

Jack Delano Young Negro farm laborer, Stem, North Carolina May 1940



There are two elections coming up this week that have the potential to shake up a lot of things, not least of all the global financial markets, both in their own way and for their own reasons. First of all, the May 22-25 European parliament elections, which as far as I’m concerned should simply be declared illegal in at least a few of the 28 EU member countries they’re held in. I find it unbelievable, and I even tend to find it scary, that not one respected member of the respected press has paid any attention to the story that emerged during the course of last week and that I described this way on Friday:

Europe Imitates The Fall Of The Roman Empire

First, there was a passage from Tim Geithner’s new book. Then, there was a 3-part series ‘How The Euro Was Saved’ by Peter Spiegel for the Financial Times. Together, they deliver the following storyline: EU leaders refused to let Greece have a referendum on its bail-out, and toppled PM Papandreou to kill it. Then, afraid that Italian PM Berlusconi would make good on his threat to return to the lira if they stuck to their bail-out conditions, they toppled him. What this means to Europeans is that if they elect a government for their country, and it subsequently falls out of favor with Brussels, they can expect to see it overthrown, and likely have it replaced by a technocrat handpicked by the EU leadership (as happened in Greece and Italy). Ergo: Europe is not a democracy, and pretending otherwise is foolish. Democratic elections in member states are merely empty lip service exercises, because on important topics governments of member states have no say.

In fact, the only journalist who did pick up on it was Ambrose Evans-Pritchard, also on Friday, and while I understand people’s reservations concerning Ambrose, please don’t forget this: as it became known that the EU leadership has no scruples when it comes to bringing down elected governments of member states, AEP was the only one writing for the mainstream media who brought this ultimate betrayal of European democracy, and hence of all European voters, to light.

• EU Officials Plotted IMF Attack To Bring Rebellious Italy To Its Knees (AEP)

The revelations about EMU skulduggery are coming thick and fast. Tim Geithner recounts in his book Stress Test: Reflections on Financial Crises just how far the EU elites are willing to go to save the euro, even if it means toppling elected leaders and eviscerating Europe’s sovereign parliaments. The former US Treasury Secretary says that EU officials approached him in the white heat of the EMU crisis in November 2011 with a plan to overthrow Silvio Berlusconi, Italy’s elected leader. “They wanted us to refuse to back IMF loans to Italy as long as he refused to go,” he writes. Geithner told them this was unthinkable. The US could not misuse the machinery of the IMF to settle political disputes in this way. “We can’t have his blood on our hands”. This concurs with what we knew at the time about the backroom manoeuvres, and the action in the bond markets. It is a constitutional scandal of the first order. These officials decided for themselves that the sanctity of monetary union entitled them to overrule the parliamentary process, that means justify the end. It is the definition of a monetary dictatorship. Mr Berlusconi has demanded a parliamentary inquiry. “It’s a clear violation of democratic rules and an assault on the sovereignty of our country. The plot is an extremely serious news which confirms what I’ve been saying for a long time,” he said.

This is no trifle matter, even though one may get that idea because of the deafening silence we’ve been blinded with so far on this topic. As I write, it scares me anew. In three days, elections begin for a region that holds 500 million people. But there is a tiny group, largely unelected, in Europe’s capital Brussels, that find they have the moral right to handpick their favorites and topple non-favorites who were elected in democratic elections. If it reminds me of one thing, it’s how Salvador Allende lost the power his people voted him into, and lost his life, in Chile in 1972, because the CIA and Milton Friedman’s Chicago Schoolboys wanted someone else, who would serve THEIR purpose, not that of the people. That is what happened in both Greece and Italy, and we can now prove it.

And no, there were no bombs and machine gun heli’s involved this time around, but that’s not where we should put the dividing line. A coup is a coup. And any coup in an ostensibly democratic nation is a crime that the perpetrators need to be dragged in front of a judge and jury for, if not court-martialed. Yeah, well, that sounds lovely, but not a word was said or written. I looked earlier today, and there was only one reference I could find, in the English edition of Greek paper Ekathimerini in which Evangelos Venizelos, finance minister under Papandreou, the Greek PM who was ousted under EU auspices because he wanted the Greek people to decide in a referendum whether they wanted Troika austerity or not, an event in which Venizelos did not play a clean role at all, that same Venizelos who is now leader of PASOK, the party that held power for decades but is presently scraping the voters barrel in polls for this week elections, said:

Barroso did not choose PM, says PASOK chief

“Mr Barroso did not have the main role in the discussion and the process,” said the PASOK chief. “Whoever says this does not have an understanding of the international balance of power and of the roles that EU figures have.” Venizelos also said that Papademos had not been first choice to become interim prime minister. Before he was sworn in on November 11, Parliament Speaker Filippos Petsalnikos and PASOK veteran Apostolos Kaklamanis had been suggested for the role, Venizelos claimed. However, Venizelos defended the decision not to proceed with a referendum, which eurozone leaders insisted should only be on whether Greece should remain in the euro. The PASOK leader suggested that proceeding with the vote would have led to a flight of deposits. “Did anyone want the banks to collapse the next day and the country to default?” he said.

