall.

At the G-10 Rome meetings held in late 1971 Connally proclaimed to his astonished counterparts, "The dollar is our currency, but it's your problem."

Nixon’s Treasury Secretary John Connally.

It’s everyone’s problem now.

Deutsche Bank: It’s time to buy gold

Leslie Shaffer | @LeslieShaffer1 Friday, 26 Feb 2016 | 4:01 AM ET
Gold is still expensive, but rising economic risks and market turmoil mean investors should buy it for insurance, Deutsche Bank said Friday.

The recovery since the global and European financial crises had put the price of gold under some pressure. The yellow metal, which some analysts view as a safe haven or as a protection against rising inflation, typically underperforms during periods when the economy is growing or inflation is low. However, in a note issued Friday, the German Bank said economic signs are pointing in gold's favor.
"There are rising stresses in the global financial system; in particular the rising risk of a U.S. corporate default cycle and the risk of a sharp one-off renminbi devaluation due to the sharp increase in China's capital outflows," Deutsche Bank added."Buying some gold as 'insurance' is warranted."
----"A bit like insurance, which is often a grudge purchase for many, some investors may balk at the current levels," it said. "We would, however, argue that given the plethora of negative deposit rates globally, the holding cost of gold is now negligible in many jurisdictions, and therefore gold deserves to be trading at elevated levels versus many other assets."

Day Of Reckoning Imminent

Tyler Durden
So goes the dollar – or any paper money – when it’s not backed by gold or some other commodity that can’t be created at will.  For without a stable base to hold its supply in check, what’s a dollar anyway?
It’s abstract, indefinite, and arbitrary.  It can be created out of thin air at the whims of the Federal Reserve.  A pocket full of dollars one day and you can buy the things you want and need.  On the next day these same dollars can revert to their intrinsic value…fire tinder or toilet paper.
Gold to paper currency conversion once limited the Federal Reserve’s money creation games.  But that was before the U.S. severed the dollar’s relationship to gold and commenced the dollar reserve standard.  Prior to 1971, a foreign bank could exchange $35 with the U.S. Treasury for an ounce of gold.  After that, when foreign banks handed the U.S. Treasury $35, they received $35 in exchange.
Nixon announces that he will “temporarily” default on the convertibility of the dollar into gold. One cannot show this video often enough, because it is such an excellent example of a government official lying as soon as he opens his mouth, with every single sentence he utters. It also betrays a frightening degree of economic ignorance.
Unlike gold, which has no debt obligation or counterparty risk, dollars can expire worthless when their promissory obligation is defaulted on.  Alternatively, they can be inflated to nothing when a desperate Federal Reserve moves to dropping suitcases of money from helicopters over major urban centers.

If this helicopter drop concept is new to you let me assure you that it is no joke.  In fact, this is what former Federal Reserve Chairman, Ben S, Bernanke, said the Fed would do in a time of financial crisis.  He laid it out very clearly in his November 21, 2002 speech, Deflation: Making Sure “It” Doesn’t Happen Here. Then as Federal Reserve Governor (now former Chairman), Bernanke had the following to say…

“The U.S. Government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.  By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. Government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the price in dollars of those goods and services.”

Later in this same speech, Bernanke made reference to a “helicopter drop,” alluding to a central banker hovering in a helicopter – dropping suitcases full of money to individuals.

The dollar is our currency, but it’s your problem

October 2007 (Magazine)By Kevin Hebner

World economy stands on the cusp of another crash, warns Lord Mervyn King

7 February 2016 • 8:02pm
Former Bank of England Governor Lord Mervyn King has warned that the world is on the cusp of another crash because regulators’ have failed in their attempts to reform the financial system in the wake of the last crisis.

“Another crisis is certain, and the failure…to tackle the disequilibrium in the world economy makes it likely that it will come sooner rather than later,” Lord King says in his new book, the exclusive serialisation of which starts in The Telegraph this weekend.

Since the last crisis, “governments and regulators have been hyperactive at the national and international level” but “bankers and regulators have colluded in a self-defeating spiral of complexity”, he claims.

