Saturday, January 30, 2016

Collapse Spreading: World’s largest steelmaker kicked out of credit markets, begins closing plants in Europe. US next.

ArcelorMittal Seen Locked Out of Markets as Steel Punishes Bonds
  • Company faces $15 billion repayment bill over next six years
  • Steelmaker struggling to cope with metals-price plunge
ArcelorMittal SA, the steelmaker facing almost $15 billion of bond repayments over about six years, has been locked out of credit markets, according to money managers.
Bonds of the world’s largest producer of the alloy have fallen to levels that make an immediate return to the market too costly, said Olivier Monnoyeur, a high-yield portfolio manager at BNP Paribas Investment Partners. Thirteen of ArcelorMittal’s 16 notes due by 2022 have fallen this year, with some quoted at as low as 75 percent of face value, and with some yields as high as 12 percent, according to data compiled by Bloomberg.
“Yields in the market for ArcelorMittal are not sustainable and restrict their access to the bond market,” said Monnoyeur at BNP Paribas Investment Partners, which oversees about 509 billion euros. “I am not sure the appetite to invest will be there.”
A spokesman for ArcelorMittal in London said the company had a “very strong liquidity” position. He declined to comment on refinancing activity. The company saidon Jan. 19 it had cut its 2016 cash needs by $1 billion and identified $1 billion of structural improvements.
Steel crisis spreads to Europe as Arcelor Mittal shuts Spanish plant
Steelmaker mothballs Spanish plant, showing crisis that has cost 5,000 UK jobs is spreading to Europe
Fresh evidence of how the steel crisis is intensifying has come from Spain, with Arcelor Mittal mothballing a plant in Sestao.
The company blamed record steel imports from China at “below production prices” and “falling selling prices” for the decision to shut the electric arc furnace plant near Bilbao in northern Spain, which produces slab and coil steel.
European steel companies are under intense pressure from Chinese rivals, who are flooding the market with cheap steel as demand falls in their home market.
Most of China’s steel industry is government backed, with Beijing subsidising production so that plants can run at a loss.
China lost 500,000 jobs in steel recently (all the ones it added in the boom over the last decade)… and is expected to lose another 1,000,000 this year… this is a global problem. Did you see the advert for the Vietnamese name around the pitch at a recent Premier League match? It was a steel company. While China factory wages are about $3.60ph (compared to $36 in Europe) Vietnam is just $1.50…. and Indonesia comes in at $0.60 ph… there is a massive capacity glut and a whole new generation of cheap production sites to contend with. We need a “health & safety tax to equalise the difference between standards – not one on the wage difference but the extra risks those people take we would not impose on our own people to make the price a little less noncompetitive & encourage take up of better working standards in places that supply our demand.

Friday, January 29, 2016

Turning Our Backs

With the winter winds of January came a flurry of reports that several states were moving to cut thousands of people from their Supplemental Nutritional Assistance Program (SNAP, or “food stamp”) rolls.
In New Jersey, for example, Governor Chris Christie pulled the plug on benefits to 11,000 unemployed state residents.
By this spring, an estimated 500,000 people nationwide could be cut off. For most of them, the maximum benefit of less than $200 a month is all the federal aid they get. For some, it’s their entire income.
These people live in states that have chosen to reinstate work requirements on able-bodied adults without children, which had been suspended since the 2008 economic downturn. It means that single adults who aren’t working at least 20 hours a week or participating in a job-training program may only get three months of nutrition assistance in a three-year period. After that, they’re on their own.
Paul Sableman / Flickr
Some people call this a successful example of welfare reform at work. But to experts like Joe Soss, a University of Minnesota professor who studies the drive to “end welfare as we know it” that started in the 1990s under President Bill Clinton, it’s the latest chapter in a misguided ideological campaign.
This drive is a consequence, he told me, of political rhetoric suggesting that low-income people are poor because of their inability to exercise self-discipline and make good choices.
“It’s a modern update of longstanding prejudices,” Soss explained. These “get-tough policies are cast as benefiting the poor in the long run,” he added, while their hardline supporters claim to shield taxpayers from “criminal thugs, undocumented immigrants, and those who live off the welfare system.”
His 2011 book, Disciplining the Poor, chronicles the rise of what Soss calls “poverty governance” over the past 40 years. “Efforts to get tough with the poor have often been a bipartisan affair,” Soss said. “But Republican-controlled states have generally been at the forefront of efforts to restrict social supports — from cash aid to nutrition, housing, and health care — and to use poor people’s behaviors as a litmus test for government help.”
That approach was evident earlier this year, when six of the Republican presidential candidates attended an antipoverty forum in South Carolina inspired by the late “bleeding-heart conservative” politician Jack Kemp. Christie took part. But the way his policies have played out is less bleeding-heart than cold-blooded.
Under Christie’s leadership, New Jersey has sharply reduced the share of federal block grant money it spends on direct cash assistance to needy families, according to the Center for Budget and Policy Priorities. But as the number of people getting help has fallen, the percentage of the state’s residents living in poverty actually went up — from 9 percent to 11 percent — between 2009 and 2012.
Now, community servants worry that more stringent work rules for food assistance are being imposed when there isn’t enough job and education assistance for people who need it. “I don’t know where these work programs are. And I know we are not ready for this,” Diane Riley of the Community FoodBank of New Jersey told
It’s a story that’s being repeated across the country. The trend is also fueling a debate — not over whether people should be working instead of receiving welfare, but whether we get there by investing more in education, training, and job creation, or by slashing budgets, shaming the poor, and turning our backs.
The post Turning Our Backs appeared first on OtherWords.
This piece was reprinted from Other Words by RINF Alternative News with permission.

Europe Disintegrates. France declares economic state of emergency Germany in total meltdown.

EU on brink: France declares ‘state of economic emergency’ as Germany faces financial ruin
FRANCE is in a state of economic emergency, President Francois Hollande announced today, amid fears the worsening financial situation in Germany could topple the entire eurozone.

Investor sentiment plunged as the socialist leader announced unemployment in France has surged to an 18-year high of 10.6 per cent – plunging the country into a new economic crisis.
It comes as Germany faces the most difficult start to a year in recent memory. Its own industrial production growth has slipped to ZERO per cent and customer confidence has plummeted in a catalogue of disasters for Chancellor Angela Merkel.
An increasingly desperate Mr Hollande has now said he will PAY French employers to hire people in a bid to boost jobs as he sought to restore confidence and said that it was time to address the country’s “broken” economic model.
He said: “Our country has been faced with structural unemployment for two to three decades and this requires that creating jobs becomes our one and only fight.”
France was facing an “uncertain economic climate and persistent unemployment” and there was an “economic and social emergency”, he said.
Firms will get €2,000 (£1,500) when they employ young, unemployed people for at least six months.

WHEN will Socialists learn that you cannot pay Companies to employ people. They are not real jobs. In 6 months the Companies will be paid more by their Government than it gets back in income tax from the low paid employee in two years. And this from an ailing economy. “….and the 35 hour week will be safeguarded…”

Laffer: Growth in homelessness mainly due to a bad economy, economic policies

Former Reagan Economic Advisor Art Laffer on the economy and homelessness in the U.S.