Hmm, Evangelos. That’s how we decide these matters, is it? Maybe the question should be: did anyone want democracy? Because if they did, that was no longer an option, was it? How on earth can someone who’s the leader of a party that’s part of a democratic system, and who apparently hopes to be elected as the leader of a democratic nation, defend the toppling of his former boss in such a way? What the f**k is wrong with you? And what the f**k is wrong with all the journalists who have undoubtedly read the accounts of both the Berlusconi and the Papandreou coups, and decided not to write one single word about them while there are elections in just 3 days in which voters are fooled into thinking their vote counts for something?

Parties that are critical of the EU, if not downright against it, may win large victories in France, Holland, the UK, Finland, Norway, Italy and perhaps more countries. We’ll know by Sunday. But what will that mean? The entire mainstream storyline is HOW are we going to do Europe, not IF we’re going to do it. How fast are we going to hand over ever more powers to a cabal of career “civil servants” who have shown they are more than willing to sweep aside any actually elected politician from any of the 28 EU nations who dare stand in their way, and in the way of their dreams of what Europe should be, damn the people, and damn the democratic process?! Maybe this will give everyone a pause for thought:

Greek Selloff Shows Rush for Exit Recalling Crisis

Bondholders in Europe just got a wakeup call. After a four-month rally in euro-region debt, yields on Italian and Spanish bonds had their biggest one-day jump in almost a year last week as a selloff that started in Greece spread. With bids evaporating and prices sliding, traders poured into derivatives as they rushed to protect against losses. Italy’s and Spain’s bonds extended that slump today. [..] The risk is that speculative traders, who bought debt on the assumption the European Central Bank would support the market, may try to flee at the same time if the outlook darkens. “You only know how wide the door to the exit is when there are a few of you trying to push through at the same time,” Michael Riddell, fund manager at M&G Group, which oversees $417 billion, said on May 16. “I don’t think liquidity has been that great in peripherals at any stage.” Prices plunged in the wake of opinion polls suggesting the nation’s governing coalition was losing support before local-government votes and European Parliament elections on May 25. Prime Minister Antonis Samaras’s coalition partner Pasok, which dominated Greece’s politics for three decades, was ranked sixth in a poll with 5.5% as voters blamed the party for the country’s economic meltdown. The first round of local and regional elections in Greece ended yesterday with no single party winning enough support to declare a decisive victory. In Italy, Prime Minister Matteo Renzi’s party is facing its first elections since coming to power three months ago, risking a voter backlash amid a sluggish economy and a corruption scandal in Milan.

How much irony is there in thinking that the financial markets are the only hope left for European voters? Democracy is Europe is roadkill until those responsible for toppling Papandreou and Berlusconi have been thrown out, the system has been restructured to ensure no such things can happen again, and the appropriate courts have passed judgment on the guilty parties. None of those things are going to happen, the same old clique that executed the coups will start divvying up the cushy jobs come Sunday night if they haven’t already, and that can only mean one thing: the old continent is morally going going gone. And it’s not just the politicians, or whatever the proper term is for Brussels career wankers, it’s just as much an indictment of the entire world press.

I was going to cover the Ukraine elections this weekend too, but I’ll do that later in the week, Europe’s “monetary dictators” got me riled up plenty for now. And that goes for the entire press corps too. What a bunch of useless parakeets.

• Over-Heating Stock Markets Raise Crash Fears (Telegraph)

Global equity markets are over-heating, the UK’s top professional investors’ body has warned, raising fears that “vulnerable” stocks are poised for a crash. The number of investors who think the world’s leading stock markets such as the S&P 500 and the FTSE 100 are overvalued has reached its highest level yet, according to a survey of professional money managers completed by the CFA Society of the UK. The survey offers a rare insight into the thinking of the investment community, which manages billions of pounds on behalf of pension funds and households. It revealed that 49pc of the 530 stocks experts now believe that developed equity markets are overvalued – signalling rising fears of a correction – up from 39pc just three months earlier. The number of money managers that felt there were further gains to be made in stock markets fell to its lowest level reported, at just 16pc, down from 50pc at the start of last year. “With both the FTSE and S&P indices hovering around record highs, our data suggests that investors should perhaps be cautious about reaching for yield in developed market equities when investment professionals view that yield premium as vulnerable,” said Will Goodhart, CFA Society chief executive. The UK’s blue chip index soared to a 14-year high last week and markets in the US have gone into uncharted territory. Goldman Sachs expects the S&P 500 to fall during the next three months from highs of 1,877.9 at the end of last week. “The return potential for the US market is dampened by limited room for valuation and margin expansion given the strong recovery we have seen already,” said the investment bank’s portfolio strategy team. Investors are driving share prices higher in the belief that companies listed in developed markets will benefit as the US and UK economies return to growth, said Dr Stephen Barber, political economist from London South Bank University. “Markets are discounting mechanisms and they are pricing a fairly optimistic view of growth in the both the US and the UK,” he said. “However, the markets can’t price in the fact that these views could be wrong.”

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Nasdaq, Russell 2000, all’s tumbling but Dow and S&P. Mom and Pop, check your six.