Lord King had a turbulent ten-year reign as Governor of Bank of England between 2003 and 2013 - a period in which he was at the heart of a £500bn bailout of Britain’s broken banking system in 2008 led by Chancellor Alistair Darling and Prime Minister Gordon Brown in response to the global crash.
As Governor of the Bank, Lord King was responsible for Britain’s interest rate policy and money supply. He says that Brown’s “tripartite” system of financial regulation, created in 1997 and comprising the Bank of England, the Treasury and the Financial Services Authority – failed to protect Britain’s financial system when the credit crunch struck in 2007.
---- Since the crisis, low interest rates have fuelled asset prices and a desperate search for yield, leaving central banks trapped “in a prisoner’s dilemma” unable to raise rates for fear of slowing growth and causing another downturn. However, short- term measures to maintain market confidence in the aftermath of the crisis has only perpetuated the underlying disequilibrium, Lord King argues..
“Only a fundamental rethink of how we...organise our system of money and banking will prevent a repetition of the crisis. Without reform of the financial system, another crisis is certain, and the failure…to tackle the disequilibrium in the world economy makes it likely that it will come sooner rather than later."

After G20 stalemate, focus turns to signs of growth momentum

Sat Feb 27, 2016 9:52am EST
Investors worried about the risk of a new global recession are hoping that data over the coming week will show that some momentum remains in the world economy, eight years into its slow recovery from the financial crisis.
The Group of 20 economies were unable to agree on a joint push for new stimulus measures at a meeting which ended on Saturday, turning attention instead to upcoming business surveys from China, Japan, Europe the United States.
Central banks in Europe and Japan may inject a little more stimulus into their economies later in March. But the Federal Reserve and the Bank of England look likely to sit tight for now, meaning hopes for a period of calm in the world's volatile financial markets lie largely with the indicators.
"It seems economic data will have to bear the burden of stabilizing sentiment," economists at Barclays said in a note to clients on Friday.
A first reading of inflation in February for the euro zone on Monday will help shape expectations of how much further below zero the European Central Bank is likely to push its deposit rate the following week.
Euro zone inflation picked up in January but is expected to have fallen back to zero in February, according to a Reuters poll of economists. ECONEZ
If there is also a weakening of the monthly purchasing manager indexes for Germany and other leading euro zone countries, the ECB may consider increasing its bond-buying program as well as cutting rates on March 10.
"There is a growing chance that the ECB will do more at its March meeting than simply lowering its deposit rate," Ralph Solveen, an economist at Commerzbank, said.
U.S. payrolls figures on Friday may help ease fears about the world's biggest economy, which appeared to stumble soon after the Federal Reserve felt confident enough to hike interest rates for the first time in nearly a decade in December.
Solid U.S. job growth and pay growth are seen as the best antidote to the upheaval in global financial markets which has hurt confidence and even raised questions about whether the United States was heading back into recession.

Arab States Face $94 Billion Debt Crunch on Oil Slump, HSBC Says

February 28, 2016 — 9:02 AM GMT
Gulf Cooperation Council countries may struggle to refinance $94 billion of debt in the next two years as the region faces slowing growth, rising rates and rating downgrades, according to HSBC Holdings Plc.

Oil-rich GCC states have to refinance $52 billion of bonds and $42 billion of syndicated loans, mostly in the United Arab Emirates and Qatar, HSBC said in an e-mailed report. The countries also face a fiscal and current account deficit of $395 billion over the period, it said.

Expectations that these funding gaps "will be part financed through the sale of sovereign U.S. dollar debt will complicate efforts to refinance existing paper that matures over 2016 and 2017," Simon Williams, HSBC’s chief economist for the Middle East, said in the report. "With the Gulf acting as a single credit market, the refinancing challenge will likely be much more broadly felt" and "compounded by tightening regional liquidity, rising rates and recent downgrades," he said.

GCC states, which collectively produce about a quarter of the world’s oil, are taking unprecedented measures to shore up their public finances as crude prices struggle to rebound from the lowest levels in 12 years. The countries, which include Saudi Arabia and Oman, have also been hit by a series of rating cuts, while billions of dollars have been drained from the region’s banking system.

Gulf countries have about $610 billion outstanding in FX-denominated bonds and syndicated loans, HSBC said. This includes financial and corporate debt, as well as sovereign debt, mainly in the U.A.E., Bahrain and Qatar, it said.
We end with democracy British, perfidious Albion, style. Brexit looks better with each passing day. Time to take back democracy from the Bilderberger insider elite. In the EUSSR, the eurocrats are getting their feelings hurt. That’ll be another 100 million euros in eurocrat benefits then.
Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof.

John Kenneth Galbraith

Nine deceptions in our history with the EU

The strange pseudo-deal stitched up between David Cameron and his 27 EU colleagues is yet another example of the EU's smoke and mirrors

The key to understanding the unique system of government known as the “European Union” is that everything about it is based on smoke and mirrors, with nothing ever being quite what it is pretending to be. Of this, the strange little pseudo-deal stitched up between David Cameron and his 27 EU colleagues is only yet another example.