The Biggest Scam In The History Of Mankind - Who Owns The Federal Reserv...

Grocery Chain Aldi Expanding Organics to Meet Consumer Demand

(Julie Fidler)  Aldi Inc., a German grocery chain that is rapidly expanding in the United States, is making great strides to offer healthy foods at an affordable price.
The discount grocer plans to introduce Healthier Checklanes in select stores. Instead of candy and chocolate, Aldi will offer an assortment of nuts, trail mixes, dried fruits, and granola bars at its registers. The company says it will roll out the program to its nearly 1,500 stores by year’s end.
By introducing Healthier Checklanes and through a number of other initiatives, we are doing our part to remove temptation at checkout and stocking stores with even more nutritious options,” said Jason Hart, chief executive officer of Aldi. “At Aldi, we truly care about our customers, and we’re responding with guilt-free checkout zones and increased food options they can feel good about.”
Aldi says it has also removed certified synthetic colors, partially hydrogenated oils and added MSG from its exclusive food brands, which account for more than 90% of its products. In addition, it will offer milk free of artificial growth hormones, and its yogurt, sour cream, and cottage cheese will be made with milk containing none of the hormones. [1]
The stores will expand its selection of fresh and organic meat and produce, and will offer a wider variety of gluten-free products under the liveGfree brand. [2]
Other initiatives include highlighting nutritional facts on the front of exclusive brand food packages and partnering with registered dieticians to offer consumers tips, recipes, and meal-planning suggestions.
The news comes near the company’s similar announcement that it will be banning bee-killing pesticides on produce.
Aldi has become one of the world’s biggest food retailers by offering quality products at prices approximately 30% lower than Walmart’s, threatening Whole Foods and 365 by Whole Foods Market, which is set to launch this year.
And for those with more upscale tastes, Aldi offers a number of artisanal cheeses, smoked salmon, quinoa and coconut oil.
The chain plans to spend $3 billion to open roughly 500 more stores in the U.S. over the next 2 years.
If you’ve never experienced the magic of Aldi, you should go prepared to make a few impulse buys. I know of whence I speak. You can find everything from artificial Christmas trees, to rose bushes, to yoga mats.
Aldi also makes a decent wheel of brie.
[1] Food Business News
[2] Business Insider

Silver market in disarray after benchmark price fixed far below spot rate

(Adds comment from CME and market participants, background on changes to fixing system)
London 28/01/2016 – The silver market was thrown into disarray on Thursday after the LBMA Silver Price was set 84 cents below the spot and futures price this morning.
The LBMA Silver Price – the crucial daily benchmark used by producers and traders around the world to settle silver products and derivatives contracts – was set at $13.58 per ounce.
At the time of the auction, which begins at 12 noon London time, the spot price was at $14.42 per ounce while the futures price on the CME was at $14.415, leaving a number of market participants extremely confused as to what has happened.
“The LBMA Silver Price is established through a transparent electronic auction mechanism designed to adjust the price until there is equilibrium between buy and sell orders,” a CME spokesman said.
CME and Thomson Reuters won the battle to provide the methodology and price platform for the daily process back in July 2014, replacing the 117-year old fix in August that year under sweeping reforms of the entire precious metals complex.
“Given the orders placed in the auction today by five participants, the buy and sell orders became balanced after 29 rounds and the LBMA Silver price was established at a price of $13.58,” CME added.
The difference between silver price and futures prices was nearly six percent but the benchmark cannot be changed, a second person familiar with proceedings told FastMarkets.
“Unfortunately, it’s not [a mistake],” Ole Hansen, head of commodity strategy for Saxo Bank, told FastMarkets. “This could be the end of the fix. It took 14 minutes to find a fix – they obviously found a fix way off of the market.”
Another source also suggested that the continued existence of the fix has been put in jeopardy by the huge discrepancy in today’s price, adding that many producers – who still use the price as their daily reference – may have lost significant amounts of money if any contracts have been settled according to the fix.
“A huge number of contracts are still settled on that price,” another said. “This will no doubt cause significant problems.”
The ‘fix’ or ‘benchmark’, as it is now known, is still the global benchmark reference price used by central banks, miners, refiners, jewellers and the surrounding financial industry to settle silver-based contracts.
While some traders continue to use the 24-hourly traded spot price, larger players prefer the snapshot-style daily benchmark to settle bulkier contracts on a traditionally over-the-counter (OTC) market.
The price is set every day by six participants – HSBC, JPMorgan Chase Bank, Mitsui & Co Precious Metals, The Bank of Nova Scotia, Toronto Dominion Bank and UBS – using a system run by CME and Thomson Reuters.
(Additional reporting by Tom Jennemann, editing by Mark Shaw)

About Ian Walker

Ian joined FastMarkets in 2014 after three years working as a personal finance journalist. He is now based in our London office as a Correspondent, reporting on both base and precious metals.

Mass layoffs as mining company warns of 32,000 job cuts

(Kevin Krowley)  Mining companies in South Africa, the world’s biggest platinum and manganese producer, have informed the nation’s mines ministry of intentions to cut about 32,000 jobs as prices decline, Mineral Resources Minister Mosebenzi Zwane said.
“Commodity prices have fallen for quite some time and that is causing problems in term of jobs and restructuring,” he told reporters Thursday in the capital, Pretoria. “We are engaging with companies to try and see how best we can deal with that situation in a responsible way.”
Anglo American Plc’s Kumba Iron Ore unit is the latest producer to announce potential job cuts, saying it plans to reduce its staff and contractors by about 3,900 after prices for the steelmaking ingredient dropped almost 40 percent last year. Plunging commodity prices are adding to pressure on an industry struggling with regulatory changes and unreliable power supplies, and some of the country’s biggest mining companies are threatening to cut jobs.

Mitigation Efforts

Mining accounts for more than half of the nation’s exports and employs about 440,000 people, a critical source of jobs in a nation with a 25 percent unemployment rate.
The department will seek to mitigate job cuts by transferring workers to other mines, re-skilling employees and asking companies if they can cut costs in other ways, Zwane said.
“Where there are job losses, we’ll put in mechanisms to deal with that situation,” he said. “We’re going to do everything possible in our power to try and control the situation until the price of commodities improves.”
Section 52 of the country’s mineral resources law obliges companies to inform the minister if 10 percent of a workforce or more than 500 people are likely to lose their jobs in a year.



In hard times, it’s important to remember your times tables

10 x 10 is 100, 10 x 100 is 1000, 1000 x 1000 is a million, a million x a million is a billion, and a million times a billion is a trillion.

