Uncertainty, threats, and counter-threats. By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET. Catalonia’s recent declaration of independence may have been a largely symbolic act but the economic hangover it has left in its wake is very real. Last month the number of unemployed in the region rose by 7,391 – the highest rise in a month of November since 2009. During the same period the number of people registered with social security fell by 4,038 – the sharpest fall since November 2013. The economic pain is already taking a psychological toll. According to a new poll published by Spain’s Center for Sociological Research (CIS for its Spanish acronym), the number of households that fear that their economic situation will worsen in the next six months surged from 14.2% in August to 22.2% in October. By contrast, in Spain as a whole there was hardly any change, with the rate barely budging from 15.1% to 15.6%. Almost 3,000 firms have shifted the registered address of their headquarters outside Catalonia since the banned referendum on October 1, many to Madrid. Although the exodus has slowed in recent weeks, every day dozens of Catalan companies continue to change their registered office, despite the express appeal of Spain’s Prime Minister, Mariano Rajoy, to stop doing so after the activation of Article 155 of the Constitution. The Catalan exodus has so far been purely administrative, with companies effectively shifting domiciles, the ‘brass plate’ of the business, to avoid legal and tax complications rather than moving staff or operations, which would have huge cost and logistical implications.
Authored by Tom Luongo, In 1989 Francis Fukayama declared that we had reached ‘The End of History.’ Democracy as a form of government would, in fact, be the end of the evolution of human interaction. The West had triumphed and that the rest was ‘just a chase scene,’ to borrow a phrase from Neal Stephenson’s brilliant dystopian novel ‘Snow Crash.’ But, this past week’s events in the Middle East tell me that autocracy has replaced democracy and the trans-national parliamentary system of the European Union that Fukayama championed in his 2007 article in The Guardian. The EU no longer practices representative Democracy today. Diktats come down from unelected technocrats in Brussels. They are wholly-owned by stateless rent-seeking oligarchs (i.e. George Soros). Everyone in and around the EU is expected to obey or face tanks in the streets (Spain) or endless legal entanglements from captured international courts (Poland). If you circumvent the rules, the EU will change them to suit its masters’ needs. Just look at any proposed Russian pipeline into Europe over the past five years. In the U. S. we have been subjected to the worst form of operant conditioning by an unelected Deep State and its quisling media for a year. They created the mass delusion that President Donald Trump is a secret Russian agent. The goal was to overturn a democratic election, which itself the people had to overcome systemic voter fraud to win.
This post was published at Zero Hedge on Nov 10, 2017.
Will Spain’s central government blink (again)? By Don Quijones, Spain & Mexico, editor at WOLF STREET. Madrid’s standoff with Spain’s north eastern province of Catalonia, which plans to hold a forbidden referendum on national independence on October 1, grows more and more complex by the day. Just in the last week alone the following developments have taken place: Spain’s Civil Guard has raided Catalonia’s parliament and government HQ as part of its investigation into political corruption in the region. As new research has shown, this investigation forms part of a broader police operation that has served as a means for Spain’s governing People’s Party to spy on political rivals. Catalonia’s government has replaced the region’s chief of police with a die-hard separatist. It has also purged the cabinet of any members perceived as not fully committed to the separatist cause. Deloitte published its annual barometer of Spanish businesses according to which 74% of business leaders believe that the independence of Catalonia would do serious harm to Spain’s economy. Support in Catalonia for national independence is on the wain, according to a new poll, with 49% opposing independence, and just 41% favoring it. That said, only 67.5% of respondents said they still plan to vote on Oct. 1. Most of them will be nationalists. Madrid will do everything it can to stop them. The Rajoy government has warned this week that anyone who participates in the purchase of ballot boxes for the referendum could be criminally prosecuted.
This post was published at Wolf Street on Jul 23, 2017.
