Jul 182015
 
 July 18, 2015  Posted by at 12:59 pm Finance Tagged with: , , , , , , , , ,  


NPC “Georgetown-Marines game” 1923

I started writing this on my last night in Athens for now, Wednesday, and had no time to finish it then:

On the eve of my temp absence from this great city, a few things. I could simply extend my stay, which might be slightly cheaper, but A) flights to Athens cost less all the time, and B) I have to go see my mom in Holland, who’s not doing well at all. On top of that, Nicole arrived in Holland last week, and we might as well just fly out back here together in a few weeks.

My ‘job’ here is by no means done, anyway. Because of the general strike today, another Solidarity Clinic that I wanted to donate some of your AE for Athens Fund money to, is closed (update on the Fund tomorrow). Parliament is debating the latest Troika strangle plan as we speak, and who knows what tomorrow will bring? An entire economy is being deliberately suffocated, and all in all it’s just total madness. Quiet madness, though (update: and then the riots broke out..).

Two things I’ve been repeatedly asked to convey to you are that:

1) you can’t trust any Greek poll or media, because the media are so skewed to one side of the political spectrum, and that side is not SYRIZA (can you imagine any other country where almost all the media are against the government, tell outright lies, use any trick in and outside the book, and the government still gets massive public support?!),

and:

2) Athens is the safest city on the planet. I can fully attest to that. Not one single moment of even a hint of a threat, and that in a city that feels very much under siege (don’t underestimate that). And people should come here, and thereby support the country’s economy. Don’t go to Spain or France this year, go to Greece. Europe is trying to blow this country up; don’t allow them to.

Then: I was reminded of something a few days ago that has me thinking -all over- ever since. That is, to what extent has Greece simply been a set-up, and a lab rat, for years now? I’m not sure I can get to the bottom of this all in one go, but maybe I don’t have to either. Maybe the details will fill themselves in as we go along.

One Daniel Neun wrote on Twitter, in German, translation mine, that:

Greece’s 2009 deficit was retroactively manipulated upward through a collaboration of the EU, IMF, PASOK, Eurostat (EU statistics bureau) and Elstat (Greek statistics bureau). That is the only reason why interest rates on Greek sovereign bonds skyrocketed in the markets, which in turn made Greek debt levels skyrocket.

The political and media narrative has consistently been that Greece “unexpectedly” and “all of a sudden” in late 2009, when a new government came in, was “found out” to have much higher debt levels than “previously thought”. And then had to appeal for a massive bailout. Obviously, Neun’s version is quite different. His doesn’t look like just another wild assumption, since he names a few sources, among which this from Kathimerini dated January 22, 2013:

Greece’s Statistics Chief Faces Charges Over Claims Of Inflated 2009 Deficit Figure

The head of Greece’s statistics service, Andreas Georgiou, and two board members at the Hellenic Statistical Authority (ELSTAT) are to face felony charges regarding the alleged manipulation of the country’s deficit figure in 2009.

Financial prosecutors Spyros Mouzakitis and Grigoris Peponis have asked a special magistrate who deals with corruption issues to investigate whether claims that Georgiou, the head of the national accounts department Constantinos Morfetas and the head of statistical research, Aspasia Xenaki, were responsible for massaging the figures so that Greece’s deficit appeared larger than it actually was, triggering Athens’s appeal for a bailout.

The three face charges of dereliction of duty and making false statements. Ex-ELSTAT official Zoe Georganta caused a storm in 2011 when she accused Georgiou of pumping up Greece’s deficit to over 15% of GDP, which was more than three times higher than the government had forecast in 2009.

However, she told a panel of MPs last March that she knew of no organized plan behind this alleged manipulation of statistics, instead blaming the politicians that handled Greece’s passage to the EU-IMF bailout of “inexperience, inability or maybe some of them profited.” The former ELSTAT official claimed that the deficit for 2009 should have been 12.5% of GDP and could have easily been brought to below 10% with immediate measures.

As well as this from Greek Reporter dated June 18 2015:

The 2009 Deficit Was Artificially Inflated, Former ELSTAT Official Tells Greek Parliament

Greece’s deficit figures for 2009 and 2010 were deliberately and artificially inflated, and this was at least partly responsible for the imposition of bailouts and austerity programs on the country, a former vice president of the Hellenic Statistical Authority (ELSTAT), Nikos Logothetis, said.

Testifying before a Parliamentary Investigation Committee on examining and clarifying the conditions under which Greece entered its bailout programs and the accompanying Memorandums, Logothetis called ELSTAT president Andreas Georgiou a “Eurostat pawn” that had converted the statistics service into a “one-man show.” He also accused Georgiou of bending the rules and “using tricks” to bump up the deficit’s size.

“A lot of the criteria were violated in order to include public utilities in the deficits. The deficit was enlarged even more by the one-sided fiscal logic of ELSTAT president Andreas Georgiou. It should not have been above 10%. The ‘alchemy’ that was carried out demolished our credibility, drove spreads sky high and we were unable to borrow from the markets. The enlargement of the deficits legitimized the first Memorandum and justified the second for the implementation of odious measures,” Logothetis said.

Noting that this was the third time he was testifying, Logothetis pointed out that Georgiou’s practices had been questioned by himself and other ELSTAT board members (most prominently by Zoe Georganta) but Georgiou had chosen to silence them so that the deficit figure was released only with his own approval and that of Eurostat.

Logothetis claimed that Georgiou had avoided meeting with ELSTAT’s board, even after Logothetis resigned, because the board’s majority would have questioned his actions. He also insisted that “centers” outside of Greece had played a role and needed someone on the “inside,” while he suggested that “someone wanted to bring the IMF into Europe.”

The former ELSTAT official said he was led to this conclusion by “seeing spreads rise as a result of the statistical figures until we reached a real enlargement of the deficits, violating the until-then not violated Eurostat criteria.”

A view from the ground was provided earlier today by my friend Dimitri Galanis in Athens when I asked him about this:

Let me help you a bit: September 2008 Wall Street crashes. For a whole year the whole planet is furious against TBTF banks and filthy rich bank CEOs. A year later – 2009 – the Deus ex machina – Georges Papandreou, then the newly elected Greek PM, “discovers” all of a sudden that Greek debt was bigger than everybody “imagined”.

The EU is “surprised” – Oh nobody knew!!! [everybody knew] Et voila: The Wall Street crisis becomes the Greek and Eurozone crisis. IMF gets a footing in the eurozone. Wall Street, French and German banks get bailed out. Greece suffers – Eurozone on the brink of collapse.

Greece is the tree – the rest is the forest .

And then I saw a piece by former US Secretary of Labor Robert Reich yesterday:

How Goldman Sachs Profited From the Greek Debt Crisis

The Greek debt crisis offers another illustration of Wall Street’s powers of persuasion and predation, although the Street is missing from most accounts. The crisis was exacerbated years ago by a deal with Goldman Sachs, engineered by Goldman’s current CEO, Lloyd Blankfein. Blankfein and his Goldman team helped Greece hide the true extent of its debt, and in the process almost doubled it.

And just as with the American subprime crisis, and the current plight of many American cities, Wall Street’s predatory lending played an important although little-recognized role. In 2001, Greece was looking for ways to disguise its mounting financial troubles. The Maastricht Treaty required all eurozone member states to show improvement in their public finances, but Greece was heading in the wrong direction.

Then Goldman Sachs came to the rescue, arranging a secret loan of €2.8 billion for Greece, disguised as an off-the-books “cross-currency swap”—a complicated transaction in which Greece’s foreign-currency debt was converted into a domestic-currency obligation using a fictitious market exchange rate. As a result, about 2% of Greece’s debt magically disappeared from its national accounts.

For its services, Goldman received a whopping €600 million, according to Spyros Papanicolaou, who took over from Sardelis in 2005. That came to about 12% of Goldman’s revenue from its giant trading and principal-investments unit in 2001—which posted record sales that year. The unit was run by Blankfein.

Then the deal turned sour. After the 9/11 attacks, bond yields plunged, resulting in a big loss for Greece because of the formula Goldman had used to compute the country’s debt repayments under the swap. By 2005, Greece owed almost double what it had put into the deal, pushing its off-the-books debt from €2.8 billion to €5.1 billion.

In 2005, the deal was restructured and that €5.1 billion in debt locked in. Perhaps not incidentally, Mario Draghi, now head of the ECB and a major player in the current Greek drama, was then managing director of Goldman’s international division. Greece wasn’t the only sinner. Until 2008, EU accounting rules allowed member nations to manage their debt with so-called off-market rates in swaps, pushed by Goldman and other Wall Street banks.

In the late 1990s, JPMorgan enabled Italy to hide its debt by swapping currency at a favorable exchange rate, thereby committing Italy to future payments that didn’t appear on its national accounts as future liabilities. But Greece was in the worst shape, and Goldman was the biggest enabler.

Undoubtedly, Greece suffers from years of corruption and tax avoidance by its wealthy. But Goldman wasn’t an innocent bystander: It padded its profits by leveraging Greece to the hilt—along with much of the rest of the global economy. Other Wall Street banks did the same. When the bubble burst, all that leveraging pulled the world economy to its knees.

Even with the global economy reeling from Wall Street’s excesses, Goldman offered Greece another gimmick. In early November 2009, three months before the country’s debt crisis became global news, a Goldman team proposed a financial instrument that would push the debt from Greece’s healthcare system far into the future.

This time, though, Greece didn’t bite.

As we know, Wall Street got bailed out by American taxpayers. And in subsequent years, the banks became profitable again and repaid their bailout loans. Bank shares have gone through the roof. Goldman’s were trading at $53 a share in November 2008; they’re now worth over $200. Executives at Goldman and other Wall Street banks have enjoyed huge pay packages and promotions. Blankfein, now Goldman’s CEO, raked in $24 million last year alone.

Meanwhile, the people of Greece struggle to buy medicine and food.

Note: when Reich says that “..Goldman wasn’t an innocent bystander: It padded its profits by leveraging Greece to the hilt..”, he describes a tried and true Wall Street model. This is how investment firms like for instance Mitt Romney’s Bain Capital operate: take over a company, load it up with (leveraged) debt, strip its assets and then throw the debt-laden remaining skeleton back unto the public sphere. In this sense, the Troika and its Wall Street connections function as a kind of venture/vulture fund with regards to Greece. Nothing new, other than it’s never been perpetrated on a European Union country before.

So what do you think: was Greece set up to fail from at least 6 years ago, has it all been a coincidence, or did they maybe just get what they deserve?

Here’s a short timeline. In October 2009, Papandreou becomes the new PM. Shortly thereafter, he “discovers” with the help of Elstat head Andreas Georgiou that the real Greek deficit is not the less than 5% the previous government had predicted, but more than 15%. Within months, salaries and pensions or cut or frozen and taxes are raised. That apparently doesn’t achieve the intended goals, so Papandreou asks for a bailout.

Within 10(!) days, ECB, EU and IMF (aka Troika) fork over €110 billion. The conditions the bailout comes with, cause the Greek economy to fall ever further. Moreover, everyone today can agree that no more than 10% of the €110 billion ever reaches Greece; the remainder goes to the banks that had lent it too much money to begin with.

The remaining investors -the big bailed out banks had fled by then- agree to a 50% haircut, with even more odious conditions for Greece. Papandreou wants a referendum over this and is unceremoniously removed. Technocrat Lucas Papademos is appointed his successor. As Athens literally burns in protest, a second bailout of €136 billion is pushed through. More and deeper austerity follows.

By now, a large segment of the population is unemployed, and pensions are a fraction of what they once were. In an economy that depends to a large extent on domestic consumption, there could hardly be a bigger disaster. Papademos must be replaced because he has no support left, and Samaras comes in.

He allegedly posts a budget surplus, but that is somewhat ironically only possible because the entire economy is no longer functioning. Greek debt-to-GDP rises fast. The Greek people this time revolt not by fighting in the streets, but by electing Syriza.

And that brings us back to January 25 2015. And eventually to Thursday, July 16 2015.

What have the bailouts achieved? Well, the Greek economy is doing worse than ever, and the people are poorer than ever. Both have a lot more bad ‘news’ to come. So says the latest bailout imposed on Tsipras at gunpoint.

To go back to 2009, if the Elstat people who testified -multiple times- before the Greek Parliament were right, there would have been either no need for a bailout, or perhaps a much smaller one. Which, crucially, would not have required IMF involvement.

It therefore doesn’t look at all unlikely that Greece was saddled with an artificially raised deficit, and that the intention behind that, all along, was to get the Troika ‘inside’ for the long run. So the country could be stripped of all its assets.

The bailouts needed to be as big as they were to 1) successfully make the international banks ‘whole’ that had lent as much as they had into the Greek economy, 2) get the IMF involved, 3) and absolve the notorious -and cooperative- domestic oligarchy from any pain. And make all the usual suspects a lot more money in the process.

The added benefit was that it was obvious from the start that the Greeks would never be able to pay the Troika back, and would be their debt slaves for as long as the latter wanted, giving up all their treasured possessions in the process.

Or, alternatively, it could all have been a terribly unfortunate coincidence. It would be a curious coincidence, though.

