Harris&Ewing US Navy Yard, Washington. Sight shop, big gun section 1917
We’ll never know what happened?!
The first sign of trouble on the New York Stock Exchange was a color – a sickly yellow. On the hand-held computers on the cavernous trading floor, that color meant one thing: the Big Board was down. What began Wednesday morning with a seemingly workaday software glitch soon escalated into one of the most startling computer outages in Wall Street history – and, for the Big Board, a race against the clock. At the 9:30 a.m. opening bell, traders’ orders for some stocks weren’t reaching the proper destinations for processing. Techies were frantic to fix the problem. At about 9:32 a.m., they succeeded. Two hours later, boom. One floor trader started shouting, “My handheld’s down! My handheld’s not working!”
He and other traders hurried over to a ramp on the trading floor where NYSE executives usually meet with them to explain any problems. Not today. Three hours later, still nothing. Everyone was just standing around. “The order flow wasn’t being entered into the display books on the trading floor,” said Pete Costa, president of Empire Executions, who’s worked at the exchange for 34 years. “As soon as that happened, the exchange shut down to understand what was going on.” Every computer screen “went this pukey, canary yellow color,” Costa said. “That means the stock has stopped trading.”
Seven thousand orders were sent but never executed, he said. The system had to be rebooted. That took about 45 minutes. The big concern was getting the exchange up and running as soon as possible. The 4 p.m. closing bell loomed. That’s when the NYSE sets stock prices that indexes and mutual funds use to calculate their values. “My initial reaction was, ‘That’s OK, I hope they can reopen for the close,’” said Jamie Selway at Investment Technology. At the open and before the close, orders can be routed to other exchanges, he said. But at the close, the world needs the NYSE.
Not the sort of power a politburo has.
Since the last week of June, the Chinese government has intervened in the country’s stock markets nearly every day to stop their steep slide. But the harder Chinese authorities try, the more it looks like they are losing control. The Shanghai Composite Index fell 5.9% on Wednesday and is down nearly one-third from its peak on June 12. Since then, $3.5 trillion in value has been erased from companies in the benchmark index—or nearly five times the size of Apple Inc. China’s bond market and currency also began to get hit Wednesday as worries deepened that a contagion from stock-market losses could further trammel the country’s slowing economy. It felt even more ominous because Chinese officials had rushed out another raft of emergency measures earlier Wednesday to reassure the market.
The moves only heightened what is turning into an epidemic of anxiety among Chinese investors and a crisis of confidence in their leaders. Stocks were volatile early Thursday. “The more the government intervenes, the more scared I am,” said Li Jun, who runs a fishing and restaurant business in the eastern city of Nanjing. He has spent about 3 million yuan, roughly $500,000, on stocks, using borrowed money for about one-third of the total. Mr. Li has sold some of his investments every time the market “popped up a little” following a rescue announcement by the Chinese government. “I have no faith” in its ability to halt the losses, he says. Wednesday’s drop left the Shanghai index down 32% from its peak and at its lowest level since March.
The latest drastic step by Beijing is a six-month ban on stock sales by controlling shareholders and executives who own more than 5% of a company’s shares. Any violation of the rule, announced Wednesday night, would be “treated seriously,” China’s securities regulator said. Early Thursday, China’s central bank said it has provided “ample liquidity” to a company owned by the country’s top securities regulator. The company is lending the funds to securities firms, which then will use the money to buy stocks. The Chinese government has been praised for driving decades of economic growth and keeping the economy strong during the global financial crisis.
In recent years, Chinese authorities have struggled with rising debt levels and the need to reform the economy away from government-driven infrastructure programs and toward consumer spending. As it fought slower growth and a weakening real-estate market, the government turned its attention to the country’s languishing stock markets. But Beijing’s inability to stop the recent decline has rattled investors who have long been used to seeing the government use its power to control markets. “Beijing’s latest bid to calm the market has had the opposite effect,” said Bernard Aw, market analyst at IG Group. “The panic is spreading, and authorities appear to be grasping at straws to hold back the tide.”
In China, the invisible hand of the market sometimes needs help from the iron fist of the state. That’s certainly true after a meltdown vaporized $3.5 trillion in the value of shares traded on the Shanghai and Shenzhen exchanges. President Xi Jinping’s government isn’t being subtle in its campaign to reflate the bubble it had a big role in creating. The government has suspended initial public offerings and eased rules on margin loans, even allowing investors to use their homes as collateral to borrow money to buy stocks. On June 27, the People’s Bank of China cut its benchmark interest rate and the amount of reserves certain banks are required to hold. Days later, it offered financial support to a group of 21 brokerages that have pledged to buy 120 billion yuan ($19.3 billion) worth of shares and hold them for a year.