One of the more bizarre aspects of contemporary life in the West is how we’ve all become blasé about massive amounts of market intervention monies being used to combat ‘valitillydee’ in stock markets, currency values and so forth….but the experience for most of us is of living on smaller and smaller amounts every year.
The 3% (who have allegedly now become the 1%) measure their incomes in millions, and the intervention they need when things go wrong in billions. Governments then being forced to bail them out and/or defend their currencies against the speculators (who earn millions and cost billions) cost these exercises in trillions. This is because a million x a billion is a trillion. It’s all quite simple, really.
When, towards every year end, multinational companies set their tax accountancy dogs onto the HMRC bill, the amount starts out in billions and then winds up in the very low monetary base level rarely heard about these days, thousands. So if the original bill was £1.5billion, and the dogs of whore get it down to £200,000 (such is not unusual) this too makes mathematical business sense for almost everybody: if a thousand tax accountants earn £100,000 each on the job, the globalists win because they save billions, the accountants win because they make millions, and the shareholders win because the dividend gets bigger by thousands. This too is because a thousand x a thousand is a million. Innit brirrant how, like, it all squares off?
It works, in fact, for everyone except the Treasury….and we the ordinary law-abiding taxpayers, who wind up losing our health and welfare packages to pay for it all. Take my situation: Zirp has cost me on average £1,500 a year since 2010, and there are just a gnat’s under 30 million taxpayers in the UK. My case is atypical because I have (or rather had) some capital, but actually it’s pretty much the same for everyone: a real average ‘wage’ of £5,000 a year (including all unemployed, retired, full time housewives and those in further education) is now worth 30% less than it was twenty years ago….or £1,500. The tax rate we, the peasants, pay on that will be circa 15%….or £225.
We are, by now, aware of being down here in the base dregs of society, because we’re measuring things in hundreds. But fifteen hundred pounds more earned by us comes to £45billion… so you see, if next year we don’t do just, say, nine tax-evasion deals with fat globalists, we can all have our salary values restored to where they were in 1995, and the Treasury would get £6.75bn in tax off us, plus £40-50billion more off the piggies.
Result, happiness.
But not from the neoliberal viewpoint. Because you see, the shareholders would lose and lots of them are institutions. Pensions would be in danger. Without Zirp and QE, the banks would collapse and the stock markets tumble, and then the Treasuries would be emptied (once we’d been dragged screaming to be bailed in) and government as we know it would cease and would all that really be such a bad thing?
Anyway – although all those things could easily happen come what may – it will be (perhaps literally) over the dead bodies of the 1%. So very large numbers of worthless fiat notes will continue to be thrown at lost causes.
Here’s today’s eye-watering example: despite intervening to the tune of £47billion during last night’s trading, the People’s Bank of China looked on in horror as the Shanghai composite index fell another 2.9% anyway. It fell because Yellen’s Fed speech said there’d likely be another rate rise in March. Now the European markets are wobbly because the Shanghai fell, and New York didn’t react well to Yellen and so S&P futures are uncertain and….here we go round the mulberry bush.

Kalashnikov cranking up AK-47 factory in Florida

(Aaron Smith)  The famous Kalashnikov AK-47 assault rifles have been made in frigidMoscow since their inception 69 years ago. Soon, they’ll be made in sunny Florida, too.
Kalashnikov USA has been approved by the city of Pompano Beach to assemble guns there.
Kalashnikov USA of Tullytown, Pa., was importing rifles made by Kalashnikov Concern, the original AK-47 manufacturer in Moscow, until 2014 when President Obama imposed sanctions against Russia following its annexation of Crimea. At that point, Kalashnikov USA severed all ties with the Russian company.
The company started making the guns in Pennsylvania last year, but is shifting manufacturing to Florida. Kalashnikov hasn’t said why they are moving or how big the Pompano Beach operation will be.
Kalashnikov USA has recast itself as an American manufacturer of Kalashnikov-brand guns. It launched new lines of rifles and shotguns last week at the SHOT Show in Las Vegas, the annual conference of the National Shooting Sports Foundation.
This included its new Alpha line of rifles with high capacity magazines holding 30 rounds.
The company obtained “light manufacturing” approval in July 2015 from Pompano Beach, which is located on the Atlantic coast between Boca Raton and Fort Lauderdale.
The company also has licenses from Pompano Beach and the federal Bureau of Alcohol, Tobacco, Firearms and Explosives to import, but the licenses don’t specify what it would be importing, or from where.
The licenses do not allow the company to sell guns in Pompano Beach, or to make ammunition, so the Pompano Beach factory will be selling to retailers elsewhere.
The Kalashnikov brand dates back to the Stalin era of the Soviet Union. Based in Moscow,Kalashnikov Concern makes the AK-47 assault rifle, named after its designer, Mikhail Kalashnikov, and the year it went into production, 1947.
AK knock-offs are widespread, produced in many countries including China, former Soviet countries and also the U.S. But the true Kalashnikov brand is seen as something special by American collectors, and prices for the weapon have spiked since Obama’s sanctions on Russia halted imports.
The Kalashnikov is one of the most popular assault rifles in the world, prized for its durability and reliability. In the current Afghan war, U.S. Marines captured a Kalashnikov from the Taliban that had been in use since it was produced in the Soviet Union in 1954.
The gun will now also be produced in Florida, a gun friendly state with relatively loose gun laws.
Military style rifles with their high capacity magazines are permitted in Florida. But they’re restricted in other states, including New York, Connecticut and Colorado.
Kalashnikov USA plans to produce 10-round magazines for its rifles and shotguns to make them legal in states with more restrictive gun laws.

Survey: 63 percent of American families can’t afford $1,000 ER visit

by: J. D. Heyes
Obama economy
(NaturalNews) Things are better today in America than they were during the first few years of the Obama presidency, when the Great Recession was in full swing, and unemployment was high.
Or so we’re told.
While the employment rate is certainly lower today than at its peak of 10 percent, what isalso true is that the overall quality of employment is nowhere near as good as it was prior to Obama’s two terms in office. In fact, the president’s policies have done more to harm employment and depress wages than to build them up.
There is ancillary evidence of this everywhere you look:
— The current rate of economic expansion is the worst it’s been since World War II. In fact, it is worse than economists had believed. As noted by The Wall Street Journal:
Since the recession ended in June 2009, the economy has advanced at a 2.2% annual pace through the end of last year. That’s more than a half-percentage point worse than the next-weakest expansion of the past 70 years, the one from 2001 through 2007. While there have been highs and lows in individual quarters, overall the economy has failed to break out of its roughly 2% pattern for six years.

Poor economic policies lead to less growth and fewer opportunities

So yes, Obama may have been correct to criticize “the Bush economy,” but it’s performed even worse under his “leadership.”
— Indeed, Obama’s economic record is the worst in 80 years. As reported by The Daily Caller:
No other president since the Great Depression has presided over such a steadily poor rate of economic growth during his first five years in office. This slow growth should not be a surprise in light of the policies this administration has pursued.
— The Obama economy has been so hard on Americans that nearly two-thirds of Americans – 63 percent – can’t even afford a $500 automobile repair or a $1,000 emergency room visit.
According to a recent analysis by, and cited by, though most families will experience some kind of unexpected expense in the coming weeks and months, a majority are not saving for them:
Unexpected expenses are almost guaranteed to occur, but few Americans are budgeting for them by stashing money in savings each week or month, the latest Money Pulse survey from has found.
“The survey shows that a very significant minority of American households apparently don’t have the resources to pay for an unexpected expense of around $1,000,” Stephen Brobeck, executive director of the Consumer Federation of America, told
The survey found that fewer than 4 in 10 Americans – 37 percent – would pay for an unexpected expense out of savings.

