Thursday, August 13, 2015

Chinese Food For Thought

It occurred to me -- after lunch, which was Chinese food -- that I haven't seen the term currency war in my pre$$ (I guess they are not speaking the same language).

Of course, for real economic news I usually turn to other sources anyway, and will likely listen to some alternative views as I work on this post today just to get their take.

"China’s stock markets in turmoil again" by Neil Gough New York Times   July 27, 2015

HONG KONG — After several weeks of relative calm, tumult returned to China’s stock markets Monday, casting doubt on the government’s measures to support share prices.

See: Chinese Stock Market Crashing

While the volatility follows a spate of weak economic data, it also reflects a broader uncertainty in the market. Investors, who borrowed heavily to buy shares during the boom, are increasingly unsettled. The situation is creating wild swings in both directions.

In other words, it is behaving exactly as is the U.S. stock market.

Even stocks that had been strong performers in the recent rebound were hit hard.


For more than a year, China’s stock market soared as investors aggressively borrowed money to buy shares.

They have a Federal Reserve, too, huh? 

The government helped fuel the boom, promoting the potential for the bull market and new companies in official news outlets.

What do you think I'm reading every day?

Millions of ordinary Chinese tried to cash in on the rally. But the markets started to turn in late June as investors grew concerned about a potential bubble. Shares lost more than $3 trillion in a matter of weeks.

It's popped.

The government moved aggressively to prop up stocks. Authorities suspended initial public offerings, introduced a $120 billion market stabilization fund backed by the central bank, and encouraged executives to buy company shares. The moves helped restore confidence. Stocks rebounded modestly.

It's like what they do here.

But investors are increasingly sensitive. Monday’s drop came after the Chinese economy showed increased signs of weakness; industrial profits fell and the factory sector slipped.

Investors in China borrowed heavily in recent months to invest in stocks. With prices falling again, they may be forced to unwind some of these so-called margin trades to repay what they borrowed, prompting further pain in the markets.

If the sell-off continues, it could also have broad economic ramifications. The bull market helped offset the slowdown in China’s traditional industrial drivers of growth. The slump could also weigh on consumer confidence at a time when the economy is already slowing.

Officials have signaled their willingness to continue stabilization measures.

On Monday, the China Securities Finance Corp., a government agency, said it would continue buying stocks to help prop up the market, according to the state news agency Xinhua....

History has shown that doesn't work.



"The worst drop in China’s stock market in eight years helped drag down other markets around the world. The tough day followed declines in US markets last week, when faced with a drop in stock prices in Asia, Europe, and the United States, investors moved into traditional safe havens. Dividend-heavy stocks, like utilities, gained. Investors favor high-dividend companies in volatile times because they provide a reliable income stream. ‘‘There are some growing concerns that we’re looking at a slowdown in global economic growth,’’ said Sean Lynch, at Wells Fargo Investment Institute. Monday gave the US market its fifth straight loss. The S&P 500 is still up about half a percent for the year. The Dow is down 2 percent, and the tech-heavy Nasdaq is up 6 percent."

Must be why Macy's is going there:

"Struggling at home, Macy’s sets its sights on China" by Anne D’Innocenzio Associated Press  August 13, 2015

NEW YORK — Macy’s Inc. is setting its sights on Chinese shoppers, with plans to test selling goods online in the world’s second-largest economy late this year.

The news, announced Wednesday, came as the retailer reported a 26 percent drop in second-quarter profit and sales that came in short of Wall Street expectations. The company cut its annual sales forecast, and its shares tumbled 5.1 percent Wednesday.

And that is allegedly in an economy that is back on track, with good growth and improving job conditions.

As part of the joint venture with Hong Kong-based Fung Retailing Ltd., Macy’s will begin selling merchandise on Alibaba Group’s Tmall Global, which connects Chinese shoppers with overseas retailers. Macy’s offered few details about what it will sell in China but said it hasn’t ruled out opening stores there, as well.

Related: Billionaire Ma’s wealth tumbles as Alibaba struggles

It’s the latest measure taken by Macy’s to pump up sales in a tough retail environment and changing consumer preferences in the United States.

That's the second time I've seen that sort of thing in the last week or so.

