"It's strange that men should take up crime when there are
so many legal ways to be dishonest. “
Al Capone
This weekend’s global picture.
In
America.
Harvard Gives the U.S. an 'F’
September 15, 2016, 7:12 AM EDT
A new
report from the Harvard Business School this morning says the United States is
“failing the test” of economic competitiveness.
The
report is part of a project launched in 2011 by Michael Porter and his
colleagues to understand the disappointing performance of the U.S. economy in
recent years and identify steps to restore growth. Looking at the last five
years, it finds unusually slow economic growth, declining productivity growth,
slow employment growth, declining labor force participation, stagnant or
declining real incomes, and a slowdown in small business formation.
That’s
not to say that the U.S. doesn’t still enjoy some outsized advantages in the
global economy. The Harvard study cited strengths in higher education,
entrepreneurship, innovation, management and capital markets as key areas where
the U.S. still leads. But, it said, “these strengths are being offset by
weaknesses,” including the corporate tax code, the K-12 education system,
transportation infrastructure, health care, and a broken political system.
“Many of the weaknesses, are in areas driven by federal
policy,” the report concludes. “The federal government has made no meaningful
progress on the critical policy steps to restore U.S. competitiveness in the
last decade or more.”
What’s to be done? In true business school form, the Harvard report offers
an eight point plan:1) Reform the corporate tax code
2) Move to a territorial corporate tax system
3) Ease immigration of highly-skilled individuals
4) Address distortions and abuses in the global trading system
5) Improve infrastructure
6) Simplify and streamline federal regulation
7) Create a sustainable federal budget, including entitlement reform
8) Responsibly develop America’s energy resources
But the number one task is to fix a broken U.S. political system, which has stymied progress on the eight points above. “To us, the confused national discussion about our economy and future prosperity in this election year is our worst nightmare. There is almost a complete disconnect between the national discourse and the reality of what is causing our problems and what to do about them. This misunderstanding of facts and reality is dangerous, and the resulting divisions make an already challenging agenda for America even more daunting.”
Amen to that. You can read the full report here.
This is the big national debt problem Congress won’t talk about
Published: Sept 16, 2016 5:20 a.m. ET
Lawmakers ignore economic consequences of consumer and student debt
Federal deficit hawks in Congress, driven by ideology and the campaign donations of, for lack of a better term, millionaires and billionaires, held yet another hearing last week about the national debt — but U.S. lawmakers continue to ignore the debt that is causing real trouble for the nation.The debt danger Americans should really worry about comes from credit cards and student loans.
Personal finance website WalletHub reported that U.S. consumers added $34.4 billion of credit card debt in the second quarter of 2016 alone, equal to nearly half the overall total in 2015 and almost matching the $36 billion for all of 2012.
Credit card debt is likely to show a net increase of $80 billion in 2016, WalletHub forecasts, versus $71 billion in 2015 — pushing outstanding balances over the $1 trillion threshold for the first time and making the average household debt a “perilous” $8,500.
This new debt isn’t due to a rash of irresponsible splurging, but is rather a symptom of the growing gap between living costs and income as people make up the difference with their credit cards, the progressive website AlterNet noted in reporting the study.
This was the finding of a 2014 study by Demos, a New York-based think tank, after it surveyed two groups of low and middle-income families — one group carrying credit card debt and the other with credit cards but no debt.
More
In Europe.
Bank Slump Triggers Worst Week in Three Months for Europe Stocks
September
16, 2016 — 8:19 AM BST Updated on September 16, 2016 — 5:06 PM BST
A tumble in Deutsche Bank AG spread to the industry, deepening a selloff
that dragged European equities to their biggest weekly plunges since before the
U.K. secession vote.Shares of the German lender sank 8.5 percent, the most since the aftermath of the British referendum, after rebuffing the $14 billion claim from the U.S. Justice Department to settle a probe. Royal Bank of Scotland Group Plc and Credit Suisse Group AG also fell more than 4 percent, along with some Italian and Portuguese firms. That highlighted the vulnerability of the recent rebound, with a gauge tracking the region’s lenders down 5.6 percent this week, erasing about a third of its gain from the past two months.
The Stoxx Europe 600 Index fell 0.7 percent to a six-week low, down for a sixth time in seven days. Concerns about lenders and worries that the region’s central bank may balk at adding stimulus have sent the gauge to its first back-to-back declines since June and down 2.2 percent in the past five days. A record streak of withdrawals from the region’s funds continued into a 32nd week, a Bank of America Corp. report showed.