Jul 162015
 
 July 16, 2015  Posted by at 4:27 am Finance Tagged with: , , , , , ,  


John Collier Grandfather Romero, 99 years old. Trampas, New Mexico 1943

China’s Debt-to-GDP Ratio Just Climbed to a Record High (Bloomberg)
China Stock Suspensions Opens Can Of Derivatives Worms (Reuters)
Greek Lawmakers Pass Austerity Bill Despite Strong SYRIZA Dissent (Kathimerini)
EMU Brutality In Greece Has Destroyed The Trust Of Europe’s Left (AEP)
Lexit: The Left Must Now Campaign To Leave The EU (Guardian)
There’s No End In Sight To The Greco-European Drama (Guardian)
Shock Announcement From IMF Reveals Greece Was Duped by Europe (EI)
The EU Shot Its Greek Hostage, Now Spain Is Nervous (Fiscal Times)
Greece’s Lessons for an Indebted World (WSJ)
13 Short Lessons From The Greek Crisis (J.W. Mason)
The Euro-Summit ‘Agreement’ on Greece – Annotated (Yanis Varoufakis)
I Love Germany. And Greece. And Especially Finland. (Waldman)
IMF Chief: Greek Bailout Talks a ‘Colossal’ Challenge Going Forward (WSJ)
Greek Pudding (Jim Kunstler)
What’s Wrong with Our Monetary System and How to Fix It (Kuzminski)
Kiwi Dollar Falls As Dairy Prices Plunge At Latest Auction (NZ Herald)

Private debt: 207%.

China’s Debt-to-GDP Ratio Just Climbed to a Record High (Bloomberg)

While China’s economic expansion beat analysts’ forecasts in the second quarter, the country’s debt levels increased at an even faster pace. Outstanding loans for companies and households stood at a record 207% of GDP at the end of June, up from 125% in 2008, data compiled by Bloomberg show. China’s stimulus, including interest rate and reserve-ratio cuts to shore up growth, threatens to delay the country’s efforts to reduce its debt, posing risks to the financial stability of the world’s second-largest economy. Nonperforming loans had already climbed by a record 140 billion yuan ($23 billion) in the first quarter as the expansion in gross domestic product slowed.

“It’s quite an alarming issue,” says Bo Zhuang, a China economist at London research firm Trusted Sources. “The government is trying very hard to slow down the pace of the leveraging up, but they are not deleveraging. The debt-to-GDP ratio will continue to go up.”
China’s economy expanded 7% in the three months through June from a year earlier, the National Bureau of Statistics said Wednesday, unchanged from the first quarter and beating economists’ estimates of 6.8%. Corporate and household borrowing rose 12% in June from a year earlier. China went on an unprecedented borrowing binge following the 2008 global financial crisis and has been struggling to clean it up ever since. Rising debt will keep slowing the country’s growth, according to Ruchir Sharma at Morgan Stanley

Read more …

Do we even want to know?

China Stock Suspensions Opens Can Of Derivatives Worms (Reuters)

The suspension of hundreds of mainland China stocks during a market plunge from mid-June could lead to disputes between banks and their clients over the valuation of billions of dollars of equity derivatives. Banks dealing in derivatives are concerned that valuation terms covering market disruptions in other Asian markets, such as trading halts when stocks move up or down by the exchange’s daily range limits, might not apply to the wave of stock suspensions in China. As China’s stocks tumbled by 30 percent in less than a month, around 1,500 listed companies, more than half the market, suspended their own stocks in a bid to sit out the rout.

“It’s not yet clear if the existing disruption event language for other Asian jurisdictions can be applied to China or how the existing disruption definitions for limit-up, limit-down would apply to suspended stocks,” said Keith Noyes, regional director, Asia Pacific, at the International Swaps and Derivatives Association (ISDA), which represents the world’s largest derivatives dealers. Noyes and an in-house lawyer at a major Asian dealer said banks were reviewing the issue. “There could be wrangling over issues such as whether the Shanghai composite index closing price, which would generally be the easiest to use to value contracts, is a good price or a disrupted price, given that so many stocks are now suspended,” said Noyes.

Dealers have written at least $150 billion of outstanding over-the-counter (OTC) equity derivatives on mainland-listed shares, according to estimates by Shanghai-based investment consultancy Z-Ben Advisors. When drawing-up such instruments, most dealers draw on ISDA standard definitions as a basis for valuing equity derivative positions when the underlying stock market is disrupted. The language was drawn up in 2008 following disruptions in the South Korean and Taiwan markets, when China’s markets were all but closed to outside investors, and applies to a number of Asian markets, including Taiwan, South Korea, Singapore, and Hong Kong, but not mainland China. Noyes said the dealer community may need to reach an agreement on whether it could be extended to China to help more easily resolve disputes.

Read more …

Major shuffle coming?!

Greek Lawmakers Pass Austerity Bill Despite Strong SYRIZA Dissent (Kathimerini)

Greek Parliament passed the prior actions demanded by lenders to pave the way for bridge financing and a third bailout in a vote during the early hours of Thursday morning. A total of 229 MPs voted for the measures, 64 voted against, six voted present and one was absent. Prime Minister Alexis Tsipras saw 32 of his MPs vote against the measures, while another six abstained. All of the deputies from coalition partner Independent Greeks backed the legislation. This means that the number of coalition lawmakers supporting the bill remained above the 120-mark, which is the level below which the government is considered not to have a mandate to continue.

Before the vote, Tsipras said the agreement with lenders was the only viable option open to him and challenged rebels within his party to propose a better one. In his speech before Parliament, Finance Minister Euclid Tsakalotos sought to defend Greece’s agreement with creditors as a necessary evil. “It’s a difficult agreement, a deal which only time will show if it is economically viable,” he said. “I don’t know if we did the right thing, but I know we felt we had no choice,” he said. “We never said this was a good agreement,” he added, noting that “a lot will depend on how politicians will handle the many changes included in the agreement.”

Economy Minister Giorgos Stathakis, for his part, declared that “these are moments for responsibility,” noting that everyone “must state clearly where they stand on Greece’s dilemma. The government received a half-finished second bailout which was frozen and was confronted by non-viable system,” he said. SYRIZA’s parliamentary spokesman Nikos Filis accused eurozone officials of executing a “coup” at a summit in Brussels on Monday when the agreement was reached. Their aim, he said, was “to topple the Greek government, to give the message that a leftist administration cannot survive in Europe.”

Read more …

“The lesson that they will draw from this debacle is: negotiating with Germany is a waste of time; be willing to act unilaterally, be willing to default unilaterally, have a plan for achieving a primary surplus if you haven’t already achieved it, have a hard default and euro exit option in your back pocket, and be willing to use it at the first sign of hassle from the ECB,”

EMU Brutality In Greece Has Destroyed The Trust Of Europe’s Left (AEP)

The EU establishment henceforth faces what it has always feared: a political war on two fronts at once. It is long been fighting an expanding coaltion of free marketeers, parliamentary “souverainistes”, anti-immigrant populists on the Right. Its has now lost its remaining emotional hold on the Left after the scorched-earth treatment of Greece over the past five months – culminating in the vindictive decision to impose yet harsher terms on this crushed nation just days after its cri de coeur in a landslide referendum.
This has been coming for a long time. We Conservatives have watched in disbelief as one Socialist party after another immolates itself on the altar of monetary union, defending a project that favours the elites – a “bankers’ ramp”, as the old Left used to call it.

We have watched our friends on the Left apologise for 1930s policies. We have seen them defend a regime of pro-cyclical fiscal cuts imposed on the whole eurozone by a handful of “Ordoliberal” reactionaries in the German finance minstry. To the extent that these gentlemen know what they are doing – and most Nobel economists would dispute that – they have certainly not risen to the challenge of pan-EMU leadership. As ex-official Philippe Legrain writes in Foreign Policy, Germany is proving to be a “calamitous hegemon”. By a twist of fate, the Left has let itself become the enforcer of an economic structure that has led to levels of unemployment once unthinkable for a post-war social democratic government with its own currency and sovereign instruments.

It has somehow found ways to justify a youth jobless rate still running at 42pc in Italy, 49pc in Spain and 50pc in Greece, despite mass emigration. It has acquiesced in the Long Slump of the past six years, deeper in aggregate than the span from 1929 to 1935. It meekly endorsed the EU Fiscal Compact, knowing that it imposes a legal requirement on eurozone states to slash their public debt by 1.5pc of GDP in France, 2pc in Spain and 3.5pc in Italy and Portugal, every year for the next two decades – a formula for near permanent depression. It outlaws Keynesian economics, and indeed classical economics. It is a doomsday construct. This is what they agreed to, and what they have reluctantly defended, because until now they dared not question the sanctity of EMU.

And so the once mighty Dutch Labour Party has been reduced to a pitiful relic. Pasok has been obliterated in Greece. The Spanish Socialist Workers’ Party has lost its left-wing to the rebel Podemos movement, freshly victorious in Barcelona. France’s Socialist leader, Francois Hollande, has been languishing at 24pc in the polls as the French working class defects to the Front National. Yet events in Greece have finally broken the spell. “Progressives should be appalled by EU’s ruination of Greece. It’s time to reclaim the Eurosceptic cause,” writes Owen Jones in a remarkable piece in The Guardian. The new term “Lexit” is gaining currency. The voices of Left are uneasy. Their instincts are to oppose everything that UKIP stands for. “At first, only a few dipped their toes in the water; then others, hesitantly, followed their lead, all the time looking at each other for reassurance,” Mr Jones writes.

Read more …

Perhaps “Leftit” is a better term. And not just in Britain.

Lexit: The Left Must Now Campaign To Leave The EU (Guardian)

At first, only a few dipped their toes in the water; then others, hesitantly, followed their lead, all the time looking at each other for reassurance. As austerity-ravaged Greece was placed under what Yanis Varoufakis terms a “postmodern occupation”, its sovereignty overturned and compelled to implement more of the policies that have achieved nothing but economic ruin, Britain’s left is turning against the European Union, and fast. “Everything good about the EU is in retreat; everything bad is on the rampage,” writes George Monbiot, explaining his about-turn. “All my life I’ve been pro-Europe,” says Caitlin Moran, “but seeing how Germany is treating Greece, I am finding it increasingly distasteful.” Nick Cohen believes the EU is being portrayed “with some truth, as a cruel, fanatical and stupid institution”.

“How can the left support what is being done?” asks Suzanne Moore. “The European ‘Union’. Not in my name.” There are senior Labour figures in Westminster and Holyrood privately moving to an “out” position too. The list goes on, and it is growing. The more leftwing opponents of the EU come out, the more momentum will gather pace and gain critical mass. For those of us on the left who have always been critical of the EU, it has felt like a lonely crusade. But left support for withdrawal – “Lexit”, if you like – is not new. If anything, this new wave of left Euroscepticism represents a reawakening. Much of the left campaigned against entering the European Economic Community when Margaret Thatcher and the like campaigned for membership.

It would threaten the ability of leftwing governments to implement policies, people like my parents thought, and would forbid the sort of industrial activism needed to protect domestic industries. But then Thatcherism happened, and an increasingly battered and demoralised left began to believe that the only hope of progressive legislation was via Brussels. The misery of the left was, in the 1980s, matched by the triumphalism of the free marketeers, who had transformed Britain beyond many of their wildest ambitions, and began to balk at the restraints put on their dreams by the European project.

Read more …

“The real disaster is if everything stays as it is..”

There’s No End In Sight To The Greco-European Drama (Guardian)

The last act of the classical Greek tragedy ends with two outcomes: disaster and catharsis. In the current Greek debt drama, however, there has been no catharsis. The purification has failed to materialise. It would have meant that both sides had seen the error of their ways and come to their senses. Instead, the madness continues: Greece will take on €86bn of debt in addition to the existing €317bn (not including the emergency loans from the ECB). From Angela Merkel through François Hollande to Alexis Tsipras, all eurozone government leaders assert that Greece will emerge from over-indebtedness more quickly this way and will be economically healed in three years. Europe pretends that the bailout will help. And Greece acts as if everything is fine now.

The Brussels summit was not a disaster, though. Greece does not fall into chaos and the euro remains stable. Maybe Walter Benjamin, who once said: “The real disaster is if everything stays as it is,” was right. When it comes to classical drama, it seems we have not reached the final act after all. The fourth act, the “retardation”, continues. The action is slowing down, with suspensory moments: the troika returns to Athens and monitors the situation, while the Greek authorities delay and tinker about again. Until the action moves into a phase of extreme tension towards the finale. When will that be? Merkel hopes it will be after the next parliamentary elections.

For the Greeks, there is more at stake in this drama than there is for the Germans. The Germans will lose a lot of money at the most. The Greeks, however, have long since come under the tutelage of the donors. What Tsipras signed on Monday is the permanent abandonment of Greek sovereignty. Athens will be told what budget surplus it must achieve and what taxes it should raise. Fiscal sovereignty is broken. The constitution will be interfered with to impose pension cuts. The administration and judiciary must be rebuilt according to the standards of the northerners. It is not about a bailout loan, but it is avowedly about nation building, as if Greece were a failed state. Even the IMF has condemned the deal as unworkable and said the levels of debt are unsustainable.

Greek culture is being encroached upon in every way. The Sunday opening of shops is being enforced, whether the still strongly religious population likes it or not. Consumption is more important than orthodox religion – that is the credo of the north. In international law the internal affairs of a nation are largely taboo; in the euro protectorate there are no taboos.

Read more …

And more than once.

Shock Announcement From IMF Reveals Greece Was Duped by Europe (EI)

The IMF has fiercely criticised the bailout deal offered to Greece by the Eurozone, revealing that the Eurogroup of finance ministers had ignored its advice when negotiating with Greece over the weekend. In a communique released last night, the IMF said Greece’s public debt was now “highly unsustainable” before concluding: “Greece’s debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far.” It now appears that the deal, rather than seeking to help the Greek economy, was designed principally to teach Greece a lesson and remove Syriza from power. Today the Greek parliament votes on whether to accept the austerity deal that it was bullied into over the weekend during negotiations dominated by Germany.

Certainly, the IMF bombshell is likely to stiffen the resolve of the those Syriza MPs such as Papas Lapavitsas, an economics Professor from the School of African and Asian Studies (SOAS) in London, who have long argued that a Greek exit from the euro is the only realistic choice open to revive the Greek economy. He’s previously outlined these ideas in articles he has written for the Guardian and for ThePressProject. Regardless of the immediate outcome of the vote, the whole drama has weakened transparency and democracy in Europe. The euro project is now clearly seen as a failing project and its eventual break-up appears inevitable to many. The only questions remains when and how exactly it will occur.

