EU farm subsidies to a Saudi billionaire for breeding racehorses

September 29, 2016

The EU is replete with examples of how a bureaucratic process is made into a god and they lose sight of the objectives intended to be achieved by that process. Process keepers in Brussels have become more important than process objectives.

The latest example is of subsidies paid to a Saudi billionaire for a farm he owns in the UK where he breeds racehorses.

BBC:

Taxpayers are paying more than £400,000 a year to subsidise a farm where a billionaire Saudi prince breeds racehorses.

The Newmarket farm of Khalid Abdullah al Saud – owner of the legendary horse Frankel – is among the top 100 recipients of EU farm grants in the UK.

The system’s critics say Brexit will let the UK redirect £3bn in subsidies towards protecting the environment.

A spokesman for the prince declined to comment.

Farm subsidies swallow a huge chunk of the EU’s budget. They were started after World War Two to stimulate production, but led to food mountains that had to be dumped.

A compromised reform process – the so-called “greening” of the Common Agricultural Policy – resulted in farmers mostly being paid depending on how much land they own.

Frankel (horse).jpg

Frankel owned by Khalid Abdullah al Saud


 

Is Saudi Arabia giving up on its oil wars?

September 29, 2016

There is a faint whiff of realism entering into Saudi Arabian government policy. They have started to curb public expenditure, they have flagged salary cuts for public employees (not just now but in 2 years), they are desperately trying to diversify their economy. Much of the change has been forced due to self-inflicted collateral damage to their various “oil wars” against shale oil, against Iranian oil and against Russian oil. They have tried to use low oil price as a weapon in their political and ideological battles. But Saudi Arabia has not yet developed the capabilities (and competence) among its indigenous work force to cope without the fat cushion of oil revenues. Without foreign competence and labour, Saudi would collapse and the only thing keeping the foreign competence and labour there is oil money.

It may be a faint hint of an increasing pragmatism that for the first time in 8 years the Saudis and OPEC have agreed to a modest cut in oil production.

It is not the end of the  oil wars but it may be the beginning of the end.

Reuters: 

OPEC agreed on Wednesday modest oil output cuts in the first such deal since 2008, with the group’s leader Saudi Arabia softening its stance on arch-rival Iran amid mounting pressure from low oil prices.

“OPEC made an exceptional decision today … After two and a half years, OPEC reached consensus to manage the market,” said Iranian Oil Minister Bijan Zanganeh, who had repeatedly clashed with Saudi Arabia during previous meetings.

He and other ministers said the Organization of the Petroleum Exporting Countries would reduce output to a range of 32.5-33.0 million barrels per day. OPEC estimates its current output at 33.24 million bpd.

“We have decided to decrease the production around 700,000 bpd,” Zanganeh said.

The move would effectively re-establish OPEC production ceilings abandoned a year ago.

However, how much each country will produce is to be decided at the next formal OPEC meeting in November, when an invitation to join cuts could also be extended to non-OPEC countries such as Russia.

Oil prices jumped more than 5 percent to trade above $48 per barrel as of 2015 GMT. Many traders said they were impressed OPEC had managed to reach a compromise after years of wrangling but others said they wanted to see the details.

“This is the first OPEC deal in eight years! The cartel proved that it still matters even in the age of shale! This is the end of the ‘production war’ and OPEC claims victory,” said Phil Flynn, senior energy analyst at Price Futures Group. 

Jeff Quigley, director of energy markets at Houston-based Stratas Advisors, said the market had yet to discover who would produce what: “I want to hear from the mouth of the Iranian oil minister that he’s not going to go back to pre-sanction levels. For the Saudis, it just goes against the conventional wisdom of what they’ve been saying.”.

Saudi Energy Minister Khalid al-Falih said on Tuesday that Iran, Nigeria and Libya would be allowed to produce “at maximum levels that make sense” as part of any output limits.

That represents a strategy shift for Riyadh, which had said it would reduce output to ease a global glut only if every other OPEC and non-OPEC producer followed suit. Iran has argued it should be exempt from such limits as its production recovers after the lifting of EU sanctions earlier this year.

…….. Saudi Arabia is by far the largest OPEC producer with output of more than 10.7 million bpd, on par with Russia and the United States. Together, the three largest global producers extract a third of the world’s oil.

Iran’s production has been stagnant at 3.6 million bpd in the past three months, close to pre-sanctions levels although Tehran says it wants to ramp up output to more than 4 million bpd when foreign investments in its fields kick in. … Saudi oil revenue has halved over the past two years, forcing Riyadh to liquidate billions of dollars of overseas assets every month to pay bills and cut domestic fuel and utility subsidies last year.

It may even be that the Iranians and the Saudis are actually talking to each other.

