BRICs Illusion: Western Banks' Exodus from Brazil

♠ Posted by Emmanuel in at 7/02/2015 01:30:00 AM
Adios HSBC in Brazil; we hardly knew ye.
There was a time when Brazil, Russia, India and China or the BRICS were all the rage, and MNCs felt they had to have a presence in these countries. Unfortunately, we all know what's happened since. Consider China and Brazil in particular: China has slowed down tremendously as its export-driven economy has reached its limits and saturation of the world market with PRC-made goods has set in. As a result, Brazil's resource-dominated exports have found fewer and fewer Chinese takers. Being a fairly undiversified economy, Brazil has slown down and even gone into reverse.

Recent news that HSBC--which once had an ad campaign styling itself as "The World's Local Bank"--was essentially giving up retail banking in Brazil means that nearly all the Johnny-Come-Lately Western banks have fled Brazil. With sky-high interest rates in Brazil, this should not be the case on first glance:
Making money through lending should not be a problem for banks operating in Brazil. The country's interest rates are currently at an eye-watering 13.75% and expected to rise even higher this year. So it comes as something of a surprise that HSBC has announced this week it will practically end its operation in Latin America's largest economy - retaining only a few large corporate clients.
However, operating conditions are difficult in as geographically vast a market as Brazil. With thin activities concentrated in major cities not being enough to achieve profitability on a sustained basis, most have fled...including HSBC now:
HSBC Holdings Plc this week became the third foreign retail bank to abandon or scale back in Brazil in the past two years, leaving the South American nation with just two still doing business there. Citigroup Inc. agreed to sell its credit-card and consumer-finance unit two years ago and Societe General SA decided to close its consumer-finance operation in February. Also giving up on the South American nation: Bank of America Corp., Spain’s Banco Bilbao Vizcaya Argentaria SA, Italy’s Intesa Sanpaolo SA and France’s Credit Lyonnais SA, which shuttered their Brazil retail banks in the past two decades.

Brazil, geographically the world’s fifth-biggest country, is a punishing place for retail banks trying to break in or expand, and is already home to Latin America’s biggest lender by market value, Itau Unibanco Holding SA, and its largest by assets, Banco do Brasil SA. As opportunities to purchase smaller rivals passed it by in recent years, London-based HSBC also fell victim to new regulatory capital requirements after the 2008 global financial crisis.

“To grow in an economy like Brazil, given the size of its territory, banks need to expand geographically,” Henrique Kleine, head equity analyst at brokerage Magliano SA in Sao Paulo, said in a telephone interview Tuesday. “HSBC lost the opportunity to gain scale. The conditions don’t exist to grow in Brazil anymore.”
The political-economic conditions in Brazil are, to be frank, dire. It is in a recession and has a corruption scandal engulfing its government. Having ditched the internationalization strategy, money losers had to go first for HSBC, and none was losing more money than its Brazil operations.

It's another sad story on the BRICs Boulevard of Broken Dreams.

Death Wish 6: Tsipras, Greek Financial Suicide Co-Pilot

♠ Posted by Emmanuel in ,, at 6/30/2015 01:30:00 AM
Hitch a ride with the infantile Tsipras.
Andreas Lubitz, the suicidal Germanwings co-pilot who crashed an Airbus A320 into the French Alps, has understandably gone down in infamy for his actions. Suicide is bad enough from the perspective of any number of major world religions, but taking another 149 lives with you is much, much worse. I was reminded of the Lubitz episode when Greece's amateur-grade pinko of a "leader," Alexis Tsipras, engaged in financial suicide that took the entire Greek nation to an unknown, likely morbid, fate.

You see, like Lubitz practicing how to plunge a jetliner to its grave, Tsipras had premeditated financial suicide, taking 11 million people along for the ride to oblivion. Readers of my generation should be familiar with the Charles Bronson action franchise Death Wish that ran from the 1970s to the 1990s. Let's just say the latter sequels were not any good...but Death Wish 6: Tsipras, Greek Financial Suicide Co-Pilot would be the worst of the lot. In this 2015 remake, Tsipras plunges the Eurozone into turmoil out of his Narcissist-Leninist convictions to speed the demise of capitalism.