Read more …

“I don’t take hostages I’m not willing to shoot..”

The EU Shot Its Greek Hostage, Now Spain Is Nervous (Fiscal Times)

In a battle over banking regulation at the end of the Clinton administration, former Republican Sen. Phil Gramm of Texas remarked on the importance of being willing to inflict pain when negotiations don t go your way. “I don’t take hostages I’m not willing to shoot”, Gramm explained. The point Gramm was making is that once you demonstrate that you don’t make idle threats, future negotiations are easier. The treatment of Greece by its European creditors may have had a similar effect. In Spain, which is even more indebted than Greece, the leftist Podemos Party has been gaining influence, in part by making promises in line with those made by Greece’s Syriza Party. In May, Pablo Iglesias, the leader of Podemos, demanded that Spain’s debt be restructured and that debt payments be tied to economic growth.

“For Spain to be able to meet its international obligations, we have to link debt payments to economic growth and expansive job creation policies”, he said. A similar argument had been made by former Greek finance minister Yanis Varoufakis, who so aggravated his European counterparts that he was eventually replaced. The reaction of Podemos to the punishing deal to enable another Greek bailout was telling. After battling to the bitter end, Syriza was forced to accept a humiliating offer from its creditors. In a deal primarily driven by Germany and other northern European countries, Greeks face pension cuts, huge tax increases, reduced services, and the forced sale of $50 billion worth of the country s physical assets.

In Madrid on Tuesday, it was as though the Eurogroup, fresh from dealing with Greece, had turned to Spain with smoking gun in hand and asked, “What were you saying”? The answer from Podemos top economic policy officer, Nacho Alvarez, was essentially, “Who, me? Nothing. Nothing at all.” Speaking to reporters, Alvarez said that debt restructuring wasn t really necessary after all. ‘Spain, he said, is not Greece’. Or so he must fervently hope. “Greece and Spain are different economies in very different situations which demand different economic strategies”, Alvarez said at a press conference. He added, “Podemos and Syriza have different economic approaches and said that he is confident the country’s current programs to stimulate economic growth will allow it to manage its debts.

Whether Podemos has detected a significant shift in the country s economic future over the last two months or has had a change of heart more related to the Eurogroup s treatment of Greece is up for debate. However, if part of the aim of Greece’s creditors was to punish Syriza pour encourager les autres, there seems to be little room for debate at all. It worked. In the near term, at least, it worked.

Read more …

Defaults come in clusters.

Greece’s Lessons for an Indebted World (WSJ)

Sovereign defaults are like cockroaches: There’s seldom just one. Greece’s debts are so high, its recession so deep and its economy so uncompetitive, it’s easy to play down the lessons it offers to the rest of the world. But while Greece is exceptional, the entire world is suffering from an overhang of debt. Since 2007, public debt in advanced economies (including national, state and local governments) has risen by 35 percentage points of total economic output, according to the McKinsey Global Institute. In many countries it has risen by far more: 47 points in Italy, 50 in Britain, 63 in Japan, 83 in Portugal. A country can shed such steep debt several ways: via austerity, economic growth and low real (that is, inflation-adjusted) interest rates.

More common than appreciated, though, is the more radical step of restructuring debt by reducing interest, lengthening the maturity or slashing the amount owed. “Will Greece be the last sovereign debt restructuring of this cycle? No,” says Susan Lund of McKinsey. “Look around the world and you can see other countries with very toxic combinations of high debt and low growth.” In their 2009 history of financial crises, Harvard University economists Carmen Reinhart and Kenneth Rogoff observe that “country defaults tend to come in clusters.” In the 1930s, the Great Depression triggered defaults throughout Europe and Latin America. In the 1980s, plunging commodity prices triggered a wave of defaults by emerging economies that had borrowed heavily from Western banks.

Noteworthy defaults this time around have been rare: they include Greece, Cyprus and Argentina (the latter linked to its prior-decade restructuring). The quietude is unlikely to last. Ukraine is now seeking to restructure its debts to private investors, as is Puerto Rico (which, to be sure, is not a sovereign country). Opposition politicians in Ireland, Spain and Italy have in the past pressed to restructure some of those countries’ debts, which according to McKinsey stood last year at 115%, 132% and 139% of gross domestic product, respectively.

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“The euro system today is an instrument in the hands of European capital to roll back the gains of social democracy.”

13 Short Lessons From The Greek Crisis (J.W. Mason)

The deal, obviously it looks bad. No sense in spinning: It’s unconditional surrender. It is bad. There’s no shortage of writing about how we got here. I do think that we — in the US and elsewhere — should resist the urge to criticize the Syriza government, even for what may seem, to us, like obvious mistakes. The difficulty of taking a position in opposition to “Europe” should not be underestimated. It’s one of the ironies of history that the prestige of social democracy, earned through genuine victories by and for working people, is now one of the most powerful weapons in the hands of those who would destroy it. Personally I don’t think I can be a useful contributor to the debate about Syriza’s strategy. But we also need to understand the economic logic of the situation. So, 13 theses on the Greek crisis and the crisis next time. These points are meant as starting points for further discussion. I will try to write about each of them in more detail, as I have time.

1. The euro system today is an instrument in the hands of European capital to roll back the gains of social democracy. On twitter, Marshall Steinbaum says, “That is why everyone supports the euro: as a route around their domestic political difficulties, ie, voting.” I think that’s right, I think the overriding goal of the system today is to create a set of apparently objective constraints that allow elected governments to take unpopular measures while saying “we had no choice, the markets require it.” I’ve written about this here and here.

2. A great myth of the euro is that it’s been good for Germans. It’s a puzzle, the kind of story that calls for dialectics, that Germany has both Europe’s strongest working class and most advanced social democracy, and its most rigidly conservative elite. For a while those forces were roughly balanced, but over the past generation German workers have done the worst, absolutely and relatively, of any country in Europe. The north-south divide in Europe perhaps analogizes to the racial divide in the US, so perhaps the same slogans apply: Black and white, unite and fight!

3. The euro is not a new gold standard. This is a tricky one — I feel a clear vision here requires one to first see how the euro is a new gold standard, and only then seeing how it isn’t one after all. Despite the dreams of its supporters (and fears of its opponents) the euro system does not provide an automatic constraint on the choices of elected governments. In the abstract, it looks more like Keynes’ proposals at Bretton Woods. Its actual functioning as the enforcement mechanism of neoliberalism, requires the active intervention of the authorities.

4. The ECB is a political actor. You may think that the ECB has violated the norms of independent central banks, or you may think it has revealed their true content. But either way it is actively intervening in the political process to reshape society in fundamental ways, not just following a set of objective rules to fulfill a narrow technical function. It was already evident several years ago that the ECB was selectively withholding support from financial markets to put pressure on elected officials, and now it is undeniable.

Read more …

Brutally honest. Yanis voted NO last night. Can he stay on as MP?

The Euro-Summit ‘Agreement’ on Greece – Annotated (Yanis Varoufakis)

The Euro Summit statement (or Terms of Greece’s Surrender – as it will go down in history) follows, annotated by yours truly. The original text is untouched with my notes confined to square brackets (and in red). Read and weep…

Euro Summit Statement Brussels, 12 July 2015

The Euro Summit stresses the crucial need to rebuild trust with the Greek authorities [i.e. the Greek government must introduce new stringent austerity directed at the weakest Greeks that have already suffered grossly] as a pre- requisite for a possible future agreement on a new ESM programme [i.e. for a new extend-and-pretend loan].

In this context, the ownership by the Greek authorities is key [i.e. the Syriza government must sign a declaration of having defected to the troika’s ‘logic’], and successful implementation should follow policy commitments.

A euro area Member State requesting financial assistance from the ESM is expected to address, wherever possible, a similar request to the IMF This is a precondition for the Eurogroup to agree on a new ESM programme. Therefore Greece will request continued IMF support (monitoring and financing) from March 2016 [i.e. Berlin continues to believe that the Commission cannot be trusted to ‘police’ Europe’s own ‘bailout’ programs].

Given the need to rebuild trust with Greece, the Euro Summit welcomes the commitments of the Greek authorities to legislate without delay a first set of measures [i.e. Greece must subject itself to fiscal waterboarding, even before any financing is offered].

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“Perhaps Hell is full of creditors who failed to fit through the eye of a needle..”

I Love Germany. And Greece. And Especially Finland. (Waldman)

If you are sympathetic to Greece and therefore mad at Germany, you are a sucker. If you think the Greeks are lazier and more dishonest than is usual in the human species, you are also a sucker, and have let a political framing cajole you into bigotry. If you think Germans are unusually cruel, you have also let politics make a bigot of you. If you are taking sides in a conflict framed as nation versus nation, you have already taken the wrong side. You’ve made a basic error, like picking a day when a tricky prosecutor asks whether you committed the murder yesterday or last Thursday. (I presume your innocence.)

You can usually find evidence in support of lots of different narratives. Hypotheses of human affairs are not in general mutually exclusive. Many different stories can in some sense be true. Among those in-some-sense-true narratives, we should choose to emphasize those whose application will lead to better social outcomes over other potentially defensible narratives. That’s why I frequently argue that we should emphasize the role of creditors rather than debtors when lending arrangements go bad. I am not making a claim about God’s view of the subject. Perhaps Hell is a debtors’ prison, and there is truly no greater evil than failing to repay a loan. Perhaps Hell is full of creditors who failed to fit through the eye of a needle. These questions are, I think, beyond the sort of knowledge that should inform policy.

What is clear is that unserviceable debt arrangements, when they accumulate, are enormously costly in human and economic terms, and so we need norms and institutions to regulate credit extension. My view, which I think almost anyone with a passing familiarity with the human species would have to concede, is that people under financial stress make decisions with a view to a shorter-term time horizon and with less capacity to be fastidious than people who have already financed their own immediate term. That is why I argue that we should emphasize norms that hold creditors accountable more than norms that hold debtors accountable. Creditors as a class are capable of regulating the initiation of debt arrangements at lower cost and with greater effectiveness that debtors are.

If we want societies that yield good outcomes, then, we should impose a heavy regulatory burden on creditors, and we must choose moral narratives consistent with that. Perhaps the very worst moral narratives in all of human history are those that allocate blame on the basis of tribal, ethnic, or national groups. There is just never, ever, any sufficient reason to go there in my view. It is perfectly reasonable to hold leaders and governments accountable, as well as the institutional embodiments of interest groups. This is not because leaders individually are worse people than members of the public who may agree with their decisions. I carry no water for fairy tales about the inherent virtue of ordinary folk.

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Shouldn’t be so hard, you know what to do.

IMF Chief: Greek Bailout Talks a ‘Colossal’ Challenge Going Forward (WSJ)

IMF chief Christine Lagarde said she still had hope the eurozone would provide Greece with a substantial restructuring of the country’s debt, but warned of difficult negotiations as officials seek to complete a bailout deal in the weeks ahead. Ms. Lagarde’s comments come a day after the fund warned in a report that Greece needed much more debt relief than European officials have so far considered—an apparent effort to pressure Germany into concrete commitments on debt restructuring. Normally, the fund reserves its most honest assessments for secret, high-level meetings.

But by taking the highly unusual step of making public its bleak appraisals of Greece’s economy, Ms. Lagarde and her lieutenants are drawing a red line for the eurozone: Agree to substantial debt relief or lose the fund’s support and risk a Greek exit from the eurozone. “What I very much hope is that we can all keep to a very tight timetable and we can respond to a challenge that is colossal,” Ms. Lagarde said in an interview on CNN on Wednesday. The debt-restructuring commitments will be key as Athens tries to sell a bailout program that Greece’s voters have already rejected in a recent referendum.

The IMF and its largest shareholder, the U.S., worry that without such a commitment the government won’t be able to persuade the public or parliament to support the major budget cuts and economic overhauls creditors say are vital for the country’s financial salvation. “Up until a few months ago, our partners didn’t discuss the issue of debt restructuring,” said Finance Minister Euclid Tsakalotos. Still, he said it was “too early to judge this deal.” “We will be able to see when talks wind up in 30 to 40 days when we have the final agreement. Then we can all judge it with seriousness for the good of the country,” Mr. Tsakalotos said.

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“The eventual implosion of the European Union, and the banking system hugging its face vampire squid style, will be the financial equivalent of the Black Death..”

Greek Pudding (Jim Kunstler)

The proof of the pudding is in the eating, the old saw goes. This one, alas, is a mélange of several old shit sandwiches bound in a liaison of subterfuge and seasoned with political absurdities. Having been fooled in this bistro before, citizen-patrons leave the table resigned to yet another bout of food poisoning as the music of universal upchuck rings across the European Union from Helsinki to Lisbon What is on display more brightly and clearly than ever, though, is the utter fakery of international banking. The players have lost faith in their own shenanigans. They simply go through the motions now awaiting the political fallout, which is to say the revolt of the people who can still do arithmetic. So, now Greece can supposedly expect another $90Billion-equivalent in new loans on top of the $350Billion-equivalent already racked up.

That’s rich. The loan repayment schedule must look like a map of Middle Earth. Most perplexing — especially for those on summer hiatus in which time seems to be suspended — is the fact that the rescue package will take weeks, perhaps months, to gin up while Greece is right now so utterly paralyzed in bankruptcy that no goods can move, no bills can be paid, and the economy cannot deliver the necessities of daily life. The old refrain, “your check is in the mail” may not be so reassuring to folks who haven’t eaten for three days. Personally, I would expect the gasoline bombs to be flying around Syntagma Square before the middle of the week.