Crackpot Schemes POITOU, FRANCE – ‘Nothing really changes.’ Sitting next to us at breakfast, a companion was reading an article written by the No. 2 man in France, douard Philippe, in Le Monde. The headline promised to tell us how the country was going to ‘deblock’ itself. But upon inspection, the proposals were the same old claptrap about favoring ‘green’ energy… changing the tax code to reward one group and punish another… and spending more money on various humbug initiatives. *** Subsidized green energy scams are mainly creating eyesores – other than that, they add up to nothing but cronyism writ large. After the one of the biggest solar company bankruptcies ever happened in Spain, a detailed economic study found that for every subsidized renewable energy job the government ‘created’ (at a cost of nearly $2 million per job!) 2.2 jobs were lost elsewhere. It is a good bet that the math isn’t much different elsewhere. To add insult to injury, there is precisely zero evidence that carbon emissions are reduced by even one iota due to these efforts. It is an apodictic certainty that no economy can possibly be ‘rescued’ by the subsidization of this nonsense. There is a widespread belief in government circles that ‘economic growth’ can somehow be conjured up by bureaucrats. That is a costly error that increasingly endangers the future of Western civilization. [PT]
This post was published at Acting-Man on July 12, 2017.
In many other countries, excluding the United States, corrupt bankers are often brought to task by their respective governments. The most recent example of a corrupt banker being held accountable comes out of Spain, in which the former head of the International Monetary Fund (IMF), Rodrigo Rato was sentenced to four years and six months behind bars. According to the AFP, Spain’s National Court, which deals with corruption and financial crime cases, said he had been found guilty of embezzlement when he headed up Caja Madrid and Bankia, at a time when both groups were having difficulties. Rato, who is tied to a slew of other allegations was convicted and sentenced for misusing 12m between 2003 and 2012 – sometimes splashing out at the height of Spain’s economic crisis, according to the AFP. The people of Spain were outraged over the scandal as it was discovered during the height of a severe financial crisis in which banks were receiving millions in taxpayer dollars. Bankia was eventually nationalized and given 22 billion in public money.
This post was published at Zero Hedge on Feb 27, 2017.
After Brexit in the UK and Donald Trump’s election in the US, the political elites of the world are slowly waking up to the inevitability that the will of the people can not be ignored forever. In Northern Europe, the electorate has rebelled against political elites, like Angela Merkel, who have embraced “open borders” and the influx of refugees from war-torn areas in the mid-east that have brought with them increasing violence and terror attacks. In the U. S., the rebellion is the direct result of Americans being fed up with a federal government that is defined by cronyism and complete dysfunction. Now, the latest demonstration of an electorate fighting back against its elected officials comes from Spain as 80,000 people rallied in Barcelona on Sunday in a show of support for Catalan leaders locked in a political battle with Madrid over an independence referendum. In Catalonia, separatists complain their relatively wealthy region is overtaxed by an oppressive central government in Madrid to subsidize poorer regions of the country.
This post was published at Zero Hedge on Nov 14, 2016.
Call bond-market veteran Bill Gross a ‘broken watch.’ He doesn’t care. His gripe about negative interest rates and a flood of debt, which he considers a risk, not a fix, for a global economy that’s still limping out of the financial crisis, is challenged daily by resilient demand for the bonds he’s bearish on. But even if being ‘right’ eventually is a hard sell right now, he’s not backing down, Gross said in his latest monthly commentary. ‘The problem with Cassandras, such as Gross and Jim Grant and Stanley Druckenmiller, among a host of others, is that we/they can be compared to a broken watch that is right twice a day but wrong for the other 1,438 minutes,’ Gross wrote. ‘But believe me: This watch is ticking because of high global debt and out-of-date monetary/fiscal policies that hurt rather than heal real economies.’ Germany, Switzerland, France, Spain and Japan are among countries that have negative yields on government-issued debt. Their hope is that cheap, even free, borrowing raises inflation and revives asset prices that can filter through economies; they argue extreme policies have been needed. Gross and others have argued that rates, including those at the Federal Reserve, at near zero or below won’t create sustainable economic growth and actually undermine capitalism.
It’s now a familiar refrain: A European prime minister calls a referendum, his job could be on the line and markets are getting worried. This time it’s not Britain’s David Cameron but Italy’s Matteo Renzi, who has called a vote on an ambitious overhaul of the political system aimed at ending the country’s unstable governments. If he loses, Renzi has promised to quit, an outcome that Citigroup Inc. called probably the biggest risk in European politics this year outside the U. K. The vote is expected in October, though it is already spooking investors and Italian bonds are once more under-performing their Spanish peers. The yield on 10-year Italian securities overtook those on similar-maturity Spanish debt for the first time in almost a year on June 27, a day after Spain’s Acting Prime Minister Mariano Rajoy defied opinion polls to consolidate his position in a general election. A public opinion poll by Euromedia Research said that 34 percent of Italians would vote against Renzi’s plan, with 28.9 percent in favor, 19.4 percent undecided on which way to vote and 17.7 percent undecided on whether to vote. The poll based on 1,000 interviews was conducted on July 1. No exact date for the referendum has been set.
