China

Time to stop the world’s biggest welfare cheat

WHO are you

Being a welfare cheat is not a bad way to describe the United Nations.

In 2000, twenty-nine UN agencies employed a total of 48,500 staff. Scroll forward to the latest figures in 2018 and that has blown out to near as makes no difference, 110,000 across 38 distinct agencies. In 20 years time, one imagines the UN will be aiming to be twice the size with a whole new raft of agencies seeking new funding.

What the UN tends to do is conceive new agencies within its womb and then give birth to them leaving them to make their own way, generally by “small” under the radar voluntary payments under “trust” which grow exponentially over time. To its credit, the UN nails bureaucracy.

The more puzzling question is how can our governments be so blind as to keep encouraging this welfare cheat to claim more benefits for its ever extended family? What is the return on all that investment?

One should be disturbed at the way the UN lists the voluntary payments made by individual countries as an “honour roll.” That somehow we are not worthy unless we play ball. Cash for access? Not exactly. That all depends on who you are.

Analysing the UN “regular budget” papers reveals that prompt payment is encouraged. Australia just missed out on a podium position as it was the 4th nation to remit its full-year contribution on January 11th, 2019. All US$61 million.

China might have been a bit late to wire its 2019 contribution of US$343.7 million to the UN coffers but it is seen as the future. The United States was conspicuous by its absence from the honour roll board figures despite chipping in US$674.2 million in 2019. Mind you, this excludes all the other voluntary payments made to other UN bodies and peacekeeping units.

Is it any wonder that Trump wants to defund it. Can you name one other charity that treats its #1 philanthropic patron which contributes twice the amount of any other country in aggregate – 24% of the total – with such disdain? It is not as though the US has reduced its generosity over the past two decades. On the contrary. It has grown proportionally.

The World Health Organization (WHO) deserves particular attention. It has grown from 3,672 staff at the turn of the century to 8,153. The USA gifted WHO over $281 million in 2018 or 10% of its total income. In 2000 the US gave $148 million.

What gives? WHO has more than doubled its staff levels. In 2018, it raked in $2.9 billion in income, more than twice that of eighteen years ago. Yet with all these extra resources, it couldn’t provide superior intelligence much less improved outcomes. It reminds us of the Australian fire services during the recent bushfires.

How was it that WHO couldn’t give any sensible or consistent guidance about how the world needed to prepare for coronavirus? Why did it tell us there was no risk of human-to-human contact? Surely if those nations that volunteer 10s if not 100s of millions of dollars for a subscription service had the correct information, borders would have been shut way sooner and the devastation mitigated.

For if WHO had done its own homework in Wuhan, it would never have criticised Trump’s travel ban “on the basis of “unnecessarily interfering with international travel and trade” and “increasing fear and stigma.“, something that was lazily just dug out of the pandemic playbook from 2017. Since when have ever pandemics played to a one size fits all prescription?

Why was WHO blindly parroting whatever came out from Beijing’s propaganda ministry instead of using its $190 million annual travel budget to investigate China’s watered-down claims for itself? Why did it take so long to call a pandemic? One assumes that pandering to its future is the way to keep the gravy train going, even if it unnecessarily costs countless lives.

What do all these surplus to requirement staff across UN bodies actually do for all the extra money lobbed at them?

UNICEF has more than trebled its workforce since 2000. Over 1/3rd of its $6.7bn income in 2018 was spent on “cash assistance.” If cash transfers are the largest expense line, should we just settle for the notion that we need 3x the number of staff to administer it? Most of this cash is distributed to countries that rank amongst the worst in terms of corruption. The audited accounts talk about fraud mitigation strategies. That makes sense when only $438,000 is detected and $15,000 recovered on $2.3 billion of cash assistance. At 0.02% of funds misappropriated, any major bank would blush with performance figures like that.

To get a grasp of how children move onto their own welfare teat, the UNFCCC, aka the climate change cult, had a $99m budget in 2018 to feed 738 mouths. When it was spun out of the parent UN in 2011/2012 it had a $30m budget across 461 staff. For 2020-21, the UNFCCC is looking for $177 million. Within that, $31.2 million is set aside for “complementary activities broadly mandated as beneficial to achieving UNFCCC objectives and goals.” Another $21 million for IT and data. Of course, it requires $36.3 million in “oversight and administration

Governance and oversight have never been a strong suit at the UN. UNAIDS gave us a perfect example of how sacred cows are protected by the parent.