• Wall of Worry Rebuilt as Nasdaq Rout Sends Cash to 2-Year High (Bloomberg)

Investors are losing their nerve in the stock market amid selling that has sent some industries down the most since 2008. In the past, that’s been a signal to buy. Global money managers raised cash holdings to a two-year high this month and say America is the worst place to invest, a Bank of America Corp. survey published last week shows. Investors have pulled about $10 billion from funds that buy U.S. equity this month, set for the biggest outflows since August, according to data compiled by Bloomberg and the Investment Company Institute. After embracing stocks last year for the first time since the bull market began, individuals are showing signs of reverting to the skepticism that led them to pull more than $400 billion from mutual funds from 2009 through 2012. While hedge fund manager David Tepper says caution is appropriate now, others consider the lack of exuberance a healthy sign that sets the stage for more gains. “Walls of worry are everywhere,” Robert Doll, who helps oversee $118 billion as chief equity strategist at Nuveen Asset Management in Chicago, told Tom Keene and Michael McKee on Bloomberg Radio’s “Surveillance” on May 14. “This is the least believed bull market that I’ve ever seen. From here it’s earnings, it’s fundamentals, it’s can the economy grow? And my guess is the answer to that question is yes.”

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Ouch! Didn’t see this one coming, did you?

• Highway Trust Fund: The Next Big American Economic Crisis (BI)

On Wednesday, President Barack Obama gave his first formal warning about this impending self-inflicted disaster — the Highway Trust Fund, a transportation and infrastructure fund financed by gasoline taxes, is set to run out by the end of the summer. Thus far, Congress has not come up with a solution, and both sides are beginning to dig in. By July, thousands of projects and contracts could be put on hold amid the uncertainty — right in the middle of summer construction season. In one economic analysis released last week, the Obama administration warned 700,000 jobs tied to the fund and its uncertain future are at stake. “Right now, there are more than 100,000 active projects paving roads and rebuilding bridges, modernizing our transit systems,” Obama said Wednesday in remarks near the Tappan Zee Bridge in Tarrytown, New York, where a $3.9 billion effort to replace the current aging structure is underway. “States might have to choose which ones to put the brake on. Some states are already starting to slow down work because they’re worried Congress won’t untangle the gridlock on time. And that’s something you should remember every time you see a story about a construction project stopped, or machines idled, or workers laid off their jobs.” The fundamental problem is that gasoline taxes alone are no longer enough to finance the Highway Trust Fund, due to declining fuel use across the U.S. However, neither the White House nor Congress wants to raise those taxes, and there is a disagreement about how to fill the fund without them. Simply put, spending on transportation and infrastructure now exceeds gas taxes taken in. During recent testimony before the Senate Finance Committee, Joseph Kile, the assistant director for microeconomic studies at the congressional budget office, laid out two politically painful potential solutions — either cut spending in the fund’s two accounts by 30% and 65%, or raise the gas tax by 10 to 15 cents per gallon.

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Good research project. Pity the NYT reports on it.

• House of Debt: The Case Against the Financial Rescue (NY Times)

Atif Mian and Amir Sufi are convinced that the Great Recession could have been just another ordinary, lowercase recession if the federal government had acted more aggressively to help homeowners by reducing mortgage debts. The two men — economics professors who are part of a new generation of scholars whose work relies on enormous data sets — argue in a new book, “House of Debt,” out this month, that the government misunderstood the deepest recession since the 1930s. They are particularly critical of Timothy Geithner, the former Treasury secretary, and Ben Bernanke, the former Federal Reserve chairman, for focusing on preserving the financial system without addressing what the authors regard as the underlying and more important problem of excessive household debt. They say the recovery remains painfully sluggish as a result. At stake in their debate with Mr. Geithner, whose own account of the crisis was published last week – in a book called “Stress Test” – is not just the judgment of history but also the question of how best to prevent crises. “Our point is very simple,” said Mr. Mian, a professor at Princeton. “Bernanke won. We did save the banks. And yet the United States and Europe both went through terrible downturns.” The focus on preserving banks, he said, “was an insufficient mantra.”Mr. Sufi, at the University of Chicago, said in a separate interview that he was baffled by claims that the government’s efforts were successful. “If you actually look at the argument that people like Mr. Geithner make, they almost always point to financial metrics like risk spreads and interest rates,” he said. “But if you look at the real economy, it just tends to come out in our favor.” Millions of Americans remain unemployed almost five years after the formal end of the recession. Christina Romer, who led President Obama’s Council of Economic Advisers during the recession, said the research by Mr. Mian and Mr. Sufi had convinced her that she and other administration officials underestimated the importance of helping homeowners. But she said Mr. Mian and Mr. Sufi, in turn, had underestimated both the economic impact of the financial crisis and the effectiveness of the government’s response.