---- Shares of Italy and Portugal were the worst performers in western Europe, with Banca Monte dei Paschi di Siena SpA and Banco Comercial Portugues SA falling to fresh records. The Deutsche Bank plunge dragged Germany’s DAX Index down 1.5 percent, the most since Aug. 2. The measure also suffered from sliding automakers, with BMW AG and Volkswagen AG falling more than 2.5 percent. Energy producers resumed their slides as oil declined.
More
Divided European leaders struggle with post-Brexit vision
European
leaders, struggling to overcome an historic crisis following Britain's vote to
leave the EU, agreed on Friday to explore closer defense cooperation and boost
security at their external borders, but could not hide deep divisions over
refugees and economic policy.
Meeting
in the Slovak capital with the British conspicuously absent, the 27 other EU
members unveiled a six-month "road map" of measures designed to
restore public confidence in Europe's ailing common project.
But
several leaders, including Italy's Matteo Renzi and Hungary's Viktor Orban,
shattered the facade of unity as soon as the meeting ended, underscoring how
divided the bloc remains after years of economic crisis, a record influx of
migrants and a series of deadly attacks by Islamist militants.
"I'm
not satisfied with the (summit) conclusions on growth or on immigration,"
said Renzi, apparently miffed at being excluded from a joint news conference
given by Germany's Angela Merkel and France's Francois Hollande at the end of
the summit.
"To
define as a step forward today's document on migrants would require a form of
fantasy, a verbal high-wire act," the Italian prime minister added.
Orban
criticized Merkel for refusing to agree to a ceiling on the number of migrants
entering Europe, calling her welcoming stance towards refugees
"self-destructive and naive". Until the policy was corrected, the
Hungarian premier said, a "suction effect" would continue to draw
masses to Europe.
More
Europe’s Biggest Natural Gas Producer Is Running Out of Fuel
September
16, 2016 — 1:00 AM BST Updated on September 16, 2016 — 8:41 AM BST
The European
Union’s biggest natural gas producer is running out of reserves.
The
Netherlands, also the region’s largest trading hub for the fuel, has used up
almost 80 percent of its natural gas reserves, Dutch statistics office CBS said
on Friday. Production fell 38 percent over the previous two years and is set to
fall further as the government limits extraction because of earthquakes in
Groningen, the province that houses the EU’s largest gas deposit, it said.
The nation of about 17 million people is struggling to contain tremors linked to gas production by a joint venture of Exxon Mobil Corp. and Royal Dutch Shell Plc that has damaged thousands of homes. The government budget has been hit by the caps on extraction and declining wholesale prices, with gas accounting for just 3 percent of state income in 2015, down from 9 percent two years earlier, the CBS said.
“The production ceiling put in place for Groningen has had a definite impact on gas production during the last years,” CBS said. “Considering the Groningen field accounts for almost three-quarters of the remaining reserves, Dutch natural gas production will likely fall further, despite a small increase in production from the remaining fields, most of which are in the North Sea.”
The Netherlands produced 3.85 trillion cubic meters (136 trillion cubic feet) of gas since the discovery of the Groningen deposit in 1959, more than total global production last year, and has 940 billion cubic meters of reserves, CBS said. Output fell to 52 billion cubic meters last year, the lowest level since the early 1970s, from 84 billion in 2013.
----State income from gas fell to 5.3 billion euros
($6 billion) in 2015, down from 15.4 billion euros in 2013, the CBS said
More
In
the UK.
Against All Odds, North Sea Proves Resilient to Oil-Price Slump
September
16, 2016 — 11:15 AM BST
Oil producers in the North Sea were supposed to be among the first victims
of OPEC’s battle for market share. Instead their high-cost, decades-old
facilities are proving surprisingly resilient to the price slump.Crude oil and condensate output is likely to continue rising in the U.K. North Sea until 2018 as projects that were sanctioned before crude’s plunge four years ago start up, according to estimates by industry consultant Wood Mackenzie Ltd. Even though production dips after that, output by the end of the decade will still be roughly equal to the 2015 level.
Since 2014, the Organization of Petroleum Exporting Countries has pumped without limits and allowed prices to plunge to 12-year lows to squeeze higher-cost rivals. While the strategy is expected to reduce non-OPEC output by 840,000 barrels a day this year, the battle is far from over. The unexpected stamina of areas like the North Sea, where operators have proved adept at keeping the taps open to keep cash flowing, is adding to the global glut and keeping prices lower for longer.