Independent experts concluded that UN AIDS Executive Director, Michel Sidibé,  had been responsible for creating a toxic environment that promoted “favouritism, preferment and ethical blindness.” Sidibé accepted no responsibility for any sexual harassment, bullying or abuse of power that occurred under his watch.

The investigation started after Sidibé’s deputy was accused of forcibly kissing, groping and trying to drag a colleague into his Bangkok hotel room in 2015.

In a survey of the 670 staff members at the UN agency conducted by independent investigators, 18 admitted they had experienced some form of sexual harassment in the previous year and a further 201 said they were on the wrong end of workplace abuse.

One staff member went on the record saying, “U.N.AIDS is like a predators’ prey ground…You have access to all sorts of people, especially the vulnerable: You can use promises of jobs, contracts and all sorts of opportunities and abuse your power to get whatever you want, especially in terms of sexual favours. I have seen senior colleagues dating local young interns or using U.N.AIDS resources to access sex workers.

UN Secretary-General Antonio Guterres, who made it clear he had a zero-tolerance policy with regards to sexual harassment when he took office,  refused to fire him. Despite his term ending in January 2020, Sidibé has offered to quit in June 2019 in order to ensure a stable transition period! In what world does a person outed for turning a blind eye to such a poisonous culture get to leave on his own terms?

Perhaps the economic devastation that will result from coronavirus will be the perfect excuse for countries to drastically wind back payments to these UN bodies. There appears overwhelming evidence that more money doesn’t always buy better outcomes much less lift ethical behaviour. Power corrupts. Absolute power corrupts absolutely.

WHO’s official 2017 pandemic playbook says it all

WHOTWO

The World Health Organisation (WHO) has bungled its response during the coronavirus crisis. Politics always seems to trump principle. This cartoon is particularly blunt.

In mid-January, WHO happily parroted Chinese propaganda which said, “preliminary investigations conducted by the Chinese authorities have found no clear evidence of human-to-human transmission of the novel coronavirus (2019-nCoV) identified in Wuhan, China.” This, instead of independent verification by WHO.

WHO Director-General Tedros Adhanom Ghebreyesus praised China’s “transparency” despite whistleblower doctors being silenced by the propaganda machine. Several have sadly ended up dying.

Ghebreyesus even took potshots at governments looking to close borders to quarantine themselves on the basis of “unnecessarily interfering with international travel and trade” and “increasing fear and stigma.”

The interesting thing is that Director-General was reading straight from WHO’s very own 2017 playbook, ‘Pandemic Influenza Risk Management [PIRM]- A WHO guide to inform and harmonize national and international pandemic preparedness and response‘.

On travel, the report noted,

The International Health Regulations (IHR) (2005) seeks to limit the public health measures taken in response to disease spread to those “that are commensurate with and restricted to public health risks, and which avoid unnecessary interference with international traffic and trade.” This aligned with China’s rhetoric.

On member state cooperation,

Under the Framework, Member States are responsible for (1) ensuring the timely sharing of influenza viruses with human pandemic potential with Global Influenza Surveillance and Response System (GISRS); (2) contributing to the pandemic influenza benefit-sharing system, including by working with relevant public and private institutions, organizations and entities so they make appropriate contributions to this system; and (3) continuing to support GISRS.” p.16

China covered up the extent of the problem by destroying lab samples taken in December causing the unexplained viral infections in Hubei province. Imagine what might have happened if China had been open and honest at the offset? How lucky to have a WHO that pushed China’s narrative that the spread of COVID-19 was slow?

Indeed it is the chief of WHO that calls the Public Health Emergency of International Concern (PHEIC) and for declaring a pandemic. The PIRM report stated,

The responsibility of determining a PHEIC lies with the WHO Director-General under Article 12 of the IHR (2005). The determination of a PHEIC leads to the communication of temporary recommendations…During the period of spread of human influenza caused by a new subtype, based on risk assessment and appropriate to the situation, the WHO Director-General may make a declaration of a pandemic.”  p.14

Why did it take till March 10 for the Director-General to declare a pandemic? 64 days after the start. 118,000 people had caught COVID-19 by then. Now the number stands at 351,000.