What evidence do I offer that Tsipras' suicide act--pretending a referendum was a "democratic" choice even it was to be held after financial lifelines are cut--was premeditated? I offer you two things. First, Greek negotiators thought they were talking in good faith with the nation's creditors when Tsipras pulled a "gotcha" on everyone--including them:
No one was more surprised by Greek Prime Minister Alexis Tsipras’s call for a referendum than his team of negotiators in Brussels. Shortly before midnight on Friday in the Belgian capital, the Greeks and representatives of the European Union and International Monetary Fund, tucked away in the EU Commission’s Charlemagne building, learned via Twitter that their efforts were in vain, according to an EU official. It was the first they’d heard about it. They soon left the room, their attempts to thrash out a compromise in tatters.
Second, Tsipras ignored his so-called "finance minister," self-styled erratic Marxist Yanis Varoufakis, over imposing capital controls on the Greek people. Said Varoufakis:
Capital controls within a monetary union are a contradiction in terms. The Greek government opposes the very concept.
Yeah, whatever. The upshot is that Tsipras had no intention of concluding an agreement with Greece's creditors anyway--the Greek negotiators were props. Even the leftist agitator Varoufakis was only there for show. While we don't know when Tsipras became convinced of his death wish any more than Lubitz did, that he had one is certain.

Reading the concluding text of the Communist Manifesto, Tsipras' methods are perfectly understandable in hindsight as he attempts to make the ruling classes tremble. He may not singlehandedly destroy the Eurozone, but he certainly will try his darndest to do so even if he damns the whole Greek nation to oblivion:
The Communists turn their attention chiefly to Germany, because that country is on the eve of a bourgeois revolution that is bound to be carried out under more advanced conditions of European civilisation, and with a much more developed proletariat, than that of England was in the seventeenth, and of France in the eighteenth century, and because the bourgeois revolution in Germany will be but the prelude to an immediately following proletarian revolution.

In short, the Communists [e.g., Syriza--ed.] everywhere support every revolutionary movement against the existing social and political order of things. In all these movements they bring to the front, as the leading question in each, the property question, no matter what its degree of development at the time. Finally, they labour everywhere for the union and agreement of the democratic parties of all countries.

The Communists disdain to conceal their views and aims. They openly declare that their ends can be attained only by the forcible overthrow of all existing social conditions. Let the ruling classes tremble at a Communistic revolution. The proletarians have nothing to lose but their chains. They have a world to win [my emphasis]. 
Proletariat of all countries, unite, and all that.

UPDATE: I obviously agree with Chris Giles of the FT that Tsipras is getting what he deserves.

Investment Roadshow: 'Fight ISIS, Buy Kurdistan Bonds'

♠ Posted by Emmanuel in , at 6/29/2015 01:30:00 AM
Invest in the peshmerga, the brave fighters of ISIS--buy Kurdistan bonds.
Among more adventurous "investments" I've covered in the recent past, Ukraine bonds are among the choice picks insofar as literally fighting anti-Western forces are concerned. With yields north of, oh, 50%, they are factoring in a substantial reduction in the value of these bonds as Ukraine's "government" is literally fighting for its life. But, here's some good news if you're having doubts about investing in Ukraine: Try some Kurdistan bonds. 

I have portrayed the Kurds as the only real good guys in Iraq as they fend off ISIS, a rapacious central government in Baghdad, Saddam's Baathist loyalists, and a Turkey fearful of a nation of Kurdistan at the same time. Instead of investing in those opposing a new Russian Empire or a reborn Soviet Union, you can put your money to work funding those at the frontlines of a war against a hyper-retrograde "caliphate." Last week, the Kurds were in London flogging Kurdistan bonds. In a world of low interest rates, some of these fringe issues are becoming increasingly attractive:
As the fight against Islamic State rages in Iraq, the semiautonomous Kurdistan region is wading into a battle of different sorts. Its government is in London to woo international investors for a new bond issue, the latest among fringe emerging markets. The Kurdistan Regional Government [KRG] is planning to raise cash through a bond sale, its first ever, as it seeks to plug a gaping hole in its finances thanks to weaker oil-sale revenues amid an increasingly costly battle with the radical militants.

The KRG is holding fixed-income investor meetings this week through Friday in London, organized by Deutsche Bank and Goldman Sachs International, to gauge appetite for the energy-rich region’s debt, and may issue a bond after that. They are meeting big institutions and frontier-market investors, and will complete the size of the bond depending on demand.