Is that the lame-a$$ excu$e they are going to use to describe the continuing failure of an economy only benefiting the .01%?

Macy’s has been a stellar performer among department stores during the recovery from the recession. But in the past year or so, it has seen a slowdown.

The company has now missed Wall Street analysts’ earnings expectations for two straight quarters and in three of the last five. That comes after beating forecasts for six straight years from 2007 to 2013, according to Ken Perkins, president of Retail Metrics LLC, a retail research firm.

The results from Macy’s, the first major retailer to report its finances this quarter, raise further concerns about consumer spending. J.C. Penney, Kohl’s, and Nordstrom will report their second-quarter results later this week.

Of course, they could always just lie about them like Toshiba.

Macy’s was hurt by some of the same factors that tripped it up earlier in the year. A strong US dollar has curtailed tourist spending in key locations like New York and Los Angeles. A West Coast port labor dispute added to those problems. Macy’s said Wednesday that planned markdowns in many departments were delayed to keep store racks filled when expected new merchandise arrived late.

I was told the labor dispute really didn't slow down much.

But like other retailers, Macy’s, which has headquarters in Cincinnati and New York, also faces long-term challenges. For one, its middle-class customers are not spending more in its stores, despite an improving economy. They remain fixated on deals and they’re increasingly looking online. And the money they are spending is going elsewhere.

Really? Where? 

Remember, this is all during a period when we are being told by government and pre$$ that the U.S. economic recovery is outpacing everyone else and the job market is improving by leaps and bounds.


Macy’s says it’s optimistic about the second half of the year after a number of recent initiatives.

It bought Blue Mercury, a Washington, D.C., cosmetics and skin-care retailer, this year and is expanding its store footprint. It’s getting ready to open the first four outlet stores called Macy’s Backstage this fall in and around New York City. And this month, Macy’s is expanding same-day delivery for online shoppers to nine additional markets, for a total of 17.

As for China, Macy’s said that by making the brand more accessible there, the company hopes to learn a few things about its domestic and international customers in the United States.

‘‘Millions of Chinese have come to know and love Macy’s when they live in the United States or travel to New York, San Francisco, Chicago, and other American destinations,’’ CEO Terry Lundgren said. ‘‘By making Macy’s accessible in China, we have an opportunity to deepen our relationship with domestic and international customers and to grow sales.’’

So much for all the war talk.


Also seeMarkets snapshot: Yuan’s drop rattles the markets

Look who is questioning the data!

"China’s economic data questioned" by Neil Gough New York Times  August 13, 2015


HONG KONG — Whenever China’s economy swooned in recent downturns, its currency never buckled. It held steady, or strengthened, even as China’s neighbors or trading partners scrambled to cut the value of their own currencies to deal with the fallout.

With the Chinese yuan now taking its biggest plunge in decades, the worry is that the country’s already slowing economy is even worse off and the government is panicking.

Officially, the economy is growing at 7 percent — a steady pace that the leadership has indicated can support decent job growth and put more money into consumers’ pockets.

But a look below the surface shows a more worrisome picture.

Core parts of the economy, like construction, are weaker than ever as the real estate industry struggles. Consumer spending, which was supposed to pick up the slack, is not that strong. And financial services, a major driver of growth when the stock market was booming, are slipping.

The data coming out of China, too, are somewhat suspect. Economists wonder whether some provinces could be dealing with outright recessions.

It's like looking in a mirror.


While the government said the decision was intended to make the currency more market oriented, the devaluation was also largely a gift to exporters. In relative terms, it makes China’s shipments of clothing or electronics to consumers in the United States or Europe more affordable.

“I don’t see this mini-devaluation as some kind of outrageous act,” said George Magnus, an economic adviser to the bank UBS. “But it is part of an array of other economic and financial stimulus measures designed to shore up the flagging growth rate.”

The government has taken the usual steps by cutting interest rates and freeing up more money for banks to lend. But the leadership has also turned to more unconventional means in recent months to try to cushion the blow as the economy’s once-runaway expansion sinks back to earth.

But what? That is what the Fed has done.

It relaxed a rule that banned investment companies tied to local governments from piling on debt. When the stock market slumped, it aggressively moved to halt the slide. It has also pledged tens of billions of dollars in support to state-controlled policy banks for loans to favored projects.