At least there is a get out of jail free clause in WHO’s 2017 PIRM report,

Ethics do not provide a prescribed set of policies; rather, ethical considerations will be shaped by the local context and cultural values.” p.18

We guess it must be ok in WHO’s mind that China’s ethics are shaped by the culture of the Communist Party.

As to the question of the effectiveness of social distancing? WHO concluded with this vague paragraph,

Nevertheless, measures that have been associated with containment such as social distancing, hand/respiratory hygiene and judicious use of antiviral drugs may be effective in mitigating the impact of outbreaks of a new influenza subtype in individual countries. These measures are most likely to be successful and are better supported by data demonstrating effectiveness when implemented in specific local (smaller scale) circumstances, e.g. households and closed or semi-closed institutions. Although there is no evidence of any wider population-level containment effect, these measures may reduce the spread and overall impact of the pandemic and could be considered as part of a country’s national preparedness plan, depending on available resources.” p.62

Has there been an overreaction on social distancing which is likely to produce catastrophic economic side effects? If hygiene and antiviral drugs are effective, does social distancing have any impact at all? If not, aren’t governments submitting companies and employees to unnecessary hardship?

Assuming one self-isolates for 14 days, if one catches COVID-19 the first day out of quarantine was there any point to the first 14?

In Japan, peak hour trains to work remain as crowded as normal yet the country isn’t registering a severe outbreak of the disease. Close quarter drinking parties below the cherry blossoms are in full swing, yet no real signs of mass contagion. Japanese are meticulous with hygiene. Is it a factor? Japan has 1,046 cases and 44 deaths so far.

South Korea’s success would seemingly be driven by the sheer number of tests conducted on its population (270,000) which has made controlling out who needs to be isolated easier, as opposed to social distancing and hoping for the best. South Korea has tested 5,200 people per million population vs America at 74, according to the Centre for Disease Control. We don’t profess to hold any expertise in virus containment, but the data seems to bear out highly inconsistent results.

Yet it doesn’t escape the immutable fact that UN bodies, in general, have terrible track records. Why do so many countries want to entrust sovereign laws to UN groups that can’t keep their own houses in order?

In the last audited set of accounts (Dec 2018), WHO operates on a $2.9bn budget of which $931.22 million is paid in salaries across 8,153 staff or an average of $118,000 each. Although in the FY2018 financial year, expenditures totalled $2.5 billion, leaving a $442 million surplus after financial revenue. 

WHO spent $191.7 million on travel, $178 million on operating expenses and $177 million on medical supplies and materials. Medical supplies and materials are mainly purchased and distributed by WHO including vaccines, medicines, medical supplies, hospital running costs, fuel, as well as related shipping costs.

Contracted services look an interesting line item at $781 million. Medical research activities and security expenses are also included in contractual services. 

Despite Ebola in 2014, MERS in 2012, H1N1 Swine Flu in 2009 and SARS in 2002 it is hard to ignore the fact that with over 8,150 well-paid staff members WHO can’t construct a better policy prescription in limiting the spread other than provide sketchy anecdotal data on what methods seemed effective in containing the spread? Perhaps China can loan some propaganda ministry staff to better shape the responses. That’s right, they already have.

Let’s not forget that Tedros Adhanom Ghebreyesus proposed former Zimbabwe dictator Robert Mugabe as a WHO ambassador in 2017. It is not hard to see where the lack of judgment comes from.

Surely lightning can’t strike twice, RBA?

The video posted here is of then Treasury Secretary Hank Paulson who steered the US financial system through the GFC. He is speaking to the Financial Services Committee in 2009. Perhaps the most important quote was the one that world central banks failed to heed –

Our next task is to address the problems in the financial system through a reform program that fixes our outdated financial regulatory structure and that provides strong measures to address other flaws and excesses.

Central banks across the globe honestly believe in fairytales to think they have learnt the lessons of 2008 or 2000 for that matter. Sadly they continue to use the only tool they possess – a hammer – which would be great if every problem they encountered was actually a nail.

When will people realise that had central banks practised prudent monetary policy over the past 20 years, they would possess the ammunition to be able to effectively steer the economy through Coronavirus? Everything the RBA and government are deploying is too little and too late. They never ran proper crisis scenarios and are now scrambling to cobble together an ill-contrived strategy wasting $10s of billions in the process all at our expense.