Opec Countries (image pinterest.com)

Opec Countries (image pinterest.com)


 

Social class is necessary for any society and does not have to be unjust

September 28, 2016

One of the great “politically correct” myths is that people are born equal. A fundamental strength of the human race is that we are all unique individuals and not identical copies rolling off a production line. Our genes fix the envelope of our potential capabilities, and our upbringing determines to what extent we fulfill our potentials. The fundamental fallacy in Marxist theory is in the assumption that a classless society is desirable. In fact it is not even possible. Forcing or coercing unequal people to be “equal” is always unjust.

Some have considered class a “necessary evil” and most social theories assume that having classes is, in itself, unfair and a “bad thing”. But there is no example of a successful (sustainable and growing) society which has not had social classes of some kind. Ruling and ruled, rich or poor, aristocracy and peasants, masters and slaves, the political class and the great unwashed, workers and bosses, union members and others, employers and employees, producers and consumers, Brahmins and the Dalits. The Guilds were about capability and competence to begin with but later became contaminated when they became “closed”. Secret societies grew to try and create new classes which cut across other class boundaries. My hypothesis is that in any society, the inherent variations in human capabilities and competences make social classes both inevitable and necessary. Human diversity (genetic and epigenetic) is (I assume) a fundamental component for the success of the human race (again defined as being sustainable and growing). That diversity is what makes people unequal. The inequality is not, in itself, unjust. It just is. We are not clones  – thank goodness.

Since the French revolution, “egalite” has been made into a fashionable – but false god. A search for “equality” is not just incompatible with, it is also opposed, to a search for justice. It is just for a sick person to receive more care than a healthy person but it is unequal. Affirmative action may be one way of approaching fairness – but it is unequal. The “better man wins” in the Olympics is a celebration of the inherent inequality among humans. If we wanted equality of result, Usain Bolt would have to be handicapped (about 10 m would do). The capitalist goal of “to each as he deserves” and the socialist objective of “to each as he needs” are both expressions which inherently acknowledge the reality of inequality. They both seek their definitions of what is just – not what is equal.

The real issue is not, I think, to seek a classless condition which would cause society to break down, but to achieve classes which are not unjust. Classes will appear as a natural consequence of humans being gregarious. The real solution, which may well have to be a dynamic solution to fit the times, is to design the class system to be used, rather than let it appear by default. Most of the perceived injustices of class are connected to either the classes being hereditary or because movement between the classes is forbidden. The Indian caste system is grossly unjust because it is both hereditary and it forbids movement between castes. Having a class system does not necessitate oppression or injustice. At any given time, even the much vaunted “open” Swedish society also has its functioning classes, but to its credit – and even though there is a not an insignificant hereditary component – movement of individuals across class lines is possible, regular and continuous.

The real question is what attributes to use in defining classes which help a society to function and which are not unjust. It cannot be along just hereditary lines and it cannot be just based on wealth. However any class system must be able to accommodate the realities of ancestry and wealth. Parents will always seek to give their children an advantage  and wealth will always be able to purchase more. Whatever classes we invent must be capable of juxtaposing different levels of wealth within each class and must allow membership from any parentage. It should be possible to move from one class to another.

My choice of class system would then be one where the classes themselves did not create a hierarchy and where the main classification criterion would be based on the predominant, gainful occupation of the individual.  Each class would have its share of rich and poor, idiots and geniuses, and its share of parasites. Classification would not be until the prefrontal cortex was fully developed (at 25). Everybody under 25 would be a non-adult and classless. Marriage across class lines would be permitted. Voting would then be restricted to adults.

I think 5 classes will do.

5-classes


 

US shale gas arrives in Scotland today

September 27, 2016

The SNP’s idiotic environmental policies means that Scotland has to import shale gas from the US even though there is plenty available locally. North Sea revenues for Scotland have collapsed and Scottish energy policy is a self-inflicted wound. In Europe generally, it is misguided, meaningless, environmental constraints on energy policies which have been a major contributor to holding back the economic recovery.

The low oil price in 2016 has effectively postponed any new independence referendum for a few years to come. Without North Sea revenues Scotland – if it wants to be an independent EU country – would be the “poor man of Europe” for 2 decades.

Image result for Scotland north sea revenue collapse

graphic: market oracle

BBC: 

The first shipment of US shale gas is arriving in Scotland amid a fierce debate about the future of fracking in the UK.

A tanker carrying 27,500m3 of ethane from US shale fields is due to dock at Grangemouth, the refinery and petrochemicals plant owned by Ineos.

The company said the gas would replace dwindling North Sea supplies and secure the future of the plant’s workforce.


 

When “star” athletes are permitted to dope and get a dispensation to cheat

September 25, 2016

UPDATE: Guardian article (see below).


Following on from my previous post, the BBC had this today. It reduces even further the very little confidence I have in WADA and the way in which the “sporting establishment” have permitted “stars” to cheat.

Of course these doped up athletes could do nothing wrong because they were officially permitted to “do wrong”.

Legal but unfair.

Compliant but unethical.