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“123% of almost nothing isn’t much. ”

• And They Call This A Recovery? (Lee Adler)

By now you have heard about Friday’s blockbuster housing starts numbers that blew out conomists’ expectations. Here’s the actual, not seasonally adjusted data. Total starts in April came in at 94,900. That was the strongest April performance since the top of the housing bubble. April starts have risen 123% from the April 2009 low. That sounds impressive, but 123% of almost nothing isn’t much. Percentages don’t mean much in this market. The whole numbers are more illustrative. Total starts have soared by that percentage because an abominable total of only 42,500 units were built in April 2009. Compare that with the nearly 185,000 units built in April 2005 at the peak of the housing bubble. The current level of starts is just over half that number. The gain in single family starts was less robust, hitting 60,100. That was 8.7% better than last April’s 55,300 units and it’s up a booming 72% from the 2009 low. But that’s only an increase of 25,000 from the tiny number of starts in April 2009, 35,000. Compare the current number with April 2006 when 135,000 units were started. So is the housing market really booming? It’s all a matter of perspective. Total starts are still down 49% from the April 2005 level. Single family starts are still down a whopping 60% from the extremes of the bubble in April 2005 (when I put my house up for auction and successfully sold it in 2 weeks). And the “recovery,” such as it is, may be about to run into real trouble. It’s about supply and demand. They have been growing in tandem, but not this month. In March single family sales fell, but starts rose sharply in both March and April. The divergence creates a record oversupply in the single family market. The last time sales fell while starts were still rising was in 1986, at the onset of a six year housing recession that few recall because the more recent one was so much worse. But those of us who were working in the housing industry then certainly remember it. It was a disaster. Homebuilders were dropping like flies as sales dried up and prices fell. Maybe the March sales downtick was an aberration due to the weather, as many have claimed. [..] If the March decline was not an aberration and sales do not rebound, the housing industry could be ready to tank again. Not that it ever recovered. New home sales and starts are still approximately 30% below where they were at the bottom of the 1986-92 housing recession. And they call this recovery?

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Recovery!

• America’s Homeless: The Rise Of Tent City, USA (CNN)

Homeless encampments known as “tent cities” are popping up across the country. Formed as an alternative to shelters and street-living, these makeshift communities are often set up off of highways, under bridges and in the woods. Some have “mayors” who determine the rules of the camp and who can and can’t join, others are a free-for-all. Some are overflowing with trash, old food, human waste and drug paraphernalia, others are relatively clean and drug-free. The National Law Center on Homelessness & Poverty documented media accounts of tent cities between 2008 and 2013, and estimated that there are more than 100 tent communities in the United States – and it says the encampments are on the rise. “[T]here have been increasing reports of homeless encampments emerging in communities across the country, primarily in urban and suburban areas and spanning states as diverse as Hawaii, Alaska, California, and Connecticut,” the organization’s study states. Tent cities are most common in areas where shelter space is scarce or housing unaffordable. Yet, many people say they choose to live in a tent even when shelter is an option. And they do so for one big reason: freedom. Shelters typically have strict rules: many require guests to check in and out at certain times that can conflict with work schedules and they often don’t allow couples to stay together. Drug and alcohol use is also prohibited, and some people don’t qualify for the subsidies they need to stay in a shelter because of a prior jail time (for certain crimes), or other reasons. “Shelter is one step away from jail,” said Dave, who lived in a tent city in Camden, N.J., that CNNMoney visited. The NLCHP found that of the more than 100 camps, only eight were actually considered legal. Ten tent cities weren’t officially recognized, but the city or county wasn’t doing anything to get rid of them. The vast majority of encampments, however, have been shut down and occupants have been evicted. One of the most recent evictions took place in Camden, N.J., this week, when the state, county and city joined forces to shut down multiple tent cities and kick out the residents. While the county worked with the occupants to find them somewhere to go, Camden’s shelters were already full and many people ended up on the streets Instead of evicting people from tent cities, the NLCHP says the root of the issue – unaffordable housing – needs to be addressed.

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The bad loan percentage must be beyond comprehension.

• Nomura Warns Of Chinese Post-Bubble Bad Loans (MarketWatch)

Nomura argues — in a new report — there are now many similarities between China’s property market today and Japan’s two decades ago. The obvious parallel is the scale of the property boom. Both Japan and China let property lending race ahead of GDP growth and experienced overheating economic activity, coupled with aggressive bank lending. But perhaps the most important similarity between these two property markets is behavioral: an institutional failure to publicly face up to an ugly bad-loan situation as the market reversed. In Japan’s case, a weak regulatory regime and lax accounting meant there was an unwillingness to impose discipline, and no financial institutions were forced into bankruptcy. Although direct lending to real estate at the time was less than 20% of the nation’s total loan portfolio, over the next decade Japan’s banks eventually wrote off a cumulative 25% of all outstanding loans, according to Nomura estimates. This period gave rise to Japan’s “zombie banks,” which took much of the blame for the country’s infamous “lost decade” of growth. Likewise in China today, there is widespread skepticism that Chinese banks are revealing anything close to a true picture of their non-performing loans. Between loans regularly rolled over, murky lending to well-connected state-owned entities and the explosion in shadow banking, it all contributes to a similarly opaque environment. Recognizing bad debts effectively becomes a political compromise. Nomura estimates half of Chinese banks’ loans books include some sort of property collateral. Another similarity they highlight is the levels of hubris. Back then, Japan was the “next big thing” in the global economy — the world’s largest creditor nation, collecting accolades for everything from its economic performance to its corporate management ethos. China meanwhile has been told it is only a matter of time before it overtakes the U.S. to become the world’s largest economy, and it could even one day see the yuan usurp the greenback as the world’s reserve currency. Perhaps then, we shouldn’t worry about ghost cities of uninhabited investment properties, since they will eventually fill up, and all those problematic loans will take care of themselves. The worst Beijing appears to countenance is that GDP growth will slow to 7%.