China’s plan has been to wean itself off a debt-driven growth model that has led to wasteful, government-led investment. Instead, policy makers want consumers to become the main engine for the economy, but that will take time.

It's called priming the pump here.

They hoped to maintain growth by keeping credit flowing to favored projects, a nationwide program that amounts to trillions of yuan worth of investment in new infrastructure. The money is going to redevelop shantytowns, expand road and rail networks, and build wastewater treatment facilities.

All the AmeriKan money went into bank coffers and the war machine.

But such efforts have not been enough. Consumers aren’t yet able to shoulder the burden of driving the economy. While incomes are still rising, the job market has started to show signs of stress. Vacancies are declining across the market as companies reduce hiring in response to slowing business growth.

The stock market slump has also taken a toll. Ordinary investors have poured money into the markets during the last year, and many are now sitting on losses.

The overall result is that consumers are spending less.

No back-to-school shopping this year.


“To be honest, no one has a clue.” 

"China’s currency devaluation may fuel tensions" by Joe McDonald and Christopher S. Rugaber Associated Press  August 12, 2015

BEIJING — China’s surprise move Tuesday to devalue its currency has intensified concerns about a slowdown in the world’s second-largest economy, whose growth rate has reached a six-year low. It is also fanning tensions with the United States and Europe, whose exports could become comparatively costlier.

Maybe Macy's will act as an ambassador.

China’s central bank said the yuan’s devaluation was a result of reforms intended to make its exchange rate more market-based. The yuan is linked to the dollar, which has jumped in the past year. Tuesday’s move will mean the yuan will more fully reflect market fluctuations, Chinese officials say.

A close peg between the dollar and the yuan has hurt Chinese exporters by keeping their goods expensive overseas, thereby threatening jobs in key manufacturing industries. Exports in July plummeted by an unexpectedly steep 8.3 percent from a year earlier. A cheaper yuan will lower the prices of China’s exports.

‘‘The move signals that [China] is willing to use all available tools, including a weaker currency, to prop up exports and its domestic economy,’’ said Eswar Prasad, an economist at Cornell University.

Yet many economists cautioned against seeing Beijing’s move mainly as an effort to benefit its exporters at the expense of overseas competitors. They note that China’s currency, left to market forces alone, would have declined in value in recent months.

‘‘It is a small step forward to accommodating market forces,’’ said Sung Won Sohn, an economics professor at the California State University’s Smith School of Business.

China’s currency move unnerved global investors. US stocks tumbled Tuesday, with the Dow Jones industrial average closing down 212.33 points.

That thing has been all over the place lately!

The yuan, also known as the renminbi, is allowed to fluctuate in a band 2 percent above or below a rate set by the People’s Bank of China based on the previous day’s trading.

The bank said that starting Tuesday, the daily target will be based on where the yuan closed the previous day, a change that gives market forces a bigger role in determining the currency’s level. The center of Tuesday’s trading band was set 1.9 percent below Monday’s level. The yuan fell 1.3 percent against the dollar and was down 1.9 percent by afternoon.

China’s economic growth has slowed to an annual rate of just 7 percent, which is healthy for most countries but far below the double-digit pace it has enjoyed for decades. The country’s leaders fear that growth below that pace will raise the unemployment rate and possibly lead to social unrest.

Chinese don't like that.

Still, China’s action Tuesday sparked complaints in Washington, where members of Congress have long complained that Beijing manipulates its currency to gain a trade advantage.

‘‘For years, China has rigged the rules and played games with its currency,’’ said Senator Chuck Schumer, a New York Democrat. ‘‘Rather than changing their ways, the Chinese government seems to be doubling down.’’

The Zionist tool just took a jab at China while Kerry was there?

The Treasury Department’s response was more measured.

‘‘While it is too early to judge the full implications of the change . . . China has indicated that the changes announced today are another step in its move to a more market-determined exchange rate,’’ a department statement said.

China becomes the third major economy to act to lower its currency value. Initiatives by Japan and the European Union over the past two years depressed the yen and the euro.

No one picked over them much, and it didn't help.

Those moves contrast with action foreseen from the Federal Reserve, which is expected to boost the short-term interest rate it controls later this year. A Fed rate hike would probably raise the value of the dollar, which has already jumped about 14 percent in value in the past 12 months against a basket of foreign currencies.