The bond issue seeks to fulfill the government’s budget deficit, which is expected to reach $5 billion this year for the second year in a row, said Ezat Sabir, head of the investment and economy committee in the KRG’s regional parliament. KRG’s bond plan comes at a time when global investors anticipate a rise in U.S. interest rates, which could trigger a selloff in riskier emerging-market debt. Some of the riskiest sovereigns in the world—such as Armenia, Bulgaria and Ecuador—have sold debt in recent months, finding takers for the high yields they offered amid record low global interest rates.
Actually, Kurdish officials explain, their bonds are not a dubious investment since some of the richest oil reserves in Iraq lie in Kurdistan. In other words, revenue streams should be fairly steady going forward:
The KRG doesn’t have a credit rating, which usually helps investors make a decision, and Kurdish fighters are fighting Islamic State just outside the borders of the Kurdish region. But some bankers and government officials are still optimistic.

They point to the Iraq 2028 bond that trades at around 8%—more favorable than the yields on debt issued by countries such as Venezuela, Greece and Ukraine. And the country’s economy is underpinned by oil. Islamic State, despite its advances, is still far away from the heart of oil production in southern Iraq. The Iraqi central government, meanwhile, is also looking to raise debt through its own bond sale.

“We are optimistic about the future of our future economy because we have huge reserves of gas and oil,” the KRG’s Mr. Sabir said.
Given how menacing ISIS has become, there may be an additional normative component to investing in Kurdistan.

Corporate America Buys Fast Track Authority

♠ Posted by Emmanuel in at 6/27/2015 01:30:00 AM
Money talks, so fast-track's passage was more or less assured.
We have come full circle on trade at the end of Barack Obama's second term as the American president. Campaign Mode Obama circa 2008 adopted some pretty nasty anti-trade rhetoric. As I noted so many years ago, this tactic is standard fare for Democratic candidates for president to gain the support of or at least silence staunchly isolationist elements in their party like labor unionists. Once they enter office, however, they ditch these patsies and reveal...their true pro-trade agenda.

And so it's happened with the passage of fast-track authority. With no further votes to win--he is in his second and last term as US president, Obama has pushed for this authority enabling him to conclude trade deals abroad--the Trans-Pacific Partnership (TPP) in Asia and the Transatlantic Trade and Investment Partnership (TTIP) in Europe--and have them voted on an up-or-down basis in the US congress without modification.

What accounts for the relatively easy passage of  fast-track authority--after a few temporary hiccups? Simple: pro-trade contributions to politicians far outstrip anti-trade ones:
The political maneuvering and opinions on the trade partnership remain complex. But the money flowing to senators from interested groups has been much more one-sided. Industries, such as banks, insurance companies, utilities and many more, that back the bill in its current form have donated $218.4 million to current senators since October 2008, according to money in politics researcher MapLight. That's about nine times more than the $23.2 million contributed by groups that oppose it.

"As far as business, this is the most important vote that will be taken this year," said Anthony Corrado, a professor of government at Colby College in Waterville, Maine, who studies campaign finance. "The business community for the most part has been united on TPA, so you might expect a large disparity."
Seen from the perspective of campaign finance contributions, we should have known that the anti-trade set never really stood a chance. Money talks, that's all.

Will the Party 'Save' China's Imploding Stock Markets?

♠ Posted by Emmanuel in , at 6/26/2015 01:13:00 PM
Fried chicken...or fried rat? That's the real question about what's in Chinese stocks.
There's been a silly controversy about a customer who found a rat-shaped piece in a KFC order. As it turned out, the piece was only rat-shaped but was wholly chicken meat. For some reason, this episode reminded me about the debate about corporate governance issues among PRC-listed firms: How much disclosure is being provided by these firms? Moreover, is Chinese-style accounting to be trusted? Explaining why he didn't invest in PRC-listed assets, famed investor Bill Gross called them the "mystery meat" of the financial world for this very reason. Are the Chinese serving up fried chicken...or fried rat? Unfortunately, it remains hard to tell.