BBC: 

Sir Bradley Wiggins has insisted he was not trying to gain an “unfair advantage” from being allowed to use a banned steroid before major races. 

The Olympic cyclist told the BBC’s Andrew Marr Show he took the powerful anti-inflammatory drug triamcinolone for allergies and respiratory problems.

Sir Bradley said he sought therapeutic use exemptions (TUEs) to “put himself back on a level playing field”.

TUEs allow the use of banned substances if athletes have genuine medical need.

Sir Bradley’s TUEs were approved by British authorities and cycling’s world governing body, the UCI.

What is worse is the manner in which the licence to dope is justified:

Sir Hugh Robertson, vice-chairman of the British Olympic Association, told BBC Radio 5 live’s Sportsweek:Whatever you think about whether he should have been allowed to do this, the fact is the anti-doping rules at the time allowed him to do so”.

If Bradley Wiggins had not been a star, and from a “sporting power”, I wonder if he would have got dispensation to cheat.


Epilog: 26th September

The article in today’s Guardian is more of the same but it seems pretty clear that Bradley Wiggins was given official sanction to “cheat” by the UK cycling authorities.

Guardian: …… which invited more questions than it answered in dealing with the trio of therapeutic use exemptions granted to Wiggins in 2011, 2012 and 2013 to allow him to take the powerful corticosteroid triamcinolone, for legitimate medical reasons before his biggest races of the season. …….

…….. “This was to cure a medical condition. This wasn’t about trying to find a way to gain an unfair advantage; this was about putting myself back on a level playing field in order to compete at the highest level,” Wiggins said, explaining why he had received an injection for 40mg of triamcinolone just before his triumphant 2012 Tour.

He said he had “really struggled” with respiratory problems in the run-up to the 2012 Tour one of the high points even among so many in that golden summer for British sport. But he did not really explain how that tallied with the account he gave in 2012 in his autobiography.

Then, Wiggins said: “I’d done all the work, I was fine-tuned. I was ready to go. My body was in good shape. I’m in the form of my life. I was only ill once or twice with minor colds, and I barely lost a day’s training from it.” 

Nor did he really manage to explain the contradiction between the “no needles” rhetoric espoused in the same book and the fact he received injections of a powerful drug just before the biggest races of his life; nor the fact that he has never discussed the TUEs in any of his books or since. His contention that he believed questions on needles to refer exclusively to doping is similarly hard to countenance.

It is time for WADA to be open about all athletes who have TUE’s. It’s difficult not to be cynical.


 

Remarkable how so many top athletes take asthma medication

September 23, 2016

When top athletes get out of breath while competing it is called “Exercise Induced Asthma”. Getting out of breath is surely a consequence of the athlete’s physical condition and it seems to me that EIA is an entirely invented medical condition. This allows them to get a “therapeutic use exemption” (TUE) and then use asthma medicine to improve their breathing. The TUE is effectively being used as a doping licence. Why inventing a “medical condition” and then using drugs is not considered cheating is beyond me.

tue-doping-licence

tue-doping-licence

Daily Mail: Six more Team GB athletes have had their medical data leaked by a group of Russian hackers calling themselves the Fancy Bears. In the latest batch of data stolen from the World Anti-Doping Agency, the Fancy Bears list the therapeutic use exemptions (TUEs) granted to 41 athletes.

The British athletes were revealed as sprinter Harry Aikines-Aryeetey, sailors Sophie Ainsworth and Saskia Clark, rower Richard Chambers, cyclist Steve Cummings and gymnast Nile Wilson. As with the vast majority of the previous batches, all six of these athletes have been allowed to take medication for their asthma via inhalers.

The drugs in question have since been removed from WADA’s banned list and therefore no longer need any special permission for their use.

Among the international athletes in this batch – the largest so far – are Swiss cycling star Fabian Cancellara, American golfer Patrick Reed and US distance runner Galen Rupp. 

Team GB now accounts for 23 of the 107 athletes named by the Fancy Bears, with top names such as Chris Froome and Sir Bradley Wiggins among those targeted. 

Under pressure from out of breath athletes and their trainers, these asthma inhalers are no longer banned.  WADA may as well remove all restrictions on all drugs.

I find WADA hypocritical. The acronym could just be for the “World Approved Drugs Association”.


2016 Ig Nobels are more embarrassing than satirical

September 23, 2016

The problem with the Ig Nobels has become that they actually take themselves seriously. Unfortunately what should be satirical and irreverent has become an embarrassing example of politically correct, science “humour”. The awards have turned into a glorification of non-science, science fraud and stupidity.


The 2016 Ig Nobel Prize Winners

 The 2016 Ig Nobel Prizes were awarded on Thursday night, September 22, 2016 at the 26th First Annual Ig Nobel Prize Ceremony, at Harvard’s Sanders Theatre. The ceremony was webcast live.

