Another race to the crash: who goes first Deutsche Bank or Italian Banks? Can bankers get politicians to pull the emergency cord? Who gets screwed? Stay tune for Crash 2.0.
Why bank executives are stoking a banking crisis, with Deutsche Bank in their crosshairs.
The result is what has been called secular stagnation, new normal, ugly deleveraging, balance sheet recession and Japanification. I call it “QE infinity”: a prolonged period of low growth and low interest rates, where policy-makers persist in implementing policies that won’t fix the problem. They won’t ever say they’re out of ammunition, but central bankers are starting to look like naked emperors. “Is monetary policy by itself going to create growth, employment? You seem to give a lot of responsibilities to the European Central Bank. Can monetary policy create growth by itself? The answer is no. Monetary policy can create the economic conditions for growth,” ECB President Mario Draghi told the European Parliament last year. Put differently, there is only so much monetary policy can do to re-start growth: it is an anaesthetic, not a cure. to the European Central Bank. Can monetary policy create growth by itself? The answer is no. Monetary policy can create the economic conditions for growth,” ECB President Mario Draghi told the European Parliament last year. Put differently, there is only so much monetary policy can do to re-start growth: it is an anaesthetic, not a cure.
Source: Our global financial system is broken. Here’s a plan for fixing it | World Economic Forum
These days, hardly a week goes by without a new report about struggling retailers and rising vacancies in Manhattan.
Average retail asking rents fell year over year in seven of the borough’s 12 main retail submarkets in the first quarter of 2016, according to Cushman & Wakefield. And several prime shopping districts now have availability rates well over 20 percent, while stretches on Bleecker Street and Broadway have become notorious for their empty storefronts.
These signs of trouble are coinciding with record spending by retail investors and the rise of the retail condo.
Investors have shelled out $25 billion on Manhattan retail properties since the beginning of 2011, according to data from Real Capital Analytics. And in recent years, buyers have been more willing to dig deeper into their wallets and accept higher per-square-foot prices — forcing them to find tenants willing to pay high rents to justify their purchases.
Since 2000, RCA’s database counts 24 Manhattan retail condo sales that were priced at $10,000 per square foot or more. All of them closed after July 2011 and 17 closed in 2014 and 2015.
“I don’t want to say it’s a bubble but it’s been constantly bid up for six years,” Lee & Associates Managing Principal Peter Braus told The Real Deal.
Consolo added that retail condo sales prices have gone into the “stratosphere” in recent years.
“It is clear that there were numbers that were far too aggressive and the market just couldn’t keep up,” she said.
While real estate insiders are reluctant to call it a retail bubble, many acknowledge that a correction is imminent.
Michael Weiser, president of commercial brokerage GFI Realty Services, said the best indicator of whether Manhattan’s retail market is weakening is vacancy.
Availability rates — which measure the amount of retail space that is vacant or will become available — rose in all but one of Manhattan’s main retail submarkets between the first quarters of 2015 and 2016, according to Cushman.
Among those neighborhoods, several stand out: On Fifth Avenue between 42nd and 49th streets, a staggering 31 percent of retail space was available for lease. Meanwhile, Soho clocked in with a 25 percent availability rate followed by Herald Square and the Meatpacking District (both at 22 percent), Times Square (20 percent) and Madison Avenue (17 percent).
Braus said that owners who paid a steep price for retail space are more reluctant to accept lower rents. “That’s one reason why you’re seeing a lot of vacancies in those neighborhoods,” he noted.As it happens, those six districts were also home to the bulk of the priciest Manhattan retail purchases in the last two and half years, accounting for 57 of the 73 sales priced at $100 million or more recorded by RCA since January 2014. (That excludes office properties with retail components.) They are also among the neighborhoods where asking rents saw the steepest rise over the past two years, the numbers from Cushman & Wakefield show.
Worth the time to read the entire article here:
Source: Manhattan Retail Market | Retail Vacancies NYC | Thor
Solomon arranges some of the most crucial loans of the war effort and, working in concert with Robert Morris – the Revolution’s chief banker – becomes central to the colonials’ eventual victory. When George Washington sees his one-in-a-million opportunity to trap and destroy Lord Cornwallis at Yorktown, it is money that is wanting and Solomon comes through. Washington can’t move his army into siege position to capitalize on Cornwallis’s historic error because an army on the march must be fed. Robert Morris turns once again to Solomon the broker, who comes up with the vital $20,000 when the Treasury itself is empty. Within a day, the French and American armies, flush with the funds necessary, make their way to Yorktown and surround the city. Cornwallis is cut off from supply lines and promptly gives up.