If you enjoy financial adventure, then there is no finer place to invest than in China. In 2015, its stock markets have been both the best-performing and worst-performing in the world due to wild gyrations. Daily moves of ±5% are the norm and not the exception. During the last few sessions, for instance, the Shanghai Composite Index has fallen an astounding 19% in 9 trading days:
Friday was another black day in recent times for Chinese stock markets. The stocks, as suggested by Shanghai Composite index, nosedived 7.40 per cent for the day to mark their biggest daily point-wise fall in more than seven years. Regional indices too were hit badly, with Shenzhen Composite ending 7.9 per cent lower. Selling was seen across the board, with nearly 2,000 of 2,800 listed companies on Shanghai and Shenzhen exchanges hitting their 10 per cent-daily limits. limits.
That was harsh, but nothing new for Chinese stocks given the recent trend. The stocks have been bleeding over the last 9 trading sessions. In fact, the Shanghai market — which is nearly three times bigger than India's stock market in terms of market capitalisation — has lost a fifth its weight during the period. 
Also:
China’s $8.8 trillion stock market has plunged from first to worst on global performance rankings, threatening to bring an end to the longest bull market since the ruling Communist Party introduced equity trading to the world’s largest population in 1990. Morgan Stanley advised clients to refrain from purchasing mainland shares in a report on Friday, saying the Shanghai Composite’s June 12 high likely marked the top of the rally.
Market observers generally agree that the Chinese Communist Party has goaded retail investors through a relentless state media blitz about the benefits of investing in equities. To sweeten the pot, it has enabled these neophyte mom-and-pop investors to borrow considerable amounts to buy stocks. The end result has been fascinating to watch: Amidst a visibly slowing Chinese economy, stock markets kept rising as debt-fueled retail investors tried to cash in on a supposedly "government guaranteed" bull run. Once in a while, though, the reality becomes evident that (a) the Chinese economy is slowing, (b) unsophisticated mom-and-pop investors gorged on debt are driving this run, and (c) everyone expects the government to goose the market when it slows.
 
But here's the thing: what if the PRC cheerleaders shut the hell up and the government simply says "Well, that's just the way it is with stocks?" Recent movements have left the propagandists speechless:
Only months ago, encouraging words from Xinhua sent stocks soaring. Now, with markets sinking, that official line has gone quiet, leaving many wondering how -- or whether -- Beijing might respond. Just how much China’s state media are used to telegraph government views on the markets is the subject of debate. Xinhua, founded in 1931 as the Red China News Agency, didn’t answer calls to its news hotline seeking comment.

But analysts agree that Xinhua, a ministry-level government department, is too powerful to ignore. If nothing else, reports and commentary by state media sway investor psychology and can turn a rout into a rally -- or vice versa. “Investing in China stocks means you have to follow state media,” said Nelson Yan, the chief investment officer at the Hong Kong unit of Changjiang Securities Co. Government policy, after all, has been largely behind the world-beating 124 percent market gain of the past 12 months.
What to do? Call me crazy, but I prefer to invest in companies that observe good corporate governance: they have real and verifiable earnings, real and verifiable assets, and some semblance of an intelligible business model. Hoping that the Chinese government will keep talking up the market does not sound like a wise investment strategy to me. More often that not, Chinese listed companies have none of these things, leaving us to guess what Chinese apparatchiks are serving up: fried chicken...or fried rat?

Given recent headlines, it seems even gullible mom-and-pop investors in China believe the latter.

Caveat emptor!

UPDATE: Bang on schedule--call it the PBoC put--the People's Bank of China has reduced the benchmark lending rate for the fourth time since November 2014, while reducing reserve requirements as well. The timing suggests that the tanking stock market again drove monetary policy-making. Can the Party keep the stock market party going? I didn't even bet on it either way. 

Will Obama Boycott (Now PRC-Owned) Waldorf-Astoria?

♠ Posted by Emmanuel in ,, at 6/25/2015 01:30:00 AM
Reds' listening devices under the bed at the now Chinese-owned New York Waldorf-Astoria?
One of the best-known hotels in the world is the Waldorf-Astoria in New York. Its fame stems from world leaders, celebrities, and movers and shakers in the world of business patronizing this venerable institution for decades. A source of its renown has been American presidents staying there whenever in the Big Apple. Like, for instance, while delivering addresses at the United Nations. If only these rooms could speak, they could tell us about persons who have shaped our world. Consider the presidential suite:
The Waldorf Towers, which bills itself as a hotel atop a hotel and has its own drive-through entrance on East 50th Street, has 26 “presidential style” suites. The presidential suite itself isn’t even the biggest or the most expensive. (It is surpassed by the Cole Porter, with five bedrooms; the royal, where the Duke and Duchess of Windsor lived; and the penthouse.)