REPRODUCTION PRIZE [EGYPT] — The late Ahmed Shafik, for studying the effects of wearing polyester, cotton, or wool trousers on the sex life of rats, and for conducting similar tests with human males.

REFERENCE: “Effect of Different Types of Textiles on Sexual Activity. Experimental study,” Ahmed Shafik, European Urology, vol. 24, no. 3, 1993, pp. 375-80.

REFERENCE: “Contraceptive Efficacy of Polyester-Induced Azoospermia in Normal Men,” Ahmed Shafik, Contraception, vol. 45, 1992, pp. 439-451.


ECONOMICS PRIZE [NEW ZEALAND, UK] — Mark Avis, Sarah Forbes, and Shelagh Ferguson, for assessing the perceived personalities of rocks, from a sales and marketing perspective.

REFERENCE: “The Brand Personality of Rocks: A Critical Evaluation of a Brand Personality Scale,” Mark Avis, Sarah Forbes, Shelagh Ferguson, Marketing Theory, vol. 14, no. 4, 2014, pp. 451-475.

WHO ATTENDED THE CEREMONY: Mark Avis and Sarah Forbes


PHYSICS PRIZE [HUNGARY, SPAIN, SWEDEN, SWITZERLAND] — Gábor Horváth, Miklós Blahó, György Kriska, Ramón Hegedüs, Balázs Gerics, Róbert Farkas, Susanne Åkesson, Péter Malik, and Hansruedi Wildermuth, for discovering why white-haired horses are the most horsefly-proof horses, and for discovering why dragonflies are fatally attracted to black tombstones.

REFERENCE: “An Unexpected Advantage of Whiteness in Horses: The Most Horsefly-Proof Horse Has a Depolarizing White Coat,” Gábor Horváth, Miklós Blahó, György Kriska, Ramón Hegedüs, Balázs Gerics, Róbert Farkas and Susanne Åkesson, Proceedings of the Royal Society B, vol. 277 no. 1688, pp. June 2010, pp. 1643-1650.

REFERENCE: “Ecological Traps for Dragonflies in a Cemetery: The Attraction of Sympetrum species (Odonata: Libellulidae) by Horizontally Polarizing Black Grave-Stones,” Gábor Horváth, Péter Malik, György Kriska, Hansruedi Wildermuth, Freshwater Biology, vol. 52, vol. 9, September 2007, pp. 1700–9.

WHO ATTENDED THE CEREMONY: Susanne Åkesson


CHEMISTRY PRIZE [GERMANY] — Volkswagen, for solving the problem of excessive automobile pollution emissions by automatically, electromechanically producing fewer emissions whenever the cars are being tested.

REFERENCE: “EPA, California Notify Volkswagen of Clean Air Act Violations”, U.S. Environmental Protection Agency news release, September 18, 2015.


MEDICINE PRIZE [GERMANY] — Christoph Helmchen, Carina Palzer, Thomas Münte, Silke Anders, and Andreas Sprenger, for discovering that if you have an itch on the left side of your body, you can relieve it by looking into a mirror and scratching the right side of your body (and vice versa).

REFERENCE: “Itch Relief by Mirror Scratching. A Psychophysical Study,” Christoph Helmchen, Carina Palzer, Thomas F. Münte, Silke Anders, Andreas Sprenger, PLoS ONE, vol. 8, no 12, December 26, 2013, e82756.

WHO ATTENDED THE CEREMONY: Andreas Sprenger


PSYCHOLOGY PRIZE [BELGIUM, THE NETHERLANDS, GERMANY, CANADA, USA] — Evelyne Debey, Maarten De Schryver, Gordon Logan, Kristina Suchotzki, and Bruno Verschuere, for asking a thousand liars how often they lie, and for deciding whether to believe those answers.

REFERENCE: “From Junior to Senior Pinocchio: A Cross-Sectional Lifespan Investigation of Deception,” Evelyne Debey, Maarten De Schryver, Gordon D. Logan, Kristina Suchotzki, and Bruno Verschuere, Acta Psychologica, vol. 160, 2015, pp. 58-68.

WHO ATTENDED THE CEREMONY: Bruno Verschuere


PEACE PRIZE [CANADA, USA] — Gordon Pennycook, James Allan Cheyne, Nathaniel Barr, Derek Koehler, and Jonathan Fugelsang for their scholarly study called “On the Reception and Detection of Pseudo-Profound Bullshit”.

REFERENCE: “On the Reception and Detection of Pseudo-Profound Bullshit,” Gordon Pennycook, James Allan Cheyne, Nathaniel Barr, Derek J. Koehler, and Jonathan A. Fugelsang, Judgment and Decision Making, Vol. 10, No. 6, November 2015, pp. 549–563.