Central banks only have one role – to support markets with consistently sound monetary policy that creates confidence in the marketplace. Not run around like headless chooks and make knee-jerk responses and follow other central banks off a cliff like lemmings to disguise their own incompetency. The willful negligence displayed by our monetary authorities needs to be recognised. The RBA has got the economy trapped in a housing bubble of their own creation.

So when the RBA talks about, “Australia’s financial system is resilient and it is well placed to deal with the effects of the coronavirus” it couldn’t be further from the truth.

While it is true to say that Australia is relatively more healthy than other economies in terms of the percentage of GDP in national debt, the problem is we rely on the health of our foreign neighbours. 37.5% of our exports go to China. What is the first thing that will happen when our trading partners suffer economic weakness at home? Nations that exercise common sense will look to push domestic production and supply so as to boost their local economies. It is a natural process.

Sadly the RBA, APRA and ASIC have been too busy convincing us that climate change was a priority rather than getting businesses to focus on sensible commercially viable shareholder-friendly strategies. Some groups like the AMA have been encouraged to parade their climate alarmist virtues on breakfast TV.

Unfortunately, instead of focusing on fireproofing our establishments from ruthless cutthroat overseas competitors, our businesses and commerce chambers waste time on chasing equality and diversity targets instead of striving to just be the “best in class”.

Sure, we may have certain raw materials (that the lunatic Greens and Extinction Rebellion protestors will do their best to shut down) that China or other nations will rely on, our service sector weighted economy will be crushed. Almost $250bn, a fifth of our GDP, derives from exports.

Just look at Australian business investment as a % of GDP dwindle at 1994 lows. Mining, engineering, machinery and even building investment are nowhere.

That means our ridiculously high level of personal debt will become a problem. It stands at 180% of GDP as recorded by the RBA on p.7 of its Chart Pack. Most of this debt is linked to housing. Housing prices should crater should coronavirus not be solved in short order. Delinquencies will surge. Families that are funding a mortgage with two incomes may end up being forced to do in with one. Then we cut our gym memberships, Foxtel and stop buying coffee from our local cafe. It is the chain reaction we need to be wary of.

That will work wonders for banks with 60-70% mortgage exposure and precious little equity to offset any ructions in housing prices. If you thought Japan was bad after its bubble collapsed – you ain’t seen nothing yet. By the time this is over we could well see Australian banks begging for bailouts. Note that cutting interest rates further kills interest rate spreads and smacks the dollar which hikes the cost of wholesale funding which these banks heavily rely on.

Yet our RBA knows that it must choose the lesser of two evils. It needs to keep the bubble inflated at all costs because the blood that would come from bank failure is just not worth contemplating. Maybe if they had listened to Hank Paulson they might have been able to hold their heads high rather than showing off, the fool’s version of glory.

Milton Friedman once said,

The power to determine the quantity of money… is too important, too pervasive, to be exercised by a few people, however public-spirited, if there is any feasible alternative. There is no need for such arbitrary power… Any system which gives so much power and so much discretion to a few men, [so] that mistakes – excusable or not – can have such far-reaching effects, is a bad system. It is a bad system to believers in freedom just because it gives a few men such power without any effective check by the body politic – this is the key political argument against an independent central bank.

How right he was. When the economy tanks, await the RBA and government pointing fingers at each other when both failed to avert the coming crisis which had been so bleeding obvious for so long.

Batten down your hatches.

Colonialism and Comcars

Image result for robert menzies car

Senator Mattias Cormann has admitted he was behind the decision to change the colour of our government Comcars – which ferry politicians around – from white to dark grey in order to remove any remnants of our colonial past, which in his words were “a better reflection of a modern, forward-looking Australia.” Forget the fact that most government cars were painted black, including Sir Robert Menzies’ Bentley (above). Might have been better to channel the founder of the Liberal Party as inspiration instead some woke nonsense. Or just let the drivers, who need to clean and maintain the vehicles, choose. 

Seriously though, what % of Australians have ever thought that our white Comcars harked to a colonial past? Best put it to a plebiscite and waste more time. 

Dark Grey? Isn’t that a gloomy hue? Should Aussies prepare for dark days ahead? Truth be told the colour is probably quite representative of where our economy is heading, even without coronavirus.