On July 8, China’s securities regulator banned major company shareholders (those with stakes exceeding 5%), corporate executives, and directors from selling their shares for six months. So far, the government’s moves have had little impact. Since peaking on June 12, the Shanghai Composite Index has fallen almost 32%, dropping more than 5% on some days. The selling pressure in China has been so severe that on July 8, about 1,300 companies halted trading in their stocks on mainland exchanges, freezing $2.6 trillion worth of shares, or 40% of the stock market capitalization. On July 7, Hong Kong followed the mainland exchanges into bear market territory.
The stock market rout, the worst mainland market slump since 1992, has been an embarrassment to Xi and Premier Li Keqiang, who have vowed to push through more than 300 reforms aimed at reducing state intervention and letting market forces play a bigger role in China’s $10 trillion economy. As Chinese stocks made a 150% run from July 2014 through June 12, state-controlled media both urged individual investors to buy and characterized the stock boom as an affirmation of Xi’s policies. “This is a real testing moment for the leadership,” says Zhao Xijun, deputy dean of Renmin University’s School of Finance. “The evaporation of fortunes of more than 80 million individual investors would pose unthinkable social problems for the country.”
Up today, but with very many stocks supended. Tons of nervous leveraged ‘investors’. How this can end well is very hard to see.
Since the Shanghai Composite index dropped from a 52-week high around 5,178 on June 12, it’s been downhill all the way. In just three weeks, stocks listed on mainland China’s most prominent exchange tumbled 30% from their seven-year highs. The even more speculative ChiNext Index has lost 42% of its value over 21 days. Investors and traders who piled into Chinese shares over the past year, causing Shanghai to rise 150% and other markets to catapult even more dramatically, faced margin calls on their highly leveraged positions and started selling with both hands and both feet. It was the biggest rout in this volatile market since 1992, and it prompted the Chinese government to take strong measures.
Last week, the Bank of China cut short-term interest rates for the fourth time this year. Regulators relaxed margin requirements and cracked down on short sellers, while state-run media tried to calm jittery investors with happy talk. That did little to stanch the hemorrhage. Over this past weekend, government authorities and “private” Chinese brokerages and companies announced even more dramatic moves to prop up stocks: • Brokerages and mutual-fund companies said they would buy billions of dollars’ worth of Shanghai shares. • A state-owned investment firm said it would buy China-based ETFs. • 28 companies said they would put planned initial public offerings on hold, as IPOs had been the focus of the most intense speculation. • Regulators also increased the kinds of assets that can be used as collateral to buy stocks, to include — are you ready for this? — people’s homes. I’m not making this up.
The goal: Show retail investors that the all-powerful Chinese government had their backs and that the “Beijing Put” was alive and well. Except it wasn’t. Shanghai opened up a strong 8.5% on Monday, despite Greece’s resounding “no” vote in Sunday’s referendum. But shares slipped throughout the trading day and closed up only 2.5%. On Tuesday, Shanghai slipped 1.3%, and on Wednesday plunged 5.9%. That was a clear sign that the government had taken its best shot and failed. Which means that the most likely direction for Shanghai, Shenzhen and other mainland exchanges is down, down, down. Morgan Stanley, which made a good “sell” call on China weeks ago, now expects Shanghai to fall as low as 3,250 by mid-2016. Citigroup analysts told clients the selloff has a “long way to go.” I agree, but I think it could go much, much lower.
Losing $1 trillion per week.
China’s market downfall has been dramatic and painful for the investors involved. But so far there has been little immediate impact on the rest of the world, because China tightly limits foreign investment in mainland stocks. China’s stock markets are, for the most part, a mom and pop affair—about 80% of the trading that happens in Shanghai and Shenzhen is done by Chinese individuals. They represent at most 14% of the total Chinese population. But there’s little doubt the effects of this downturn will be felt globally—it just may take some time. After all, Chinese investors have lost more about $3.4 trillion in equity value from the markets mid-June peak until the July 7 close. And although the government is supporting state-owned companies in the markets, other companies have seen their market value plummet.