WHO ATTENDED THE CEREMONY: Gordon Pennycook, Nathaniel Barr, Derek Koehler, and Jonathan Fugelsang


BIOLOGY PRIZE [UK] — Awarded jointly to: Charles Foster, for living in the wild as, at different times, a badger, an otter, a deer, a fox, and a bird; and to Thomas Thwaites, for creating prosthetic extensions of his limbs that allowed him to move in the manner of, and spend time roaming hills in the company of, goats.

REFERENCE: GoatMan; How I Took a Holiday from Being Human, Thomas Thwaites, Princeton Architectural Press, 2016, ISBN 978-1616894054.

REFERENCE: Being a Beast, by Charles Foster, Profile Books, 2016, ISBN 978-1781255346.

WHO ATTENDED THE CEREMONY: Charles Foster, Thomas Thwaites. [NOTE: Thomas Thwaites’s goat suit was kindly released for Ig Nobel purposes from the exhibition ‘Platform – Body/Space’ at Het Nieuwe Instituut in Rotterdam, and will be back on display at the museum from 4 October 2016 till 8 January 2017.]


LITERATURE PRIZE [SWEDEN] — Fredrik Sjöberg, for his three-volume autobiographical work about the pleasures of collecting flies that are dead, and flies that are not yet dead.

REFERENCE: “The Fly Trap” is the first volume of Fredrik Sjöberg’s autobiographical trilogy, “En Flugsamlares Vag” (“The Path of a Fly Collector”), and the first to be published in English. Pantheon Books, 2015, ISBN 978-1101870150.

WHO ATTENDED THE CEREMONY: Fredrik Sjöberg


PERCEPTION PRIZE [JAPAN] — Atsuki Higashiyama and Kohei Adachi, for investigating whether things look different when you bend over and view them between your legs.

REFERENCE: “Perceived size and Perceived Distance of Targets Viewed From Between the Legs: Evidence for Proprioceptive Theory,” Atsuki Higashiyama and Kohei Adachi, Vision Research, vol. 46, no. 23, November 2006, pp. 3961–76.

WHO ATTENDED THE CEREMONY: Atsuki Higashiyama


 

Clinton eyes …

September 23, 2016

Clinton eyes,
Wobbling like jelly.
Clinton eyes,
Beginning to close and fail?
How can the hope that burned so brightly
Suddenly burn so pale?
Clinton eyes.

with apologies to rabbits

clinton-eyes-image-gateway-pundit

image gateway-pundit

The Hill:

In 2014 Conan O’Brien did a spoof of Hillary Clintons interview with Diane Sawyer about her lack of lingering health issues following her 2012 concussion. In an obviously photoshopped version Clinton’s eyes are made to oscillate crazily.

It was a very funny piece. Now, it may not seem so funny.

Hillary Clinton exhibited abnormal eye movements during her recent speech in Philadelphia and they were not photoshopped.

Her eyes did not always move in the same direction at the same time. It appears that she has a problem with her left sixth cranial nerve. That nerve serves only one function and that is to make the lateral rectus muscle contract. That muscle turns the eye in the direction away from the midline. 

It comes out of the base of the brain and runs along the floor of the skull, immediately beneath the brain before coursing upward to the eye. Dysfunction of that muscle causes the striking picture of the eyes not aiming in the same direction and causes the patient to suffer double vision.

Like all things medical, there is a long list of potential causes but in my opinion the most likely one, based on Clinton’s known medical history is an intermittent lateral rectus palsy caused by damage to or pressure on her sixth cranial nerve.

It is known that she suffered a traumatic brain injury in late 2012 when she fell and struck her head. What is also known is that she was diagnosed with a transverse sinus thrombosis — blood clot in the major vein at the base of the brain. Almost all patients with a transverse sinus thrombosis suffer swelling of the brain and increased intracranial pressure. Most have headaches, balance issues and visual disturbances — all of which Clinton was reported to have following that event.

Clinton’s physician reported that she was placed on Coumadin (a blood thinner) to dissolve the blood clot. Actually, that is incorrect, because Coumadin has no effect on an existing clot. It serves only to decrease the chance of further clotting occurring Clinton’s physician has also reported that on follow up exam, the clot had resolved. That is surprising since the majority of such clots do not dissolve. The way it was documented that the clot had resolved has not been reported.

If, as is statistically likely, Clinton’s transverse sinus is still blocked, she would still have increased pressure and swelling and decreased blood flow to her brain. That swelling would place pressure on the exposed portion of the sixth cranial nerve at the base of her brain, explaining the apparent lateral rectus palsy. And such a deficit can be partial and/or intermittent. 

Additionally, when patients who have decreased intracranial blood flow becoming volume depleted (dehydrated) or have a drop in blood pressure loss of consciousness can occur. That could explain her witnessed collapse in New York City on 9/11.

One thing that is taught early in medical school is that a patient’s history, physical exam, signs and symptoms should usually lead to a single diagnosis. …….. 