Has anyone noticed the eerie paucity of news emanating from the other hard-luck nations of the EU, namely Spain, Portugal, Italy, and Ireland? The money hole that these deadbeats are in makes Greece look like a dimple in the sand. What, I wonder, is the message to them from the Greek negotiation melodrama? (Lend more money to real estate developers to build more houses and condos that will never be sold? That’ll work!) No, the entire EU debt fiasco harks back to the original meaning of “ring around the rosie” — a theme song of the Black Death. The eventual implosion of the European Union, and the banking system hugging its face vampire squid style, will be the financial equivalent of the Black Death. Kingdoms will fall and social systems will be turned upside down.

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“The idea of giving private banks a monopoly over money creation goes back to seventeenth century England.”

What’s Wrong with Our Monetary System and How to Fix It (Kuzminski)

Something’s profoundly wrong with our global financial system. Pope Francis is only the latest to raise the alarm: “Human beings and nature must not be at the service of money. Let us say no to an economy of exclusion and inequality, where money rules, rather than service. That economy kills. That economy excludes. That economy destroys Mother Earth.” What the Pope calls “an economy of exclusion and inequality, where money rules” is widely evident. What is not so clear is how we got into this situation, and what to do about it. Most people take our monetary system for granted, and are shocked to learn that the government doesn’t issue our money. Almost all of it is created by loans made “out of thin air” as bookkeeping entries by private banks.

For this sleight-of-hand, they charge interest, making a tidy profit for doing essentially nothing. The currency printed by the government – coins and bills – is a negligible amount by comparison. The idea of giving private banks a monopoly over money creation goes back to seventeenth century England. The British government, in a Faustian bargain, agreed to allow a group of private bankers to assume the national debt as collateral for the issuance of loans, confident that the state would be able to service the debt on the backs of taxpayers. And so it has been ever since. Alexander Hamilton much admired this scheme, which he called “the English system,” and he and his successors were finally able to establish it in the United States, and subsequently most of the world.

But money is too important to be left to the bankers. There is no good reason to give any private group a lucrative monopoly over the creation of money; money creation should be the public service most people mistakenly believe it to be. Further, privatized money creation allows a few large banks and financial institutions not only to profit by simply making bookkeeping entries, but to direct overall investment in the economy to their corporate cronies, not the public at large. Ordinary people can get the financing they need only on burdensome if not ruinous terms, leaving them as debt peons weighed down by mortgages, student loans, auto loans, credit card balances, etc. The interest payments extracted from these loans feed the private investment machine of Wall Street finance, represented by the ultimate creditor class: the notorious “one percenters.”

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Not looking good down under.

Kiwi Dollar Falls As Dairy Prices Plunge At Latest Auction (NZ Herald)

The latest GlobalDairyTrade auction was another shocker, the GDT price index dropping by 10.7% from the last sale a fortnight ago and with wholemilk powder prices registering their biggest fall in 12 months Whole milk powder – which is responsible for about 75% of Fonterra’s farmgate milk price – fell in price by 13.1% to US$1,848 a tonne to its lowest level in six years. Fonterra’s current milk price forecast of $5.25 per kg of milksolids for 2015/16 is based on GDT prices reaching about US$3500 a tonne towards the end of this season. Dairy NZ estimates $5.70 a kg to be the breakeven point for most farmers. AgriHQ dairy analyst Susan Kilsby said the auction result was “disastrous”.

“Farmers now face two consecutive seasons of extremely low milk prices,” she said in a commentary. “The majority of farmers can’t breakeven at such a low milk price.” Economists estimate a $1/kg drop in the milk price equates to about $2 billion less income for dairy farmers. “Farm debt levels will rise. Rural communities will suffer as farmers reduce spending to the bare essentials,” Kilsby said. AgriHQ’s theoretical 2015-16 farmgate milk price has decreased to $4.22 per kg milksolids – down 83c on a fortnight ago and $1.27 lower than a month ago. The dairy auction result was responsible for taking around 40 pips off the Kiwi dollar, and the NZ/Australian dollar cross rate dropped to below A89.50c.

Read more …

Jun 302015
 
 June 30, 2015  Posted by at 9:01 pm Finance Tagged with: , , , , , , ,  


Unknown Soldier group, Federal Army 1865

I have plenty to say on the topic of this essay. But the most important thing I think is that I know the EU is blowing up itself by trying to exert far too much influence on the very member nations that made its existence possible. Brussels is a blind city. To see it blowing itself to smithereens makes me very happy.

The flipside is that it will take a lot of pain, and probably even the very wars the EU was originally founded to prevent, to figuratively burn it to the ground. But that, if you’ll alow me, is for another day:

Loads of good words published today on EC President Jean-Claude Juncker and the Greeks, and the crop gets creamier, there’s fake Nobles winners and all joining in, but this is not a new issue, guys, and the lot of you are quite late to the game.

Moreover, y’all Krugmans and Stiglitzes fully missed something that happened while Juncker was ‘speaking’ yesterday: Jean-Claude changed the entire game in one brilliant move. The Greeks I was with, including in Syntagma Square, didn’t notice it either.

What changed is that after Juncker’s speech, the discussion is no longer about data or numbers or facts anymore (but who understands that?), because he never mentioned them.

It’s instead now about fear and fight and flight and various other base instincts, you name them. And that’s not a coincidence. The reason he, and the EU as a whole, resort to this ‘message’ (and no, these guys’ spin teams are not stupid) is to a substantial extent that it’s simply all they have left.

Whatever they had to present in the way of numbers, data etc. has already been rejected by the Greek government 100 times. Since their data have since the start been diametrically opposed to what Syriza stands for and was elected on, which they knew, that should be no surprise, and indeed never was for the Troika.

If you saw Juncker yesterday, and it doesn’t even matter whether he was inebriated or not (does he perhaps wake up drunk, like Yeltsin?), accusing Tsipras of lying -for which he offered no proof- while telling big fat obvious lies himself (“we never asked for pension cuts”) -for which ample proof to the contrary is available-, y’all should realize that a bit more scrutiny of the man is obviously warranted.

I’ve written this story a hundred different times before already: the EU is an organization led by people with, let’s define this subtly and carefully, sociopathic traits (Antisocial Personality Disorder), simply because the EU structure self-selects for such people. As do all other supra-national organizations, and quite a few national ones too, but let’s stick with Brussels for now.

That such people are selected is due in great part to the less than transparent democratic acts and procedures in Brussels. Which allow for ever larger numbers of the same ‘sort’ of people to accumulate. No coincidence there either.

Many of you will say that you can’t say that kind of thing, you can’t call Juncker a sociopath. But the fact is, I can. Who can not say it are Tsipras and Varoufakis, not in public. But I wouldn’t even want to guess at the number of times they’ve done so in private. And it’s high time we lift the veil on this. We are being governed by sociopaths, and that’s by no means just a European thing.

And besides, in general it’s not something that we should refrain from talking about. The reason we do is, I bet you, is because we don’t know how to recognize the traits and characteristics. But in fact, that’s not hard. Just plucked this off the interwebs in 2 seconds flat:


Profile of the Sociopath
• Glibness and Superficial Charm.
• Manipulative and Conning.
• Never recognize rights of others, see their self-serving behaviors as permissible. …
• Grandiose Sense of Self. …
• Pathological Lying. …
• Lack of Remorse, Shame or Guilt. …
• Shallow Emotions. …
• Incapacity for Love, Compassion
• Need for Stimulation.

Anyone want to tell me that does not describe Juncker? Still, the big problem with sociopaths -and do note how I subtly steer away from the term psychopath- is that you can not have an effective negotiation with them. Because once you’ve reached a conclusion -which’ll be hard fought and take forever-, they’ll just renege on it and come back with additional conditions. And then claim you are the one who did that.

Check Juncker. Check the 5 month history of Greece negotiations with the Troika. And note that that’s exactly what they accuse Syriza of. They claim Tsipras suffers from the very disorder they do. That too is typical. It’s a pattern, an MO, it’s how these minds function.

The main one for me is the lack on empathy, compassion. That got 1000s killed in Ukraine, and in the Mediterranean, and now in Greece. All deathly dramas Brussels could have prevented, and chose not to. In Brussels and Berlin, it’s more important that countries toe the line than that their citizens actually survive.

Europe has moved, at a very rapid clip, from a union of 28 different sovereign states, each with their own governments and political views and directions, to one where a top heavy bureaucratic structure, hand-puppeted on by a mere handful member states and systemic banks, dictate what each member state, both its politicians and its citizens, may do or not do. Or think. Electing a left wing government, for instance, equals asking for trouble.

There is no democracy left in Europe, people have no direct say anymore, there’s just a two-pronged dictatorship: there’s Merkel and Hollande, who in the Greek crisis have proven themselves to be mere tools to vested interests, and I’m being extremely kind now, and there’s Juncker and Tusk and Dieselflower, who are really just inconsequential sociopathic wankers that could at any moment be replaced by other hammers and screwdrivers.

In that light, it can only be a fitting irony that it was Juncker in his speech yesterday who said:

“Playing off one democracy against 18 others is not an attitude which is fitting for the great Greek nation.”.

He could have easily followed up with:

Because that’s what we in Brussels have a monopoly on.”

The EU is a club led by people with mental disorders, that panders to special interests. It’s not a union of sovereign nations that hold meetings on how to find common ground. That common ground is now supposedly a given, and no matter what any nation thinks about that matters one bit anymore. Unless it’s Germany or France, and even then. The EU has superseded the nations that formed it. And that can never have been the idea of the people of these nations. As I started writing a few hours earlier today:

It won’t be a surprise anymore that I am not a fan of the European Union. That is to say, I like the idea but not the execution of it, and certainly not the clowns who execute it. However, what happened yesterday is something that even I couldn’t foresee. The Troika volunteered to self-immolate, though the three-headed beast is undoubtedly too full of hubris to understand what it did. Good.

Still, I’m looking at this, thinking: really guys? You really think deliberately sparking chaos in an EU member state on the eve of a democratic referendum is something that will help your case in the long term? Have you thought this through at all? I’m guessing the overriding notion is that threatening and bullying as a model has worked for Brussels so far; but I’m also guessing that the approach has its limits.

Like with many things, there may well be a gaping hole between what can be considered legally justified and what morally justified. But be that as it may, you can’t rule over 28 different sovereign nations with no morals whatsoever. That’s coming back to bite you in the face.

For the ECB to freeze ELA for Greek banks is the biggest blunder it has ever made, and arguably the biggest one it is capable of making in its present mandate. For one thing, it’s a purely political move, and the ECB has no place in politics, or politics inside the ECB.

That the Eurogroup added to the insult a refusal to grant Greece a one-week extension so preparations for the referendum could be executed in peace, tells us loud and clear what it thinks about democracy: it’s a mere afterthought.

Bullying sovereign nations gets old, fast. What you guys are at the moment doing to Greece, you won’t be able to repeat against Italy or Spain. They’ll have you for breakfast.

The EU, which is made up of 28 democratic and sovereign nations, is being run like some absolute kingdom, ostensibly led by a 24/7 drunk. How long do you think that can last?

The very minimum the ECB should have done thi week is to issue an explicit guarantee for all Greek bank deposits up to and including the July 5th referendum. To make sure there would be no bank runs and line ups at ATMs leading up to the vote, which merely represents the purest form of democracy. That is hasn’t speaks volumes. And it can’t possibly have been a monetary deliberation; what happens now is far more costly for the bank, and for European taxpayers, than such a guarantee.

I love that the EU does this, and the Troika with it, because they ensure their own demise. What I don’t like is the people who will fall victim in the interim, starting with the ones here in Greece. If this is the best the EU can do on a human scale, it has no reason to exist. And everyone better get out while they can.

Europe can form a great union, peaceful and prosperous and happy. It has many many wise and smart people who can make that work. But those people are not in Brusssels, where the decisions are being taken. And there’s a reason for that.

Jun 232015
 
 June 23, 2015  Posted by at 10:08 am Finance Tagged with: , , , , , , , , , ,  


Wyland Stanley Marmon touring car at Yosemite 1919

Greece: “It’s Like We Bought A Bad Franchise” (SMH)
Greece Is A Sideshow. The Eurozone Has Failed (Aditya Chakrabortty)
Crisis Is The New Normal For Weary Greeks (Guardian)
Greece’s Red Lines Start To Blur And Bend (Guardian)
Greek Offer To Creditors Runs Into Angry Backlash At Home (Reuters)
Syriza Members Warn Tsipras Against Betrayal With Bailout Compromise (Dow Jones)
On Those Creditor ‘Red Lines’ For Greece (Peter Doyle)
Greek Bank Run Fears Escalate As Capital Controls Openly Discussed (Telegraph)
EU Leaders Weigh Greek Debt Relief as Second Step in Aid Talks (Bloomberg)
The 2 Main Points Of Contention In The Greek Debt Saga (MarketWatch)
Why The Words ‘Civil War’ Are No Longer A Joke In Greece (Paul Mason)
The Euro “Young Adults Living With Their Parents” Zone (Zero Hedge)
Chinese Investors Are Swimming Naked in a Bubble (Pesek)
India Infrastructure: Built On Debt (FT)
“What We Are Paying For Is 20 Years Of Blunder & Neglect” (Simon Black)
Wages of Sin Still Weigh on Big Banks (WSJ)
$140 Billion Bond Fund Goes To Cash, “Braces For Bond-Market Collapse” (ZH)
History in Free Verse (Jim Kunstler)
Pop Goes The Bubble (Dmitry Orlov)
Ukraine President Poroshenko Admits Overthrow of Yanukovych Was a Coup (Zuesse)
What Would Europe Look Like If The Soviets Hadn’t Defeated Hitler? (John Wight)

“.. if Syriza can deliver just 20% of what it promised, it will be in power for 20 years..”

Greece: “It’s Like We Bought A Bad Franchise” (SMH)

The received wisdom is that if this summit does not strike a deal, then there is no hope of avoiding a Greek default on a €1.6 billion IMF loan, due to be repaid by the end of June. And if the loan is not repaid, Greece is likely to crash out of the euro and perhaps even the EU. International lenders are holding “hostage” €7.2 billion of new bailout cash, which will be released when Greece agrees to an economic reform package. However on Sunday the possibility was flagged that leaders could reach a broad, “in principle” deal on Monday, and hammer out the details at the very last minute when the loan is due. Neither side wants Greece to leave the eurozone. And there is said to be just a few billion euros difference in the reform packages being proffered.