Interestingly, according to car insurer youi,

Our accident frequency research reveals that dark coloured cars are more likely to be in an accident than lighter coloured cars, likely because they are less visible to other drivers on the road. Grey coloured cars topped the list, followed by black and charcoal.

Who says that politicians don’t make sacrifices for us?

If we study where the proportion of cars coloured in colonial white is highest, perhaps parliament should be spending up big on a reeducation program in Tasmania for their unconscious colonialism. youi claimed,

Tasmania has the highest percentage of white cars at 33.80% versus the national average of 30.45% (silver 19.4%, blue 11.29%)

White cars seem to be connected to toxic masculinity too. Best run a campaign on unconscious sexism if youi is to be believed.

Compared to females, white is more popular for males relative to other colours (34.34% for males, 26.46% for females)

Take it a step further and question how much more Cormann could have done to reduce the racist footprints of colonialism.

Why are we buying cars from a maker that powered the Nazi Luftwaffe, SS and Wehrmacht, based in a nation that at the time was hell-bent on world domination and genocide? If we went for Lexus or Toyota we’d be buying cars built by a country that was also determined to colonize The Pacific. Jaguars or Range Rovers would be off the list, even though the Indians now own the brands. Rolls-Royce & Bentley are German-owned. Italians were colonialists. Maserati, Fiat, Lancia and Alfa Romeo banned. The French? Colonialists. Renault and Peugeot-Citroen are out. The Spanish? Colonialists. No SEATs, although that is owned by the Germans. America? Someone is bound to raise an issue with their CIA operative endorsed post-war military hegemony. So no Caddies, Fords or GM cars, especially after the axing of the Holden brand. China? Buying Haval or Great Wall cars would at the very least cut down on the overall cost of Comcars, especially with the generous 10-yr unlimited kilometre extended warranty.  That is how we cut the budget deficit. 

Maybe we should just buy Volvos. Maybe that way we could appeal to be supporting the home team of climate activist, Greta Thunberg to shore up the youth vote while acknowledging that the Viking hordes of 1000 years ago was far back enough in history to upset anyone today. If we’re lucky, the Swedish Riksbank may consider buying our sovereign debt again

Seriously, haven’t our pollies got anything better to do than conjure up such illogical nonsense like this? Given we’re at this level of discourse, perhaps walking, cycling or public transport would be a better bet for our lawmakers. At the very least it would put them in touch with how commoners live.

Another Chinese bank bailed out

Harbin Bank, a 622 billion yuan (US$90bn in assets) juggernaut in the country’s north became the fifth bank – after Baoshang Bank, Bank of Jinzhou, Heng Feng Bank, and Henan Yichuan Rural Commercial Bank – to be bailed out by the Chinese state.  As can be seen above, the trend of confidence shown by the markets over recent years is waning – fast.

According to Zerohedge, “as was the case with at least one previous bank “rescue”, Harbin Bank was connected to a former oligarch who disappeared not that long ago amid allegations of massive fraud..”

ZH goes on, “Another curious fact: a little over a year ago, Harbin Bank, which in March 2018 had abandoned plans to list its shares in China, announced it would raise over $2 billion in perpetual bonds to replenish its capital after regulators in early 2018 allowed lenders to sell such instruments to bolster their balance sheets. Incidentally, a perpetual bonds is effectively the same thing as equity, but for some bizarre reason sells much better in China where the investing population is apparently stupid enough to be fooled by the clever change in designation. As such, Harbin Bank was the first Chinese lender to announce its intention to sell perpetual bonds to increase its Additional Tier 1 (AT1) capital. We now know what prompted the bank’s rush.”

According to Bloomberg,

Chinese banks reported 2.2 trillion yuan (US$315bn) of non-performing loans at the end of June, which, according to the China Banking and Insurance Regulatory Commission (CBIRC) is the highest level in over 15 years…Troubles facing Guangdong Nanyue’s biggest shareholders may also add to its woes. Neoglory Holding Group Co., which is going through a court-led bankruptcy restructuring after defaulting on its bonds, is the largest shareholder of Guangdong Nanyue with a 16.52% stake, followed by Gionee Communication Equipment Co., which is in liquidation, according to a report published by China Lianhe Credit Rating in June. The two hold a combined 25.4% stake in the lender.

Note in recent times, Baoshang Bank was taken over by the government in May and the Bank of Jinzhou was rescued in July.