The rising dollar has hurt US exporters by making their goods costlier abroad, and China’s move to devalue its currency could further complicate the Fed’s decision on when to raise rates. By making Chinese goods comparatively cheaper in the United States, a weaker yuan would push already-low US inflation even lower.

The Fed wants to be ‘‘reasonably confident’’ that inflation is returning to its 2 percent target before raising rates. Inflation has risen just 1.3 percent in the past 12 months.

Michael Feroli, an economist at JPMorgan Chase, suggested that the dollar’s rise poses a concern for some Fed officials, known as doves, who have been reluctant to raise rates. Should the US economy stumble in the coming weeks, ‘‘dollar strength would only further embolden the doves at the next meeting’’ in September, Feroli said.

Still, Feroli said, ‘‘we think this a minor stumbling block for a September’’ rate increase.

USB economist Tao Wang said Beijing would probably move cautiously, but investor expectations of further weakening ‘‘could quickly become entrenched’’ and cause the yuan to ‘‘depreciate quite quickly and significantly.’’

She said that would represent a ‘‘sea change in China’s exchange rate policy’’ but would help to support flagging economic growth.


Who cooked up this $hit?

"On Greek streets, grim talk and empty storefronts" by Derek Gatopoulos Associated Press  July 23, 2015

ATHENS —Empty storefronts are again a feature of Greece’s towns and cities as spending dries up in a crisis that puts Greece’s future in the euro in doubt. The tales of hardship are repeated up and down the country of nearly 11 million people.

In Prasinoudis’ neighborhood of Koukaki, a bakery, grocer, barber, and several clothing shops on the main commercial drag have disappeared behind whitewashed windows — all victims of the crisis.

‘‘It’s over for Greece,’’ said Giorgos Prasinoudis, who ran his motorcycle repair shop in Athens for three decades through good times and bad. Now a ‘‘For Sale’’ sign hangs outside the window. ‘‘We won’t recover for another 50 years.’’

The downturn worsened after the late-June decision by the Greek government to impose a series of strict controls on the free flow of money, with a paltry 60-euro ($66) a day limit on withdrawals from ATMs.

For an economy where cash payments are the norm, that’s a huge problem.


Locked out of international bond markets in the spring of 2010, the country has relied on foreign rescue money to pay its debts — on condition that tough austerity measures, such as cuts to spending and increases in taxes were imposed.

That's some rescue.

A million jobs, mostly in the private sector, have been lost since then — around a fifth of the country’s workforce.

But after appearing to stabilize last year, the Greek economy has faltered again as unemployment remains high. At last count, unemployment was still over 25 percent and more than 50 percent for those under 25.

Those are staggering numbers.

Alongside the capital controls, the government imposed a new round of austerity, raising sales taxes and levies on businesses, while maintaining emergency taxes on households that have eaten up disposable incomes.

Just the thing they were elected NOT to do!

Early Thursday, Parliament approved a second round of measures demanded by rescue creditors for a new bailout.

Another betrayal of the Greek people.

Retail associations fear a return to the peak levels of unemployment around 2012, when they were hit by a surge of business failures.

Five years after the first bailout by Greece’s partners in the euro currency and the International Monetary Fund, some 85,000 retailers have gone out of business and the sector has lost 45 percent of its income, according to the National Confederation of Greece Commerce.

Some rescue, huh?

Constantine Michalos, head of the Athens Chamber of Commerce, wrote a letter to the finance ministry this week urging the government to take urgent measures to help businesses stay open, particularly those struggling to import goods from abroad.

‘‘In essence the bank holiday has not ended,’’ he wrote. ‘‘The vast majority of Greek companies are half a step from going out of business.’’


Won't be able to order Greek for dinner.

"Bailout talks back in Athens, as tough conditions OK’d" by Nicholas Paphitis and Derek Gatopoulos Associated Press  July 24, 2015

ATHENS — Without the bailout money, Greece would be unable to pay the debts due over the coming three years and would likely be forced to leave the euro, Europe’s shared currency.

It's a $hell game, with the money junkies just passing cash around. Now wonder the Greek economy is going out of business.