When, some years back, I co‑authored what I believe is still the most comprehensively researched history of the “European project”, nothing struck me more than how consistently it has, at every stage, been built on one deception after another, which is why the book was called The Great Deception. Here are nine of them.

1. How it all began

To this day, the European Commission website deliberately confuses two quite incompatible models for a future “United States of Europe” put forward after the Second World War. Its account starts with Winston Churchill’s call for a “United States of Europe” in 1946, which led two years later to the “intergovernmental” Council of Europe. But no one was more scornful of this than the Frenchman Jean Monnet, who had a wholly different model in mind, first conceived back in the Twenties. His “United States of Europe” would be centred on an entirely new kind of “supranational” government, able to overrule the vetoes of any of its individual member states. It was Monnet’s vision that won, through the “Schuman Declaration” he drafted in 1950. This led to the European Iron and Steel Community, with Monnet at its head, which even then he explicitly hailed as the “government of Europe”.

2. 'Switch-sell’ in Rome

When Monnet’s first bid to move straight to the complete political union of its original six members was rebuffed in 1954, he and his allies realised they could only achieve their real goal step by step. So they deliberately decided to conceal it, by pretending that they were only seeking to create a trading arrangement. But the treaty of Rome in 1957 did begin by declaring their intention to work for “ever-closer union”, and set up all the core institutions needed to run a future government of Europe – even though this was far more than was needed to administer what was sold as its headline purpose: the creation of just a “Common Market”.

3. Macmillan joins deceit

When, in 1961, Britain first applied to join “the Six”, Harold Macmillan and Edward Heath had been fully briefed by Monnet’s allies as to the project’s ultimate goal, full economic and political union. But papers released under the 30-year rule show that, at the end of June, the Cabinet accepted their urging that, for “presentational” reasons, this should not be revealed to the public or Parliament. British entry should be sold as being only to a “Common Market”, concerned just with trade and jobs.

9. Mr Cameron’s 'treaty’

Almost everything about Cameron’s “treaty” to give Britain a “special relationship” with the EU is yet again smoke and mirrors, not least the insistence that it is “legally binding and irreversible”. Under the Vienna Convention, a treaty is only valid when the signatories can guarantee delivery of what they have agreed. But in at least two respects, on economic governance and recognition that Britain is no longer bound to “ever closer union”, Cameron’s deal requires change to the EU treaties themselves. So it could only become “legally binding” after going through all the procedures now required for EU treaty change, depending on ratification by every member state, often involving referendums, any one of which could make Cameron’s “treaty” reversible.

Until then, Cameron’s little deal cannot conceivably be considered “legally binding”. To pretend otherwise is just another deception. But he may still get away with it, because no one will challenge him on it (Michael Gove’s claim that it could be reversed by the European Court of Justice is quite irrelevant).

Brussels bureaucrat: ‘We’re not bureaucrats!’

Juncker’s chief spokesperson takes exception at journalist’s description of his work.
By Paul Dallison 2/23/16, 5:04 PM CET Updated 2/24/16, 10:39 AM CET

A journalist who used the term “euro bureaucrats” received an ear-bashing from Jean-Claude Juncker’s chief spokesman Tuesday who said it was not an acceptable way to refer to “European civil servants.”
Margaritis Schinas, who heads the European Commission’s spokesperson’s service, took offense at a question from an Italian journalist during the daily midday briefing. The journalist asked Schinas about the behavior of Martin Selmayr, Juncker’s powerful chief of staff, who has been accused by officials in Rome of briefing against them.
The journalist asked if Selmayr’s alleged conduct was “in line with the duties of ‘euro bureaucrats,’ whose salaries are paid by European taxpayers.”
Schinas responded: “Thank you for repeating that we are bureaucrats in our faces. I have told you repeatedly that we do not like that term for the European civil service, for the many thousands of colleagues who work for the institutions. We do not think bureaucrat is the way to describe our job.”
“Each time you will use the term bureaucrat, I will answer back that we are civil servants working for the interests of all 28 member states.”
More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly.

Woody Allen.
At the Comex silver depositories Friday final figures were: Registered 24.79 Moz, Eligible 129.41 Moz, Total 154.20 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today back to the usual suspects again, the banksters. How these criminals hold on to their global banking licences is a mystery. Of course Citigroup is innocent until proven guilty in a court of law, but being American rather than Swiss or European, I suspect that this will never see the light of day in a US criminal court.