As of July 8, about half of the stocks that traded in Shanghai and Shenzhen have voluntarily halted trading indefinitely—which potentially puts the brakes on everything from corporate expansion plans and spending to the pay their executives take home. And they’re merely suspending stock losses that these companies will have to take eventually. How far could global contagion spread, and where could it go? Here are some trouble spots to watch. Tanking markets are putting foreign banks that have been active in China for years in a tough spot. China’s state media pounced on Morgan Stanley for urging investors to steer clear of Chinese stocks in a June 26 note. Rumors are flying that short-selling “foreign crocodiles” and “foreign devils” are to blame.
Never mind that foreign investors own less than 1% of mainland stocks, according to BofA/Merrill Lynch. Or that the few foreign investors Beijing allows to trade A-shares aren’t even allowed to sell short; or that the Shanghai-Hong Kong Stock Connect caps the number of securities (paywall) that can be sold short to a teeny percentage. More than creating a temporary headache for Morgan Stanley, the accusations could be used to keep the bank off of lucrative China-related business with state-owned companies for years to come—even though it was the right call on mainland stocks. Others including Bank of America and Credit Suisse identified China’s market as a bubble as well. Foreign banks have lent over $1 trillion to Chinese public and private companies as well, with the majority of that concentrated in Hong Kong, UK, US and Japanese lenders.
The renminbi—one of the world’s most tightly controlled currencies—may be hit by significant weakness, with predictions that Beijing will stand down from its traditional interventionist stance. “We’re looking for about 5-10% depreciation over the next one year even though it might be stable over the next few months,” Adarsh Sinha, head of Asia Pacific G10 FX strategy at BofAML Global Research, told CNBC. “History tells us that whenever China is facing any economic volatility, they always keep the currency as flat as a pancake. However, the tricky thing for China is that their capital account is gradually opening up, which makes it difficult for them to credibly stabilize the renminbi now.”
Further monetary easing is widely expected as part of Beijing’s toolkit to halt the panic-selling in mainland stocks, and economists widely agree that will place severe downward pressure on the onshore renminbi (CNY). But if China wishes to gain MSCI status and internationalize the yuan, it cannot continue intervening in currency markets as it’s done in the past, experts say. “Government intervention steps contradict intentions to allow market forces to determine the allocation of resources. Herein was the first major test of embracing market discipline,” said Jeremy Stevens, international economist at Standard Bank in a note, referring to the impact of intervention on Beijing’s international ambitions.
The CNY has traded in a narrow range around 6.2 per dollar in recent sessions but the offshore yuan (CNH), traded outside the mainland, has hit fresh three-month lows against the greenback this week. That said, the CNH is a more freely floating currency so it’s much harder for the PBoC to intervene compared to the onshore yuan.
And they keep falling.
Iron ore prices have plunged to a fresh six-year low as the commodity gets caught up in the fallout from China’s massive sharemarket plunge, with steel now reportedly cheaper per tonne than cabbage. Iron ore prices in China plummeted more than 10% to $US44.59 a tonne on Wednesday night, their lowest level since May 2009. At that price, most Australian miners would be producing at a loss, with the exception of low-cost giants Rio Tinto and BHP Billiton. Miners have already been under pressure on the stock market: Fortescue Metals slumped more than 6% on Wednesday, while BHP and Rio each lost more than 3%. Iron ore prices hit a low of $US47 a tonne in April this year before recovering to rise above $US64 a tonne in June.
IG Markets strategist Evan Lucas said that the price of steel – of which iron ore is a key ingredient – in China was so weak it was “now cheaper per tonne than cabbage”. While copper jumped as the US dollar slipped, oil prices were also on the slide, with US benchmark West Texas Intermediate falling 68 cents to US$51.65 a barrel on Wednesday, its fifth day of losses. Many agricultural commodity prices were also weaker, including cotton and wheat. The slide in iron ore comes as China’s share market remains in freefall, even in the face of the government’s extraordinary efforts to calm investors.
Point is, central banks should never try to exert all this control.
For a world so confident that central banks can solve almost all economic ills, the dramas unfolding in Greece and China are sobering. “Whatever it takes,” Mario Draghi’s 2012 assertion about what the ECB would do to save the euro, best captures the all-powerful, self-aware central bank activism that’s cosseted world markets since the banking and credit collapse hit eight years ago. From the United States to Europe and Asia, financial markets have been cowed, then calmed and are now coddled by the limitless power of central banks to print new money to ward off systemic shocks and deflation. But even if you believe central banks will do whatever it takes – to save the euro, stop the recession, create jobs, boost inflation, prop up the stock market and so on – it doesn’t necessarily mean it will always work.