Last week’s decision at a summit of the eurozone’s 19 leaders to open up bailout discussions provided certain conditions were met by Athens has helped ease the sense of economic crisis that was enveloping Greece.

Over the past week, Parliament has approved two sets of creditor demands — the first introduced sweeping sales tax increases, the second concerned judicial and banking reforms.

Despite facing a rebellion among his own party’s ranks in both votes, Tsipras’ coalition government has survived. He relied on opposition parties to push the measures through.

For how long?

‘‘We have chosen a compromise that forces us to implement a program in which we do not believe, and we will implement it because the alternatives are tough,’’ Tsipras said. ‘‘We are summoned today to legislate under a state of emergency.’’

Then why don't you just resign?



"Greece on Friday invited the International Monetary Fund to participate in its negotiations with European creditors over a vital third bailout — talks that are expected to start next week after a few days’ delay and must conclude before Greece faces another big repayment Aug. 20. Negotiators are now expected to arrive in Athens over the weekend with talks probably starting Monday, Greek officials said. Athens is looking to secure yet another bailout — the third since its finances imploded in 2009 — worth $93 billion over three years. Without the money, the country faces imminent bankruptcy and a probable exit from the shared euro currency."

"Greece and rescue lenders are still working out the format of upcoming talks, the labor minister, Giorgos Katrougalos, told Skai television Sunday, confirming a delay in the negotiations for a third international bailout. Bailout negotiators from the European Commission, European Central Bank, and International Monetary Fund had been due to start arriving in Athens last Friday to begin talks for the new rescue package worth an expected $93 billion. But late Saturday, a government official said talks at a ‘‘technical level’’ were now set to start Tuesday. Katrougalos said Finance Minister Euclid Tsakalotos and other Cabinet colleagues were likely to meet directly with the inspectors — a move that had been previously ruled out by the country’s left-wing government. Prime Minister Alexis Tsipras had promised to end austerity measures and stop direct talks in Athens between ministers and debt inspectors. But the government was forced to reach a compromise after banks and the stock market were closed late last month. Banks have since reopened, but strict limits on money withdrawals and other transactions remain."

"Greece kicks off talks with creditors" by Nicholas Paphitis and Menelaos Hadjicostis Associated Press  July 28, 2015

ATHENS — Greece’s government on Monday launched complex bailout negotiations with creditors, but faced rebuke following revelations that former finance minister Yanis Varoufakis had formed a secret committee to plan for the possible conversion of euros into drachmas ‘‘at a drop of a hat.’’

That is why he was run out.

Finance Minister Euclid Tsakalotos said late Monday that meetings in Athens had begun between Greek officials and negotiating teams representing creditors, with talks to intensify Tuesday, paving the way for higher-level discussions, possibly by the end of the week.

Before the talks started in Athens, a recording of Varoufakis discussing a parallel currency plan was made public.

Opposition parties have criticized Varoufakis and urged Prime Minister Alexis Tsipras to explain to lawmakers what he knew of his former finance minister’s actions.

In the recording of a telephone briefing for investors on July 16 following his resignation days earlier, Varoufakis claimed that he and a childhood friend who was a computer expert hacked into his ministry’s computer systems as a first step to creating ‘‘a parallel banking system’’ in the event Greek banks were shuttered.

The Greeks would have been better off.

The Greek banks were closed on June 29 to avoid a bank run amid fears that Greece was heading for a euro exit. In theory, a parallel system formed from the effective cloning of tax accounts would have allowed the finance ministry to continue payments in the form of so-called IOUs.

Varoufakis said he had been authorized by Tsipras to undertake the planning prior to the general election in January when the radical left Syriza party was swept to power. And he insisted that his actions were legal, in the public interest, and aimed at keeping the country in the 19-country eurozone.

In essence, the plan, which Tsipras ultimately blocked, would have created a ‘‘functioning parallel system’’ to give the government ‘‘some breathing space.’’

‘‘It would be euro-denominated but at the drop of a hat it could be developed to a new drachma,’’ Varoufakis said.

Varoufakis confirmed the authenticity of the recording, which was released by the briefing organizers, London-based Official Monetary and Financial Institutions Forum.