Citigroup Faces Fraud Suit Claiming $1.1 Billion in Losses

February 27, 2016 — 2:34 AM GMT Updated on February 27, 2016 — 6:11 PM GMT
Citigroup Inc. was sued for fraud by investors and creditors of a bankrupt Mexican oil services firm over claims they were harmed by a loan scheme that also led the bank to cut 2013 profit by $235 million and fire at least a dozen people.
Citigroup’s loans led to the 2014 collapse of the Mexican firm, Oceanografia SA, and caused Dutch lender Rabobank Groep, with investors and creditors, to lose at least $1.1 billion, according to the lawsuit filed Friday in Miami federal court. Rabobank and other investors separately filed a negligence suit in Delaware state court against auditor KPMG LLP. 
Citigroup’s Mexican subsidiary, Banamex, made short-term loans to Oceanografia, which did work for state-run Petroleos Mexicanos, or Pemex. In turn, Pemex repaid the bank. Citigroup Chief Executive Officer Michael Corbat said in February 2014 that $400 million of accounts receivable from Oceanografia were fraudulent. He said the bank was working with Mexican authorities and would find out “who perpetrated this despicable crime.”
Rabobank and the investors claim Citigroup conspired with Oceanografia to accept falsified work estimates even as the oil services firm became increasingly dependent on cash advances to survive. Those Citigroup loans propped up Oceanografia, while Pemex repaid the bank with millions of dollars in interest, according to the complaint.
“Intentional misconduct on the part of Wall Street banks -- including Citigroup specifically -- is far from unfamiliar,” according to the complaint. “Yet again, greed and dishonesty have victimized blameless businesses and investors.”
Mark Costiglio, a Citigroup spokesman, and Manuel Goncalves, a spokesman at KPMG, both declined to comment on the lawsuits. Quinn Emanuel Urguhart & Sullivan LLP, the law firm that filed the lawsuit, provided copies of the complaint. The filing couldn’t be independently confirmed in court records.
Citigroup has said in regulatory filings that it’s cooperating with an investigation by the U.S. Securities and Exchange Commission and a Justice Department request for information about the fraud. The SEC inquiry has included requests for documents and witness testimony, the bank said in a filing on Friday.  
Mexican authorities placed Oceanografia in bankruptcy and later charged several Citigroup employees with crimes, according to the complaint. None of the creditors who sued have collected money through the bankruptcy, according to the complaint.
The complaint includes claims that the bank violated the Racketeer Influenced and Corrupt Organization Act and engaged in fraud while breaching its fiduciary duty. It seeks compensatory and punitive damages.
----Oceanografia’s cash advance requests were subject to a two-step approval process by Citigroup to verify that documents submitted accurately reflected the terms of its contracts with Pemex, according to the complaint. In at least 166 cash requests, Citigroup didn’t satisfy either step, failing to detect falsified documents, according to the complaint.
In February 2014, Citigroup contacted Pemex to discuss the cash advances and learned about Oceanografia’s phony supporting documentation, according to the complaint.
With Pemex aware of this scheme, “Citigroup had no choice but to distance itself from and shift blame to Oceanografia including by becoming a whistle-blower and playing the victim,” according to the lawsuit. “However, Citigroup’s efforts to avoid responsibility are transparent.”

Solar  & Related Update.

 With events happening fast in the development of solar power and graphene, I’ve added this new section. Updates as they get reported. Is converting sunlight to usable cheap AC or DC energy mankind’s future from the 21st century onwards? DC? A quantum computer next?

Buffett: Wind and Solar Power Competition Challenges Utilities

February 27, 2016 — 9:45 PM GMT
Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., said subsidized wind and solar power in the U.S. may erode the economics of electric utilities that care little for efficiency.

The joke in the industry was that a utility was the only business that would automatically earn more money by redecorating the boss’s office,” Buffett wrote Saturday in his annual letter to shareholders. “Some utilities ran things accordingly. That’s all changing.”

Utilities across the country have been grappling with how to integrate wind farms and solar plants into their systems and business models. Cheap power from large-scale renewables has undercut the profitability of conventional electricity generation from coal and nuclear sources. In addition, rooftop solar panels have sapped sales for power distribution companies.

Berkshire is both a utility owner and a producer of electricity from renewable energy. After it pledged in July to almost double its $16 billion investment in renewables, its Nevada utility, NV Energy, persuaded state regulators to raise fees and cut credits for new home-solar customers. Nevada casino operators have tried to break away, saying they can buy cheaper power in the open market, including some from renewable sources.