Other costs are increasing

Gasoline and diesel fuel prices are falling – finally – and that should eventually translate into additional savings, as reductions in transport and processing costs lead to lower prices for food and other necessities. But at the same time, these reductions, which most likely will be temporary, are being offset by price increases in other sectors of the economy – again, thanks to Obama’s policies:
His EPA just issued massive new emissions rules for coal-fired power plants that, according to U.S. Rep. John Shimkus, R-Ill., co-chair of the House Coal Caucus, will lead to higher electric rates.
“This rule will penalize consumers by jeopardizing energy reliability and increasing utility costs to families and businesses” in his state and around the country, Shimkus wrote in an op-ed co-authored with Rep. Rodney Davis, another Illinois Republican.
In reality, even as the price of oil, gasoline and natural gas fall, electricity rates are already rising.
— Obamacare has created dramatically higher out-of-pocket expenses for more American families. As noted in a new study of health insurance rate increases by Freedom Partners – a group advocating for smaller government and free markets – all but one state, Mississippi, are seeing insurance rate increases this year due to the Affordable Care Act.
Four of those states – Minnesota, Alaska, Tennessee and Hawaii – will see increases on average of 30 percent, while 17 others will average 20 percent increases.
“We need to get government regulations out of the way,” Freedom Partners official Nathan Nascimento said.

Germany now has half of its gold in Frankfort

by Smaulgld

German Gold Repatriation.

German gold repatriation begun in 2013, continues.
Germany is the owner of the second largest central bank gold hoard, much of it held at the New York Federal Reserve.
The majority of Germany’s gold is held abroad. The Bundesbank plan is to repatriate gold in sufficient amounts to have at least half of their gold in Germany by 2020.
Germany and other countries repatriating their gold are emptying the New York Federal Reserve’s vault.
Update May 5, 2015: Another 10 tons of gold left the NY Fed vaults in March 2015. (see chart below)
Update January 27, 2016: Frankfort becomes Bundesbank’s largest gold storage location- (see below)
German flag

Why Germany Has Much of its Gold Abroad

According to the World Gold Council Germany has 3,384.2 tons of gold, the second largest central bank gold holdings*.
Until recently, Germany stored 69% of its gold abroad in London, Paris and New York. By 2020 the German Bundesbank claims they will have half of their gold in Germany, 37% at the New York Federal Reserve and 13% in London at the Bank of England.
Jens Weidman, President of the Deutsche Bundesbank explains in this video from the Deutsche Bundesbank the historic reasons (Cold War concerns) for storing Germany’s gold abroad and the changed circumstances. He notes there is no need to have gold in France since Germany and France share the same currency, the Euro. London and New York provide geographic diversity and dollar and pound exchange capabilities.
Germany Requests Its Gold Back – A Slow Start
In January 2013, Germany made a gold repatriation request to United States Federal Reserve in New York and Banque de France in Paris regarding a portion of the gold they held on deposit at those entities. At the time, Germany cited the potential of a currency crisis and the need to have its gold close by.
Germany requested repatriation of a total of 674 tons of gold from the New York Fed and the Banque de France. The Fed notified Germany their gold would be delivered over a period of eight years, raising eyebrows as to why it would take so long to make the requested repatriation.
In January 2014, it was reported that just 37 tons of gold had been returned to Germany, with 32 tons coming from Paris and just five tons from New York.
The Pace Picks Up
In January 2015, however, the German central bank the Bundesbank announced that it had received 120 tons of gold in 2014; 35 tons from Paris and 85 tons from New York.
In March of 2015, Henner Asche, deputy head of markets for the Bundesbank noted that 67 tons of gold had been transferred from Paris to Frankfurt and 90 tons from New York to Frankfort, reflecting an increase in the amounts reported at year end 2014 and bringing the total received to 157 tons.
Herr Asche also reported that 1,447 tons of the Bundesbank’s gold were held in New York, 438 tons in London and 307 tons in Paris.
On January 27, 2016, the Bundesbank announced that in 2015 210 tonnes of gold were transferred to Frankfurt from Paris (110 tonnes) and New York (about 100 tonnes).
With approximately 1,403 tonnes of gold, Frankfurt has been our largest storage location, ahead of New York, since the end of last year,” said Carl-Ludwig Thiele, Member of the Executive Board of the Deutsche Bundesbank.
Germany Kicks off a Repatriation Craze
Germany’s request in January 2013 to have its gold repatriated set off a slew of interest in gold repatriation from other central banks including those in the Netherlands, Belgium and Austria. Gold repatriation requests have continued to drain the New York Federal Reserve’s gold vault.

U.S. Federal Reserve Gold Holdings

The charts below (click to enlarge) by Nick Laird of Sharelynx show the most current Federal Reserve gold holdings.
Federal Reserve gold holdings chart since 1913
The Fed’s gold holdings have declined steadily since the early 1960’s.
In January 2015 19.891 tons of gold left the NY Fed and another 9.5571 tons were shipped out the door in February.
U.S. Federal Reserve Gold Held on Behalf of Other Nations
Fed earmarked gold holdings for foreign central banks chart 2015
As countries repatriate their gold, the Fed’s vaults get emptier.
In March 2015, the NY Fed shipped out more than ten tons of gold.
Federal Resere earmarked foreign gold holdings

Another ten tons of gold left the NY Fed in March. Nearly 200 tons of gold have been removed over the past twelve months.

*For a list of the top twenty gold holding nations and commentary click here.

The Shipping News Says the World Economy Is Toast

In October 2008, as the repercussions of the financial crisis were starting to ripple through the global economy, I noticed a press release from Swedish truckmaker Volvo saying that its European order book had fallen by more than 99 percent between the third quarters of 2007 and 2008 -- to just 155 from 41,970. That prompted me to study various other real-world activity measures ranging from shipping to air freight, and to conclude that "the news is all bad and getting worse, fast." The same exercise today, I'm afraid to say, leads me to a similar conclusion about the growth outlook.
Here's a chart showing what's happening to the cost of shipping containers from China's ports, one for the country and one for Shanghai. Both indexes are compiled by the Shanghai Shipping Exchange and cover shipments to the rest of the world including Europe, the U.S. and Africa; the broader China index is down more than 40 percent from its peak in mid-2012:
China Freight
Source: Shanghai Shipping Exchange via Bloomberg
The traditional global shipping measure is called the Baltic Dry Index. Shipping purists (who rival gold bugs in their dedication to minutiae) will tell you it mostly reflects how many vessels are afloat on the world's oceans; a glut of shipbuilding means more boats available, which drives down the cost of shipping bulk raw materials such as iron ore, steel and coal. But given the fragile state of the global economy, it's hard to shake the feeling that the index has been trying to tell us something important about global demand in recent years:
Baltic Dry
Source: Bloomberg
There's a similarly contractionary pattern in the available data on air freight. Here's a chart showing tons of goods shipped per mile across U.S. skies since the start of the decade:
Cargo US
And here's the equivalent chart for Europe, this time in tons per kilometer:
CArgo Europe
While neither chart shows the volume of airborne freight falling off a cliff, both are drifting lower -- which is not what you want to see at this point in what is supposed to be a nascent global economic recovery.
So what about Volvo's order book? In the third quarter of 2015, the company had orders for just 42,648 trucks, a 30 percent slump from the end of 2014 and the lowest level in three years:
While that's nowhere near as dramatic as the 2008 decline, it does suggest that companies who are in the business of moving goods by road from A to B aren't investing in any expansion of their fleets.
There's a scene in the film adaptation of Annie Proulx's Pulitzer Prize-winning novel "The Shipping News": An old newshound explains to newbie journalist Kevin Spacey how dark clouds on the horizon justify the hyperbolic headline "Imminent Storm Threatens Village."
"But what if no storm comes?" Spacey asks. The veteran replies with a second-day headline: "Village Spared From Deadly Storm." Unfortunately, having survived the storm fanned by subprime mortgages and the credit crisis, the clouds are gathering again over the global village we live in; they are getting darker every day.
(Corrects description of shipping price indexes in second paragraph, and time reference in seventh paragraph to three years.)
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
To contact the author of this story:
Mark Gilbert at
To contact the editor responsible for this story:
Therese Raphael at