The Italian Dilemma: Weak banks and faltering domestic demand

September 22, 2016

Reblogged with permission from Focus Economics

The sudden panic about a potentially imminent Italian banking sector collapse back in July has somewhat subsided for now, but sooner or later the issue will inevitably rear its ugly head again. Two months after Italian bank stocks collapsed even further in the aftermath of the Brexit vote, fears of an imminent need for a bail-in have receded as the Italian government works on plans to shore up its weakest bank, Monte dei Paschi di Siena (MPS). This will be achieved via an alternative but rather ambitious method culminating—if all goes according to plan—in a new capital injection. However, MPS, which came up short in July’s ECB stress tests, has already received capital injections in the past. Such plans to patch up banks have tended to involve kicking the can down the road rather than providing a more definitive solution to the 360 EUR billion of non-performing loans (NPLs) weighing down Italy’s banking sector, equivalent to one fifth of its GDP. If a sustainable solution is not found to clean up Italian bank balance sheets in the near future, they will inevitably constrain domestic demand and thereby weigh on the country’s already feeble growth even further.

focuseconomics_italy_economy-01.png

 

 

Domestic demand, the longstanding mainstay of the Italian economy, is already under intense pressure. In the second quarter, GDP failed to grow in quarter-on-quarter terms, primarily on the back of a broad-based deterioration in all components of domestic demand (private consumption, government consumption and fixed investment), which could not be offset by the unusually-positive contribution of the external sector to growth. The difficult climate for domestic demand in Italy is nothing new, since the austerity policies implemented in recent years have taken their toll and Italian governments have centered their efforts on trying to boost external demand instead in order to reverse the current account deficit Italy had until 2012 and keep it positive going forward. And yet private consumption has remained the main driver of Italy’s feeble economic recovery. Analysts foresee that the poorer-than-expected performance of domestic demand (especially private consumption) in the second quarter this year will be temporary, but its growth rate will nevertheless decelerate in 2017.

Our latest September Consensus Forecast for Italy, obtained by polling 37 local and international analysts, sees GDP growing a meagre 0.9% both this year and next, a figure which has in both cases been gradually revised down in recent months from the 1.2% forecasts for both years back in January. The panel are basing their growth projections primarily on modest improvements in consumer spending, albeit at a slower rate than initially expected, on the back of gradual gains in household disposable income fueled mainly by improving employment and low inflation. Domestic demand is forecast to contribute 1.1 percentage points to total growth this year (which will be dragged down slightly by a 0.2% contraction in the external sector), of which 0.7 percentage points will come from the strongest component, private consumption. In 2017, domestic demand is expected to decelerate and contribute 0.8 percentage points to growth while the external sector will pick up slightly. Of the domestic demand components, private consumption is seen remaining the main cornerstone of the tentative recovery next year, decelerating from 2016 but still contributing 0.5 percentage points to growth.

A failure to swiftly clean up bank balance sheets means domestic demand will inevitably suffer as bank credit supply constraints continue to prevent the recovery of investment. Loan-loss provisioning reduces the credit banks have available for lending, especially to small and medium-sized enterprises (SMEs) and consumers, which are perceived as risky. Arguably, analysts assessing the Italian banking sector are now most worried about the risk of chronically constrained growth rather than another systemic shock, as banks are trapped in a vicious circle whereby poor economic growth means bad loans keep growing, which in turn weigh on growth even further. The latest ECB stress tests showed that most Italian banks do have loss-absorbing capacity to withstand a theoretical three-year economic shock, but strong concerns remain about their profitability as NPLs reduce their lending ability and deter investors.

Moreover, this scenario of sustained weakness prolongs the risk of banks eventually being forced to resort to a bail-in. A recapitalization of the banking sector involving substantial losses for retail investors would strongly hit consumer confidence and spending, the backbone of Italy‘s economy, which analysts we surveyed foresee as remaining essential to its fragile recovery. For a country whose already weak economic growth is heavily dependent on domestic demand, this would therefore bode disaster, and not only for the individual citizens with affected bond holdings.

Italy’s banking sector woes

The Italian government is desperate to avoid any need for a bail-in, especially after the politically disastrous bail-ins of a handful of small regional banks last year. In this context, it has sought to reassure the markets that individual critical cases of weakness are contained and new capital can be raised without the need for individual investors to take a hit. But exactly how the overwhelming quantity of NPLs in the Italian banking sector will be dealt with is still far from clear. Italian banks have only made provisions to cover just under half of the 360 EUR billion NPLs weighing down their bank balance sheets, of which 201 EUR billion are already estimated by the IMF to be bad loans that will be irrecoverable. Plans such as that affecting MPS, where NPLs are to be offloaded into a securitization vehicle in an attempt to sell them to investors, would seem to be in line with the IMF’s recommendation that Italy build a robust market in NPLs. And yet many analysts consider such ambitions rather wishful thinking, especially since most of the bad loans on Italian bank balance sheets are uncollateralized loans to small businesses and consumers (in contrast to the mortgage NPLs that dominated Spanish and Irish bank balance sheets during their time of stress), and specialist NPL buyers tend to be more attracted to loans with easily recoverable, tangible collateral.