High-Cost Utilities

“Tax credits, or other government-mandated help for renewables, may eventually erode the economics of the incumbent utility, particularly if it is a high-cost operator,” Buffett wrote Saturday. Berkshire Hathaway Energy’s track record of efficiency “leaves us particularly competitive in today’s market (and more important, in tomorrow’s as well).”

The company’s Iowa, Oregon and Utah utilities produce more power with fewer employees and a lower accident rate than before it bought them, Buffett said. The Iowa utility operated without a rate increase for 16 years, while average rates in the industry rose 44 percent, he said.

Berkshire’s pledge to spend another $15 billion on renewable-power development “will make great sense, both for the environment and for Berkshire’s economics,” he said. “It seems highly likely to me that climate change poses a major problem for the planet.”

The monthly Coppock Indicators finished January

DJIA: -06 Down. NASDAQ: +75 Down. SP500: -02 Down.  Both the DJIA and the S&P 500 have now turned negative.

Saturday, 27 February 2016

Weekend Update 27/02/2016 – Brexit Picks Up Steam.

Brexit Countdown Clock.

Brexit Quote of the Day.
“People might cite David Cameron as proof that you can be totally impervious to the effects of an Eton and Oxford education.”

With apologies to Senator Barney Frank.

Despite a plethora of Brexit scare stories by European vested interests and the disgraceful unprosecuted perverts at the BBC, the sun will stop shining in Britain if we leave the EUSSR, Germany will refuse to sell us Mercs and Beamers, Spain won’t allow in British tourists, France will ban Champagne sales, and on and on, Brexit is looking better and better and picking up unlikely converts, and all because of Cameron’s total failure to negotiate anything meaningful with the EUSSR. But first this news of irrelevance at the G-20.

Brexit and Refugees Join G-20 Worry List in Draft Communique

February 27, 2016 — 1:53 AM GMT Updated on February 27, 2016 — 5:32 AM GMT
The Group of 20 added a potential Brexit and an escalating refugee crisis to its long worry list, even as it argued recent market volatility didn’t reflect global growth momentum.

In a draft of the communique obtained by Bloomberg News, the G-20 members agreed to use monetary, fiscal and structural tools to boost growth and "calibrate and clearly communicate" their policies.

Underscoring concerns over the limitations of central bank-led stimulus, "monetary policy alone cannot lead to balanced growth," the document said.

Finance chiefs from the G-20 nations agreed to "consult closely" on foreign exchange markets, warning that excessive volatility can hurt financial and economic stability. The group promised to improve their monitoring of capital flows in an effort to identify potential risks sooner and reiterated past pledges to refrain from competitive devaluations.

"It doesn’t seem the meeting offers concrete, deliverable or coherent solutions to boost growth," said Raymond Yeung, senior economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. "I doubt whether it will have a meaningful impact on the market in the near term."

Steep losses on global stock markets and volatility in currencies this year fueled calls for G-20 members to do more to stoke economic growth and bolster stability. The International Monetary Fund last month trimmed its global growth projections and said 2016 would be a "year of great challenges."

Now back to Brexit. The Prime Minister’s campaign to Europe set out with very low expectations and triumphantly managed to exceed them.  The EU doomsters equate the EU with Europe. After Brexit Great Britain will still be in Europe, just thankfully not in the geriatric, wealth and jobs destroying, EUSSR.  Unlike Europe’s youth generation , Britain’s youth will at least have a chance at a job, and some wealth creation.

Below the latest Brexit developments.

Worse than the Japanese, at least worse looking, are the Germans, especially at pool-side. The larger the German body, the smaller the German bathing suit and the louder the German voice issuing German demands and German orders to everybody who doesn’t speak German….[But] this is nothing compared to the French on a tropical shore. A middle-aged, heterosexual, college-educated male wearing a Mickey Mouse t-shirt and a string-bikini bottom and carrying a purse — what else could it be but a vacationing Frenchman?

P.J. O’Rourke. Holidays From Hell.

If the arch-Europhile Lord Owen wants out of the EU, it should make us all stop and think

David Owen has weighed his own ideals against the lessons of history – and come to a stark conclusion

Many of those clamouring for Britain to leave the European Union have always loathed it. Not so David Owen. All of his political life, he has been a proud European – and has been prepared to stake his career on it. He resigned from Labour’s front bench in protest against its lack of commitment to the EU, then became foreign secretary when this was remedied. Later, after his party turned against the EU once again, he resigned to help set up the Social Democratic Party. He has always been a forceful critic of what he calls the “chauvinistic and unrealistic” idea that Britain can, or should, act alone.