Bill Gates Foundation Favours Businesses, Not The Poor

by Carol Adl
Gates foundation
A U.K.-based campaign group Global Justice Now have just released a report which says the Bill & Melinda Gates Foundation is funding strategies that promote multinational corporate interests at the expense of social and economic justice.
The activists for social-justice accuse the Microsoft billionaire of distorting global-development priorities through the immense wealth and influence of his Seattle-based foundation.
The Seattle Times reports:
With assets of $44 billion, the Bill & Melinda Gates Foundation is not only the world’s biggest philanthropy, but it also spends more on international aid and global-health programs than most nations.
That financial clout gives the foundation an outsized role in shaping global-health and agriculture programs, says a new report titled “Gated Development: Is the Gates Foundation always a force for good?”
Yet the foundation’s emphasis on vaccines, technological solutions and specific diseases undermines support for basic health systems in poor nations, argues the report’s publisher, Global Justice Now, a U.K. group with 60,000 members that advocates for more just policies around trade, food and energy. At the same time, the foundation both invests in and collaborates with pharmaceutical and agricultural corporations, creating “a corporate merry-go-round where the (foundation) consistently acts in the interests of corporations,” the report says.
“The world is being sold a myth that private philanthropy holds many of the solutions to the world’s problems, when in fact it is pushing the world in many wrong directions,” the report adds.
In a written response, the Gates Foundation said the report “misrepresents the foundation, our work and our partnerships.”
In order to improve the quality of life for the world’s poorest people, government, NGOs and for-profit companies must collaborate, the response says.
“The private sector has access to innovations — for example, in science, medicine and technology — that can save lives. And we believe that the role of philanthropy is to take risks where others can’t or won’t,” the foundation said.
The foundation also pointed out that its staff has no control over the finances and investments of the Gates Foundation Trust.
The U.K. report is the first to assemble in one document the entire litany of concerns raised about the Gates Foundation, from alarm over its funding of genetically modified crops in Africa to criticism of its support for charter schools in the United States.
“By collecting all this information and analyses in one place, we hope to make it easier for other actors to challenge the Gates Foundation’s approach to aid work,” said Polly Jones, head of campaigns and policy for Global Justice Now.
Criticism of the foundation is stifled, simply because it funds so many NGOs, universities and media organizations, Jones pointed out.
“We were surprised at how few critical voices there were, which made us want to dig further.”
(The Seattle Times receives a Gates Foundation grant to help fund Education Lab, a Times’ project that spotlights promising approaches to persistent challenges in public education.)
While governments must answer to their citizens and demonstrate the effectiveness of international-aid programs, the Gates Foundation enjoys unprecedented power with no accountability, Jones added.
“Just because you have a lot of money, and you’re being generous in giving some of it away, is that enough to allow you to influence global health and agriculture policies?” she asked.
In Africa, for example, the foundation is promoting a more industrialized version of agriculture, where small farmers might boost their harvests by using fertilizer and high-tech seeds. But given the cost of those seeds and chemicals, it’s not clear whether the farmers themselves will benefit, or just the businesses involved.
“You don’t change a system by providing somebody with a smartphone or climate-resistant crop,” Jones said. “Creating a more just system requires more than a technological fix.”
The group is calling for an independent, international evaluation of the Gates Foundation by the Organisation for Economic Cooperation and Development (OECD), as well as an inquiry by the U.K. government into the relationship between that country’s development arm and the foundation.
However, the Paris-based OECD has no authority over the Gates Foundation.

Gold Dilution Hits Record 542 Oz For Every Ounce Of Physical, Liquefaction of Current Global Debt & Derivatives Might Require $50,000.00 Gold

The Coming Revaluation of Gold – Hugo Salinas Price

Liquefaction of current Global Debt & Derivatives might require $50,000.00 Gold
For a visual appreciation of the coming conditions, we have provided a few graphs. The first column illustrates the present condition, with present CB Reserves at $11.025 Trillion dollars, plus an estimate of CB Reserves of 31,110 tons of gold at $1,100 Dollars an ounce (according to an authoritative calculation of 183.000 tons of gold in existence at present, of which 17% are calculated to be held as Reserves by Central Banks around the world). The second column presents the present CB Dollar Reserves, below CB reserve gold revalued at $22,000 Dollars an ounce. The third column presents the present CB Dollar Reserves, below 50,000 tons of reserve gold revalued at $50,000 Dollars an ounce. We use the larger figure for CB gold, because some analysts think that China, and also Russia, have far larger gold reserves than they disclose publicly.

Why do we use $22,000 and $50,000 Dollars an ounce? Because other thinkers have estimated a necessary revaluation of gold, with various figures between a low price of $10,000 Dollars and ounce and a high price of $50,000 Dollars an ounce. So we arbitrarily selected $22,000 Dollars an ounce and $50,000 Dollars an ounce. Take your pick. The price and the quantity of gold in Central Bank vaults are really immaterial; the facts will be known eventually, and the result will be what we have pointed out above: the restoration ofbalanced trade and balanced budgets in our present highly disorderly world.
Once the world’s currencies are “gold-backed”, then the gold held by individuals, trusts or corporations will cease to lie lifeless in stocks of gold. All gold will have become money and will spring to life in furthering economic activity: the revaluation of gold by Central Banks will also revalue, simultaneously, the 151,890 tons of gold which are thought to be in private hands at present – 183,000 tons total, minus 31,110 tons held by Central Banks = 151,890 tons in private hands.

COMEX SNAP: Gold Dilution Hits Record 542 Oz For Every Ounce Of Physical

physical-to-paper gold dilution – just exploded. “We are going to need a bigger dilution chart.”
There had been an eerie silence at the Comex in recent weeks, where after registered gold tumbled to a record 120K ounces in early December nothing much had changed, an in fact the total amount of physical deliverable aka “registered” gold, had stayed practically unchanged at 275K ounces all throughout January.
Until today, when in the latest update from the Comex vault, we learn that a whopping 201,345 ounces of Registered gold had been de-warranted at the owner’s request, and shifted into the Eligible category, reducing the total mount of Comex Registered gold by 73%, from 275K to just 74K overnight.
BREAKING NEWS – COMEX Registered Gold Inventories Plummet 73% In One Day
This is the lowest level of Registered Gold inventories on the Comex for more than 20 years & the most surprising movements of Comex Registered Gold inventories ever.