Draghi himself merely pleaded for faith on that score three years ago when he added, “Believe me, it will be enough.” Critically, given the direction of events in Athens, his celebrated epigraph was preceded by “Within our mandate…” And so the prospect of the ECB potentially presiding over, some say precipitating, the first national exit from a supposedly unbreakable currency union will inspire a rethink of the limits of Draghi’s phrase for all central banks. Of course, the ECB does not want to push Greece out of the euro. But ‘whatever it takes’ may just not be enough to preserve the integrity of the 19-nation bloc if the ECB’s mandate prevents it from endlessly funneling emergency funding to insolvent Greek banks. And as long as the Greek government is at loggerheads with its creditors, the central bank can’t wave a magic wand of monetary support without breaking its own rules.
And not even because they’re not solvent. how crazy is that?
Some large Greek banks may have to be shut and taken over by stronger rivals as part of a restructuring of the sector that would follow any bailout of the country, European officials have told Reuters. European leaders will gather on Sunday in a last-ditch attempt to salvage agreement with Greece after months of acrimonious negotiations that have taken the country to the brink of leaving the euro. But regardless of whether or not fresh funds are now unlocked for the government, some Greek banks, damaged by political and economic havoc, may have to be closed and merged with stronger rivals, officials, who asked not to be named, told Reuters.
One official said that Greece’s four big banks – National Bank of Greece, Eurobank, Piraeus and Alpha Bank – could be reduced to just two, a measure that would doubtless encounter fierce resistance in Athens. A second person said that although mergers of banks were necessary, this could happen over the longer term. “The Greek economy is in ruins. That means the banks need a restart,” said the first person, adding that prompt action was necessary following any bailout between Athens and the euro zone. “Cyprus could be a role model.” “You have a tiny bit of time … you would do restructuring straight away.”
Greece’s financial system has been at the heart of the current crisis, hemorrhaging deposits as relations between the radical left-wing government of Prime Minister Alexis Tsipras and creditors worsened. After Athens defaulted on debt owed to the IMF last month, the ECB froze emergency funding for the banks, precipitating their temporary closure and a €60 daily limit on withdrawals from cash machines. A decision by Greek voters last week to reject bailout terms offered by the country’s international creditors prompted the ECB to maintain its cap, meaning that the banks will run out of cash soon.
The major financial problem tearing economies apart over the past century has stemmed more from official inter-governmental debt than private-sector debt. That is why the global economy today faces a similar breakdown to the Depression years of 1929-31, when it became apparent that the volume of official inter-government debts could not be paid. The Versailles Treaty had imposed impossibly high reparations demands on Germany, and the United States imposed equally destructive requirements on the Allies to use their reparations receipts to pay back World War I arms debts to the U.S. Government. Legal procedures are well established to cope with corporate and personal bankruptcy. Courts write down personal and business debts either under “debtor in control” procedures or foreclosure, and creditors take a loss on loans that go bad. Personal bankruptcy permits individuals to make a fresh start with a Clean Slate.
It is much harder to write down debts owed to or guaranteed by governments. U.S. student loan debt cannot be written off, but remains a lingering burden to prevent graduates from earning enough take-home pay (after debt service and FICA Social Security tax withholding is taken out of their paychecks) to get married, start families and buy homes of their own. Only the banks get bailed out, now that they have become in effect the economy’s central planners. Most of all, there is no legal framework for writing down debts owed to the IMF, the ECB, or to European and American creditor governments. Since the 1960s entire nations have been subjected to austerity and economic shrinkage that makes it less and less possible to extricate themselves from debt. Governments are unforgiving, and the IMF and ECB act on behalf of banks and bondholders – and are ideologically captured by anti-labor, anti-government financial warriors.
The result is not the “free market economy” it pretends to be, nor is it the rule of economically rational law. A genuine market economy would recognize financial reality and write down debts in keeping with their ability to be paid. But inter-government debt overrides markets and refuses to acknowledge the need for a Clean Slate. Today’s guiding theory – backed by monetarist junk economics – is that debts of any size can be paid, simply by reducing labor’s wages and living standards, plus by selling off a nation’s public domain – its land, oil and gas reserves, minerals and water distribution, roads and transport systems, power plants and sewage systems, and public infrastructure of all forms.