The revelation that Varoufakis was working on a Plan B over Greece’s future was one of many in a wide-ranging discussion on the Greek crisis. He also said that Finance Minister Wolfgang Schaeuble of Germany wanted Greece to leave the euro but that his boss, Chancellor Angela Merkel, was against a so-called Grexit.

The recording prompted an outcry among opposition parties.

The main conservative opposition, New Democracy, accused Varoufakis of ‘‘dark methods that threaten democracy’’ and summoned Tsipras to brief Parliament.

Tsipras, who is already facing a revolt within Syriza over a raft of austerity measures required by creditors for the talks to actually begin, is under pressure to call early elections once the bailout discussions are completed.

When he will be out.



"After five weeks in a deep sleep, equities in Greece are about to trade again — though not entirely freely. Closed since June 29, the Athens Stock Exchange reopens Monday. A host of restrictions will govern the purchase of shares by local traders due to emergency capital controls. Owners of Greek equities have seen the market give up 85 percent of its value since 2007. “It’s very hard for me to see why Greek stocks will be something people want to get involved in the near term,” said Chris Konstantinos, at Riverfront Investment Group in Richmond. “You have to think the earnings direction for a country like Greece is going to be negative for a long time.” The country has flirted with chaos during its monthslong impasse with creditors. The deadlock broke July 13 when Prime Minister Alexis Tsipras agreed to austerity measures to free up another bailout. Greek traders will be able to buy stocks and bonds only with new money, such as funds transferred from abroad or money from existing investment account balances held at Greek brokerages. No such constraints will apply to foreign investors, provided they were active in the market before capital controls were imposed."

Also see:

Stocks plunge in Greece as Athens exchange reopens
Progress seen in talks on Greek bailout
Germany softens its tone on third bailout for Greece

"Greece agrees to a new 3-year bailout, vows to win ratification despite dissent" by Elena Becatoros and Derek Gatopoulos Associated Press  August 12, 2015

ATHENS — Greece agreed to harsh terms for a new three-year bailout Tuesday and vowed to push it through Parliament this week, despite mounting dissent in the ruling left-wing party.

With the country facing the risk of a debt default next week, Prime Minister Alexis Tsipras had sought to speed up the talks. After Greece and its creditors reached an accord on the main points on Tuesday, Tsipras called for an emergency session of Parliament for a vote late Thursday.

Greece needs to start tapping the new bailout — worth 85 billion euros ($94 billion) — so it can make a key debt repayment next week and secure its future in the euro.

The draft agreement forces Tsipras to accept what he had vowed to resist only months ago: the sale of some state property and deep cuts to pensions and military spending and ending tax credits for people considered vulnerable.

Dissenters in Tsipras’s left-wing Syriza party, who want to end bailout talks and return to a national currency, promised to fight the deal, describing it as a ‘‘noose around the neck of the Greek people.’’


Investors cheered the news of progress.

All the more reason to oppose it.

Greece’s government borrowing rates fell, a sign investors are less worried about a default.

That has always confused me. They raise rates on those most unable to pay?

The Athens Stock Exchange, which reopened recently after being shut for five weeks during the most severe part of Greece’s financial crisis, closed up.

That's all that is really important.

Cash-strapped Greece needs more money by Aug. 20 at the latest, when it has a debt repayment of just over 3 billion euros ($3.3 billion) to make to the European Central Bank.

The government said it has also gained key concessions from lenders: greater control over labor reforms, avoiding a ‘‘fire sale’’ of state assets, and softer deficit targets.


It said it had agreed to have a 0.25 percent government deficit this year and a 0.5 percent surplus next year, when not counting the cost of servicing debt. Those so-called primary surpluses would rise to 1.75 percent in 2017 and 3.5 percent in 2018.

Yeah, turns out the GREEK ECONOMY is GROWING if you take away all the DEBT SERVICE!

The surpluses are more ambitious than those of many European countries — Spain, for example, is not expected to achieve a primary surplus before 2018. That’s largely because the creditors want to make sure Greece is able to start paying off its debt load as soon as possible.

The government says the creditors wanted even more ambitious surplus targets, and that the targets it agreed to mean it will be able to spare the country budget cuts worth 20 billion euros ($22 billion).

Yeah, you guys have done a great job. 