Still, it’s roomy, with a foyer, a living room with a decorative fireplace, a dining room that seats 10, a kitchen and a boudoir off the marble master bathroom. It is spacious enough, at 2,245 square feet, to accommodate 50 guests. (The suite can also be converted into a more economical one-bedroom.) Originally fitted with colonial-style furnishings, it was redecorated in a Georgian style in 1969, “to be evocative of the White House, without trying to copy it,” said Matt Zolbe, the hotel’s director of sales and marketing.

There’s no great original art to speak of, but the living room is graced by an upholstered rocking chair that belonged to John F. Kennedy; wall sconces donated by Richard M. Nixon; and books by Homer, Shakespeare, Lewis Carroll and J. K. Rowling (she stayed there). Facing the king-size bed and Serta Perfect Sleeper mattress (with 400-thread-count sheets from Anichini) is a desk owned by Gen. Douglas MacArthur, who had a suite at the hotel.
If you're rich enough, you too can stay at the presidential suite. However, it may not deserve its name for much longer if rumors are true that Barack Obama will not be staying there for the upcoming UN general assembly:
Every president since Franklin D. Roosevelt has stayed in the presidential suite on the 35th floor of the Waldorf Astoria New York in Manhattan. The accommodations run $4,000-$6,000 per night, hotel officials say, and feature souvenirs collected from past commanders in chief and security measures like bulletproof glass windows. Current and former White House officials have long considered the hotel and its staff as the best in the world at hosting the most powerful man in the world. That may all be about to change. President Barack Obama is on track to skip the Waldorf this fall when he heads to New York for the annual United Nations General Assembly, several officials told Yahoo News. 
Is Obama boycotting this Hilton-managed property over the antics of heiress Paris Hilton? Hell no! Reportedly, the PRC-based Anbang insurance group buying the property has resulted in [my eyes are rolling here] "security" issues. What if the presidential suite is now riddled with listening devices? At least that's the argument of those steering Obama away from the Waldorf-Astoria:
While the officials would not say so explicitly, they strongly indicated that the decision to reevaluate the historic relationship with the Waldorf was tied to the hotel’s sale to China’s Anbang Insurance Group, approved by U.S. regulators earlier this year. While Hilton will continue to operate the property for 100 years, one U.S. official linked the American decision to relocate the president to worries about Chinese espionage and to the announcement of an upcoming “major renovation” at the hotel that could provide an opportunity to install surveillance gear. The recent theft of millions of federal workers’ personal information, pinned on China, has fed the sense of alarm in Washington. China denies responsibility for the breach.
What's this, hotel protectionism? Having passed Committee on Foreign Investment in the US (CFIUS) scrutiny, you would think that security-related concerns have been assuaged since the American president has always stayed at the Waldorf-Astoria. I guess not. 

Trade Agreement-Signing Competition: US vs. China

♠ Posted by Emmanuel in , at 6/24/2015 01:30:00 AM
US, China race to sign preferential trade deals...which exclude the other.
With the WTO Doha Round safely written off--it's so stale that even the obituaries declaring it dead date to 2012--another "great game" has preoccupied the great (trading) powers. Aside from being the two largest economies in the world, the US and China are also its two largest traders in goods and services. Paying no heed to the notion of "trade diversion," both are racing to sign preferential trade agreements with any and all comers--except each other, that is. As it so happens, Laura He has an interesting description of this contest to ink PTAs at MarketWatch.

Let's start off with China. Its strategy involves linking together a series of bilateral arrangements for an eventual wider, regional deal known as the Regional Comprehensive Economic Partnership [RCEP]. After the RCEP, there will be an even broader deal in China's plans for APEC member nations known as the Free Trade Area of the Asia-Pacific [FTAAP]:
Last week, China signed a landmark free-trade agreement with Australia, the latest entry in Beijing’s recent parade of high-profile trade deals. [T]hese deals can also be seen in the context of a “free-trade race” with the U.S., in which each side racks up competing — and often overlapping — free-trade agreements, or FTAs. Specifically, the Australia deal follows closely a similar agreement with South Korea, inked June 1, and falls into China’s plan for a Regional Comprehensive Economic Partnership, which Beijing hopes will in turn serve a grander, more globe-straddling strategy for a Free Trade Area of the Asia-Pacific.