Imposed by the monopoly of inter-governmental financial institutions – the IMF, ECB, U.S. Treasury, and so forth – creditor financial leverage has become the 21st century’s new mode of warfare. It is as devastating as military war in its effect on population: rising suicide rates, shorter lifespans, and emigration of the age-cohort that always have been the major casualties of war, young adults. Instead of being drafted into the army to fight foreign foes, they are driven from their homes to find work abroad. What used to be a rural exodus from the land to the cities from the 17th century onward is now a “debtor exodus” from countries whose governments owe unpayably high sums to creditor governments and to the banks and bondholders on whose behalf they impose their policy.
4 million people.
Nearly 4 million citizens, or more than one in every three, were deemed to be living in poverty or suffering from social exclusion in 2013, with the poverty line set at 4,068 euros per person per year, according to the Hellenic Statistical Authority (ELSTAT). The data released on Wednesday showed that the share of the population living in poverty reached 22.1%, compared with 23.1% in 2012 and 19.7% in 2008. The share of the people at risk of poverty or social exclusion came to 36% in 2013, against 35.7% in 2012 and 27.6% in 2008.
The average annual income per person amounted to 8,879 euros in 2013, and the average disposable income of households in Greece reached 17,270 euros. In total, the number of households at risk of poverty stood at 888,452, out of a total of 4,266,745, or 2,384,035 people out of a total population of 10,785,312 two years ago. The ELSTAT survey also showed that the wealthiest 20% of the population had an annual income 6.5 times higher than the poorest 20% in 2013, compared to 6.6 times higher in 2012.
Hard to believe in a modern nation.
Last week in Greece, two mass demonstrations were held outside Greek Parliament. NO vote supporters turned out en masse for a rally on Tuesday and the next day saw a demonstration led by the YES camp. Despite the comparable attendance at both rallies, the NO demonstration – according to official figures – was broadcast by all 6 of the nationwide television stations’ major news programs for a cumulative 8 minutes and 33 seconds. YES supporters fared far better, with 47 minutes and 32 seconds of on-air time dedicated to their rally. But the propaganda problem doesn’t just boil down to numbers. Greece’s biggest television station, MEGA Channel, broadcast a report claiming that the capital controls had created mile-long lines outside the banks.
The station cited exaggerated figures and used pictures that, it was later discovered, had been taken years ago in South Africa. When a guest on MEGA asked the anchorwoman “why do you only broadcast the YES viewpoint?” she replied “is it really our fault if all factions in Greece favor a YES?” The results of the referendum, which indicate that every region of the country no matter how small registered a majority NO vote, should provide her with answer enough. From the beginning of the crisis right up to today, the mainstream media in Greece have ‘sold’ austerity’s formula to the nation’s citizens. At the parliamentary investigations committee it was revealed that major journalists had been travelling to the U.S. for IMF seminars.
In 2011, Wikileaks published Top Secret wire messages from the American embassy in Athens regarding monitoring of the country’s media outlets. According to these messages, the embassy was even interfering in how talk shows were edited, in the interest of projecting a more favorable image of the United States abroad. Yannis Pretenteris, until last year Greece’s most popular newscaster, even admitted in his book that he knowingly lied to the Greek people every evening, but that he did so to help save the country. Since the crisis began 3,000 journalists have lost their jobs. This has created a climate of fear and uncertainty in the workplace, and has only led to a hardening of the official line. Simply put, whoever opposes the interests of the media company loses his or her job.
1 lesson really: stop trying to make things worse.
It’s now clear, or should be clear, that the Greek program was doomed to failure without major debt relief; no matter how hard the Greeks tried, austerity would shrink GDP faster than it reduced debt relative to the baseline, so that the debt situation was bound to worsen even as the attempt to balance the budget imposed vast suffering. And there was no good, or even non-terrible, answer given Greece’s membership in the euro. But there’s a broader lesson from Greece that is relevant to all of us — and it’s not the usual one about mending our free-spending ways lest we become Greece, Greece I tell you. What we learn, instead, is that fiscal austerity plus hard money is a deeply toxic mix.