But it’s not about the money, says Panagiotakis. “It’s political, it’s about who has control. If Syriza is seen as giving in to their demands, then they have no reason to continue in government. “Syriza – and Greece – doesn’t want a deal where something is given now but taken away again in three months time. Syriza wants a deal, even with compromises, that allows them to continue with policies without being kept hostage.” Syriza’s negotiators are also painfully aware that concessions that would be broadly acceptable to the Greek public may prove unacceptable to its own MPs. Depending on the degree of movement, they could lose as many as 20 MPs from their fragile coalition.

But if they secure a lasting deal, rather than a temporary fix, they will have achieved what many thought impossible. “My neighbours, friends and family say if Syriza can deliver just 20% of what it promised, it will be in power for 20 years,” Panagiotakis says. But the mood at the protest was that “rupture” with Europe was vastly preferable to more government spending cuts. “The cost of living is rising, business life has been ‘disappeared’, there’s no development,” says Bletas. “If we don’t succeed [in getting a better deal] it’s not worthwhile to stay in Europe. It’s like we bought a bad franchise.”

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Every European got poorer.

Greece Is A Sideshow. The Eurozone Has Failed (Aditya Chakrabortty)

Workers in France, Italy, Spain and the rest of the eurozone are now being undercut by the epic wage freeze going on in the giant country in the middle. Flassbeck and Lapavitsas describe this as Germany’s “beggar thy neighbour” policy – “but only after beggaring its own people”. In the last century, the other countries in the eurozone could have become more competitive by devaluing their national currencies – just as the UK has done since the banking meltdown. But now they’re all part of the same club, the only post-crash solution has been to pay workers less. That is expressly what the EC, the ECB and the IMF are telling Greece: make workers redundant, pay those still in a job much less, and slash pensions for the elderly. But it’s not just in Greece.

Nearly every meeting of the Wise Folk in Brussels and Strasbourg comes up with the same communique for “reform” of the labour market and social-security entitlements across the continent: a not-so-coded call for attacking ordinary people’s living standards. This is what the noble European project is turning into: a grim march to the bottom. This isn’t about creating a deeper democracy, but deeper markets – and the two are increasingly incompatible. Germany’s Angela Merkel has shown no compunction about meddling in the democratic affairs of other European countries – tacitly warning Greeks against voting for Syriza for instance, or forcing the Spanish socialist prime minister, José Luis Rodríguez Zapatero, to rip up the spending commitments that had won him an election.

The diplomatic beatings administered to Syriza since it came to power this year can only be seen as Europe trying to set an example to any Spanish voters who might be tempted to support its sister movement Podemos. Go too far left, runs the message, and you’ll get the same treatment. Whatever the founding ideals of the eurozone, they don’t match up to the grim reality in 2015. This is Thatcher’s revolution, or Reagan’s – but now on a continental scale. And as then, it is accompanied by the idea that There Is No Alternative either to running an economy, or even to which kind of government voters get to choose.

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“..half the Greek workforce has no income.”

Crisis Is The New Normal For Weary Greeks (Guardian)

As the “last-chance” talks rolled on towards another “last-ditch” summit possibly at the end of this week, weary Greeks have deadline fatigue. “Unfortunately, we’ve become hardened and accustomed to all this, including the never-ending talks,” said Christos Griogoriades, a physics and IT teacher in Greece’s northern second city of Thessaloniki. Panic about so-called “knife-edge”, “life-or-death” negotiations has become so commonplace that it is almost meaningless to a population whose major concerns are still making ends meet and scrimping for enough to eat. Griogoriades, 42, has friends who have lost good jobs and are now living back in their parents’ rural northern villages, supporting their young children on €40 a month and homegrown vegetables.

“We’ve got to the point where people here look at others, saying: ‘OK, I think I’ve got it bad but that man over there is eating from a garbage can.’ This is going to be our reality for many years, and I think the worst is yet to come.” His parents had lived through extreme post-war poverty and knew how to live very frugally. He felt the younger generation now felt condemned to live through an economic crisis that could stretch on for decades. With the Greek crisis now dragging on longer than the first world war, there have been at least a dozen emergency summits since 2009. The nation has so often been described as perched “on the edge of a cliff” and “staring into the abyss” that it has become part of the depressing new normality, just like cash-strapped hospitals, rocketing unemployment or the families with children living in flats with no running water or electricity because they cannot pay the bills.

Thessaloniki, which has long had the country’s highest jobless rates, now has 65% youth unemployment and around a third of the general workforce out of work. But unemployment is only part of the picture. Greece has around 1.5 million jobless, but a further one million people get up every day to go to work in jobs where bosses fail to pay them promptly. Salaries can trickle in three months late or even take a year to arrive in bank accounts. This means half the Greek workforce has no income. Meanwhile, whole families can depend for survival on grandparents’ shrinking pensions. While the emergency talks focus on immediate debt and repayments, many Greeks feel that little will help their daily struggle in the grim economic landscape.

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A risky game for Tsipras.

Greece’s Red Lines Start To Blur And Bend (Guardian)

Like a husband forgiven for countless infidelities, Greek leader Alexis Tsipras is back in Brussels with a wink and a smile and, yes, another kiss and make-up proposal. Only this time, it looks like the marriage is saved. Tsipras has for the first time in several months taken the time to consider the concerns of his partners and rather than simply demanding solidarity, he has put together a plan to patch things up. What his partners want is simple, if difficult to achieve without further sacrifices. They want to close a funding gap in this year’s budget that most analysts estimate at €2bn (£1.4bn). It would appear that the leader of the leftist Syriza government has done enough to keep alive his country’s hope of staying inside the euro.

The question for his supporters at home will be, has he ditched his principled stand against further austerity, and if he has, do they care? Tackling the towering cost of the Greek pension system was once considered a no-go area. Already cut by his predecessors, Tsipras had ruled out shaving anymore from the bill. Likewise VAT was off the agenda. Now it seems he is prepared to compromise on both issues. On pensions, Athens appears to have conceded that the government’s coffers must be shielded from a wave of early retirements. According to documents supplied by Tsipras’s finance minister, Yanis Varoufakis, there are 400,000 Greeks looking to retire this year who qualify for a state pension, most of them under the existing early retirement rules. That’s a whole bunch of 60- and 61-year-olds who want to get under the wire, probably to supplement a meagre income from working or to serve as an unemployment benefit, all at a huge cost to the public purse.

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Part of the negotiations.

Greek Offer To Creditors Runs Into Angry Backlash At Home (Reuters)

Greek lawmakers reacted angrily on Tuesday to concessions Athens offered in debt talks and parliament’s deputy speaker warned the proposals would struggle to win approval, puncturing optimism that a deal to lift Greece out of crisis might be quickly sealed. European leaders on Monday welcomed the new budget proposals from Athens as a basis for a possible agreement to unlock frozen aid and avert a default that could trigger a Greek exit from the euro zone. Stock markets also welcomed the plan, with European shares extending the previous session’s sharp rally and climbing to a three-week high on Tuesday, with growing expectations that Greece was getting closer to striking a deal.

But Prime Minister Alexis Tsipras, who was voted into office in January on a pledge to roll back years of austerity in a country battered by recession, must keep his leftist Syriza party as well as his creditors onside for a deal to stick. “I believe that this program as we see it … is difficult to pass by us,” Deputy parliament speaker and Syriza lawmaker Alexis Mitropoulos told Greek Mega TV on a morning news show. If parliament does fail to back the latest offer, which included higher taxes and welfare changes and steps to curtail early retirement, Tsipras might be forced to call a snap election or a referendum that would prolong the uncertainty.

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Tsipars walks dangerously close to the line with new concessions.

Syriza Members Warn Tsipras Against Betrayal With Bailout Compromise (Dow Jones)

To avert a default and possible exit from the eurozone, Greek Prime Minister Alexis Tsipras must sell Germany’s chancellor, Angela Merkel, on his plan to fix Greece’s finances. Then he needs to persuade Vassilis Chatzilamprou. But out at the Resistance Festival, an annual gathering of Greece’s far left, the lawmaker from Mr. Tsipras’s left- wing Syriza party said he was in no mood for submission. “We cannot accept strict, recessionary measures,” Mr. Chatzilamprou warned. It was after midnight Sunday, and the weekend festival was winding down. “People have now reached their limits.” Syriza isn’t a traditional party but a coalition of left-wing groups with an intricate family tree formed out of doctrinal splinters and squabbles.

It is those many, disparate factions that Mr. Tsipras must also satisfy with any potential bailout agreement with Greece’s creditors. Mr. Chatzilamprou, for instance, is a member of the Communist Organization of Greece, which is an outgrowth of the Organization of Marxist-Leninists of Greece. It is distinct from the Communist Tendency, which has a Trotskyite bent. (Neither should be confused with the Communist Party of Greece, which is outside Syrzia.) That unusual composition has made it especially hard for Mr. Tspiras to strike a deal with eurozone and IMF officials. “The people who are responsible for the negotiation move within a frame that is determined by the central committee of the party,” says Alekos Kalyvis, a longtime union official who is on the committee and responsible for its economic-policy portfolio.

The negotiators have some latitude to make decisions, he said, “but this shouldn’t be interpreted as if they have a blank check from the party – neither them nor Tspiras.” Many of Syriza’s factions regard the party’s rise as a epochal moment for the left–and any compromise on a bailout as a deep betrayal of its principles. Stathis Leoutsakos, another Syriza member of Parliament, said Germany and the other creditor countries are determined to defeat Syriza. “In my opinion, their aim is to humiliate the Greek government,” he says. “They want the message that no other politics are accepted in the eurozone.”

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“Disfunction is very deeply entrenched indeed.”

On Those Creditor ‘Red Lines’ For Greece (Peter Doyle)

Troika-Greek negotiations are reportedly down to the wire over early-retirement pensions, VAT, and labor reforms: the IMF says all are non-negotiable; Tsipras, perhaps inadvertently echoing Mrs. Thatcher, has, so far, responded “No! No! No!” These three issues converge on those at the upper end of their working lives, the 50-74 year old cohort, and are reflected in its participation and unemployment behavior. So it is worth considering data on those and the associated implications for the negotiations. Doing so suggests that these creditor red lines lack foundation Start with the obvious. Prior to 2009, Greece stands out with lower participation rates for this cohort than all but Hungary (males) and Malta (females). And the gender participation gap is also somewhat higher in Greece, but evolving.

So Greece is unusual, but why? Possibly early/generous retirement; possibly underreporting due to tax-evasion, low-pay, and/or predominance of agriculture and services; or perhaps skills outdating/mismatching and non-participation hysteresis; or public provision of education (easing the direct financial burden on parents of young adults); or health issues; and maybe slow-evolving gender cultural choices. But whatever their roots, these participation rates give rise to the political narrative of “cosseted Greeks” and they need to rise to boost incomes in Greece over the longterm. Once identified, their causes need to be fixed; the issue is “how and when?” Alongside, prior to 2009, unemployment rates in this cohort in Greece were either low (males) or middling (females); but no evident Greek stand-out.

These unemployment data clarify that relatively low participation rates in the 50-74 cohort prior to 2009 did not evidently reflect withdrawal due to lack of jobs for them to find, the “discouraged worker” effect. Instead, they were, in that sense, some kind of voluntary/structural feature of the labor market. To get a handle on the nature of those voluntary/structural characteristics of low Greek participation rates in this cohort, consider post-2008 developments. Given how much room there was for them to rise towards European “norms”, it is astonishing that participation rates barely budged despite an extraordinary battering from policy changes aimed to shift them—with average pensions, wages, and public employment cut broadly by 50, 40, and 30 percent respectively.

Greek male participation only edged up to end-2012 while Greek females continued their slow rise through early-2011. Then participation rates for both fell relative to their trends. This makes clear that any notion that the evident disfunction in the labor market in Greece—and hence the country’s long-term growth performance—is amenable even to enormous short-term parametric fixes on early-pensions, VAT, and wages in the current negotiations can be set aside. Disfunction is very deeply entrenched indeed.

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As if capital controls in a sovereign nation is something any foreigner has any legal say in.

Greek Bank Run Fears Escalate As Capital Controls Openly Discussed (Telegraph)

Pressure is mounting on the European Central Bank to keep Greece’s flailing banking system alive for another day, amid tentative hopes Greece will finally be granted the bail-out money it needs to avoid a debt default next week. The possibility of capital controls was raised at an aborted meeting of eurozone finance ministers on Monday, with Belgium’s finance minister admitting EU officials had discussed the draconian measures to stop money bleeding out of the financial system. “There were indeed different opinions; not everybody was on the same wave length with respect to capital controls” said Johan Van Overtveldt. Germany’s finance minister Wolfgang Schaeuble is thought to have raised the possibility which was roundly dismissed by his Greek counterpart Yanis Varoufakis.

Capital controls, such as deposit withdrawal limits, can only be imposed in a country at the request of a member state government in the EU. They were last seen in the eurozone in 2013, during Cyprus’s banking crisis, after the ECB threatened to pull the plug on the country’s financial system. The remarks came as European leaders failed to agree a deal to keep the country in the eurozone after two emergency summits convened in Brussels on Monday. After the summit, German Chancellor Angela Merkel said there remained “much more to do” as Athens failed to get its reforms rubber stamped by the euro’s finance ministers earlier in the day. The Eurogroup said they needed more time to consider a revised set of Greek reforms in order to ascertain whether or not they “added up”.