“Production has stayed resilient,” said Ian Thom, an Edinburgh-based senior research manager for U.K. upstream at Wood Mackenzie. “We saw a record number of dollars invested in the high-oil price environment,” and that is still delivering new production.
----Production of crude and condensate, a type of light oil, will top 1 million barrels a day in the U.K. North Sea this year, about 8 percent higher than last year, according to Wood Mackenzie. Output will reach 1.07 million barrels a day in 2017 and 1.11 million the next year before falling to about 956,000 barrels at the end of the decade.
More
In
Africa.
One War Nears an End in Libya. Battle Scars May Prevent Another
Misratan-led fighters are on the verge of defeating Islamic State. What happens next?
September
15, 2016 — 10:00 PM BST
Standing
next to a tank, Libyan commander Abdul Hadi Lahwal picks up his
walkie-talkie and speaks with snipers positioned in a disused school on the
frontline of the battle against Islamic State. He was attempting to recover the
bodies of two of his men, killed the day before.
The
“liberation of Sirte has cost a lot,” Lahwal, a former merchant, said. “Hands
and legs have been amputated, women widowed, children have become orphans. We
must not let the future of our country slip from our hands as we did in 2011.”
The
battle to oust the jihadist group from its last major stronghold in the
North African nation looks to be nearing the end, with the militants holed up
in two small areas in Sirte. When the guns fall silent, the victory will
largely belong to militias from Misrata, whose predecessors ended the Libyan
uprising five years ago by tracking down Muammar Qaddafi as he hid in a
culvert. More than five years on, they are now fighting under the auspices of
the United Nations-backed unity government seeking to stabilize the holder of
Africa’s largest oil reserves.
With the
losses mostly theirs, the price the Misratans have paid has curbed their
enthusiasm for further conflict, according to interviews with local political
leaders, residents and fighters from the city. That shift may be tested,
though, after Khalifa Haftar -- the commander who dominates Libya’s east,
opposes the unity government and is a foe to many Misratans -- at the weekend
took over ports in the vital oil crescent without losing a fighter.
Haftar’s
move has roiled fragile alliances in Libya, where fighting has fractured the
country’s major power structures. The resulting instability fed Europe’s
migrant crisis, and enabled Islamic State to expand its self-declared
caliphate based in Syria and Iraq along the Mediterranean.
Lying on
the coast midway between Tripoli and Sirte, Misrata has emerged as a key player
in the post-Qaddafi era. The reaction of its people and leaders to Haftar’s
consolidation of power in the east will help decide the course of the conflict.
More
In
Asia.
Apple Japan unit ordered to pay $118 million tax for underreporting income: media
An Apple
Inc iTunes unit in Japan was ordered to pay some 12 billion yen ($118 million)
in tax by local authorities after underreporting income, media reported Friday.
The unit
has since paid the amount, the reports said.
The Tokyo
Regional Taxation Bureau determined that the unit, which sends part of its
profits earned from fees paid by Japan subscribers to another Apple unit in
Ireland to pay for software licensing, had not been paying a withholding tax on
those earnings in Japan, according to broadcaster NHK.
Apple
could not be immediately reached for comment outside of U.S. business hours.
The tax bureau declined to comment.
Apple and
other multinational companies have come under much tax scrutiny from
governments around the world. The European Union has ordered Apple to pay
Ireland 13 billion euros ($14.6 billion) in back taxes after ruling it had
received illegal state aid. Apple and Dublin plan to appeal the ruling, arguing
the tax treatment was in line with EU law.
Hanjin says U.S.-bound ship is being held 'hostage'
A lawyer for Hanjin Shipping
Co Ltd (117930.KS), the failed South Korean container carrier, said on
Thursday a U.S.-bound vessel was held "hostage" by disputes over
payments, adding to the struggles in getting $14 billion of cargo off its ships
stranded at sea.
"There is no clear visibility yet on what will happen with this business," Hanjin lawyer Ilana Volkov said at a hearing, when asked by U.S. Bankruptcy Judge John Sherwood whether Hanjin was liquidating.
Hanjin, the world's seventh-largest container line, filed for bankruptcy last month, leaving more than 100 ships and their cargo at sea and threatening to snarl U.S. freight traffic as the year-end shopping season approaches.
Some ships chartered to Hanjin have been sold and more are up for sale.