The fiscal austerity depresses the economy, and pushes it toward deflation; if it’s accompanied by hard money (in Greece’s case the euro, but a fixed exchange rate, a gold standard, or any kind of obsessive fear of inflation would do the trick), the result is not just a depression and deflation, but quite likely a failure even to reduce the debt ratio. For comparison, look at everyone’s favorite example of successful austerity, Canada in the 1990s. Canada came in with gross debt of roughly 100% of GDP, roughly comparable to Greece on the eve of the financial crisis. It then proceeded to do a pretty big fiscal adjustment — 6% of GDP according to the IMF’s measure of the structural balance, which is about a third of what Greece has done but comparable to other European debtors. But unemployment fell steadily.
What was Canada’s secret? The answer was, easy money and a large currency depreciation. These offset the drag from austerity, allowing growth to continue. So, how does this play into U.S. policy debates? Well, Republicans love to warn that America might turn into Greece any day now. But look at the policy mix that is now de facto GOP orthodoxy: sharp cuts in government spending (maybe offset by tax cuts for the rich, but these won’t provide much stimulus), combined with a monetary policy obsessed with fears of dollar “debasement”. That is, the conservative side of the US political spectrum, while holding up Greece as a cautionary tale, is actually demanding that we emulate the policy mix that turned Greek debt into a complete disaster.
No it isn’t. That’s a choice.
ECB President Mario Draghi suggested the Greek debt crisis is getting increasingly hard to fix, speaking hours before the ECB maintained its freeze on extra aid for the country’s banks. Landing in Rome on Wednesday after late-night talks in Brussels, Draghi was asked by Italian journalists if he would really be able “to close the dossier on Greece,” Il Sole 24 Ore and Corriere della Sera reported. “I don’t know,” he’s cited as saying. “This time it’s really difficult.”Draghi’s remarks hint at the impasse faced by euro-area policy makers as they await a detailed economic package from Greek Prime Minister Alexis Tsipras before Thursday’s midnight deadline. Without evidence of a bailout plan, Draghi and his colleagues on the Governing Council refrained from increasing Emergency Liquidity Assistance for Greek banks from the current total of almost €89 billion.
ECB Governing Council member Jens Weidmann, the head of Germany’s Bundesbank, said on Thursday that the ECB shouldn’t expand that credit line unless Greece is in a rescue program. “The Eurosystem should not increase the liquidity provision, and capital controls need to stay in force until an appropriate support package has been agreed by all parties and the solvency of both the Greek government and the Greek banking system has been ensured,” he said. “ELA is no longer being used to finance capital flight. This certainly represents a step forward, and shifts the responsibility to where it belongs: with the governments and parliaments.”
Weidmann also said that any short-term assistance to Greece must come from fiscal policy makers rather than central bankers. Euro-area officials have informally discussed an arrangement whereby the ECB maintains liquidity to Greek lenders in return for a guarantee for the loans, according to people familiar with the matter. One alternative for Greece was given little credence by Draghi on Wednesday, when he was asked by the Italian journalists if Russian President Vladimir Putin might call Tsipras and offer aid. “I do not think that will happen,” Draghi said, according to Il Sole. “It doesn’t seem like a real risk. Also, they don’t have money even for themselves.”
It really is too dumb.
The IMF has only one legitimate purpose that I can figure out: To continually write position papers and articles silly enough to keep bloggers loaded with material for rebuttal. The Wall Street Journal provides a case in point with IMF: U.S. Economy at Risk of Stalling Next Year if Fed Raises Rates Prematurely.
“The Federal Reserve risks stalling the U.S. economy by raising interest rates too early, the IMF warned Tuesday as it detailed its call for the central bank to delay a move until 2016.”
The idea that a single rate hike or two would sink the economy now but not in 2016 is of course ridiculous. The IMF’s primary concern is the rising US dollar.
If investors continue to plow into dollar assets, particularly given weaknesses in Europe, China and other emerging markets, “growth could be significantly debilitated,” the fund warned. The IMF estimates each 5% appreciation of the dollar could cut a half-percentage point off U.S. growth.
The IMF wants a weaker dollar for the US and a weaker euro for Europe. How’s that supposed to happen? The IMF is also worried about China. Does it want a weaker yuan too? The problem should be obvious, but obviously it isn’t, so I will spell it out: It’s mathematically impossible for every currency to depreciate against each other simultaneously. The IMF is worried about the loss of credibility if the Fed hikes now and has to reverse later.