Gold Is In a ‘Flight To Safety’

the strong upward correlation of the US Dollar & Gold of late are evidence of a strong flight to safety trade

‘This time is different’: Gold

RBC Capital Markets, reckons ?this time is different? for gold. In its words, gold is ?building a fundamental base that should lead to higher prices

Thursday, January 28, 2016

Anticipating the international spread of Zika virus from Brazil

In May, 2015, locally acquired cases of Zika virus—an arbovirus found in Africa and Asia-Pacific and transmitted via Aedes mosquitoes—were confirmed in Brazil. The presence of Aedes mosquitoes across Latin America, coupled with suitable climatic conditions, have triggered a Zika virus epidemic in Brazil, currently estimated at 440 000–1 300 000 cases.1 Viraemic travellers have now introduced Zika virus into at least 13 additional countries, where susceptible Aedes mosquitoes have become infected and perpetuated local transmission cycles. In Brazil, a precipitous surge in infants born with microcephaly and the detection of Zika virus RNA in the amniotic fluid of affected newborns has been reported.1 We sought to identify high-risk international pathways for the dispersion of Zika virus and global geographies conducive to autochthonous transmission.
We created a global Zika virus spread model by adapting a seasonal model for dengue that integrates global ecological niche data for Aedes aegypti and albopictus and worldwide temperature profiles.2, 3 In Brazil, we identified airports within 50 km of areas conducive to year-round Zika virus transmission. We mapped the final destinations of international travellers departing from these airports from September, 2014, to August, 2015, using worldwide flight itinerary data from the International Air Transport Association. We used LandScan, a gridded global population dataset, to estimate numbers of people living in geographies at risk for autochthonous Zika virus transmission.
9·9 million travellers departed from the aforementioned Brazilian airports for international destinations, with 65% to the Americas (figure), 27% to Europe, and 5% to Asia. Traveller volumes were greatest to the USA (2 767 337), Argentina (1 314 694), Chile (614 687), Italy (419 955), Portugal (411 407), and France (404 525). China and Angola received the highest volume of travellers in Asia (84 332) and Africa (82 838), respectively. Argentina, Italy, and the USA have more than 60% of their populations residing in areas conducive to seasonal Zika virus transmission, whereas Mexico, Colombia, and the USA have an estimated 30·5, 23·2, and 22·7 million people, respectively, living in areas conducive to year-round transmission.
Thumbnail image of Figure. Opens large image


Final destinations of travellers departing Brazil by potential for autochthonous Zika transmission
In parallel to the recent experience with chikungunya,4 Zika virus has the potential to rapidly spread across Latin America and the Caribbean. With no vaccine or antiviral therapy available, possible interventions include: personal protection (ie, repellent use) and daytime avoidance of mosquito bites (especially pregnant women until more is known about the association between Zika virus infection and microcephaly); daytime avoidance of mosquito bites among Zika virus-infected individuals to disrupt human to mosquito to human transmission cycles (80% of infected individuals are asymptomatic and the remainder have clinical syndromes overlapping with dengue and chikungunya);5 and community-level mosquito surveillance and control measures. The summer Olympic Games in Brazil in August, 2016, heighten the need for awareness of this emerging virus.
KK is the founder of BlueDot, a social benefit corporation that models global infectious disease threats. MIC, MG, and AW have received employment income from BlueDot. IIB has consulted to BlueDot. We acknowledge support from the Canadian Institutes of Health Research, National Institute of Health, R01 LM010812 , the Wellcome Trust ( #095066 ), the Bill & Melinda Gates Foundation ( OPP1119467, OPP1106023, and OPP1093011 ), and the RAPIDD program of the Science & Technology Directorate, Department of Homeland Security, and the Fogarty International Center, National Institutes of Health.


  1. European Centre for Disease Prevention and Control. Rapid risk assessment: Zika virus epidemic in the Americas: potential association with microcephaly and Guillain-Barré syndrome. 10 December 2015. ECDC, Stockholm; 2015
  2. Kraemer, MUG, Sinka, ME, Duda, KA et al. The global distribution of the arbovirus vectors Aedes aegypti and Ae. albopictus. eLife. 2015; 4: e08347
  3. Brady, OJ, Golding, N, Pigott, DM et al. Global temperature constraints on Aedes aegypti and Ae. albopictus persistence and competence for dengue virus transmission. Parasit Vectors. 2014; 7: 338
  4. Weaver, SC and Lecuit, M. Chikungunya virus and the global spread of a mosquito-borne disease. N Engl J Med. 2015; 372: 1231–1239
  5. Duffy, MR, Chen, T-H, Hancock, WT et al. Zika virus outbreak on Yap Island, Federated States of Micronesia. N Engl J Med. 2009; 360: 2536–2543

Office Market in Houston Melts Down, Watch The Banks!

Wolf Richter,
Commercial real estate is highly leveraged. Debt is everything. The entire math is based on high rental rates and low vacancy rates. Without them, the debts cannot be serviced. But now in Houston, both are shooting in the wrong direction.
OK, Houston’s economy is diversified, they say. The oil bust hurts, and there have been waves of layoffs of highly paid engineers, but it won’t hit the city as bad as the last big oil bust did, they say.
And yet, the amount of office space vacated by companies that are trying to slash their operating expenses and that is now on the market as sublease space has spiked 69% by the end of 2015, to 7.6 million square feet (msf), according to real-estate services firm Savills Studley. And they “continue to sit on the market.”

It’s going to get worse:

New sublease blocks are expected to hit the market in 2016, particularly in the CBD [Central Business District]. Shell is projected to vacate 250,000 sf in One Shell Plaza and EP Energy, likewise, is anticipated to leave 100,000 sf in the Kinder Morgan Building. Shell would likely also shed space at BG Group Place should its pending $70-billion acquisition of BG Group clear governmental hurdles and finalize.
Many large tenants who paid at the very top of the market in the last few years warehoused space in anticipation of continued headcount growth. As a result, many firms had surplus space even prior to the implementation of layoffs in the last year. In 2016, the office market should see more shadow space listings….
Occupancy, after five years in a row of increases, fell by 1.4 msf (“negative absorption”), the biggest decrease in occupancy since 2009. Going forward, M&A and bankruptcies “will contribute to additional negative absorption” and will hit the vacancy rate. It already spiked to 23.2%.