Last week, Hanjin said a Korean judge authorized $10 million to pay tug operators, ports and cargo handlers to unload four of its U.S.-bound vessels.
Since then, the Hanjin Boston, Hanjin Greece and Hanjin Gdynia have begun to unload. But the fourth ship, the Hanjin Jungil, remains at sea off the coast of California, according to the Marine Exchange of Southern California.
"We’re negotiating with every service provider and they are saying 'I'm not going to let this ship berth,'" said Volkov at the Newark, New Jersey hearing. "My client is being held hostage."
She told the court that the Korean court had postponed hearing Hanjin's request to authorize another $50 million that would allow at least four more Hanjin ships to unload U.S. cargo.
As of Wednesday, of Hanjin's 97 container ships, 36 were waiting outside of overseas ports, according to South Korea's finance ministry. Of the reminder, 37 had yet to unload and planned to return to Korea, and 24 had unloaded in Korea and elsewhere, the ministry said.
In addition to the nine "base ports" already identified for Hanjin ships to unload, the ministry said efforts were being made for Bangkok, Jebel Ali, Kobe, Melbourne and Valencia to be available for unloading Hanjin ships.
The company was seeking stay order this week that would allow its ships to unload safely in Germany, the Netherlands, Spain and Italy, the ministry said, with more to follow.
The ministry said efforts were underway to enable unloading in New York and Singapore by this weekend.
More
Russian-Iranian bank may ditch the US dollar
Published time: 15 Sep, 2016 14:43
Moscow and Tehran are actively working on opening a
joint bank with plans to carry out operations in national currencies, according
to the former president of the Russia-Iran Friendship Society Bahram Amirahmadiyan.
The decision on setting up the bank was agreed last year but Western sanctions against Tehran have been the main obstacle.
“Of course, the prospect of Russian banks opening in Iran is very attractive and important because it can widen and improve our economic cooperation,” Amirahmadiyan told Sputnik news agency, adding that banking cooperation between the two countries has a long history.
According to the official, Moscow and Tehran want to carry out all trade operations in national currencies but the plan has yet to be resolved.
“At the moment, all banking operations between Russia and Iran are carried out in dollars or euro. It's very inconvenient, because all these operations are controlled either by the EU or US central banks," Amirahmadiyan said.
He added the Russian ruble could also benefit from the bank's entry into the Iranian market, which would enable Iranian companies to buy Russian goods in rubles.
“I also think the Russian ruble can strengthen a lot on the Iranian currency market, and become a very attractive currency… I hope the same will happen to the Iranian rial in Russia,” he said.
Bilateral trade between Russia and Iran currently
stands at around $5 billion and is conducted mostly through intermediate
countries such as Cyprus or the UAE. Trade has risen 70 percent since 2015.
More
And so on to next week’s on again off again Federal
Reserve interest rate decision. As of Friday’s close, still very much believed
by the punters in the casino, to be off the table.
"We
shouldn't pour cold water on everything.
We, the eight or nine players in global investment banking, have a very
good future."
Deutsche
Bank, CEO Josef Ackermann. Davos, January 2007.
Seventy-five years ago next week, a massive geomagnetic storm disrupted
electrical power, interrupted radio broadcasts, and illuminated the night sky
in a World War II battle theater.
Seventy-five years ago, on 18–19 September 1941, the Earth experienced a great magnetic storm, one of the most intense ever recorded. It arrived at a poignant moment in history, when radio and electrical technology was emerging as a central part of daily life and when much of the world was embroiled in World War II, which the United States had not yet officially entered.
These effects raised awareness within the scientific community and among the public of the societal significance of the effects that the Sun and outer space can have on the Earth—what we now call space weather.
At 08:38 universal time (UT) on 17 September 1941, the Greenwich Observatory spectrohelioscope recorded a solar flare above this sunspot group [Newton, 1941]. The emitted ultraviolet and X-ray radiation abruptly enhanced the ionization of the Earth’s atmosphere, causing a sharp perturbation known as a “crochet” in dayside ground-based recordings of the geomagnetic field and temporarily interfering with high-frequency radio communication. Subsequently, scientists at the Mount Wilson Observatory in California observed another solar flare at 16:26 UT [Richardson, 1941].
More
Finally, some solar history from 1941. And Jason in California
notes the action in natural gas futures as last winter’s strong warming Pacific
El Nino event has ended and the prospect of a colder Pacific La Nina event becomes
a possibility. Next month we await a
possible signal from the snow cover level in Siberia. Last winter’s Pacific El
Nino trumped Siberia’s snow cover signal of an extra cold northern hemisphere
winter. Stay tuned.