Moreover, if Italy is to create a functioning NPL market, banks will need to accept significant write-downs on their loans compared to their current book value. There is a sizeable discrepancy between banks’ valuations of the NPLs and the price they would get for them if they attempted to sell off the loans to specialist distressed debt players, which will create yet more of a gaping hole on bank balance sheets. The small private Atlante fund and its successor Atlante 2, set up by the Italian government to help participate in distressed banks’ recapitalization and also to buy NPLs from banks, are unlikely to be anywhere near large enough to resolve these problems.

To complicate matters further, holdings of bank bonds by retail investors are exceptionally high due to the longstanding practice in the country of selling (or rather mis-selling) bank bonds to ordinary citizens. An IMF report published back in July calculated that retail investors own about one third of around 600 EUR billion of senior bank bonds and nearly half of an estimated 60 EUR billion of subordinated bonds on the balance sheets of Italy’s 15 largest banks. Under the bail-in requirement of the EU’s Bank Recovery and Resolution Directive (BRRD) in force since the start of this year, at least 8% of a failing bank’s total liabilities must be written off before state aid can be requested, if the EU enforces strict adherence to the rules (the Italian government has been investigating every possible loophole in case). In Italy, the IMF estimates that this requirement would hit the majority of subordinated bond holdings by retail investors in the fifteen largest banks and that it would also hit some of their senior debt holdings in two thirds of those cases.

After the experiences of massive publically-funded bank bailouts in countries such as the UK, Ireland and Spain during the height of the financial crisis, the whole idea behind the BRRD was to break the link between banking and sovereign risk and to stop putting taxpayers on the hook for private banking sector failures, making bank bondholders pay instead. But this assumes that the bondholders are institutional investors, and fails to take account of the specific circumstances of countries such as Italy where retail investors risk having their holdings wiped out too. In Italy’s case, many of the bank bondholders at risk are ordinary citizens and taxpayers, who were mis-sold bank debt as if it were as safe as placing their money in a savings account but with the added benefit of a much higher interest rate. In fact, retail investors are likely to be disproportionately affected compared to institutional investors, since individual citizens are usually sold more risky subordinated debt rather than its safer senior counterpart.

Reviving the risk of recession?

Unless concrete plans for how to create a functioning NPL market are devised, it is unclear how banks that need to recapitalize will be able to do so without ultimately ending up hurting at least some of their equity and subordinated debt holders. For a country where consumer spending is the cornerstone of an already weak recovery, imposing losses on retail investors, if they are not somehow exempted, would risk dampening consumer confidence to the extent that this could in itself push the country back into recession. This is before the wider downside risk implications of a struggling banking sector are even taken into consideration. Even if a bail-in remains avoidable, if banks are forced to use their own precious reserves to increase loan-loss provisions and capital buffers in the absence of any substantial state aid injection, this risks prolonging the Catch-22 of poor growth leading to a weak banking sector and vice versa.   

Author: Caroline Gray, Senior Economics Editor

Date: September 19, 2016


 

Trump accepts Obama’s birth was in the US, but the original birther theory was started by Clinton supporters in 2008

September 16, 2016

Someone in Trump’s campaign just said that he accepts that Obama was, in fact, born in the US. That seems to have got a lot of media attention, but it is conveniently forgotten that it was Clinton’s supporters who started the whole Obama “birther movement” in 2008.

Clinton supporters started the Obama “birther” movement

The level of ridiculous rhetoric is now going to rise in the US and it will be difficult for Clinton to match Trump. Yesterday he proclaimed (again) to the electorate that she had started the Obama “birther” movement. We can expect much more from Trump and Clinton’s staff may be hard put to keep up. In battles of exaggerated rhetoric, tempo is of critical importance. The person who makes the first claim always has an advantage. It is having the white pieces in a chess game.

But on the birther story, this certainly originated during the Clinton / Obama battle. There is still not much love lost between Clinton and Obama. The birther story was started, if not by Clinton, certainly by one or more of her supporters, and it was in 2008 during her primary battle with Obama. ….

  1. More than a full year before anyone would hear of Orly Taitz, the Birther strategy was first laid out in the Penn memo.

  2. The “othering” foundation was built subliminally by the Clinton campaign itself.

  3. Democrats and Clinton campaign surrogates did the dirtiest of the dirty work: openly spread the Birther lies.

  4. Staffers in Hillary’s actual campaign used email to spread the lies among other 0225_obamaturban_460x276Democrats (this was a Democrat primary after all — so that is the only well you needed to poison a month before a primary).

  5. The campaign released the turban photo. Hillary herself used 60 Minutes to further stoke these lies.

The article reblogged below was published by FactCheck in July 2015, just after Trump had announced his intention to run for President.