So when he declares, now, that it’s time to leave the European Union, then his reasons are worth listening to. This is not the war cry of a Little Englander or a starry-eyed attempt to draw the sword of British sovereignty from the stone of Brussels. Lord Owen has carefully weighed his own pro-European ideals against the hard lessons of recent history: contrasting what the EU says with what it does. Just because it aims to promote unity, it’s hard to ignore that its policies have brought sado-austerity, scandalously high unemployment and the rise of the far-Right. So Lord Owen has become part of a group that may well decide this referendum: Europhiles for Brexit.

Michael Howard: David Cameron's reform bid has failed – it’s time to go

Exclusive: The man who helped Cameron become Conservative leader explains why, with a heavy heart, he must now oppose his former protegé

By Michael Howard 10:00PM GMT 25 Feb 2016
In 1975 I campaigned for the UK to remain in the European Economic Community. I had high hopes that it would benefit Britain and the other members. Ever since, and even today, my preference has been for the UK to remain a member of a genuinely and fundamentally reformed EU. That reform is necessary because the EEC has morphed into a European Union that is flawed and failing.

The EU’s fundamental flaw is its misconceived attempt to impose rigid uniformity on countries as different as Finland and Greece, Portugal and Germany. The project would have a much greater prospect of sustainable success if it introduced greater flexibility – if it gave its member states room to breathe.

I had hoped that when the Prime Minister announced his intention to commence negotiations for a new UK-EU relationship he might be able to achieve fundamental reform along these lines. When he spoke of the need for fundamental reform, I believe he may have had something of this kind in mind.

It is not his fault that those efforts met with failure. It is the fault of those EU leaders so mesmerised by their outdated ambition to create a country called Europe that they cannot contemplate any loosening of the ties which bind member states.

So the questions I have asked myself are these: has the prospect of fundamental reform finally been extinguished or is there still some way in which that can be achieved? And if there is to be no fundamental reform, is the UK better in or out?

There is only one thing that just might shake Europe’s leaders out of their complacency: the shock of a vote by the British people to leave.

The very facts that make it certain that the UK could thrive as an independent country – we are the fifth largest economy in the world, the most important military power in Europe and the country with by far the most stable and deep-rooted institutions – make us very valuable members of the EU. We would be sorely missed.

The EU is like the Titanic, and we need to jump off before it sinks

Gerard Lyons25 February 2016 • 6:00pm
The European Union is like the Titanic. Imagine being in Southampton harbour the day the Titanic set sail. Its size gave the impression of invincibility: safe and secure. It wasn’t. Despite receiving warnings of impending danger it didn’t change course, hit trouble and sank.

Because it is huge, some in the UK feel we would be safer and economically stronger in the EU. This is wrong. We now have the opportunity to jump ship to safety. An opportunity we are never likely to have again. Not a leap into the dark, but for those able to look ahead, a move to safety.

Brexit allows the UK to address directly the areas that the EU has rendered us rudderless in. These include returning sovereignty and having a meaningful immigration target that can be met. We can focus attention on what is needed for small firms and for ordinary workers across the whole country. Outside the EU we can position the UK to be outward looking.

The world economy is changing as never before. Globalisation, technological change and urbanisation mean countries need to adapt, be flexible and control their own destiny.  In the modern era, talk of marriage and divorce is wide of the mark. It may not be a conscious uncoupling or an amicable split but we would strive in our post-Brexit negotiation to have an open relationship with the EU while having a polyamorous one with other countries across the world.  The choice is between a global Britain and an inward-looking, insular EU.

And time may be about to run out on the EUSSR this year, whether John Bull stays or goes.

Man Who Called Emerging-Market Rout Has a Warning for the Bulls

February 25, 2016 — 5:05 PM GMT Updated on February 26, 2016 — 2:33 AM GMT
If John-Paul Smith is right, some of the world’s biggest investors are setting themselves up for a major disappointment.

The London-based strategist, one of few to anticipate the slump in emerging markets that began in 2011, sees no sign of a turnaround and says the current environment resembles that of the late 1990s, when crises in Southeast Asia and Russia roiled the entire asset class. His stance clashes with bullish pronouncements from money managers including BlackRock Inc., Franklin Templeton and Research Affiliates LLC -- an adviser to Pacific Investment Management Co. that predicts developing-nation assets could become the next “trade of a decade.”

While Smith lacks BlackRock’s trillions under management and Franklin Templeton’s global footprint, the founder of research firm Ecstrat Ltd. has a track record for getting it right on emerging markets. His consistently pessimistic outlook since late 2010 foreshadowed losses of more than 30 percent in the MSCI Emerging Markets Index, while he gave early warning of Russia’s 1998 stock-market crash as a strategist at Morgan Stanley in Moscow.