And it’s going to get even worse:

After a tremendous building boom in 2013 and 2014, a total of 17 msf is expected to hit the market over the next few years, with 7.9 msf scheduled for completion in 2016. Only about two-thirds have been pre-leased. Some of these pre-leased properties will enter the shadow inventory as soon as they’re completed. But 5.5 msf has not been leased.
These new buildings will hit the market at the worst possible time, competing with 7.9 msf of sublease space and large amounts of shadow inventory, during a period of negative absorption.
Already the first “see-through buildings” in this cycle are appearing — that infamous phenomenon of vacant and transparent buildings dotting Houston’s business district during the oil bust of the 1980s.
Piedmont Office Realty Trust last year “opened a glassy 11-story building in the heart of the Energy Corridor district without any tenants,” the Wall Street Journal reported. The company’s CEO Don Miller lamented in November during the earnings call that “there’s no real genuine activity in the marketplace.”
And “several notable mistimed projects to be completed this will be under immense pressure,” Savills Studley reported, including:
609 Main. Of its 1,000,000 sf, only 62,000 sf have been leased so far. “Only time will tell whether that space continues to remain vacant after delivery or if the landlord successfully cannibalizes other CBD Class A buildings through new relocation deals.”
And Energy Center Five, scheduled to deliver in April, “remains completely unleased with 524,328 sf available.”
Leasing activity in 2015 plunged 42% to 8.4 msf, the weakest since Financial-Crisis year 2009. While there were some large deals in the fourth quarter, they were “bearish moves”:
Apache Corporation, for example, extended its 524,000-sf lease in Post Oak Central for just one year, pushing back its expiration from December 2018 to December 2019. It executed this extension instead of moving forward on a new development with 6.4 acres of land that it purchased in BLVD Place in 2012.
The quarter’s second largest lease, finalized by Bracewell & Giuliani at Pennzoil Place, was a renewal that saw the law firm downsize by an entire floor to 189,061 sf.
Now the market is in a holding pattern, without real demand, and lots of supply. Savills Studley’s report:
Landlords are feeling the marked reduction in tours, requests for proposals, and ultimately deal volume. Rents appear to be adjusting in spots, but the gap between tenant and landlord expectations has widened.
Many landlords still want to hit or come close to their pro forma financials. In contrast, some area businesses expect rents to adjust on a level that matches the sharp slide in energy pricing.
So overall asking rent edged down 1.6% to $28.99 per square foot, the second quarter in a row of declines. Class A asking rent fell 2.5% to $34.70. But the oncoming flood of sublet supply and new space, while demand is actually declining, will likely lead to “sharper rental rate erosion in future quarters.”
And this is where it gets tricky for banks. Commercial real estate is highly leveraged. Without high rental rates and low vacancy rates, the math won’t work and the debts cannot be serviced. Now both are shooting in the wrong direction.
Last time this happened, it turned into a gigantic mess that helped tear up over 400 Texas banks between 1980 and 1989, including nine of the state’s 10 largest.
So now everyone is hoping for a miraculous turnaround in the price of oil, in addition to healthy growth in the overall US economy, and everything else will follow. They’re hoping for another oil boom, and all that comes with it. But if their wishes come true even modestly, it would very quickly lead to a boom in production and thus an extension of the glut that would destroy the price of oil all over again before it ever gets back to a survivable level. And the shakeout in the real estate bust will simply get worse.
And how are banks that lent to the oil & gas sector dealing with? “All of it is in the gutter.” Read… Banks Much Deeper in the Hole on Oil & Gas Collateral than they Pretend

Feldstein says Fed should let the market fall and keep hiking rates

Central bank should not pause due to stock market declines, Harvard economist says


Martin Feldstein thinks talk of a recession is overblown.