Confusion reigned in Brussels as Athens was reported to have sent the wrong document to creditors at 2am on Monday morning. But in a hopeful sign, president Jeroen Dijsselbloem said the Greek plans were a “welcome step in a positive direction”. Alexis Tsipras, the Greek prime minister, said on Monday night it was now up to European authorities to find a debt deal to save Athens from default. “The ball is in the court of the European authorities,” radical leftist leader Tsipras told reporters after an emergency eurozone summit in Brussels. “Our proposal has been accepted as the basis for discussion by the institutions,” he said. “Negotiations will continue over the next two days. We don’t want a fragmented deal that is only for a limited time. We want a complete and viable solution.”

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It’ll be all too watered down. Greece needs very serious relief.

EU Leaders Weigh Greek Debt Relief as Second Step in Aid Talks (Bloomberg)

Euro-area leaders said talk of debt relief for Greece is possible once the nation resolves the immediate financing dispute with its creditors. Easing Greece’s massive obligations won’t be decided in coming days and will instead come later in aid negotiations, French President Francois Hollande told reporters after a Brussels summit on Monday. He said creditors should commit to discussing debt changes as a “second step” after an agreement on Greece’s budget, economy and near-term financing is achieved in coming days. German Chancellor Angela Merkel took a similar line. While a third aid program is off the table for now, debt sustainability is part of the aid talks, she said.

“As far as the question of Greece’s ability to finance itself and its debt sustainability, this wasn’t discussed in detail, but it became clear that this question of being able to finance itself must be part of the deal,” Merkel told reporters after the meeting. The euro area said in 2012 that it might ease terms on some existing loans if Greece fulfilled its rescue conditions. For Prime Minister Alexis Tsipras to take advantage of those pledges, he’ll have to show his government has taken steps to fulfill its bailout obligations. As Monday’s summit took shape, leaders weighed how to present a renewed commitment to debt relief as part of talks on Greece’s bailout, according to officials familiar with the discussions.

France wants follow-on rescue arrangements to be part of any deal on how to handle the current program, the officials said. Greece will insist on a debt-relief component of any aid agreement, a Greek government official told reporters in Brussels. At the same time, the Greek official said, Greece is open to considering any type of debt arrangement that would pass muster with creditors. Maltese Prime Minister Joseph Muscat said the outlines of the debt talks are already in focus. “There is a commitment towards the realization of restructuring the Greek debt,” Muscat said in an interview after the summit. Haircuts would seem to be off the table, while three things on the agenda are the maturity of the debt, the grace period for no interest and the reduction of the coupon, he said.

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The numbers.

The 2 Main Points Of Contention In The Greek Debt Saga (MarketWatch)

Hopes for an imminent deal between Greece and its creditors led stock markets to rally in Europe and in the U.S. on Monday, after Athens offered last-ditch proposals aimed at ending a debt deadlock that has left the country on the brink of default. The proposals received a warm, preliminary welcome from the Eurogroup, which is composed of eurozone finance ministers, which called the measures a “positive step in the process.” The Greek proposals are projected to save €2.7 billion or 1.51% of GDP in 2015, up from €2 billion in Greece’s initial proposal, according to Greek newspaper Kathimerini, which posted a copy of the official cost analysis of the Greek proposal late Monday. In 2016 the measures would save €5.2 billion or 2.87% of GDP, up from €3.6 billion in the initial proposal.

However, an agreement is still far from a done deal. And the political stakes are high. A joint poll conducted last week by Greek firm Kapa Research and German firm Infratest dimap in both countries showed that voters feel that the other side is being too rigid. In Germany, 78% of citizens polled said that the Greek government doesn’t sufficiently understand German demands. In Greece, 67% said Germany doesn’t understand the Greek position. Here are the two biggest bones of contention between Greece and its creditors:

Pensions Greece’s creditors have consistently asked the cash-strapped country to eliminate early retirement and phase out solidarity grants for all pensioners. On Monday, Greece offered to raise the retirement age gradually to 67 and curb early retirement, Reuters reported. The question, however, is how long it would take the Greek government to get the retirement age to 67 and what this would mean in absolute euro amounts. The Greek side wants to increase pension contributions now and to phase in cuts over three years, starting Jan. 1, so that vested rights can be safeguarded, according to Greek newspaper To Vima.This would create pension savings worth 0.37% of GDP for this year and 1.05% starting next year, according to the Greek proposal.

Value-added tax Greece’s creditors have been pushing the country to modify its value-added tax, or VAT, by imposing a 23% rate across the board, with the exception of food, medicine and hotels, which would be taxed at an 11% rate. A value-added tax is a consumption tax that is levied on goods and services at every stage of the supply chain. T The Greek government, on the other side, wants to keep VAT on certain basic goods and services at a lower rate. They say the objective is to protect the most financially vulnerable citizens, since the VAT is viewed as regressive, meaning that it affects low-income citizens more than the high earners.

Greece’s initial proposal was a sliding scale: 6% on medicine, books and theaters; 11% on newspapers, food, energy, water, hotels and restaurants; and 23% on all other goods and services. The creditors wouldn’t accept this, so Greece came back offering 6% on medicine and books; 13% for energy and basic foods; and 23% for everything else. This is expected to provide savings and new revenues equal to 0.38% of GDP in 2015 and 0.74% in 2016, according to the proposal. According to the Greek press, the main bone of contention is energy: Greece won’t budge from a 13% tax rate on electrical bills while the creditors are pushing for 23%. Meanwhile, last week the Greek electric power authority reported that its unpaid bills reached €1.9 billion in 2015, up from €1.7 billion in 2014.

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A tad overdone,

Why The Words ‘Civil War’ Are No Longer A Joke In Greece (Paul Mason)

Here’s the situation as the Eurogroup on Greece is underway. On Sunday the Greek cabinet met and decided to make a further retreat on the fiscal targets their lenders want them to meet. There’s a gap of about €2bn between the two sides, and this latest move fills €1bn of it. This is by putting up the VAT rate on electricity, cutting the pensions of better-off pensioners, reducing early retirement rights quicker than planned, a one-off tax on companies with turnover above half a million, and closing tax loopholes. However, the real change is in the tone on debt relief. Alexis Tsipras has always argued that any deal done now should form the framework of a future discussion on rescheduling Greece’s debts. Until Sunday this was a red-line issue.

Now I understand the Greek government would accept a form of words that pledged to address this in future; and an un-named EU official has said this is likely. The problem is, these extra measures are effectively “left austerity” – changes of the kind the lenders don’t like, hitting the rich harder than the poor. So even if they accept they could help balance Greece’s books, they might still object that they are not sustainable. But the background to this final concession is ominous. Tsipras and his team are under huge pressure from within Syriza, and from within the 47% of voters who, when polled last week, said they would vote for Syriza. The pressure comes verbally, in constant text messages from constituents, and from a group within the parliamentary party known as the 53 group.

These are grassroots “modernised” left-wingers – and their 53+ MPs, combined with around 30 or so from the pro-Grexit Left Platform, have enough support and willpower to reject any deal that looks like humiliation. So Tsipras and his cabinet went to Brussels to make one more big concession, but fully prepared to endure an unwilling “rupture” with lenders, leading to the imposition of capital controls and a default, if they judge lenders are actually trying to humiliate them and force them to the exit. They understand the likely chaos would not just be economic. The second of the pro-euro demonstrations is due to be held tonight.

So far has the mood darkened between this essentially right-wing, pro-austerity movement and the mass base of Syriza that it has in the past week become routine for people to start throwing around the words “civil war”, and no longer in the jokey way they used to. People fear, sooner or later, that the left and right will stop alternating their demonstrations in Syntagma Square and start vying for control of it. As I’ve explained before, this is because the election of Syriza triggered a kind of recovered memory syndrome on both sides of politics, about the cold war and fascist collaboration and dictatorship in the 1970s.

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How to gut a society 101.

The Euro “Young Adults Living With Their Parents” Zone (Zero Hedge)

A ‘region’ divided… because nothing says ‘recovery’ like 45-55% of young peripheral European adults (25-34 year olds!!) living with their parents.

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The crash will be momentous.

Chinese Investors Are Swimming Naked in a Bubble (Pesek)

The question is, can Beijing put a bottom under history’s biggest equity bubble? As JPMorgan strategist Adrian Mowat sees it, “policy makers will step in if the market correction gets beyond a comfortable level. I would imagine if the correction continues [this] week you will hear something reassuring.” He’s not necessarily wrong for the moment. China will indeed throw everything it has at the market: central bank rate cuts, tweaking margin-trading rules, slowing the pace of initial public offerings, talking up share prices, you name it. What is wrong, though, is the belief that China can prevent the crash of a market already defying the most wildly optimistic of economic scenarios. Beijing can’t do it anymore than Tokyo could in 1990, Seoul in 1997 or Washington in 2008.

China is reaching the limits of its ability to prolong a rally that turned 928 days old Friday. Beijing has encouraged companies to pursue splashy IPOs in order to sustain the excitement on stock markets, and lure Chinese households to open trading accounts. The thought is that if average Chinese feel wealthy, they’ll buy into Xi’s vision of a “China Dream” and the legitimacy of the Communist Party. But the market bubble has grown to unsustainable proportions. The median stock, for instance, has a price-to-earnings ratio of 98, while the Shanghai Composite, which has a heavy weighting toward low-priced bank shares, is valued at 23 times. The reason bank shares are so depressed, of course, is China’s dueling bubble in debt.

China has $28 trillion of public and private debt; then there’s the unprecedented $363 billion of margin debt that’s supporting shares. It doesn’t help that China’s economic fundamentals have turned for the worse. As Bloomberg Intelligence analyst Kenneth Hoffman detailed in a report Friday, Chinese demand for steel is collapsing. On June 18, Bloomberg’s steel profitability lost $37 per metric ton, hitting a record low. Chinese manufacturing activity, Hoffman wrote, could be in for a “major decline,” even if Beijing ramps up its stimulus programs.

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Everybody does it. Except for Russia?!

India Infrastructure: Built On Debt (FT)

Some day, the Delhi Metro will be able to take race fans to the Buddh International Circuit, a $400m, 16-turn, state-of-the-art track on the outskirts of India’s sprawling capital. And once a gleaming new highway is completed, the track will be connected to Delhi and the tourist destination of Agra. But for now, there is little traffic on the highway leading to Buddh and even less on the pristine racetrack. It has been three years since Formula One abandoned the Buddh International Circuit, adding it to the sporting world’s crowded list of white elephants. It does not stand in total isolation, however. Block after block of concrete skeletons of towers that were meant to provide up to 200,000 apartments line the highway, casting shadows on dusty wasteland, dried riverbeds and mesquite weeds.

Welcome to what is likely India’s largest ghost city, which extends across five expansive parcels of land along the highway adjacent to the racetrack. What was meant to be the crowning achievement of Jaypee Group and Jay Prakash Gaur, its 85-year-old patriarch, has become a monument instead to unrealistic aspirations and poor execution on the one hand and a shortfall in growth, the high cost of capital and an uncertain political landscape on the other. The scale of Jaypee’s ghost city rivals that of some of China’s famous unoccupied cities. Fortunately for Jaypee, it also owns a collection of power and cement plants across India as well as three listed companies. Unfortunately, it also has about $12bn of debt, creditors and analysts say.

Jaypee is not alone in its plight. The company is ranked number six of 10 indebted Indian conglomerates that collectively owe about $125bn to their bankers, and account for 13% of all bank loans in India, according to data from Ashish Gupta, an analyst with Credit Suisse. Others on the list include Lanco, a construction and power company; GVK, an energy and transport group; and GMR, an infrastructure conglomerate. They are among the companies that should be leading India’s efforts to bolster its inadequate infrastructure, but instead are hampered by high debt levels and weak balance sheets. In many ways, the difficulties of these groups embody the problems facing modern India, where private sector investment has virtually ground to a halt. The cost of capital is high, and banks are reluctant to extend credit because they have too many bad loans.

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Nice historical metaphor.

“What We Are Paying For Is 20 Years Of Blunder & Neglect” (Simon Black)

In May 1940, a visibly concerned Winston Churchill traveled to Paris to survey the city’s defenses. Nazi forces had already blasted past French units and were rolling easily through the Somme Valley towards Paris. There wasn’t much time. And Churchill bluntly asked the commanders in his notoriously pitiful French, “Où est la masse de manoeuvre?” “Where are your reserve forces?” He later wrote in his memoirs that their response was one of the most shocking moments of his life. “Aucune,” replied the commander. “We have none.” Hitler took Paris within a few weeks. And on June 22, 1940, seventy-five years ago to the day, French diplomats signed a peace treaty making France a vassal state of Nazi Germany.

Maxime Weygand, France’s most esteemed general, remarked of the occasion, “What we are paying for is twenty years of blunder and neglect.” Given the extraordinary risks in the system right now, these words may soon come to haunt us as well. Seven years ago a global financial crisis was spawned from too much debt, artificially low interest rates, and a complete misperception of obvious risks (like loaning money to dead people…) They ‘solved’ that problem with even more debt, lowering interest rates below zero, and continuing to ignore obvious risks (like buying stocks at all-time highs). You don’t have to be a financial genius to see the absurdity in this logic. Based on their own financial statements, most Western governments are completely insolvent, and most major central banks are close to insolvency.

They’ve already ratcheted interest rates down to zero (or below) and have racked up a mountain of debt. There are effectively no tools left for governments and central banks to deal with another major crisis. Like Paris in 1940, they have no Plan B. They’re completely defenseless to support the financial system or the currency in the event of a major shock. We should all take a moment to appreciate this level of incompetence. This doesn’t happen overnight. It takes decades of “blunder and neglect” to engineer financial vulnerability on this scale. But they’ve somehow managed to pull it off. The only question is– how long until the next financial shock? Because it’s not a question of ‘if’, but ‘when’.

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How nonsensical is this?