RCEP and FTAAP, as the latter schemes are known, are more than just another pair of Chinese government acronyms. Back in the 1990s, China was struggling to conform to the rules of the World Trade Organization, which it finally joined in 2001. But today, as an editorial by the state-run Xinhua News Agency put it last week, China wants to transition to “actively helping write international economics and trade rules” rather than following a system set up by other nations.

This month’s new trade deals are a step in that direction, Xinhua said, with China trying to “thread the beads of a China-South Korea FTA and China-Australia FTA onto the string” of its RCEP plan and eventually “create a plane” for the more ambitious FTAAP. In fact, Chinese President Xi Jinping went so far as to tell Australian Prime Minister Tony Abbott in a public letter that the FTA between their countries would “set an example” for similar agreements in the Asia-Pacific region.
Allegedly, China's reinvigorated mania in signing preferential details left and right has been spurred  by fears of being frozen out by the Trans Pacific Partnership [TPP]*:
But perhaps the root of China’s proliferation of trade deals and multinational organizations is yet another set of initials, emanating from Washington: the TPP. The TPP is the U.S. government’s Trans-Pacific Partnership, currently under negotiation by the Obama administration, with 12 countries in the Asia-Pacific arena — but not China.While neither side has openly declared an FTA race — President Obama even said that China has shown interest in joining the TPP “at some point” — many observers see the TPP and China’s RCEP as rivals.

“It is indeed commonly perceived that the TPP is designed to exclude China,” said Francis Lui, director of Hong Kong University of Science & Technology’s Center for Economic Development.
Certainly, there’s a good deal of overlap between the two proposed trading spheres, with Australia, New Zealand, Japan, Singapore, Malaysia, Vietnam and Brunei all marked for inclusion in both the TPP and RCEP. And in seeking to promote the TPP in the U.S., Obama warned in April that if the trade group isn’t set up, then China will write the trade rules for the region.

Lui said China’s rush to sign trade pacts and set up the RCEP is Beijing’s counterweight to the TPP, and “the emergence of this large number of FTAs shows that [the U.S.’s TPP] strategy can be mitigated easily. If China can sign individual FTAs with many members of TPP, then the American goal of using it to isolate China would no longer be of any significance,” Lui said. “The fact is that many members of the TPP indeed have the incentive to go into FTAs with China.”
While it's all very interesting to read about, you do have to wonder why they don't just conclude a simpler WTO agreement that China, the US and everyone else can agree to. Instead, we have multiple possibilities for trade diversion. Moreover, it gets hard for customs authorities to know just what tariff rate to administer with so many overlapping PTAs. It's going to be a nightmare to keep track of which is which if this keeps going on.

* - Also see a previous post on how FTAAP turned from an American into a Chinese advocacy.

Climate Clash of Titans: Pope Francis vs. ExxonMobil

♠ Posted by Emmanuel in ,, at 6/22/2015 01:30:00 AM
On climate change, oil and gas companies are pretty much in the same position nowadays that tobacco companies were in regard to smoking's adverse health effects during the Fifties. Just as cigarette makers denied any link between smoking and lung cancer, certain energy firms like to downplay that man-made climate change is occurring. Bloomberg has an interesting story regarding how Pope Francis' forthcoming visit to the United States is prompting Americans to sway them to their positions on social and, yes, environmental issues. Last week, Pope Francis of course released his long-awaited encyclical on mankind's responsibility regarding environmental stewardship. While it is of course required reading for Catholics, other readers are certainly encouraged to see how scientific knowledge can buttress theological argumentation.