“Both the European Central Bank and Sweden’s Riksbank were forced into rate reversals in 2011, and the Bank of Japan seesawed through rate moves in the 1990s and 2000, fund economists noted. Such an about-face puts the Fed’s all-important credibility at stake, the IMF said.”
In reality, there is not a central bank on the planet that has any credibility. Bubble after bubble is the norm. The Fed failed to predict the dotcom bust, the housing boom, the housing bust, or the great recession. The Fed has no credibility to lose. But the Fed does have good company. The credibility of the IMF is nonexistent as well. The number of global GDP downgrades by the IMF is staggering. Heck, for years on end the IMF could not even get Greece correct. Greece missed countless IMF GDP estimates. At long last, the IMF admits what any person with half a brain knew half a decade ago: Greece Will Need Debt Restructuring.
“Greece is in a situation of acute crisis, which needs to be addressed seriously and promptly,” Ms Lagarde said. Getting out of that crisis would take both reforms by Athens and a “debt restructuring”, she said.
That’s actually the first solid statement by Lagarde in years that I agree with. The irony is the eurozone ministers, Germany, and the creditors don’t want to go along with it.
“..it has been transformed into a banking union rather than a union of people.”
“Since the month of December, 200 thousand citizens have added their signatures to ask for a popular law that would set up a referendum about whether we stay in the Euro, or more precisely whether we’d like to have a national sovereign currency. A referendum that should have been held BEFORE we went into the Euro, but the decision was taken by the governments without any consultation with the citizens. In recent years, so much has been said about the need to exit the Euro, we have heard proclamations during the election campaigns, in political meetings, on the TV talk shows, but before now there’s never been a solid proposal like this one. It is possible to hold a referendum about whether to stay in the Euro.
It can be done with a constitutional law – like the one in 1989 when the people of Italy were called upon to make a decision about whether to give a mandate to the European Parliament to set up a project for a European Constitution to then submit to the member states of the community for ratification. That was to set up a union of people and yet the only thing you managed to do was to create a currency union. The EU has failed. It’s no good hiding the fact. It’s useless to pretend nothing has happened and to continue to illude ourselves that everything is going well. The Europe of those that dreamed it up, a community of people, with solidarity between states, with equality of rights and duties – all that has failed.
The entry into the Euro, the hegemony of the banks and of the world of finance have transformed the “community” into a “union”, it has been transformed into a banking union rather than a union of people. The propoganda that you have promoted in the last few years – that the Euro and the single currency are essential, that without the Euro our economy would have had a disaster, – that has failed. The economy has suffered a disaster – and that has happened with the Euro …. And a lot of people are starting to notice this. Not just Greece, but also Austria, but that’s not been reported by European or Italian media, in a single week, they have collected nearly 300,000 signatures in support of a popular petition not just about an exit from the Euro – but even from the European Union.
The world is entering a kind of no man’s land, in between the realms of insane denial and utterly obvious crisis. Europe is now destabilizing amid the Greek soap opera (an event that I predicted in January would occur in 2015); China’s stock market bubble is bursting; and the U.S. dollar’s world reserve status is about to be decimated by the global shift toward the International Monetary Fund’s basket currency reserve system. I’m afraid I’m going to have to say this because I don’t know if anyone else will admit it: Alternative economic analysts were right, and the mainstream choir was either terribly wrong or disgustingly dishonest. However, as most of us in the liberty movement are well aware, being right is not necessarily a solution to disaster.
At the forefront of alternative economics and constitutional vigilance are the people doing the real work in the movement: the preppers. These are the activists taking concrete action in the tangible world (as opposed to the ethereal laziness of the intellectual world) first to make themselves as independent as possible from the mainstream grid, thereby removing themselves as a potential refugee or looter in the event of national crisis. Second, they are the people mastering valuable and necessary skills that will allow them to rebuild any collapsed social and financial system. Third, they are the people most capable of defending our inherent freedoms and the principles of our founding culture, and they are the only people organizing locally for mutual aid and security. The fact of the matter is preppers are free, and almost everyone else is a slave — a slave to dependency, a slave to doubt, a slave to ignorance, a slave to fear and, thus, a slave to petty establishment authority.