Source: The Broker Who Saved America
Beginning of the end?
In the summer of 2007, two inconsequential Bear Stearns property-related funds were gated and then liquidated, exposing the reality of the US housing bubble and catalyzing the collapse of the financial system. While equity markets have rebounded exuberantly post-Brexit, suggesting all is well, British property-related assets have tumbled and, as The FT reports, Standard Life has been forced to stop retail investors selling out of one of the UK’s largest property funds for at least 28 days after rapid cash outflows were sparked by fears over falling real estate values. As one analyst warned,
Source: Bear Stearns 2.0? UK’s Largest Property Fund Halts Redemptions, Fears “Vicious Circle” | Zero Hedge
In a market the size of America’s prices should be lower than in other industrialised economies. By and large, they are not. Though American companies now make a fifth of their profits abroad, their naughty secret is that their return-on-equity is 40% higher at home.
The former head of SEIU says it’s time to rethink many of the basics about unions and the workplace.
Billions of dollars are moving out of Canada – nearly all tax free – with 92 tax treaties signed.
“I think those of us who warned, 35 years ago, that one of the consequences of this would be, ‘those who have the most would end up paying the least and those with the least would end up paying the most’ — we’ve been proven right. ”
Source: Canada willingly makes tax deals with tax havens | Toronto Star
The Massachusetts Supreme Court will decide whether a local shrine should be tax-exempt—a decision that could have broad implications for faith organizations in America.
The world wants U.S. debt and the U.S. needs infrastructure repair. Seems like a natural match unless you’re a Republican or fellow-traveling Democrat.
Must-Read: Narayana Kocherlakota: The World Needs More U.S. Government Debt: “Are government-imposed restrictions holding back the U.S. economy?… …In a way, yes: The federal government is causing great harm by […]
Source: Must-read: Narayana Kocherlakota: “The World Needs More U.S. Government Debt” – Equitable Growth
The 50 biggest US companies, including global brands such Pfizer, Goldman Sachs, Dow Chemical, Chevron, Walmart, IBM, and Procter & Gamble, have stashed more than a trillion dollars offshore and used more than 1,600 subsidiaries in tax havens to avoid billions of dollars in tax each year, according to Oxfam America. In a new report released today ahead of Tax Day, Oxfam outlines how corporate tax dodging costs the US an estimated $100 billion each year, a gap that the average American taxpayer would have to shell out an extra $760 to cover…..
…..The report reveals that the same companies are among the largest beneficiaries of US taxpayer funded support, receiving a staggering $11 trillion in federal loans, loan guarantees and bailout assistance from 2008-2014 even as they avoided hundreds of billions of dollars in taxes over the same period.
Oxfam calculated that during this period, these 50 companies collectively received approximately $27 in loan support for every $1 they paid in federal taxes.“…..
The companies, which made nearly $4 trillion in profits globally between 2008 and 2014, paid an average effective tax rate of just 26.5% – well below the statutory tax rate of 35% in the US and well below the tax rate of an average US worker of 31.5%…..
“For every $1 spent on lobbying, the largest 50 companies received $130 in tax breaks and more than $4,000 in federal loans, loan guarantees and bailouts,”…..
Since the initial JP Morgan deal that sparked outrage over tax deductions, consumer relief wiggle room, and other fine-print details that make such deals cheaper for companies than press releases indicate, Sen. Elizabeth Warren (D-MA) and other lawmakers have tried to force federal and state lawyers to stop the doublespeak. Warren and Sen. Tom Coburn (R-OK) have pushed for the Truth in Settlements Act since early 2014.The measure would require federal agencies to clearly delineate between deductible and non-deductible settlement costs, and include an estimate of the actual corporate costs of such deals in their formal communications about them. It passed the Senate in September, but hasn’t moved out of any of three separate committees with jurisdiction over it in Speaker Paul Ryan’s (R-WI) House.
Looking at the documents leaked from Mossack Fonseca and one thing is clear: Britain’s network is once again at the core. More than half of the companies listed in the documents are registered in the UK or its Overseas Territories, and Hong Kong plays a huge role.