I was struck by something Donald Trump said on CNN this [Sunday] morning: ‘Until I got involved in this most people didn’t know we were defending Japan and Germany.’ Of course they didn’t, and don’t – they’re too busy paying their mortgages, raising their children, and living their lives. They don’t have the time or inclination to educate themselves in the many ways their government is ripping them off, meddling in concerns that are none of America’s business, and otherwise projecting the monumental conceit of the political class overseas. Direct payments to NATO in fiscal year 2010 were $711.8 million, but this underestimates the real costs by several orders of magnitude. The US deployment of troops to Europe, the continuing expense of basing them in Germany, Spain, Italy, and elsewhere, easily equals that amount – and if we add up all the years we’ve been NATO’s mainstay, the total represents an enormous drain on the American economy. Of course, not everybody pays: some profit from this, notably the big military contractors, who rake in billions. So when Trump says our allies are ‘ripping us off,’ he’s only half right: the real thieves are the American war profiteers and their political Praetorian Guard in Congress, who make this grand larceny possible. And the costs aren’t just calculated in terms of dollars and cents. The NATO alliance, and the web of treaties that has us entangled in Asia, has created a mesh of tripwires that could put us on a war footing the moment some disputed border somewhere in Outer Slobbovia is crossed.
As interest rates in Europe fall near or below zero, lawmakers and consumer advocates in Spain and Portugal are attacking an ancient tenet of finance by insisting that lenders can owe money to borrowers. Banks in the two countries, struggling to recover from recessions that shook their financial systems, are fighting back, with billions of dollars in mortgage interest payments potentially at stake. Portugal’s central-bank governor, in a reversal, has rushed to defend the banks against a proposed law that would require them to pay borrowers when interest rates turn negative. Banks in both countries are rewriting new mortgage contracts to warn homeowners that they could never profit from subzero rates. In Spain and Portugal, banks typically tie interest rates on mortgages to the euro interbank offered rate, or Euribor, a fluctuating rate banks pay to borrow from each other. In addition, interest rates in both countries include a fixed percentage of the loan, called the spread. In much of Europe, by contrast, fixed mortgage rates are common. Euribor began turning negative last year after the European Central Bank cut interest rates below zero – charging lenders to hold deposits – to stimulate the Continent’s economies. That has pulled mortgage rates into negative territory in a few isolated cases in Portugal.
Whether you’re a government or a company in Europe, the U. S. or Asia, it’s a great time to sell bonds. Around the world, bidders are snapping up almost anything with a yield. Auctions of long-term debt by the U. S., Spain and Portugal all drew strong demand Wednesday, with the Treasury sale seeing unprecedented appetite from one class of investors. Japan sold 30-year notes Thursday at a record-low 0.319 percent. Buyers are also clamoring for company bonds, in a week that may be the busiest this year for corporate borrowing in the U. S. and Europe.
Hangover of oil dependence has only just begun. By Don Quijones, Spain & Mexico, editor at WOLF STREET. It was supposed to be the biggest, most ambitious, most lucrative infrastructure project Spain’s construction industry had ever undertaken on the Arabian Peninsula. Launched three years ago, the high-speed rail link project between Medina and Mecca was a dream come true worth some 6.7 billion, the perfect payoff of decades of patient lobbying of the House of Saud by Spain’s former King Juan Carlos I. But now it’s a rotting financial albatross around the necks of 12 large Spanish companies. Even from the beginning, things were not easy. Within a year and a half, the project was suffering significant delays. And two months ago, the consortium asked the Saudi government for more funds – ‘an absolute minimum of 1.4 billion’ – to cover the Saudi Railways Organization’s ‘unforeseeable demands,’ such as, amazingly, keeping desert sand off the tracks.
This post was published at Wolf Street by Don Quijones ‘ May 7, 2016.