During the Great Depression, the vast majority of American citizens were rural, farm-oriented people with survival skills far beyond the modern American. “Prepping” in those days was ingrained in our society, rather than marginalized and labeled “fringe.” Today, the numbers are reversed, with a dwindling number of farm-experienced Americans and a vast wasteland of urban and suburban citizens — many with few, if any, legitimate skill sets. During the Great Depression, millions of people died of starvation and general poverty, despite the incredible number of people with rural survival knowledge. What do you think would happen to our effeminate; metrosexual; iPhone-addicted; lisping; limp-wristed; self-obsessed; Twitter-, texting-, video game-addled; La-Z-Boy-riding; overgrown-child culture in the event that another economic crisis even remotely similar were to occur? Yes, most of them would die, probably in a horrible fashion.
A very impressive story.
[..] The first call came through after four days, on 30 August. The Moas team quickly found itself involved in the simultaneous rescue of two migrant boats, including a wooden fishing vessel with 350 people – many of them families from Syria – that was slowly sinking. By the end of the rescue, water was flooding onto the main deck of the fishing boat, and many of the migrants were in the sea. So many small children were rescued that the Phoenix almost ran out of baby formula. “That was a shock for most of the crew,” Catrambone recalled. “We were a bit overwhelmed with the thought that this was really happening. These children and mothers were at the hands of the sea, at the hands of death.” The Phoenix rescued 1,462 people in 10 weeks and helped a further 1,500 onto Italian navy vessels.
The Phoenix operates in international waters that start just 12 nautical miles from the shores of Libya – now one of the world’s most violent places, where two separate governments have only tenuous control over their territories. An American consultant hired to advise on security fretted that the ship’s unarmed crew was too close to Libyan waters, but Catrambone decided he was overreacting – after long periods working in Iraq and Afghanistan (and a narrow brush with death during a missile strike in Israel), Catrambone felt he knew how to calibrate risk; the success of his own business, he says, is based in part on the tendency of others to exaggerate danger. “We are not afraid to go where others are [afraid],” he told me. “We don’t need a military convoy to take us.”
While Catrambone joined the speedboat crew on rescue missions, Regina and her daughter Maria Luisa helped care for the migrants when they arrived on the Phoenix. One night Maria Luisa found herself talking to a fellow 18-year-old – a cultured, English-speaking Syrian girl named Rasha, who was travelling on her own after both her parents were killed. “I looked at her and I looked at me, and I said: ‘What if I was Rasha? What if I had to see people being killed by snipers every day, seeing my parents killed right before my eyes?’
I would want to leave,” she explained. “She was so brave. She travels, she gets on a boat. And she says: ‘Either I am going to make it, or I am going to die trying.’” The more the rescues went on, and the more stories they heard, the deeper the family and crew found themselves bound to the mission. “You might not get on the Phoenix as a humanitarian,” Catrambone said. “But you are one when you get off.”
Better get going on this. Unless you’re intent on causing riots.
The UN refugee agency says it will struggle to provide basic supplies to a wave of refugees in the Greek islands if Greece’s banking system fails in the coming days. Greece’s islands have in recent weeks overtaken Italy as the primary entry point for refugees to Europe, with nearly 80,000 arriving this year from Turkey – a rate six times the equivalent figure from 2014, according to the UN. More than 9,000 have arrived in the past week alone, and a UN refugee agency spokeswoman on the island of Lesbos, which has taken in around half of the arrivals, says the organisation’s ability to give them items as basic as bottles of water and sleeping mats is at risk.
Speaking from Lesbos, the UN’s Laura Padoan said: “The precarious financial situation means that if we can’t access cash readily, it could threaten our programmes because we pay our suppliers through Greek accounts … We do depend on having ready cash. A lot of programmes depend on cash purchases of Greek goods.” The Greek government has been overwhelmed by the unprecedented wave of refugees on its eastern islands, many of which lie just a few miles from the Turkish coast, allowing refugees largely from the war-torn countries of Syria, Iraq and Afghanistan to risk the short journey in rubber boats. As many as 19 are feared to have drowned in recent days.
Greek officials are struggling to process the refugees in a timely manner, meaning they are unable to quickly reach the mainland and further stretch resources on the islands. Some islanders have set up their own makeshift camps for migrants. The government’s own camps are vastly overcrowded – with around 5,000 refugees squeezed into squalid conditions at the Kara Tepe camp on Lesbos. In at least some camps, the government has been unable to pay local caterers to provide food to the refugees, forcing the army to step in to provide emergency food at one camp on Samos island on Tuesday. In the Greek parliament this week, migration minister Tasia Christodoulopoulou admitted the situation could lead to “imminent riots by people demanding food”.