“If there is a historical analogy for emerging markets at the present time, it’s with the 1997-98 period,” Smith said in an e-mailed response to questions on Thursday.

He sees two major reasons for pessimism. The first is a lack of progress in reducing the state’s grip on developing-nation economies, a key part of his bearish thesis five years ago. Smith cites Brazil’s inability to move on from “state capitalism,” a model that’s helped plunge the economy into its worst recession in a century. He also worries about Russia, Turkey and Poland, where he says policy makers are moving in a more “authoritarian” direction.

Smith’s other big concern is China, where he predicts a financial crisis will strike as soon as this year. Nonperforming loans are poised to surge as borrowers pile on debt to repay their existing loans, he says, while companies face “big” asset writedowns as the economy slows and commodity prices sink.

“There is a significant possibility that China and Brazil, in particular, will have to undergo some form of economic or financial crises,” he said.

The worst kind of upward GDP revision — built on more inventories, less imports

Published: Feb 26, 2016 10:14 a.m. ET
WASHINGTON (MarketWatch) — The annual pace of U.S. economic growth in the fourth quarter was marked up slightly to 1%, but that was mainly because of a bigger stockpiling of inventories that could weigh on the economy in early 2016.

The latest snapshot of the economy’s fourth-quarter performance still reflects a slowdown in growth that set in during the waning months of 2015. The government last month initially reported that gross domestic product — the value of everything a nation produces — has expanded at 0.7% rate.

The “bottom line is that fourth-quarter GDP growth was still pretty modest,” said Paul Ashworth, chief U.S. economist at Capital Economics

The economy has also started out 2016 on a softer note — and the high level of inventories in the fourth quarter probably doesn’t help. Firms might have to cut back on production to get inventories back in line.

Oil crash: Halliburton slashes another 5,000 jobs

February 25, 2016: 5:11 PM ET
Halliburton (HAL) is cutting 8% of its workforce, or roughly 5,000 positions, the Houston energy company told CNNMoney on Thursday.

The new wave of job cuts will take place across the globe over the next several weeks.
It's the latest evidence of the crisis confronting the U.S. oil industry as crude prices have crashed to seven-year lows.

"Our industry has turned down faster than anyone ever expected," Halliburton CEO Dave Lesar and President Jeff Miller said in a memo to employees obtained by CNNMoney. The execs said it's now clear that business opportunities will be "much worse than anticipated" coming into the year.

The latest pink slips bring Halliburton's job cut tally to between 26,000 to 27,000 since employee headcount peaked in 2014, the company said.

Halliburton has also attempted to cope with cheap oil by consolidating facilities in 20 countries and closing down operations altogether in another two countries.

The oil downturn has sent Halliburton's profits plunging. Its stock price has lost more than half its value since mid-2014 when crude prices peaked.

Brexit Thought of the Week.

"Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be a more productive than energy devoted to patching leaks."

Warren Buffett.

We close for the weekend with some interesting thoughts from Harvard on China.

Urbanization with Chinese Characteristics? China’s Gamble for Modernization

by Kristen Looney and Meg Rithmire 18 Feb 2016
Harvard Business School Working Paper
 Urban China’s latest man-made disaster struck Shenzhen, a city of over 20 million people and one of the country’s major economic hubs, on December 20, 2015. A massive hillside pile of construction debris, illegally dumped with the complicity of local officials, collapsed in the city’s Guangming New District, burying 33 buildings and scores of people.2 After the spectacular explosion in Tianjin in August and the seeming barrage of reports of urban infrastructure failures throughout the country, one begins to wonder if China’s urbanization demands are dramatically outpacing the country’s ability to expand urban areas. On the other hand, reports of “ghost cities,” entire cities in the middle of the desert or large suburban developments devoid of people, inspire fears that China’s supply of urban areas and infrastructure is outpacing demand, fueled by unsustainable debt and over-investment.3

Are Chinese cities the engines of growth for the Chinese and global economy or are they ticking time bombs of debt and over-investment? In a sense, they are both. Urbanization in China has proceeded this far in spite of serious institutional barriers, but those barriers have created significant problems, including urban sprawl, conflict over land rights, local government debt, and substantial inequality. A proposed set of reforms aims to catalyze rapid urbanization while eliminating the negative economic, environmental, and social costs of the previous model.