We shouldn’t forget “special mention” loans which are not classified as NPLs but potentially at risk of becoming so (equivalent to being 90+ days in arrears), rose to 3.63 trillion yuan (US$521bn), accounting for 3.3% of the total loan volume for commercial banks according to the CBIRC.

Nothing to see here? This doesn’t even include the issues of the shadow bank lending market. The one thing to be sure of is that is likely far worse than the official figures. Peer-to-peer lending ran at around $1 trillion but shonky practices has meant more than 80% of China’s 6,200 P2P platforms ended up shutting or faced serious difficulties. Only 50 were expected to pass scrutiny to continue to operate but the government, keen to revive the slowing economy, has looked to ease restrictions again.

This can only end in tears

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As Sweden’s economy slows to the worst economic growth rate in 5 years under a negative interest rate policy, one would think the Swedish Central Bank (Riksbank) would be seeking to prudently manage its asset book on the basis of appropriate risk/reward as opposed to lecturing Australia and Canada on their respective carbon footprints. What we are witnessing is yet another discrete move by authorities to manipulate markets based on fantasy rather than fact.  The hypocrisy is extreme as we shall discover.

While the Riksbank should have complete freedom in how it wishes to deploy capital, we should view this is a pathetic sop to the cabal at the European Central Bank (ECB). Since when did central bankers become experts on climate change? The RBA is no better. Deputy Governor, Guy Debelle, gave a speech in March 2019 on the risks posed by climate change which based prophecies on the data accident-prone IPCC and Bureau of Meteorology. Why not seek balance? Easier to fold to group think so as not to be outed as a pariah. Utterly gutless. Our own APRA is also pushing this ridiculous agenda on climate change reporting. It is willful negligence.

While it is true that on a per capita basis, Australia and Canada’s emissions are higher than the global average, why doesn’t the Riksbank give us credit for lowering that amount 11.4% since 2000? Even Canada has reduced its carbon emissions by 7.3% over the last 18 years. Admittedly Sweden’s emissions per capita have fallen 21.9% according to the IEA. Greta will be happy.

Why hasn’t the Riksbank taken China or India to task for their 169.9% or 94.7% growth in CO2 emissions respectively? There are plenty of oil-producing nations – Qatar, UAE, Bahrain, Saudi Arabia and Oman that have worse per capita outcomes than Australia or Canada. Do these countries get special dispensation from the wrath of the Riksbank? Clearly.

The US has pulled out of the Paris Climate Accord. If the US has marginally lower emissions per capita (15.74t/CO2-e) than Australia (16.45t/CO2-e), isn’t a double standard to write,

The conditions for active climate consideration are slightly better in our work with the foreign exchange reserves. To ensure that the foreign exchange reserves fulfil their purpose, they need to consist of assets that can be rapidly converted to money even when the markets are not functioning properly. Our assessment is that the foreign exchange reserves best correspond to this need if they consist of 75 per cent US government bonds, 20 per cent German and 5 per cent British, Danish and Norwegian government bonds.

Essentially Riksbank commitment to climate change is conditional. The US which is responsible for 13.8% of global emissions can be 75% of holdings. Australia at 1.3% can’t. No doubt sacrificing Queensland Treasury Corp, WA Treasury Corp and Albertan bonds from a Riksbank balance sheet perspective will have little impact on the total. In short, it looks to be pure tokenism. The Riksbank has invested around 8% of its foreign exchange reserves in Australian and Canadian central and federal government bonds. So perhaps at the moment, it is nothing but substitution from state to federal. Why not punish NSW TCorp for being part of a state that has 85%+ coal-fired power generation?

At the very least the Riksbank admits its own hypocrisy.

The Riksbank needs to develop its work on how to take climate change into consideration in asset management. For instance, we need a broader and deeper analysis of the issuers’ climate footprint. At the same time, one must remember that the foreign exchange reserves are unavoidably dominated by US and German government bonds. The Riksbank’s contribution to a better development of the climate will, therefore, remain small. This is entirely natural. The important decisions on how climate change should be counteracted in Sweden are political and should be taken by the government and the Riksdag (parliament).