Was Hillary Clinton the Original ‘Birther’?

by , Posted on July 2, 2015

Two Republican presidential candidates claim the so-called “birther” movement originated with the Hillary Clinton campaign in 2008. While it’s true that some of her ardent supporters pushed the theory, there is no evidence that Clinton or her campaign had anything to do with it.

In an interview on June 29, Sen. Ted Cruz said “the whole birther thing was started by the Hillary Clinton campaign in 2008,” and earlier this year, Donald Trump claimed “Hillary Clinton wanted [Obama’s] birth certificate. Hillary is a birther.”

Neither Cruz nor Trump presented any evidence that Clinton or anyone on her campaign ever questioned Obama’s birthplace, demanded to see his birth certificate, or otherwise suggested that Obama was not a “natural born citizen” eligible to serve as president.

For those unfamiliar with the controversy over Obama’s birthplace, it refers to those who contend that Obama was born in Kenya and ineligible to be president.

At FactCheck.org, we have written about the issue of Obama’s birthplace on multiple occasions — indeed we were the first media organization to hold his birth certificate in our hot little hands and vouch for the authenticity of it. But facts have done little to squelch the conspiracy theories that continue to bounce around online.

The issue arose again this week in an interview with Cruz, who was born in Canada to an American mother and a Cuban father. Yahoo News’ Katie Couric asked Cruz if he thought that was going to be an issue for voters.

“It’s interesting, the whole birther thing was started by the Hillary Clinton campaign in 2008 against Barack Obama,” Cruz said (at about the 25:25 mark). Cruz then went on to say that he believes he clearly meets the constitutional requirement for a president to be a “natural born citizen.”

The claim about Clinton’s tie to “birthers” was made earlier by Donald Trump in February at the CPAC event (at 24:20 mark). Trump — who has a history of pushing bogus theories about Obama’s birth —  said, “Hillary Clinton wanted [Obama’s] birth certificate. Hillary is a birther. She wanted … but she was unable to get it.”

We asked the Cruz campaign for backup, and it pointed us to two articles. The first ran in Politico on April 22, 2011, under the headline, “Birtherism: Where it all began.”

Politico, April 22, 2011: The answer lies in Democratic, not Republican politics, and in the bitter, exhausting spring of 2008. At the time, the Democratic presidential primary was slipping away from Hillary Clinton and some of her most passionate supporters grasped for something, anything that would deal a final reversal to Barack Obama.

According to the article, the theory that Obama was born in Kenya “first emerged in the spring of 2008, as Clinton supporters circulated an anonymous email questioning Obama’s citizenship.”

The second article, which ran several days after the Politico piece, was published by the Telegraph, a British paper, which stated: “An anonymous email circulated by supporters of Mrs Clinton, Mr Obama’s main rival for the party’s nomination, thrust a new allegation into the national spotlight — that he had not been born in Hawaii.”

Both of those stories comport with what we here atFactCheck.org wrote  two-and-a-half years earlier, on Nov. 8, 2008: “This claim was first advanced by diehard Hillary Clinton supporters as her campaign for the party’s nomination faded, and has enjoyed a revival among John McCain’s partisans as he fell substantially behind Obama in public opinion polls.”

Claims about Obama’s birthplace appeared in chain emails bouncing around the Web, and one of the first lawsuits over Obama’s birth certificate was filed by Philip Berg, a former deputy Pennsylvania attorney general and a self-described “moderate to liberal” who supported Clinton.

But none of those stories suggests any link between the Clinton campaign, let alone Clinton herself, and the advocacy of theories questioning Obama’s birth in Hawaii.

One of the authors of the Politico story, Byron Tau, now a reporter for the Wall Street Journal, told FactCheck.org via email that “we never found any links between the Clinton campaign and the rumors in 2008.”

The other coauthor of the Politico story, Ben Smith, now the editor-in-chief of BuzzFeed, said in a May 2013 interview on MSNBC that the conspiracy theories traced back to “some of [Hillary Clinton’s] passionate supporters,” during the final throes of Clinton’s 2008 campaign. But he said they did not come from “Clinton herself or her staff.”

Josh Schwerin, a spokesman for the Clinton campaign, said Cruz’s claim is false. “The Clinton campaign never suggested that President Obama was not born here,” Schwerin wrote to us in an email.

It is certainly interesting, and perhaps historically and politically relevant, that “birther” advocacy may have originated with supporters of Hillary Clinton — especially since many view it as an exclusively right-wing movement. But whether those theories were advocated by Clinton and/or her campaign or simply by Clinton “supporters” is an important distinction. Candidates are expected to be held accountable for the actions of their campaigns. Neither Cruz nor Trump, whose campaign did not respond to our request for backup material, provides any compelling evidence that either Clinton or her campaign had anything to do with starting the so-called birther movement.

— Robert Farley


 


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