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Tick tick tick goes da bomb.

• China Home Price Growth Slows In More Cities Even As Curbs Ease (Bloomberg)

China’s new-home prices rose in April in the fewest cities in a year and a half as developers offered discounts and the economy slowed, prompting the easing of property curbs in some places. Prices last month climbed in 44 of the 70 cities tracked by the government compared with 56 in March. That was the fewest metropolitan areas with price gains since October 2012 when increases were recorded in only 35 on a monthly basis. After four years of government restrictions to cool the housing market, home sales and property construction are sliding and have become a drag on the country’s economy, which recorded its slowest growth in six quarters in the first three months of the year. The central bank on May 13 called on the biggest lenders to accelerate the granting of mortgages as developers including China Vanke Co. and Greentown China Holdings Ltd. cut property prices to lure homebuyers. “China’s property market is on a very dangerous brink,” Xu Gao, Beijing-based chief economist at Everbright Securities Co., who formerly worked at the World Bank, said in a phone interview yesterday. “Concerns about the slowing market led to weakening prices and sales, which turned into a vicious circle.” Home-price growth moderated both in first-tier and less affluent cities. Prices in Beijing rose 0.1% from March, the National Bureau of Statistics said in a statement yesterday, the slowest since September 2012, while Shanghai prices increased 0.3%, the smallest gain since November 2012. The eastern city of Hangzhou had the largest decline in April among cities tracked, with prices falling 0.7% from a month earlier.

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Hmm. China has no strategic reserve. So-so story by Ambrose.

• China Steps Up Speed Of Oil Stockpiling As Tensions Mount In Asia (AEP)

China is stockpiling oil for its strategic petroleum reserve at a record pace, intervening on a scale large enough to send a powerful pulse through the world crude market. The move comes as tensions mount in the South China Sea, and the West prepares possible oil sanctions against Russia over the crisis in Eastern Ukraine. Analysts believe China is quietly building up buffers against a possible spike in oil prices or disruptions in supply. The International Energy Agency (IEA) said in its latest monthly report that China imported 6.81m barrels a day in April, an all-time high. This is raising eyebrows since China’s economy has been slowing for months, with slump conditions in the steel industry and a sharp downturn in new construction. The agency estimates that 1.4m b/d was funnelled into China’s fast-expanding network of storage facilities, deeming it “an unprecedented build”. Shipments were heavily concentrated at Chinese ports nearest the new reserve basins at Tianjin and Huangdao. “We think this is a big deal,” said one official. China accounts for 40% of all growth in world oil demand, so any serious boost to its strategic reserves tightens the global supply almost instantly and pushes up the spot price. Michael Lewis, head of commodities at Deutsche Bank, said Chinese officials at Beijing’s Strategic Reserve Bureau are playing the oil market tactically, or “buying the dips” in trader parlance. They add to stocks whenever Brent crude prices fall to key support lines, as occurred earlier this Spring. This is currently around $105. “It’s is very similar to what they have been doing with copper. Whenever it drops below $7,000 (a tonne), they see it as a buying opportunity. They do the same with agricultural commodities,” he said. China is putting a floor of sorts underneath the global oil market, calling into question predictions by the big oil trading banks that prices will deflate this year as more crude comes on stream from Libya, Iraq, and Iran, and as the US keeps adding supply shale. The strategic buying could go on for a long time since China is rapidly expanding its reserve capacity from 160m barrels to 500m by 2020, with sites scattered across the country. [..] China has stocks to cover 46 days of imports compared to 209 for the US, based on estimates from last year. India is acutely vulnerable to any disruption with just 12 days cover. The minimum safe threshold for OECD states is deemed to be 90 days.

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The pipeline’s not there yet. Who’ll fork over the $30 billion or so?

• Gazprom To Sign Monumental Gas Deal With China (RT)

Gazprom, Russia’s largest natural gas producer, and China National Petroleum Corporation (CNPC) are set to sign a gas deal that will send 38 billion cubic meters of natural gas a year eastward to China s burgeoning economy, starting in 2018. The timing is almost flawless as Russia is looking to shield itself from Western sanctions by pivoting towards Asia, and China desperately needs to switch from dirty coal to more environmentally friendly natural gas. The arrangements on export of Russian natural gas to China have nearly been finalized. Their implementation will help Russia to diversify pipeline routes for natural gas supply, and our Chinese partners to alleviate the concerns related to energy deficit and environmental security through the use of clean fuel, President Vladimir Putin said. The deal has been on the table for over 10 years, as Moscow and Beijing have negotiated back and forth over price, the gas pipeline route, and possible Chinese stakes in Russian projects. The gas price is expected to be agreed at between $350-400 per thousand cubic meters. Of course Russia wants to sell gas and resources at the highest possible prices. But because of the sanctions from European partners, we need to find a partner that can buy our gas long-term, which is why at the moment China looks very attractive to us, Aleksandr Prosviryakov, a partner at Lakeshore International, a Moscow-based asset management firm, told RT at a Confederation of Asia Pacific Chambers of Commerce and Industry (CACCI) in Moscow ahead of the big meeting on Tuesday.