Btw, where are the GREEK PEOPLE in all of this, you corporate piece of crap?!!!!!!!

Banks will be strengthened with new cash infusions by the end of the year and will have an immediate boost of ‘‘at least 10 billion euros ($11 billion),’’ it said. The government insists this means there is no longer any danger the banks may have to raid deposits to restore their financial health.

Oh, thank God the BANKS are being TAKEN CARE OF in the land of 25-50% unemployment!!!

Greece has relied on bailouts worth a total 240 billion euros ($265 billion) from eurozone members states and the International Monetary Fund since concern over its high debts locked it out of bond markets in 2010. To secure the loans, successive governments have had to implement spending cuts, tax hikes, and reforms.

While the austerity has reduced budget overspending, the measures compounded a deep recession and pushed unemployment to a record high.

Though the government was elected on a staunchly antiausterity platform in January, it has been forced into a policy U-turn after bailout talks came close to collapse last month.

Then what good are they?


The Greece of North America (read that somewhere):

Debt-ridden Puerto Rico defaults on loan payment

Puerto Rico must remake its finances

Treasury secretary urges expedited bankruptcy filing for Puerto Rico

Bankruptcy can give Puerto Rico the help it needs

So they can go right back to the same behavior that got them into trouble in the first place:

"Puerto Rico to sell bonds, post-default; Sale will be a test for ailing island" by Michelle Kaske Bloomberg News  August 12, 2015

NEW YORK — Puerto Rico’s main water utility plans to sell $750 million of revenue bonds, the first debt offering from the financially struggling Caribbean island since it defaulted on securities sold by one of its agencies last week.

Any buyers?

The deal may price as soon as next week. It will follow Public Finance Corp.’s failure to make a full bond payment Aug. 3 and come just weeks before the commonwealth is set to propose a plan for restructuring its $72 billion debt. Melba Acosta, the island’s debt chief, doesn’t foresee the water agency reorganizing its obligations in such a move.

The utility’s sale will test Puerto Rico’s ability to access the capital markets. Governor Alejandro Garcia Padilla in June said the US possession can’t afford to repay what it owes as the population falls and the economy struggles to grow. Its bond prices have dropped amid speculation about the scale of the losses facing investors.

And they never like that!

“This is going to be a bumpy ride for the commonwealth,” said Joseph Rosenblum, director of municipal credit in New York at AllianceBernstein Holding, which manages $32 billion of municipal bonds, including Puerto Rico securities. He said investors need to consider “what’s the spillover to the value of my bonds?”

AllianceBernstein will determine whether to buy once it sees the prices that are offered, Rosenblum said.

The Aqueduct and Sewer Authority, called Prasa, will use the proceeds to finance capital improvements to help the water utility comply with environmental regulations. Its debt is repaid with money from customers’ bills.

It's a mini mortgage-backed security scheme!

The yields on Prasa bonds are some of the lowest among the commonwealth’s different agencies, reflecting their relative safety amid the island’s escalating crisis. Bonds maturing July 2042 traded Tuesday at an average 68 cents on the dollar to yield 8.2 percent, less than Puerto Rico’s general obligations, data compiled by Bloomberg show.

The securities have risks and will be initially sold in denominations of $100,000, according to the bond documents. Prasa has been rationing water since May in parts of the island because of a drought, which increases expenses and lowers demand, according to the documents.

No big deal.

Puerto Rico public corporations could also win the power to file for bankruptcy protection, the bond documents warn. Island officials have been lobbying Congress to allow some agencies to do so.

Did they make it through the AIPAC lobbyists that have filled the place?


Great thing about Chines food is there are always leftovers for dinner.


China tries to ease fears about yuan’s devaluation

Markets snapshot: Stocks calm down about the yuan

Crashing: Apple, Twitter, Oil, Commodities, Greek Stocks, Chinese Stocks

11 Red Flag Events That Just Happened As We Enter The Pivotal Month Of August 2015 

It's going to be a rough September and October. 

A possible false flag bigger than 9/11 in the works? 

Like, you know, Chicago getting NUKED by an Iranian bomb they don't have, brought in by an ISIS that hates 'em (for good measure)?

The whole thing REALLY IS tied up in the financials!!

I'm hungry for more....