Wages of Sin Still Weigh on Big Banks (WSJ)

The tide might not be turning. Hopes that regulatory and compliance costs at the biggest U.S. banks might begin to retreat after years of rising may be premature. As several recent stumbles make clear, banks still have more work to do to get right with regulators. Examples abound. The Office of the Comptroller of the Currency recently determined that six banks, including J.P. Morgan Chase and Wells Fargo, had failed to satisfy a 2011 order to fix foreclosure practices. As a consequence, the banks face restrictions on purchases of mortgage-servicing rights. Bank of America, which got a passing grade from the OCC on its foreclosure fix, was told by the Federal Reserve this year that its “stress test” performance had showed that management isn’t forward looking enough…

BofA has said it would spend $100 million to improve its stress-test abilities. The fact big banks still are running afoul of regulators raises doubts about the idea lenders can quickly cut back on the billions of dollars of additional costs they have incurred since the financial crisis. And that means bank results could disappoint compared with forecasts built on lower costs. Banks’ ability to cut costs continues to be important given revenue growth is lackluster and net-interest margins remain squeezed by superlow interest rates. Although the Federal Reserve is expected to begin raising overnight rates this year, that won’t immediately relieve the pressure. Banks have been promising to improve their efficiency ratios, which measure costs as a percentage of net revenue.

JP Morgan, for example, said in a presentation in February that it was aiming for a 55% efficiency ratio, down from 58% to 60% over the past few years. Wells Fargo says it targets 55% to 59%, compared with its current 58.8% ratio. Citigroup says it is targeting the mid-50s for its core business. The persistence of elevated regulatory and compliance costs could stymie their efforts. If costs remain high and revenue doesn’t pick up meaningfully, it will be hard to hit those targets. And while stress-test costs already are baked into bank expenses, the biggest banks are having to increase spending in hope of clearing another regulatory hurdle: living wills. Up until last year, banks didn’t pay too much attention to these. A regulatory shot across their bows, though, has forced them to devote far more time and resources to them.

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Look out below.

$140 Billion Bond Fund Goes To Cash, “Braces For Bond-Market Collapse” (ZH)

Recently, it’s become readily apparent that some of the world’s top money managers are getting concerned about what might happen when a mass exodus from bond funds collides head on with a completely illiquid secondary market for corporate credit. Indeed, bond market illiquidity is the topic du jour and has almost become something of a cliche among pundits and mainstream financial media outlets years after we first raised the issue in these pages. But just because something has become fashionable to discuss doesn’t mean it’s not worth discussing and indeed, we’re at least pleased to see that the world is suddenly awake to the fact that a primary market supply bonanza catalyzed by rock-bottom borrowing costs and yield-starved investors could spell disaster when paired with shrinking dealer inventories.

[..] whether you’re talking about corporate credit or “risk free” government debt, liquidity simply isn’t there and as was on full display last October, wild swings in illiquid markets will be exacerbated by the presence of parasitic HFTs. Meanwhile, Treasury market participants are shifting to futures and corporate bond fund managers are using ETFs to offset “diversifiable” outflows, phenomena which prove investors are actively avoiding credit markets by resorting to derivatives, a practice which only serves to make the underlying markets still more illiquid.

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”..derivative interest rate swaps and credit default swaps that have been laid into history’s greatest financial minefield.”

History in Free Verse (Jim Kunstler)

History might not rhyme, exactly, but it’s not bad for free verse. Greece is this century’s Serbia — a tiny, picturesque backwater nation blundering haplessly into the center stage of geopolitics. And the European Union is, whaddaya know, Germany in drag, on financial steroids. Nobody knows what will happen next in the struggle to wring some kind of debt repayment promises out of poor Greece. Without “restructuring” — a virtual national bankruptcy proceeding — there can be no plausible promises of repayment. Both sides seem to have exhausted their abilities to juke their way out. The European Union and its wing-men at the ECB and the IMF can only pretend to kick that fabled can down the road because it has turned into a cement-filled 50-gallon drum.

The Greek government can only pretend to further dismantle its civil service and pension systems lest angry citizens toss it out and replace it with a new government, perhaps an ugly and pugnacious one made up of Golden Dawn party Nazis. In the background, Spain, Portugal, Italy, Ireland, and perhaps even France wait without peeping to see if Greece is allowed to restructure, because you can be sure they will demand the same privilege to debt relief. But that’s hardly possible because the ECB has been engineering a shift of debt-holding away from the big corporate banks — which made all the stupid loans — to the taxpayers of their member states, especially Germany, which stands to be the biggest bag-holder when a contagion of serial default seeps across the continent.

This implies, of course, that along the way to that outcome something sickening happens to the price of all the bonds that the debt is embodied in. Namely, its value craters for the simple reason that the threat of non-payment makes interest rates shoot up to reflect the actualization of risk. That would certainly set off the booby-trap of derivative interest rate swaps and credit default swaps that have been laid into history’s greatest financial minefield. Thus, the big banks that were supposedly shielded by the ECB shell game of Hide the Debt Pea Somewhere Else, will blow up in a daisy-chain of unpayable obligations. The net effect of all that will be the disappearance of nominal wealth — it crosses an event horizon into a black hole never to be seen again.

The continent discovers it is a lot poorer than it thought. Fifty years of financial engineering comes to the grief it deserves for promoting the idea that it’s possible to get something for nothing. The same thing more or less awaits the USA, China, and Japan. For the USA in particular the signs of bankruptcy have been starkly visible for a long time outside the bubble regions of New York, Washington, and San Francisco. You see it in the amazing decrepitude of the built environment — the cities and towns left for dead, the struggling suburban strip malls tenanted if at all by wig shops and check-cashing operations, the rusted bridges, pot-holed highways, the Third World style train service.

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“..most houses in the US aren’t really worth the skinny little sticks that hold up their roofs..”

Pop Goes The Bubble (Dmitry Orlov)

And so all that Americans can do with all this free money is gamble with it. There are lots of worthwhile ways to spend money—build public transportation, for instance—but the problem is that none of them make money. And that, stupid though it seems, is a requirement. But creating a huge, wasteful financial casino alongside the real economy doesn’t help the real economy—it crowds it out. And it doesn’t really make money either; it makes bubbles. This should in some measure explain the more or less continuous economic shrinkage that has been happening in the US so far this century. It is also worth noting that, dire though these negative effects already seem, Americans have by no means seen the worst of it yet.

The story one commonly hears is that the US is the richest country on earth. Well, that may be true, on average, if you include financial wealth (which tends to be rather ephemeral), overvalued real estate (which is another great big bubble), promises that won’t be kept (such as the various retirement schemes that will never pay out) and much else that isn’t quite real. But it is definitely true that the US also has the largest group of incredibly poor people—much poorer than the poorest person in the poorest country on Earth. Their wealth is measured in the hundreds of thousands of dollars—but with a negative sign in front.

They are deep in debt from investing in overvalued real estate (most houses in the US aren’t really worth the skinny little sticks that hold up their roofs), or from getting an overpriced higher education (which has qualified them to serve coffee), or from running up other kinds of debt. Some of them may still look rich and prosperous for the moment, but that’s only because… you guessed it, four whole decades of ever-lower interest rates! Once interest rates start ticking up, and their entire incomes are gobbled up by interest payments, they will start looking as destitute as they actually are.

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How long can a government act against its own laws?

Ukraine President Poroshenko Admits Overthrow of Yanukovych Was a Coup (Zuesse)

Ukraine’s President Petro Poroshenko requests the supreme court of Ukraine to declare that his predecessor, Viktor Yanukovych, was overthrown by an illegal operation; in other words, that the post-Yanukovych government, including Poroshenko’s own Presidency, came into power from a coup, not from something democratic, not from any authentic constitutional process at all. In a remarkable document, which is not posted at the English version of the website of the Constitutional Court of Ukraine, but which is widely reported outside the United States, including Russia, Poroshenko, in Ukrainian (not in English), has petitioned the Constitutional Court of Ukraine (as it is being widely quoted in English):

“I ask the court to acknowledge that the law ‘on the removal of the presidential title from Viktor Yanukovych’ as unconstitutional.” I had previously reported, and here will excerpt, Poroshenko’s having himself admitted prior to 26 February 2014, to the EU’s investigator, and right after the February 22nd overthrow of Yanukovych, that the overthrow was a coup, and that it was even a false-flag operation, in which the snipers, who were dressed as if they were Ukrainian Security Bureau troops, were actually not, and that, as the EU’s investigator put his finding to the EU’s chief of foreign affairs Catherine Ashton [and with my explanatory annotations here]:

“the same oligarch [Poroshenko — and so when he became President he already knew this] told that well, all the evidence shows that the people who were killed by snipers, from both sides, among policemen and people from the streets, [this will shock Ashton, who had just said that Yanukovych had masterminded the killings] that they were the same snipers, killing people from both sides [so, Poroshenko himself knows that his regime is based on a false-flag U.S.-controlled coup d’etat against his predecessor]. … Behind the snipers, it was not Yanukovych, but it was somebody from the new coalition.”

This was when Ashton first learned that the myth that Yanukovych had been overthrown as a result of public outrage at his having rejected the EU’s offer of membership to Ukraine was just a hoax. (Actually, the planning for this coup was already under way in the U.S. Embassy by at least early 2013, well prior to Yanukovych’s EU decision. Furthermore, the Ukrainian public’s approval of the government peaked right after Yanukovych announced his rejection of the EU’s offer, but then the U.S.-engineered “Maidan” riots caused that approval to plunge.)

If the Court grants Poroshenko’s petition, then the appointment of Arseniy Yatsenyuk by the U.S. State Department’s Victoria Nuland on 4 February 2014, which was confirmed by the Ukrainian parliament (or Rada) at the end of the coup on February 26th, and the other appointments which were made, including that of Oleksandr Turchynov to fill in for Yanukovych as caretaker President until one of the junta’s chosen candidates would be ‘elected’ on May 25th of 2014, which ‘election’ Poroshenko won — all of this was illegal.

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Now there’s history for you.

What Would Europe Look Like If The Soviets Hadn’t Defeated Hitler? (John Wight)

Never has a leader so catastrophically misjudged the character of an enemy as Hitler misjudged the Soviet Union and its people prior to launching his invasion of the country on June 22, 1941. Hitler and other top Nazis were convinced that the Soviet Union would crumble under the weight of the largest military operation ever mounted, codenamed Operation Barbarossa. German and Axis forces comprising 4 million men, 3,600 tanks, over 4,000 aircraft, and 46,000 artillery pieces attacked the Soviet Union along a 2,900-kilometer front from the Baltic in the north to the Black Sea in the south.

Hitler’s grand ideological project of colonizing Eastern Europe, granting the German and German-speaking peoples so-called “lebensraum” (living space), destroying in the process the “degenerate” and “inferior” Slav peoples, untermenschen, while crushing the threat of “Jewish Bolshevism” to his vision of a racially pure Aryan Europe, was now under way. From the outset it was to be a war of annihilation in which millions would be slaughtered. Many Western historians have attempted, when interpreting this aspect of the Second World War, to represent it a struggle between two equally monstrous totalitarian systems. This is of course completely false – a blatantly revisionist and ideological attempt to undermine the role of the Soviet and Russian people in crushing fascism in the interests not only of themselves, their country and culture, but also in the interests of humanity as a whole.

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Jun 142015
 
 June 14, 2015  Posted by at 10:24 am Finance Tagged with: , , , , , , , , , ,  


Harris&Ewing Newsie, Washington DC 1920

The IMF Knew In 2010 That The Greek Memorandum Would Increase Debt (SYRIZA)
Why Greece Should Reject the Latest Offer From Its Creditors (Philippe Legrain)
The Saga Of The Greek Review That Never Ended (Kathimerini)
Endgame Looms For Greek Crisis As Both Sides Take Talks To The Brink (Guardian)
Greece’s Last-Ditch Talks Aim at Agreement Before Monday (Bloomberg)
Germany Is Bluffing On Greece (Weisbrot)
Spain Swears In Leftist Mayors for Madrid, Barcelona in Historic Turn (AP)
Why Keynesian Voodoo Doesn’t Work Anymore (Bawerk)
US Labor Movement’s War Against Fast-Track May Not Be Over (Guardian)
Doubts Over EU Proposals For Saving TTIP Deal (Reuters)
The Warren Buffett Economy – Why Its Days Are Numbered-Part 4 (David Stockman)
End of the Line: China and Germany Look Ready to Pop (Herry Dent)
IMF Says It Will Continue To Back Ukraine (DW)
How One Accounting Rule Wrecked The Middle Class (Daniel Drew)
Britain Pulls Out Spies As Russia, China Crack Snowden Files (Reuters)
US Is Poised to Put Heavy Weaponry in Eastern Europe (NY Times)
Did Mathematician John Nash Help Invent Bitcoin? (CoinDesk)
Elon Musk Asks Permission To Put 4,000 Internet Satellites Into Orbit (Ind.)
High-Tech Solar Projects Fail To Deliver (WSJ)

The Audit Commission is set to unveil its findings June 18.

The IMF Knew In 2010 That The Greek Memorandum Would Increase Debt (SYRIZA)

An IMF document is in the possession of the Greek Audit Commission proving that the creditor knew that the memorandum would increase the Greek debt. The Audit Commission has in its possession a document which shows that the IMF knew from March 2010 that the Greek memorandum would increase Greek debt. The President of the Greek Parliament Zoe Konstantopoulou and the scientific coordinator of the Audit Commission of the Greek debt, Dr. Eric Toussaint, spoke yesterday about the contents of this document.

“We have an internal document of the IMF of March 2010, detailing the measures provided for inclusion in the 2010 Memorandum This is a very detailed and predefined plan, which was not communicated to the parliaments of 14 European Union countries who have lent to Greece nor to the Greek Parliament. Because, as you know, there was a violation of the Greek Constitution in May 2010, when the agreement was concluded, “said Mr. Toussaint.