Prior to its release, ExxonMobil sent emissaries to the Vatican in hopes that Pope Francis would tne down the man-made climate change aspect:
In the months leading up to the release of the encyclical, conservative American Catholics and even the oil and gas industry sent emissaries to the Vatican hoping to dissuade the Holy Father from weighing in on climate change, arguing that the science isn’t settled and that cutting back on fossil fuel use would hurt rather than help the world’s poor. Exxon Mobil sent several delegations to meet with Vatican officials, and a conservative Chicago-based think tank, the Heartland Institute, held a whole counter-conference on alternative climate science in Rome at the end of April. But the Pope was apparently unmoved, and the encyclical states “there is a very consistent scientific consensus that indicates that we are witnessing a worrying warming of the climatic system…Humanity is called to take conscience of the need to change life styles, ways of production and consumption to fight this warming, or at least the human causes that produce it or accentuate it.”
No arguments from me on Pope Francis' main points. However, Exxon is apparently hardening its climate change denial. In a recent shareholders meeting, its CEO pooh-poohed climate change in keeping with the anti-science stance prevalent in the United States:
The CEO of one of the world’s largest oil companies downplayed the effects of climate change at his company’s annual meeting Wednesday, telling shareholders his firm hadn’t invested in renewable energy because “We choose not to lose money on purpose.” “Mankind has this enormous capacity to deal with adversity,” ExxonMobil CEO Rex Tillerson told the meeting, pointing to technologies that can combat inclement weather “that may or may not be induced by climate change.”
Playing up the religious angle, ExxonMobil had also been petitioned by a Milwaukee-based Catholic group concerned about environmental matters. The company slammed the Catholic organization's efforts to place an expert on climate change on the board of directors:
At the meeting, shareholders sided with the company’s board and voted against a measure proposed by Father Michael Crosby and Sister Pat Daly, representatives of a Milwaukee-based Roman Catholic organization, to add a climate change expert to the company’s board. In a letter to shareholders, Tillerson and his colleagues wrote that “to set aside one seat for an environmental specialist or for any single attribute or area of expertise would, in our view, not be in the best interests of the company or its shareholders because it would dilute the breadth needed by all directors to make informed decisions for the company.”
As obstructionist and anti-scientific as mainstream American conservatives are on this issue, look at how Republican candidates for president stack up, you do have to wonder if the Catholics among them have anywhere left to hide after Pope Francis made clear where Church teaching stands on the subject matter.

Whether American leaders will keep backing sunset industries like oil and gas extraction is certainly interesting to watch as the world's wealthiest nation is decidedly backward-looking on this issue. When even Saudi Arabia--a nation almost entirely dependent on this single industry--admits that the days of fossil fuels are almost up, why the likes of ExxonMobil persist in denying the world has changed is puzzling and disturbing.

At any rate, a showdown looms when Pope Francis visits the US of A. 

I [Heart] Comedy: Russia 'Rescuing' Greece; Other Idiocies

♠ Posted by Emmanuel in ,, at 6/19/2015 02:44:00 PM
"Psst...Tsipras! I've got you covered if you really want to finish off Greece."
I am utterly entertained by the idea that Russia can help bail out Greece. True, the so-called Greek "socialist" government full of Burberry scarf-wearing and Paris Match magazine-hogging amateurs threaten Western European powers by cottoning up to Vladimir Putin. Still, the idea of Greece becoming a Russian satellite is definitely among the more amusing Syriza rants including asking for WWII reparations from Germany and styling the IMF as a criminal organization. (Remind me to try that last one on people I borrow money from in the future.)

Let's start off with Foreign Policy and its usual sort of unsubstantiated sensationalism about Russia coming to the rescue of Greece:
So far, Russia has largely stayed out of the European financial crisis. But the Greek conundrum provides a tasty incentive to dive in. If Moscow does, it would transform a five-year economic crisis into a geopolitical one. “You don’t want Europe to have to deal with Greece, who is a member of NATO, all of the sudden cozying up to Russia,” Sebastian Mallaby, a senior fellow for international economics at the Council on Foreign Relations said Thursday.

Ahead of the Friday meeting, Russian Deputy Prime Minister Arkady Dvorkovich said he “cannot comment on specific decisions” when asked if Moscow would rescue Athens.
The reliably yellow Daily Telegraph loves reheating this sort of Cold War nonsense:
A communist Greek revolution today may seem a laughable idea. Just as with the Baltic, we like to imagine that the West’s ideological victory in the land of tavernas and so many British summer holidays is irreversible. But it is not. Earlier this year Russia signed an agreement with Cyprus to give Russian naval vessels access to Cypriot ports. On the beaches of Greece’s islands this year you will hear Russian everywhere. The West’s sphere of influence cannot be taken for granted, neither in Greece nor the Balkan peninsular which it caps. We must not be complacent. 
But, back to the real world. Fantasy-loving hacks aside, let's take a look at some hard numbers. Even with upgraded forecasts, the one-trick Russian economy--dependent as it is on energy exports--will shrink a lot this year and barely grown next:
The World Bank has raised its GDP growth forecasts for Russia "to reflect a further stabilization of global oil prices". It lifted its forecast for 2015 to a contraction of 2.7 per cent, up from the contraction of 3.8 per cent it predicted in April. In addition, it has bumped up its growth forecast for 2016 to 0.7 per cent from the decline of 0.3 per cent it forecast a month ago.