Still, what hope have we got when Benoît Cœuré, member of the Executive Board of the ECB, lecturing those on “Scaling up Green Finance: The Role of Central Banks.” He noted,

2018 has seen one of the hottest summers in Europe since weather records began. Increasing weather extremes, rising sea levels and the Arctic melting are now clearly visible consequences of human-induced warming. Climate change is not a theory. It is a fact.

Reading more of this report only confirms the commitment of the ECB to follow the UN’s lead and deliberately look to misallocate capital based on unfounded claims of falling crop yields and rising prices (the opposite is occurring) and rising hurricane and drought activity (claims that even the IPCC has admitted there is little or no evidence by climate change). Sweden is merely being a well-behaved schoolboy.

Cœuré made the explicit claim, “The ECB, together with other national central banks of the Eurosystem, is actively supporting the European Commission’s sustainable finance agenda.

CM thinks the biggest problem with this “agenda” is that it risks even further misallocation of capital within global markets already drowning in poorly directed investment. It isn’t hard to see what is going on here. It is nothing short of deliberate market manipulation by trying to increase the cost of funding to conventional energy using farcical concocted “climate risks” to regulate them out of existence.

Cœuré made this clear in his speech,

once markets and credit risk agencies price climate risks properly, the amount of collateralised borrowing counterparties can obtain from the ECB will be adjusted accordingly.

What do you know? On cue, Seeking Alpha notes,

Cutting €2bn of yearly investments, the European Union will stop funding oil, natural gas and coal projects at the end of 2021 as it aims to become the first climate-neutral continent.

All CM will say is best of luck with this decision. Just watch how this kneeling at the altar of the pagan god of climate change will completely ruin the EU economy. The long term ramifications are already being felt. The EU can’t escape the fact that 118mn of its citizens (up from 78m in 2007) are below the poverty line. That is 22% of the population. So why then does Cœuré mention, in spite of such alarming poverty, that taking actions (that will likely increase unemployment) will be helped by “migration [which] has contributed to dampening wage growth…in recent years, thereby further complicating our efforts to bring inflation back to levels closer to 2%.

Closer to home, the National Australia Bank (NAB) has joined in the groupthink by looking to phase out lending to thermal coal companies by 2035. The $760 million exposure will be cut in half by 2028. If climate change is such a huge issue why not look to end it ASAP? This is terrible governance.

Why not assess thermal coal companies on the merits of the industry’s future rather than have the acting-CEO Philip Chronican make a limp-wristed excuse that it is merely getting in line with the government commitment to Paris? If lending to thermal coal is good for shareholders in 2036, who cares what our emissions targets are (which continue to fall per capita)? Maybe this is industry and regulator working hand-in-hand?

The market has always been the best weighing mechanism for risk. Unfortunately, for the last two decades, global central bank policy has gone out of its way to prevent the market from clearing. Now it seems that the authorities are taking actions that look like collusion to bully the ratings agencies into marking down legitimate businesses that are being punished for heresy.

This will ironically only make them even better investments down the track when reality dawns, just as CM pointed out with anti-ESG stocks. Just expect the entry points to these stocks to be exceedingly cheap. Buy what the market hates. It looks as though the bureaucrats are set to make fossil fuel companies penny stocks.

Nothing to see here

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Chinese regional bank, Guangdong Nanyue Bank Co said it won’t exercise an early redemption on its 1.5 bn yuan (US$215 million) 6% tier-two bond in December.

According to Bloomberg,

Chinese banks reported 2.2 trillion yuan (US$315bn) of non-performing loans at the end of June, which, according to the China Banking and Insurance Regulatory Commission (CBIRC) is the highest level in over 15 years…Troubles facing Guangdong Nanyue’s biggest shareholders may also add to its woes. Neoglory Holding Group Co., which is going through a court-led bankruptcy restructuring after defaulting on its bonds, is the largest shareholder of Guangdong Nanyue with a 16.52% stake, followed by Gionee Communication Equipment Co., which is in liquidation, according to a report published by China Lianhe Credit Rating in June. The two hold a combined 25.4% stake in the lender.

Note in recent times, Baoshang Bank was taken over by the government in May and the Bank of Jinzhou was rescued in July.

We shouldn’t forget “special mention” loans which are not classified as NPLs but potentially at risk of becoming so (equivalent to being 90+ days in arrears), rose to 3.63 trillion yuan (US$521bn), accounting for 3.3% of the total loan volume for commercial banks according to the CBIRC.