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Nervous friends.

• Russia-China Ties At Highest Level In History – Putin (RT)

Transcript of Vladimir Putin’s interview with Chinese Central Television, Xinhua news agency, China News Service, The People’s Daily, China Radio International, and Phoenix Television. Q: China is consistently making progress towards the “Chinese dream”, i.e. a great national rebirth. Russia has also set a goal of restoring a powerful state. How, in your opinion, could our countries interact and help each other in fulfilling these tasks? What areas can be prioritised in this regard? VP: Promotion of friendly and good-neighbourly partnership relations is fully consistent with the interests of both Russia and China. We do not have any political issues left which could impede the enhancement of our comprehensive cooperation. Through joint efforts, we have established a truly exemplary collaboration, which should become a model for major world powers. It is based on respect for the fundamental interests of each other and efficient work for the benefit of the peoples of our two countries. Russia and China successfully cooperate in the international arena and closely coordinate their steps to address international challenges and crises. Our positions on the main global and regional issues are similar or even identical. It is encouraging that both sides are willing to further deepen their cooperation. Both Moscow and Beijing are well aware that our countries have not exhausted their potentials. We have a way to go. The priority areas of collaboration at the current stage include the expansion of economic ties and cooperation in science and high-technology sector. Such pooling of capacities is very helpful in fulfilling the tasks of domestic development of our countries. Q: Cooperation between China and Russia has been steadily increasing, but uncertainties in global economy persist. The emerging markets are faced with new challenges and slowdown of economic growth. How can our two countries help each other to counter these challenges? How can we ensure steady increase of mutual trade and reciprocal investments? VP: In the context of turbulent global economy, the strengthening of mutually beneficial trade and economic ties, as well as the increase of investment flows between Russia and China are of paramount importance. This is not just a crucial element of socioeconomic development of our countries, but a contribution to the efforts aimed at stabilising the entire global market. Today, Russia firmly places China at the top of its foreign trade partners. In 2013, the volume of bilateral trade was close to $90 billion, which is far from being the limit. We will try to increase trade turnover to $100 billion by 2015 and up to $200 billion by 2020. Our countries successfully cooperate in the energy sector. We steadily move towards the establishment of a strategic energy alliance. A large scale project worth over $60 billion is underway to supply China with crude oil via the Skovorodino-Mohe pipeline. The arrangements on export of Russian natural gas to China have been nearly finalised. Their implementation will help Russia to diversify pipeline routes for natural gas supply, and our Chinese partners to alleviate the concerns related to energy deficit and environmental security through the use of “clean” fuel.

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This was clear 10 years ago.

• ‘F-35 Joint Strike Fighter A $400 Billion Boondoggle’ (Telegraph)

Britain’s long-delayed £70 million stealth fighter may need to be cancelled because of its poor performance, according to an analysis by a senior American air force officer. The F-35 Joint Strike Fighter being built for British and US forces is based on outdated ideas of air warfare, it is claimed. The aircraft could be unable to evade enemy radar and be too expensive for long campaigns. The critique in the US Air Force’s own journal concludes that the new fighter may even have “substantially less performance” than some existing aircraft. Britain is preparing to buy at least 48 of the Lockheed Martin aircraft to replace its scrapped Harrier jump jets; the US military is expected to order more than 2,400. The £235 billion programme is the most expensive weapons system in history at a time when defence budgets on both sides of the Atlantic are being cut. The analysis in the Air and Space Power Journal states: “Even if funding were unlimited, reasons might still exist for terminating the F-35. “Specifically, its performance has not met initial requirements, its payload is low, its range is short, and espionage efforts by the People’s Republic of China may have compromised the aircraft long in advance of its introduction.” Advances in Russian and Chinese radar defences mean it is not clear the stealth technology will still work, the analysis warns. “These facts make the risk calculation involved with prioritizing stealth over performance, range, and weapons load out inherently suspect – and the F-35 might well be the first modern fighter to have substantially less performance than its predecessors.” The author, Col Michael Pietrucha, suggests the F-35 programme should be put on hold and the US Air Force should instead look at a mix of fighters for the future.

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“A breakdown suggested fears of a nation-wide housing bubble are misplaced … “ Geez kiddo’s, really?