WASHINGTON (MarketWatch) — Martin Feldstein, a prominent Harvard economist once on many people’s short-list to lead the Federal Reserve, has a simple message for the U.S. central bank: ignore the stock market.
In an interview with MarketWatch, Feldstein said stocks are overvalued. Any signal from the U.S. central bank that it may pause from its plans to continue raising interest rates would only create the impression that there is a “Fed put” on the market. A put is an option that protects an investor from losses.
In the interview, Feldstein, now 76 and the president emeritus of the National Bureau of Economic Research, sees a risk of higher inflation going forward. He said growing talk of a recession in the U.S. is misguided.
MarketWatch: In a column in the Wall Street Journal in August, you said this about Fed policy: “It is time to escape the unprecedented monetary policy that for a while stimulated demand – but then distorted prices and brought about the current corrections.” Can you unpack that? What is going on?
Feldstein: They introduced unconventional monetary policy, quantitative easing. It was successful in the way that the Fed and [former chairman] Ben Bernanke predicted, in that it raised household wealth by driving investors into equities and increased the value of homes. And in response to that increase in wealth, consumers went out and spent more and that got the economy going. I think it was as simple as that, and it was effective. But, at the same time, these super-low, sustained low interest rates have led to a variety of risk-taking that could cause significant problems going forward. So the stock market got pushed up to a point where the price-to-earnings ratio is about 30% higher than it’s been historically and we’re seeing what that’s doing in terms of falling equity prices and similar things are happening on high-risk debt, and I could go on.
MarketWatch: You want them to tighten more?
Feldstein: I want them to do what the FOMC forecast in December, which is that they would take the rate up by 100 basis points in 2016 and continue to do more in 2017. And even that will still be very easy, accommodative, monetary conditions.
MarketWatch: Won’t financial conditions tighten and the stock market decline?
Feldstein: That’s right, the stock market might decline. But if the stock market is very overvalued we shouldn’t be surprised that, at some point, it has to revert to a more normal level.
MarketWatch: Won’t that damage the economy?
Feldstein: I’d rather it happen slowly, then build up the kind of problems we had in 2006, 2007 and 2008.
MarketWatch: So this is just an adjustment the economy has to make?
Feldstein: The danger, in my mind anyway, is if the Fed keeps interest rates extremely low, if they say, in reaction to the recent decline in equity prices, if they say: “Well maybe we shouldn’t raise interest rates,” that will just be a signal to buy more equities and to push up the price of equities even further and to get things further out of line so when the correction comes, it will be even bigger.
MarketWatch: So asset prices are now overvalued and that has to reverse?
Feldstein: Yes, and making it worse would not be a good thing.
MarketWatch: You’ve been worried about inflation for some time –even pressing Fed Chairwoman [Janet] Yellen when she first took office about it. Haven’t you been wrong so far?
Feldstein: I think I have said it was important for the Fed to make it clear that they cared about inflation. I think I wrote that and I said that in the Economic Club of New York discussion with Janet Yellen [in April 2014]. I’ve also explained, in a Project Syndicate piece, that contrary to what a lot of people say, there hasn’t been a big increase in the money supply, and therefore inflation is unlikely. People have said to me, ‘since we’ve had this explosion of money, why didn’t that create inflation?’ And what I wrote that we haven’t had that explosion of money, what happened was the commercial banks took the opportunity to just leave funds at the Federal Reserve. They didn’t use those funds to expand their lending and to expand the money supply. But I think there is the danger going forward, that, starting where you are today, with an unemployment rate of 5%, if the Fed continues to have negative real short-term rates, that we could see the unemployment rate drifting down below 5% and, at some point, that would start to raise inflation.
MarketWatch: Larry Summers, and others, have argued that the neutral interest rate – the level of interest rates consistent with full employment – is lower now than it used to be. It sounds like you are not buying that.
Feldstein: Yes, I am not a big fan of those arguments. I think it is hard to know. What we know is that actual rates are very low, but we know the Fed has made that happen. So the neutral real rate is not a number you can see in the market, it is a number that economists can try to calculate but I am not persuaded that that number is a negative number or dramatically lower.
MarketWatch: You want the Fed to hike rates steadily, step-by-step toward something like a 3.5% terminal rate?
Feldstein: Assuming that inflation does increase, as the Fed itself predicts, remember that core CPI is at 2.1% relative to 12 months ago, so if someday the price of oil stops falling, we will see actual inflation catch up with the core, so when the inflation rate gets into the 1.5%-2% range, then I think normalization of interest rates means getting interest rates back to, as you say, 3.5% to 4%.
MarketWatch: Do you want them to go steadily, go in March?
Feldstein: I hate to use their expression but it’s data dependent. So it depends on what is happening in the economy. But I wouldn’t take the fall in the equity market as a reason not to stick to their interest rate expansion path because I think that would send a very bad signal to investors that there is a kind of Fed put there and that they don’t have to worry because the stock market only goes up, because that will get it further out of line with reality.
MarketWatch: There has been growing talk about a recession. You don’t sound so worried.
Feldstein: I’m not. We’ve had a weak [fourth] quarter, basically we had a very weak October. We don’t have December numbers yet. If you look at the various forecasts that you and I probably both look at, for the first quarter, there are numbers in the 2.5% range for real GDP, so I don’t see any serious problem. And even the fourth-quarter numbers, which are just estimates at this point, are primarily driven by reductions in inventories and weaker exports. So it is not domestic demand that is doing this.
MarketWatch: If the Fed keep raising rates, won’t the dollar continue to strengthen and hurt manufacturing?
Feldstein: If we look at the impact of the exchange rate on the cost of imports and competitiveness on exports, there is very little in it from the exchange rate. The main thing that has driven the cost of imports has been the energy price, and the government breaks out those two components of what drives the import price index. The competition that supposedly comes from abroad because of the exchange rate is very small relative to the part of the import price index that is driven by energy.
MarketWatch: So commercial real estate is another example of a bubble?
Feldstein: Overvalued. The number I hear is cap rates of around 3%, that is not sustainable.
MarketWatch: Part of your concern is the Fed doesn’t have good tools to combat asset bubbles.
Feldstein: They perhaps could have them if they wanted them, but they certainly don’t use them. They have said that we should have macroprudential policies other than interest rates as a way of dealing with these kinds of risks. But when you look around, it is hard to see what those are, other than building up the capital requirements for commercial banks, which, in itself is a macroprudential policy, does reduce the risk of the banks getting into the kind of trouble that they did before. On the other hand, we have to remember that the banks are just one-third of total capital raising in the United States.
MarketWatch: It seems you were never a big fan of quantitative easing. You don’t want it in the tool kit for the next downturn?
Feldstein: I suppose it comes down to what’s the alternative. If you had said to me before the economic downturn: “What do you think about fiscal policy as a tool for fighting downturns,” I would say that is not a very good tool, we have learned from experience that trying to use discretionary fiscal policy is likely to get us in trouble because we can’t move fast enough. But when this downturn happened, I felt that this is different from previous ones. It was deeper and more importantly, longer, and therefore there was room to do fiscal policy, but the fiscal policy that the administration did in 2009 was just very badly designed and really didn’t do much to stimulate demand.
MarketWatch: And that forced the Fed.
Feldstein: And the Fed came along and said: “Well, if conventional monetary policy won’t do it, and fiscal policy they tried and failed, so it’s up to us now.” And I don’t disagree with that.
MarketWatch: What about other tools to combat downturns — negative rates and raising the 2% inflation target to 4% — you are not a fan?
Feldstein: I am not a fan.
MarketWatch: Let’s take those one at a time — negative rates
Feldstein: Negative rates just provide even more incentive for excessive risk taking. People saying: “Well I can’t get a decent return on a relatively safe asset, so I will take duration risk, I will take credit risk, I will invest in real assets like commercial real estate with exceptionally high prices.” So I think that is not a good thing. And of course in Europe, it is not doing much for them.
MarketWatch: And moving the inflation rate higher?
Feldstein: I am old enough to remember the pain of the inflation in the late 1970s and the early 1980s before Paul Volcker came around and fixed that problem. We paid a high price for getting back to a world where people believe inflation is going to stay low, and if we now come along and say: “Well instead of 2% , let’s go for 4% or 5% because that has certain technical advantages,” then people are going to say: “Oops, what are they going to do next.”
MarketWatch: I hear what you’re saying but maybe I’m not as sanguine as you are. With growth around 2%, couldn’t we end up in a ditch if the Fed does too much?
Feldstein: That’s why, when you asked would I commit to that or would I see how it plays out, I said I must see how it plays out. That’s data-dependent movement.

China’s central bank makes massive cash infusion

590-billion yuan injection is most in 3 years, intended to improve liquidity

The headquarters of the People's Bank of China in Beijing.

SHANGHAI — China’s central bank is putting the largest amount of cash into the financial system in nearly three years, using a weekly market operation to pre-empt a holiday-induced funding squeeze and offset rapid capital outflows.
The People’s Bank of China offered 340 billion yuan ($51.89 billion) of short-term loans, known as reverse repurchase agreements, to commercial banks in a routine money market operation Thursday.
The central bank provided 440 billion yuan via similar tools Tuesday, the first leg of its twice-a-week liquidity-management exercises.
Given the maturity of 190 billion yuan of previously issued loans, the PBOC’s net cash injection this week totals 590 billion yuan, the biggest of its kind since early February 2013, when it reached 662 billion yuan.
The move follows an aggressive pump-priming exercise by the PBOC last week, when the central bank offered more than 1.5 trillion yuan in gross short- and medium-term lending to banks.
The eye-popping liquidity injection is partly intended to satisfy typically surging demand for cash ahead of the Lunar New Year holiday that starts Feb. 7.
It also constitutes an effort to stem accelerating capital flight as investors become more nervous about the health of China’s economy, and as the country’s main stock market has lost nearly 23% since the start of this year.

Zika-affected Areas

Where has Zika virus been found?

  • Prior to 2015, Zika virus outbreaks have occurred in areas of Africa, Southeast Asia, and the Pacific Islands.
  • In May 2015, the Pan American Health Organization (PAHO) issued an alert regarding the first confirmed Zika virus infections in Brazil.
  • Currently, outbreaks are occurring in many countries.
  • Zika virus will continue to spread and it will be difficult to determine how the virus will spread over time.
Zika in the United States and its territories:
  • No locally transmitted Zika cases have been reported in the continental United States, but cases have been reported in returning travelers.
  • Locally transmitted Zika virus has been reported in the Commonwealth of Puerto Rico.
  • With the recent outbreaks, the number of Zika cases among travelers visiting or returning to the United States will likely increase.
  • These imported cases could result in local spread of the virus in some areas of the United States.

Countries and territories with active Zika virus transmission

 World map showing countries and territories with reported active transmission of Zika virus (as of January 22, 2016). Countries are listed in the table below.


  • Barbados
  • Bolivia
  • Brazil
  • Colombia
  • Dominican Republic
  • Ecuador
  • El Salvador
  • French Guiana
  • Guadeloupe
  • Guatemala
  • Guyana
  • Haiti
  • Honduras
  • Martinique
  • Mexico
  • Panama
  • Paraguay
  • Puerto Rico
  • Saint Martin
  • Suriname
  • U.S. Virgin Islands
  • Venezuela


  • Samoa


  • Cape Verde