The earnings warning was just a precursor. By Don Quijones, Spain & Mexico, editor at WOLF STREET. Monsanto, the world’s largest seed manufacturer, is not having a good year. The company recently slashed its 2016 earnings forecast from the $5.10-$5.60 per share it had forecast in December to $4.40-$5.10, claiming that about 25-30 cents of the reduction was due to the stronger dollar. But judging by recent trends, a strong dollar could soon be the least of its concerns. Across a number of key markets, the company is facing growing resistance, not only from farmers and consumers but also, amazingly, governments. In India, the world’s biggest cotton producer, the Ministry of Agriculture accuses Monsanto of price gouging. It even imposed a 70% cut in the royalties that the firm’s Indian subsidiary could charge farmers for their crop genes, prompting Monsanto to threaten that it would withdraw its biotech crop genes from the country.
This post was published at Wolf Street by Don Quijones ‘ March 27, 2016.
When, in October 2011, the Saudi Railways Organization (SRO) announced its decision to award the bid to build a high-speed rail line between Medina and Mecca to a Saudi-Spanish consortium, it was like a dream come true for the Spanish infrastructure and rail companies involved. Decades of patient lobbying of the House of Saud by Spain’s former King Juan Carlos I had finally paid off. Never before had Spanish companies won a tender for a project so big, so prestigious and so lucrative on the Arabian peninsula. The project’s total contract value is worth 6.74 billion. But the dream is already souring. What was originally meant to be a pioneering feat of engineering and the perfect global showcase for Spain’s mastery of high-speed rail infrastructure is now plagued by political intrigue, delays, and technical problems. The biggest problem is something that can be found just about everywhere in Saudi Arabia: sand. Turns out, fast trains don’t work well when the rails are covered in sand, especially when large sections of track are built with ballasted track, the conventional (and cheapest) method for building rail lines, but which happens to be particularly susceptible to wear and tear and even track failure in desert areas. Despite the construction of a 1.5 meter containment wall to keep the sand out, sand is still getting in, thanks mainly to the desert wind. In fact, in some places there’s so much sand that it’s almost impossible to see the tracks. Naturally, none of the consortium partners wants to take responsibility for cleaning it up. After all, it would amount to a permanent and expensive undertaking that has not been budgeted for, in a project that expressly forbids cost overruns. According to the consortium member OHL – a Spanish construction company that is drowning in debt and has just been downgraded by Moody’s while it’s mired in a massive scandal in Mexico – its contractual obligations do not include keeping sand off the tracks.
This post was published at Wolf Street on March 12, 2016.
It is those who love Europe, its diversity, its history and its humanity who should be the most enthusiastic about Brexit. A paradox? Not at all. TheEuropean Union, as currently constituted, has run out of road. It is doomed to fail, sooner or later, with catastrophic consequences for our part of the world, and the only way forward is for one major country to break ranks and show that there can be a better alternative consistent with Europe’s core enlightenment values. It would be far better if we, rather than a more socialist or nationalistic country, were the first to break the mould: Britain would have the opportunity to show that free trade, an open, self-governing society and a liberal approach could ensure the peace and prosperity at the heart of the European dream. Others would soon join us. If we vote to stay, we will lose the moral authority to speak out, and other, less benign, inward-looking, illiberal approaches may triumph instead. The eurozone is broken, and another, far greater economic crisis inevitable. The next trigger could be a fiscal meltdown in Italy, or another banking collapse, or a political implosion in Spain or France, or another global recession. Nobody can be sure what the proximate cause will be – but there will be one, and the fallout will be turmoil of a far greater magnitude than anything we saw in Greece. At the same time, the tensions fuelled by the migration crisis will grow relentlessly, especially if hundreds of thousands or even millions of people are settled across the continent over the next few years.