• Average UK House Prices Jump $15,000 In Five Weeks (Telegraph)

The price of an average home increased by nearly £10,000 between April and May, the biggest month-on-month cash increase ever recorded. Figures from Rightmove, the property website, showed house prices jumped by nine% over the past year, pushing up the value of an average home to record levels. The news came as the Bank of England said that people could be stopped taking out mortgages worth many times their salary to buy new homes to cool the market. Asking prices for homes in England and Wales increased by 3.6% or £9,409 – outstripping the previous record of £8,310 in October 2012 – between April 6 and May 10. The increase – the biggest since Rightmove started to collect house price information in 2001 – in the figures means that this month the average property is on sale at a new record high of £272,003. A breakdown suggested fears of a nation-wide housing bubble are misplaced, with London leading the way with a 16.3% year-on-year increase, compared with a more modest 4.9% in the rest of the country. The average asking price in the city is up by nearly £80,000 so far in 2014, or £4,405 a week, compared with £1,521 a week for the rest of the country. The figures emerged after Mark Carney, the Bank of England’s Governor, said he was considering capping the size of mortgage ratios to salaries to control the market. The Bank was also watching to see if the Government’s Help to Buy scheme – in which the Government gives people taxpayers’ money to cover deposits on homes worth up to £600,000 – was fuelling the increase. In March the Bank warned that mortgages larger than four times borrowers’ incomes accounted for the highest share of new home since 2005. Mr Carney suggested that the Bank could impose a new “affordability test” for borrowers as well as reining in Help to Buy. He told Sky News’ Murnaghan programme: “We could do more, we could take steps around affordability to test whether or not individuals can test mortgages at much higher interest rates. “We could limit amounts of certain types of mortgages that banks could undertake, we could provide advice – the Chancellor has asked us if we would provide advice on changing the terms of Help to Buy – all those things are possibilities and we will consider them all.”

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Now you know where QE is going. Not you.

• 10 Biggest Banks’ Commodities Revenue Rises 26% (Bloomberg)

Commodities revenue at the 10 largest investment banks rose to a two-year high in the first quarter even as companies from JPMorgan to Barclays shrank operations, according to analytics company Coalition Ltd. Raw-materials revenue at Goldman Sachs, Morgan Stanley (and the other companies making up the top 10 banks jumped 26% to $1.8 billion, the highest since the first three months of 2012, Coalition said in a report today. Only commodities showed growth as revenues in other areas from rates to emerging markets declined, the report showed. “The cold winter in North America created volatility and had a positive impact on U.S. power and gas revenues,” London-based Coalition said. “Additionally, investor product performance recovered from a very low base as client activity levels showed some improvement.” The banks’ employees in commodities declined 9% from last year to 2,098 people, Coalition estimated. Barclays said last month it plans to withdraw from most of its global raw-materials activities, and Deutsche Bank and Bank of America are pulling back as well. JPMorgan and Morgan Stanley are selling units. Goldman Sachs said last month its revenues from commodities were “significantly higher” in the first quarter and Morgan Stanley reported a “strong” performance. Natural gas futures traded in New York touched a five-year high in February amid freezing weather in the U.S. [..] Commodities revenue at the 10 largest banks fell 18% last year amid reduced volatility, Coalition said in February. The Standard & Poor’s GSCI gauge of 24 raw materials had its first drop in five years in 2013 as gold fell the most since 1981 and corn, arabica coffee and wheat slid at least 20%. The GSCI index rose 3.4% so far this year. Politicians and regulators have pressed banks to cut back their commodities activities. The Federal Reserve has said it’s considering new limits on trading and warehousing of physical commodities. Policy makers are seeking comment on ways to restrict ownership and trading of commodities such as oil, gas and aluminum by deposit-taking banks. New global capital rules also increased the cost to banks of holding commodities. Morgan Stanley still expects to complete the sale of a physical oil business to OAO Rosneft amid U.S. sanctions of Russian leaders, Porat said April 17. JPMorgan agreed in March to sell its physical commodities business to Mercuria Energy Group Ltd. for $3.5 billion. Deutsche Bank is cutting about 200 raw-materials jobs after deciding last year to exit dedicated energy, agriculture, dry-bulk and industrial-metals trading. Bank of America said in January it would dispose of its European power and gas inventory as opportunities shrink and increasing regulation curbs trading.

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• EU’s Voters Will Do Little To End The Crisis (Guardian)

Europe goes to the polls this week and the mood is sour. It is sour among voters and it is sour in the markets, where the sell-off at the end of last week was prompted by fears that the election results would open a new chapter in the eurozone crisis. That looks all too likely. Despite all the bullish talk in recent months, the problems of the eurozone have not gone away. The single currency’s weaker members, such as Greece, Spain and Italy, found it easier for a while to sell their bonds at lower interest rates. But that was largely due to the generosity of the Federal Reserve, which flooded the global economy with dollars through its quantitative easing programme. The QE injection was a godsend to the eurozone, which has so far – but perhaps not for much longer – scorned the idea of turning on the electronic printing presses. US dollars found their way through the global financial system into European bond markets, and this allowed Mario Draghi, the president of the European Central Bank (ECB), to say he would do whatever it took to save the euro, without actually having to back his words with action. This new version of the postwar Marshall plan bought the eurozone some time. What it didn’t do, however, was change the core economic problem of the eurozone’s weak periphery. They are not growing nearly fast enough to prevent their debts becoming more onerous. Generalised austerity has made matters worse, as has the ECB’s lack of sufficient offsetting action. Unemployment is high and voters are sick of austerity. It would be a mistake though to imagine that much, or indeed anything, will change as a result of the elections to the European parliament. There will be a lot of talk about how Europe needs to deliver for its people, and that will be it. Mainstream parties with their mainstream thinking will still be in charge and life will go on as before. As a result, Europe will condemn itself to an even longer period of economic stagnation, mass unemployment and austerity. Extremism will flourish. There is an alternative to this depressing scenario. Admit that it was a mistake of historic proportions to use the euro as a way of advancing the cause of ever closer union. Accept that and it is possible to avoid Europe becoming the new Japan.