The Chinese Communist Party (the CCP) sees this “New-Style Urbanization” and the creation of a large and secure middle class as critical to its shift from an investment and export-driven economy to one sustained by domestic demand. Instead of relying on markets and voluntary migration, the CCP aims to steer the process through its control of land, labor, and capital. If it succeeds, China will urbanize hundreds of millions of people in the next decades without experiencing the social dislocation and political agitation that urbanization historically brings. If it fails, the risks range from simple economic stagnation to political and social upheaval.

Although it has achieved remarkable urbanization, China is still under-urbanized relative to its level of industrialization. Unlike most countries that the World Bank classifies as “upper middle income,” barely a majority of Chinese residents live in cities. Yet at the same time, China’s industrial sector accounts for well over 40 percent of the country’s GDP.4 This “industrialization without urbanization” is a unique product of institutions that limit the free movement of labor, land, and capital. To understand these institutions—and how they fit together—is to understand the past, present, and future of urbanization in China.

The most notorious of these institutions is the household registration system, or hukou. Established in 1958, the hukou system divides the population between rural and urban and attaches each person’s citizenship to a specific locale. Traditionally, those with urban hukou have been entitled to a suite of state-provided benefits denied to rural hukou holders, including social insurance, housing, grain rations, and public services. 

Following the introduction of market reforms in the late 1970s, urban labor markets gradually opened up to rural residents, but the urban public goods regime remained out of reach. Still, the lack of access to public goods has not stopped rural residents from migrating to urban centers by the hundreds of millions. Presently, about 17 percent of China’s population, or 230 million people, belong to the “floating population” that lives in cities but does not possess a local hukou.5 Despite frequent declarations that the CCP intends to dismantle the system, reforms have proceeded around the edges of the institution while preserving its basic form. By preventing the rural population from settling permanently in the cities, the hukou system has created what some scholars have called a rural-urban “apartheid.”6

But however you look at China, China now seems to be in deep trouble. The scripted numbers never made sense and now that they are all going haywire, the apparatchiks in Beijing seem to have panicked.

As China’s Economic Picture Turns Uglier, Beijing Applies Airbrush

by New York Times • 
BEIJING — This month, Chinese banking officials omitted currency data from closely watched economic reports.

Weeks earlier, Chinese regulators fined a journalist $23,000 for reposting a message that said a big securities firm had told elite clients to sell stock.

Before that, officials pressed two companies to stop releasing early results from a survey of Chinese factories that often moved markets.

Chinese leaders are taking increasingly bold steps to stop rising pessimism about turbulent markets and the slowing of the country’s growth. As financial and economic troubles threaten to undermine confidence in the Communist Party, Beijing is tightening the flow of economic information and even criminalizing commentary that officials believe could hurt stocks or the currency.

The government moved to bolster confidence on Saturday by ousting its top securities regulator, who had been widely accused of contributing to the stock market turmoil. Mr. Xi is also putting pressure on the Chinese media to focus on positive news that reflects well on the party.

But the tightly scripted story makes it ever more difficult to get information needed to gauge the extent of the country’s slowdown, analysts say. “Data disappears when it becomes negative,” said Anne Stevenson-Yang, co-founder of J Capital Research, which analyzes the Chinese economy.

The party’s attitude has raised further questions among executives and economists over whether Chinese policy makers know how to manage a quasi-market economy, the second-largest economy in the world, after that of the United States.

---- “We are going to continue to see crackdowns on people telling a different story than what Beijing wants to hear,” Mr. Miller said. “At the same time, Beijing appears to be conflicted on this issue, because it recognizes that without independent gauges, commercial relations and foreign direct investment will suffer, due to growing skepticism over official data.”

Last September, Markit Economics, a British company, and Caixin Media, based in Beijing, stopped publishing preliminary results from a monthly survey of purchasing managers at Chinese factories. 

The preliminary results, which came a few days before the two firms and the government separately released complete numbers, often affected markets. As a result, officials at China’s statistics bureau objected to the early release, according to people with knowledge of the official order.

A spokeswoman for Markit declined to comment, while Caixin representatives did not respond to a request for comment.

“It’s a very influential economic indicator, and it’s highly cited overseas,” said Mr. Yuan, the researcher at Tsinghua. “Given the international worry over the Chinese economy, I had a sense last August that the Caixin indicator wouldn’t really last long, because its publishing in mainland China had touched high-tension lines.”

In January data released last week, the Chinese central bank omitted or hidone key number and altered the parameters of another that gave insightinto what the central and commercial banks were doing to prop up the country’s currency.

 "On the whole David Cameron wants to be good, but not too good on Europe, and not quite all the time.”

With apologies to George Orwell.