Of course, this shouldn’t be surprising. Britain has for for a while now been thought to be the global capital for money laundering. And it’s no shock that nothing has been done about it. In 2010, two years after they crashed the global economy, the City paid for more than half of the Conservative party’s election campaign, helping (along with the aforementioned Lord Ashcroft) them limp them over the line, with a Lib Dem shaped crotch. Though, of course, Labour did little to regulate in the previous 13 years.
If we want to understand modern Britain, first we need to realise that our primary economic function in the world is probably our network of tax havens. After all, around $21tn is estimated to sit in offshore accounts, of which Britain’s territories are said to make up by far the biggest part. Our own GDP is only around $3tn.
Second, we need to get to grips with the serious claims about our role as the global money laundering capital: a function which pushes up the price of the pound, making other exports unaffordable (bye bye steel), and drives up the cost of houses in London and the South East, fuelling a vast speculative bubble which sucks investment out of the rest of the economy.
And third, we need to think about how this gradually dawning economic reality interacts with our politics: not through the obvious corruption of direct bribery, but through revolving doors between government and civil service, through old boy’s networks and friendship groups, through perfectly legal election donations and media domination.
Source: Panama papers: “an old tradition of English piracy” | openDemocracy
The U.S. “is effectively the biggest tax haven in the world” —Andrew Penney, Rothschild & Co.
Source: The World’s Favorite New Tax Haven Is the United States – Bloomberg
PANAMA PAPERS
An investigation published today by the International Consortium of Investigative Journalists and its media partners reveals the hidden workings of a secretive industry that banks and lawyers use to hide the financial holdings and dealings of powerful clients, including prime ministers, parliamentarians, plutocrats and criminals, according to a trove of leaked documents.
The files, known as the Panama Papers, exposes the offshore holdings of 12 current and former world leaders and reveals how associates of Russian President Vladimir Putin secretly shuffled as much as $2 billion through banks and shadow companies, according to the joint investigative project conducted by ICIJ, the German newspaper Süddeutsche Zeitung and more than 100 other news organizations around the globe. ICIJ is the international arm of the Center for Public Integrity.
The files — which total more than 11.5 million documents — contain new details about major scandals ranging from England’s most infamous gold heist in 1983, an unfolding political money laundering affair in Brazil and bribery allegations currently convulsing FIFA, the body that rules international soccer and is under investigation by the U.S. Justice Department.
Source: Massive leak reveals offshore accounts of world leaders | Center for Public Integrity
The next time you read about macro-economists’ authoritative statements on forecasting the economy under Bernie’s programs, remember the following two charts and how well the macro-economists at the IMF did on projecting World Growth and China’s Growth. Doesn’t make him right, makes you think.
Source: When The Hockeystick Breaks: The IMF Gives Up On China Growth | Zero Hedge
Political and social change emanate from persistent pressure for a just world, not settling for what is “realistic” before even getting to the negotiating table.
Source: The Pragmatic Case for Bernie Sanders – The Atlantic
There is a growing sense of tighter financial conditions, particularly to the commercial real estate sector. Late last year the regulators issued a joint statement on Prudent Risk Management for Commercial Real Estate Lending and the latest Senior Loan Officer Opinion Survey (SLOOS) shows that banks tightened their lending standards to commercial real estate meaningfully in 4Q15…. The growing sense of gathering clouds in terms of tightening financial conditions to commercial real estate translates into a more challenging road ahead for US commercial real estate.
Sanders points out: “Three out of the 4 largest financial institutions (JP Morgan Chase, Bank of America and Wells Fargo) are nearly 80 percent bigger than before we bailed them out. Incredibly, the six largest banks in this country issue more than two-thirds of all credit cards and more than 35 percent of all mortgages. They control more than 95 percent of all financial derivatives and hold more than 40 percent of all bank deposits. Their assets are equivalent to nearly 60 percent of our GDP. Enough is enough.”
The Federal Reserve is becoming the focal point of a longstanding divide between more business-friendly Democrats and the party’s populist branch over how the next president should promote full employment and police Wall Street.
Democratic presidential hopeful Sen. Bernie Sanders (I-Vt.) put forward a lengthy list of proposals for reforming the Federal Reserve in a Dec. 23 op-ed in the New York Times.
Lawrence Summers, a former top economic adviser to President Barack Obama, who nearly became Fed chairman in 2013, penned a response on Tuesday agreeing with Sanders on some grounds, but forcefully pushing back against the notion that Wall Street influence at the Fed is too pervasive.