Nationalism in on the rise in every region of the earth. In the face of an increasingly globalized world, the banners of tribe, tradition, and particularism are being unfolded in unabashed defiance. From Paris to Peoria the battle-cry is heard: Preserve our sovereignty! Nationalism has had a bad reputation ever since the 1930s, when it was associated with colored- shirt-wearing thugs, militarism, and war: raging across Europe, it ignited a horrific conflagration. The pan-European idea was created largely in reaction to this bloody history, and yet the result has been a counter-backlash of nationalism, a new sort that has little if anything to do with its historical antecedents. In the West, this current wave of nationalism, for the most part, is relatively pacific: instead of promoting aggression across borders it is intent on making those borders impenetrable. The old Bismarckian nationalism was statist and super-centralist as well as expansionist; the new nationalism is often (though not always) libertarian, decentralist, and uninterested in foreign adventurism (i.e. ‘isolationist’). The best example of this is the new nation of Catalonia, which is seeking to part peaceably with Spain. With their own language, a long tradition going back to medieval times, and a relatively healthy economy compared to the rest of the Iberian peninsula, the Catalonians long to break free. The Spanish central authorities have reacted with all-too-predictable hostility, threatening to send in the tanks – and the European Union (EU) has taken Madrid’s side, declaring that an independent Catalonia will be isolated both economically and diplomatically.
The stock markets of the so-called PIIGS are breaking down on an absolute and relative basis – not a positive development for global markets. The PIIGS are starting to squeal again in Europe. No, not the kind that produces pancetta or linquica or bangers. We are talking about the continent’s debt-laden, economically-challenged countries known by the acronym PIIGS, namely, Portugal, Ireland, Italy, Greece and Spain. These nations are essentially economic dead weight for Europe considering their plight. That said, all financial markets are cyclical – nothing straight-lines. And indeed, despite the apparent inevitable downfall that awaits the Eurozone as a result of the PIIGS, the associated equity markets have actually been quite buoyant for the better part of the last 4 years. Not so anymore. We have posted before a composite that we constructed consisting of equally-weighted portions of each of the PIIGS’ stock markets. We call it…the PIIGS Composite. The composite starts in 2006 and hit an all-time low in June 2012, amid the Europe/PIIGS near-meltdown. Following Mr. Draghi’s ‘whatever it takes’ moment, the PIIGS Composite shot up off the mat, rallying nearly 75% in 3 years before peaking in May of last year. Since then, the composite has gradually leaked lower. Around the start of the year, the leak turned into a gusher. As of this week, the PIIGS Composite is at near 3-year lows, approaching levels last seen in 2012.
This post was published at Zero Hedge on 02/11/2016.
China’s slowdown, the plunge in crude oil and related growth measures, etc. has wrecked havoc on European banks, but particularly on Germany’s Deutsche Bank and Spain’s Banco Santandar as measured by credit default swaps (5 year senior).
When last we checked in on Catalonia, Spain’s black swan was splashing around in a desperate attempt to avoid snap elections just three months after the region’s parliament approved a ‘democratic disconnection’ resolution and just four months after Catalans voted in what amounted to a referendum on secession from Spain. The problem was that although Junts pel Si and the Popular Unity Candidacy (CUP) parties won a majority of the seats in parliament, and although both parties back a split from Spain, the two groups were unable to agree on who should lead the government. The choice was between then-President Artur Mas (Junts pel Si’s leader) or someone else. Once CUP made it clear that they would not back Mas for President, the prospect of new elections reared its ugly head and the countdown was on to January 11 – the deadline for forming a government. “Lacking a majority in the 135-seat parliament, Mas had been reliant on the support of the pro-secession, far-left CUP group, which has 10 seats.” WaPo wrote in November. “But the CUP has refused to back Mas as regional president, because of his austerity policies of recent years and his party’s links to corruption scandals.”
This post was published at Zero Hedge on 01/10/2016 –.
To many in the Western world, China is still something of a mystery. Even as Xi works to liberalize the country’s capital markets, promote the yuan in international trade and investment, and generally open the country’s doors to the world, it’s still a strange, foreboding place in the eyes of the Western public. Tales of censorship, ‘disappearing’ journalists, and endemic corruption don’t help, and neither does the ambiguity inherent in attempting to run a communist state with a semi-capitalistic economy. Of course this is a two-way street. That is, the West is something of an enigma for many Chinese as well. For those wondering what comes to mind for the average Chinese web surfer with regard to nations in Europe, we present the following map from Foreign Policy who ‘plotted the most common Chinese-language Baidu query for each European nation.’ Highlights include “likes to fight” for Russia, “why doesn’t it annex Portugal” for Spain, and “beautiful women” for Ukraine.
This post was published at Zero Hedge on 01/01/2016.