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• Greek Government At Risk From EU Elections (Ekathimerini)

Prime Minister Antonis Samaras has convinced investors to buy the story of Greece’s recovery. Now he has to persuade voters. The premier heads into elections for the European Parliament on May 25 on the back of the Greece’s first bond auction in four years and with the economy poised to return to growth later this year. With more than half the country’s youth still without work, polls suggest voters aren’t ready to credit Samaras for the changes just yet. “The euro crisis seems to be over but its causes have not withered away,” said former Prime Minister Costas Simitis of PASOK, the socialist party that dominated Greek politics for three decades. “High unemployment and uncertainty fuel euro-skepticism, while member-states become increasingly reluctant to cede more power to European institutions,” he added, in a written response to questions. Four years and three prime ministers after Greece’s then premier, George Papandreou, requested an international bailout in return for budget cuts and an economic overhaul that cost him his job, political instability still haunts Greece. That threatens to undo the coalition led by Samaras’s New Democracy and unravel the fragile progress toward stability he has achieved. While New Democracy trails SYRIZA, the opposition group that rejected the terms of the bailout packages, the bigger threat to the government may be the collapse in support for Samaras’s coalition partner PASOK. Papandreou’s PASOK, which dominated Greek politics for three decades, plunged to sixth place with just 5.5 percent of the vote in a recent poll as voters blame the party for the country’s economic meltdown. Samaras’s governing coalition has 152 lawmakers in the country’s 300-seat legislature. The prospect of the 27 PASOK lawmakers withdrawing their support could deter the foreign investors helping to fuel the recovery, according to Megan Greene, chief economist at Maverick Intelligence and a columnist with Bloomberg View. “If there were snap elections and investors were spooked by the prospect of SYRIZA being the negotiator for Greece, it could really hurt the Greek recovery because it’s so fragile,” she said in a telephone interview.

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The ones who already make more than $25 voted it down for the rest. It’s called democracy.

• Swiss Reject World’s Highest Minimum Wage of $25 Per Hour (Bloomberg)

Swiss voters rejected the world’s highest national minimum wage, striking down a proposal for an hourly rate of 22 francs ($25). The initiative was opposed by 76.3% of voters, the government in Bern said yesterday. Polls, including one by gfs.bern, forecast that outcome. “It’s a strong sign to Switzerland as a center of employment,” Economy Minister Johann Schneider-Ammann said at a news conference in Bern. “Accepting the initiative would have led to job cuts in economically weak, rural areas.” With income inequality growing among developed economies, minimum wages are on the table in other countries as well. In the U.K., Prime Minister David Cameron has increased it to £6.5 ($10.9) per hour, while in the U.S., President Barack Obama is pushing for an increase in the $7.25-an-hour federal minimum to $10.1. In Germany, Chancellor Angela Merkel’s cabinet backed a national minimum of €8.50. Rejection of the Swiss measure, which called for a full-time worker to be paid at least 4,000 francs a month, breaks with a series of plebiscites — including ones on excessive executive compensation and immigration — that companies said make Switzerland a less desirable place to do business. “People are again saying they don’t want the state to meddle,” Swiss trade association director Hans-Ulrich Bigler said. “It’s a vote of confidence by the people in the economy.”

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Higher and higher.

• Record High Radiation In Seawater Off Fukushima Plant (Japan Times)

Radiation has spiked to all-time highs at five monitoring points in waters adjacent to the crippled Fukushima No. 1 power station, plant operator Tokyo Electric Power Co. said Friday. The measurements follow similar highs detected in groundwater at the plant. Officials of Tepco, as the utility is known, said the cause of the seawater spike is unknown.Three of the monitoring sites are inside the wrecked plant’s adjacent port, which ships once used to supply it. At one sampling point in the port, between the water intakes for the No. 2 and No. 3 reactors, 1,900 becquerels per liter of tritium was detected Monday, up from a previous high of 1,400 becquerels measured on April 14, Tepco said. Nearby, also within the port, tritium levels were found to have spiked to 1,400 becquerels, from a previous high of 1,200 becquerels. And at a point between the water intakes for the No. 1 and No. 2 reactors, seawater sampled Thursday was found to contain 840 becquerels of strontium-90, which causes bone cancer, and other beta ray-emitting isotopes, up from a previous record of 540 becquerels. At two monitoring sites outside the port, seawater was found Monday to contain 8.7 becquerels and 4.3 becquerels of tritium. The second site was about 3 km away.

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