Oil prices have stabilised and recovered slightly this year after plummeting in the second half of 2014. The rouble has followed a similar trajectory, falling hard in the second half of 2014 as oil prices dropped and the west imposed sanctions on the Russian economy for its role in the conflict in Ukraine, before the currency staged a recovery in the first half of this year.
Greece's total public debt amounts to some EUR 305 billion, of which it owes Europe's crisis fighters EUR 195 B in emergency funding incurred since 2010. If Greece were truly "going socialist," they would of course choose to repudiate all its debts to European lenders post-crisis or, at the very least, give them a major haircut. You must be joking if the Greeks are counting on the Russians to pay the hated Western Europeans back.

So, the real question then is whether Greece becoming a Russian satellite would compensate for it being subjected to the same sorts of economic sanctions that Russia now faces as a result of debt repudiation or unilaterally erasing between, say, half to two-thirds of its debts. Actually, trade with Russia is around 5% of Greece's total trade--most of which are energy and raw materials. Unless Greece can import a wide range of everyday products from Russia, alienating Western Europe won't solve matters. That Russia itself isn't importing a whole lot of useful things right now it can re-export to Greece doesn't bode well for Greece following the de-globalization route.

Bottom line: Sure Greece and Russia can get together to thumb their noses at the West, but it's an empty gesture. Nobody doubts that Russia is worse off now after going rogue, and Greece is more than welcome to follow its example. But, if it thinks Russia can "replace" the EU as a major sponsor, think again. Russia doesn't have a wide range of goods to sell to Greece. Nor would Russia spend any considerable amount of money bailing out Greece to benefit Western powers who are its ultimate foes.

As the saying goes, how can Russia help Greece when it can't even help itself?

Can Mrs. Clinton Fix US Via German-Style Apprenticeships?

♠ Posted by Emmanuel in , at 6/17/2015 03:57:00 PM
Apprenticeships for the jobless youth: after eight wasted years, it may at last be Clinton Part III.
After engaging in a fair bit of America-bashing now and then, you may be surprised that I have a rather positive view of Bill and Hillary Clinton. Efforts to tar Bill Clinton before his first term made me to believe that he was a draft-dodging womanizer--which, actually, he is. But, guess what? On more substantive things--generating economic growth and putting the United States on a more internationalist path--it's very hard for me to fault Bill Clinton. By the same token, I think of Missus Clinton as an accomplished person with great ideas as well for governing. So her foreign policy chops in Asia are, er, somewhat questionable. But, just as it was way back when in the roaring Nineties, it's still the economy, stupid, and I think the Clintons understand what must be done with America best--and the world will benefit as a result.

Being an admirer of the German apprenticeship system instead of the American university-jobless system as I have called it, you will not be surprised that I think much of Missus Clinton's pitch to give enterprises hiring young people for apprenticeships a $1,500 tax credit:
Hillary Clinton will on Wednesday call for a federal apprenticeship program as a path to reducing youth unemployment, aides said, her first new policy proposal since officially launching her campaign this week. Speaking at a technical college in Charleston, South Carolina, Clinton will propose rewarding businesses with a tax credit of $1,500 for every apprentice they hire. She will say that the program would encourage businesses to take on more young workers.

Apprenticeships are a major benefit for workers who see large annual earnings gains, Clinton will argue, as well as a boon for businesses that receive a tax credit.
Of course, there is also a vote-getting angle here appealing to younger people and minorities:
But on some business issues she has moved away from the liberal line. She has not condemned the Trans-Pacific Partnership as her competition for the Democratic nomination has and she has called for reducing regulations on small banks and businesses. Linking apprenticeships with tax credits has received bipartisan support in Congress, Clinton’s aides pointed out, with Democratic Sens. Cory Booker and Maria Cantwell as well as Republican Sens. Susan Collins and Tim Scott supporting similar programs.

Clinton aides cited an unemployment rate among 18- to 34-year-olds of 7.8%, a rate that was nearly double among African-Americans. In order to win in a general election, Clinton will need to mobilize the black voters who overwhelmingly supported Barack Obama in 2008 and 2012.
With America going down the tubes and enterprises not daring to invest in America, I don't see why its electorate should keep delaying round 2 of the Clinton years. There's a chance they won't be able to revive America's fortunes, but if anyone has a track record doing so, then there are really few choices out there.