The Geomagnetic Blitz of September 1941
Seventy-five years ago, on 18–19 September 1941, the Earth experienced a great magnetic storm, one of the most intense ever recorded. It arrived at a poignant moment in history, when radio and electrical technology was emerging as a central part of daily life and when much of the world was embroiled in World War II, which the United States had not yet officially entered.
Arouras danced across the night sky as voltage surged in
power grid lines. A radio blackout interrupted fan enjoyment of a baseball
game, while another radio program was interrupted by private phone
conversations. Citizens, already on edge, wondered if neon lights were some
sort of antiaircraft signal. And far away in the North Atlantic, the
illuminated night sky exposed an Allied convoy to German attack.
These effects raised awareness within the scientific community and among the public of the societal significance of the effects that the Sun and outer space can have on the Earth—what we now call space weather.
Solar-Terrestrial Interaction
On 10 September 1941, during the declining phase of solar cycle 17, astronomers saw an unusually large, low-latitude group of sunspots on the eastern limb of the Sun. The spots had formed, as they all do, with the buoyant emergence of a concentrated bundle of magnetic field lines from the Sun’s interior through the photosphere. Over the course of the next week the spots grew, and the Sun’s rotation brought them near the center of the solar disk as viewed from Earth [e.g., Richardson, 1941]. The sunspot group was large enough to be seen with the naked eye.At 08:38 universal time (UT) on 17 September 1941, the Greenwich Observatory spectrohelioscope recorded a solar flare above this sunspot group [Newton, 1941]. The emitted ultraviolet and X-ray radiation abruptly enhanced the ionization of the Earth’s atmosphere, causing a sharp perturbation known as a “crochet” in dayside ground-based recordings of the geomagnetic field and temporarily interfering with high-frequency radio communication. Subsequently, scientists at the Mount Wilson Observatory in California observed another solar flare at 16:26 UT [Richardson, 1941].
More
Natural Gas Ends
Choppy Week on an Upward Note as Supply, Seasonal, Oceanic Factors Conflict
N. Jason Jencka September 16th, 2016 2:48 am ET
Natural gas futures for October
delivery had a choppy week of trading, reaching a Wednesday high of $ 2.99 per
million BTU after beginning the week in near $ 2.80. A clear speculative “tug
of war” between bulls and bears was the story of the week as Thursday’s
inventory report was roughly in-line with an inventory build of 62 billion
cubic feet against expectations of 60 Bcf. Expectations going forward on account
of uncertainty regarding the development of a potential “La Nina” oceanic
pattern following the El Nino conditions of 2015. If La Nina were to occur,
generally colder winter conditions would be favored across the U.S. which
would drive higher gas consumption. As of its last update, the U.S. National
Weather Service Climate Prediction Center projects a 55-60% chance of “ENSO
Neutral (non La Nina) conditions over this coming winter. Should this forecast
verify, natural gas demand would be expected to be blunted by relatively mild
temperatures.
The natural gas market is in a
particularly tumultuous state for reasons that go beyond inevitable uncertainty
weather. Global developments such as sanctions against Russia and progress or lack thereof in Japan’s post-Fukushima
attempts to restart nuclear facilities are all relevant. Wild cards include
announcements such as the Dutch announcement today that its Groningen gas field is ~80% depleted. This field has produced over its roughly 45
years an amount of gas greater than total global production in 2015. The
prospect that Europe may become more reliant
on Russian gas is politically significant and may lead to a softer diplomatic
reproach and aversion to sanctions. Considering that only an estimated 17 years
of gas remain at Groningen, the Dutch and indeed
all of Europe have a simmering challenge
poised to boil over.
Sources:
Rob Verdonck, Martijn Van Der Starre,
Bloomberg http://www.bloomberg.com/news/articles/2016-09-16/europe-s-biggest-natural-gas-producer-is-running-out-of-fuel
/ensodisc.shtml
N. Jason Jencka is
presently studying Finance and Economics at Sierra Nevada College, located near
the shores of Lake Tahoe on the border of California and Nevada.His interests
include the interplay between world markets and the global political sphere, with
a focus on developments of both sides of the Atlantic in North America and
Europe.In his leisure time he enjoys connecting with those people that have an
interesting story to tell and a genuine desire to make an impact in the world.
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