“During our work, we have also managed to establish that the means used to make the Greek debt restructuring in 2010 was absolutely detrimental, because the rights of the pension funds of Greece and of Greek citizens who held State bonds were sacrificed. For example, there was a haircut of over 50% for some employees of Olympic Airways, who had received government bonds after their dismissal without their own agreement, and through no fault of their own. No compensatory measure was arranged for them. However the big private banks that participated in the haircut received compensation of €30 billion, which was added to the Greek public debt. ” said Toussaint.

On her part the President of the Parliament said: “We seek the truth corresponding to the legitimate and illegitimate parts of the debt and of our burdensome obligation.” The preliminary findings of the Greek debt Audit Commission will be published in June 17-18, 2015.

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Legrain gets it too.

Why Greece Should Reject the Latest Offer From Its Creditors (Philippe Legrain)

Reform — Greece sorely needs it. Cash — the government is running desperately short of it. So it is time for Prime Minister Alexis Tsipras to do what’s best for Greece and accept its creditors’ reform demands in exchange for much-needed cash. That is how the Greek situation is usually framed. It is utterly misleading. Imagine you’re in prison for not being able to pay your debts. (You’re right, it’s almost unthinkable — civilized societies no longer lock up bankrupt individuals. But bear with me.) After five years of misery, you lead a rebellion, take control of the prison, and demand your release. The jailers respond by cutting off your water supply. Should you back down and return to your cell, perhaps negotiating for slightly less unpleasant conditions, in order to obtain a little liquidity?

Or should you keep fighting to be free? That, in essence, is what the standoff between an insolvent Greece and its eurozone creditors is really about. For months, Greece has had “only days” to agree a deal with its creditors before it runs out of cash. Eventually that will be true. But even if Tsipras accepted the creditors’ demands, Greece would still have “only days” before it ran out of cash. The €7.2 billion on offer right now wouldn’t even cover the Greek government’s debt repayments until the end of August. And for a measly two months of liquidity, Tsipras is expected to surrender his democratic mandate: break his election promises, agree to yet more tax increases and spending cuts that would depress Greece’s economy further, and relinquish his demands for debt relief.

Then the wrangling would start again. Because so long as Greece remains in its debtors’ prison, it will be dependent on its jailers for liquidity and therefore expected to comply with whatever additional conditions they impose. Tsipras should not submit to this debt bondage. Nine of every 10 euros that eurozone governments and the IMF have lent to the Greek government since 2010 have gone to repay its unbearable debts, which should instead have been restructured back then. But from now on, every last cent of additional funding would go to pay back debt. The Greek government now has a small primary surplus: It doesn’t need to borrow, except to service its debts of 175% of GDP.

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Nice history lesson. Not flawless.

The Saga Of The Greek Review That Never Ended (Kathimerini)

It was a sunny morning in Brussels on November 7 last year when Greek Finance Minister Gikas Hardouvelis received an e-mail from the team of inspectors of the International Monetary Fund, European Commission and European Central Bank – collectively known as the troika – that changed everything. In that moment it became clear that the review of the Greek reform process was not about to end anytime soon, as the troika was toughening its stance and demanding that Athens complete all the prior actions outlined in its second bailout deal to the letter. The government was shocked as the e-mail came just a few hours after a Eurogroup meeting ended with what appeared to be a positive message for Greece.

It came at the moment when, if the country passed the review that was being carried out – and is still being carried out – it would be able to turn over a new leaf, free of demands for more austerity, and would be able to apply for a precautionary credit line that would allow it access to the markets. That e-mail, however, detailed 19 tough measures the Greek government had a month to implement in order to wrap up the review. For the government, those measures were impossible to implement given the political climate at the time.

Seven months after that e-mail, and with a different government in Athens and the same review still pending, Kathimerini seeks answers as to why the talks with the troika stalled by speaking to the protagonists, and attempts to explain what went wrong, ultimately leading the country to elections on January 25. Did the creditors pull the rug from under Antonis Samaras by increasing their demands, as some of the former prime minister’s associates argue? Was it that the Europeans misread the intentions of the opposition SYRIZA party and its chief, current Prime Minister Alexis Tsipras? Or was it fatigue after years of tough fiscal adjustment that prevented the Greek economy from rebounding?

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Endgame’s been looming forever. Why still use that word?

Endgame Looms For Greek Crisis As Both Sides Take Talks To The Brink (Guardian)

Eleventh-hour talks to avoid Greece defaulting on its debt and plunging the eurozone into crisis intensified at the weekend with Greek officials flying to Brussels only days before a meeting of Europe’s finance ministers that many regard as a final deadline. Almost five months after he assumed power, the Greek prime minister, Alexis Tsipras, has come to a fork in the road: either he accepts the painful terms of a cash-for-reform deal that ensures Greece’s place in the single currency or he decides to go it alone, faithful to the vision of his anti-austerity Syriza party. Either way, the endgame is upon him.

Thursday’s meeting of eurozone finance ministers is viewed as the last chance to clinch a deal before Athens’s already extended bailout accord expires on 30 June. “It is in his hands,” Rena Dourou, governor of the Attica district, said. “Tsipras, himself, is acutely aware of the historic weight his decision will carry.” The drama of Greece’s battle to keep bankruptcy at bay has, with the ticking of the clock, become ever darker in tone. What started out as good-tempered brinkmanship has turned increasingly sour as negotiations to release desperately needed bailout funds have repeatedly hit a wall over Athens’s failure to produce persuasive reforms.

“It is as if they work in Excel and we work in Word,” said one insider. “There just seems to be no meeting of minds.” Last week the mood became more febrile as it emerged that Eurocrats, for the first time, had debated the possibility of cash-starved Athens defaulting. The revelation came amid reports that Germany’s chancellor, Angela Merkel, was resigned to letting Greece go. Berlin is by far the biggest contributor to the €240bn bailout propping up the near-bankrupt state. Last week, the EU council president, Donald Tusk, ratcheted up the pressure, warning: “There is no more time for gambling. The day is coming, I am afraid, that someone says the game is over.”

On Saturday Greek finance minister Yanis Varoufakis hit back, telling Radio 4 that he did not believe “any sensible European bureaucrat or politician” would seriously contemplate the country’s euro exit. “The reason why we are not signing up to what has been offered is because it is yet another version of the failed proposals of the past,” he said. The persistent demand of foreign lenders for pension reform, given the scale of austerity already undertaken in a country that has seen its economy shrink by more than a quarter in the past five years, was not only silly but plainly a deal-breaker, he said. “It is just the kind of proposal that one puts forward if you don’t want an agreement,” insisted the academic-turned-politician.

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Endgame, last ditch. Whatever.

Greece’s Last-Ditch Talks Aim at Agreement Before Monday (Bloomberg)

Greece and its creditors are locked in last-ditch talks, with European Commission President Jean-Claude Juncker trying to broker a deal over the weekend. Prime Minister Alexis Tsipras sent a delegation to Brussels Saturday with a new set of proposals to close differences on pensions, taxes and a primary surplus target. With positions hardening on all sides, the talks are Juncker’s last attempt to try to bring the sides to a compromise, according to a European Union official, who asked not to be identified. Representatives of the Troika are waiting in the wings to join the discussions if progress is made between Greece’s envoy and Juncker’s chief of staff and the aim is to reach an accord before markets open on Monday. Both sides are prepared to continue talks on Sunday.

European leaders have voiced growing exasperation with Greece’s brinkmanship that has pushed Europe’s most-indebted country to the edge of insolvency. Flitting between intransigence and conciliatory overtures, Tsipras has spent four months locked in an impasse with the country’s creditor institutions. The latest Greek counter-proposal is the second in June. The first was roundly dismissed. Greek stocks dropped 5.9% on Friday, with bank shares dropping 12%, as talks remained deadlocked. The yield on Greek 2017 bonds rose 137 basis points to 20.03%. US and European equities and the euro-area’s higher-yielding bonds also tumbled amid growing concern Greece will run out of time for reaching a deal to stave off default.

An attempt by Juncker to broker a compromise allowing Greece to defer €400 million of cuts in small pensions if it reduced military spending by same amount was spiked by the IMF, Frankfurter Allgemeine Sonntagszeitung reported, citing unidentified people with knowledge of the negotiations. With a deadline for a deal looming, Merkel told Tsipras it’s time to accept the framework for financial aid. Greece’s bailout extension expires June 30 and some national parliaments need to ratify any agreement before funds can be disbursed, which narrows the window for a deal.

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Germany simply believes its own fiction.

Germany Is Bluffing On Greece (Weisbrot)

It would be nice to think that the worst features of US foreign policy have changed since the collapse of the Soviet Union, but they have not. The Cold War never really ended, at least insofar as the US is still a global empire and wants every government to put Washington’s interests ahead of those expressed by its own voters. The current hostilities with Russia add a sense of déjà vu, but they are mainly an added excuse for what would be US policy in any case. Once we take all these interests into account and where they converge, the strategy of Greece’s European partners is pretty clear: It’s all about regime change. One senior Greek official involved in the negotiations referred to it as a “slow-motion coup d’état.” And those who were paying attention could see this from the beginning.

Just 10 days after Syriza was elected the ECB cut off its main line of credit to Greece and then capped the amount that Greek banks could lend to the government. All the hype and brinkmanship destabilize the economy, and some of this is an intentional effect of European authorities’ statements and threats. But the direct sabotage of the Greek economy is most important, and it is remarkable that it has gotten so little attention. The unannounced objective is to undermine political support for the Syriza government until it falls and get a new regime that is preferable to the European partners and the US This is the only strategy that makes sense, from their point of view. They will try to give Greece enough oxygen to avoid default and exit, which they really don’t want, but not enough for an economic recovery, which they also don’t want.

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Thai is getting Brussels scared. “Madrid and Barcelona for the first time are not going be governed by political parties, but by coalitions made up of social movements..”

Spain Swears In Leftist Mayors for Madrid, Barcelona in Historic Turn (AP)

Spain’s biggest cities — Madrid and Barcelona — completed one of the nation’s biggest political upheavals in years Saturday by swearing in far-left mayors. The radical leaders have promised to cut their own salaries, halt homeowner evictions and eliminate perks enjoyed by the rich and famous. The landmark changes came three weeks after Spain’s two largest traditional parties were punished in nationwide local elections by voters groaning under the weight of austerity measures and repulsed by a string of corruption scandals. In Madrid, 71-year-old retired judge Manuela Carmena was sworn in to cheers from jubilant leftists who crowded the streets outside city hall shouting “Yes We Can!” as they ended 24 years of city rule by the conservative Popular Party, which runs the national government.

“We want to lead by listening to people who don’t use fancy titles to address us,” Carmena said after being voted in as mayor by a majority of Madrid’s new city councilors. Carmena has vowed among other things to take on wealthy Madrilenos who enjoy exclusive use of the city-owned Club de Campo country club — opening it up to the masses. “We’re creating a new kind of politics that doesn’t fit within the conventions,” she said before being voted in. “Get ready.” In Barcelona, anti-eviction activist Ada Colau was later sworn in as the city’s first female mayor. Smiling broadly, Colau took possession of the city’s mayoral sash and scepter before thanking voters and her coalition partners. “Thank you for making possible something that had seemed impossible,” she said.

Colau has questioned whether it’s worth spending €4 million of city money to help host the glitzy Formula 1 race every other year. She thinks the funds would be better spent on free meals for needy children at public schools. Carmena and Colau ran for office as leaders of leftist coalitions supported by the new pro-worker and anti-establishment Podemos party formed last year. It is led by the pony-tailed college professor Pablo Iglesias, a big supporter of Greece’s governing far-left Syriza Party. Iglesias smiled from a balcony inside Madrid’s city hall as he watched Carmena being sworn in, then pumped his arm into the air with a clenched fist as he celebrated the victory with others on the streets.

The left’s takeover of Madrid, Iglesias said, is the goal his party has nationally for general elections that must be called by Prime Minister Mariano Rajoy by the end of the year. “Our principal objective is to beat the Popular Party in the general elections,” he said. The political fragmentation propelling Carmena and Colau into office marks a historic moment in Spanish politics, said Manuel Martin Algarra at the University of Navarra. “Madrid and Barcelona for the first time are not going be governed by political parties, but by coalitions made up of social movements,” he said.

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“Just as with drugs, the abuser must increase the dosage to feel the same high and spend accordingly.”

Why Keynesian Voodoo Doesn’t Work Anymore (Bawerk)

Keynesian policy of manipulating economic “aggregates” through countercyclical macro-measures appeared to work when balance sheets were not stretched to the brink. As we wrote in “Goebbelnomics”

“If collective exuberance and apathy is the sole cause of the business cycle, then it logically follows that human emotions need to be manipulated accordingly. Only by doing so can policymakers smooth out the ups and downs in economic activity. And what better way to do that then to change the money supplied to the general public.”

While people called this the “most sickening article ever written” it is unfortunately what economics has come down to. Through fractional reserve banking and a central bank freed from the shackles of a barbarous relic, the money supply can be expanded without limit…or at least as long as the greater populace voluntarily will leverage up their balance sheets to buy stuff and simultaneously agree to their own servitude. Nothing more than collective manipulation on a scale that would make Goebbels himself envious. The glaringly obvious result of such policies, gross capital consumption through malinvestments epitomized through a serial bubble economy, did not discourage our money masters. The best and brightest even suggest bubbles are the only remedy to what they believe is some sort of secular stagnation. Just as with drugs, the abuser must increase the dosage to feel the same high and spend accordingly.

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Many more rounds to come.

US Labor Movement’s War Against Fast-Track May Not Be Over (Guardian)

Richard Trumka, president of the AFL-CIO, the main US labor federation, was uncharacteristically ebullient after the House voted down fast track on trade Friday, delivering a sharp rebuke to Barack Obama. Trumka called the vote “a marvelous contrast to the corporate money and disillusionment that normally mark American politics today”. He added that “this was truly democracy in action”, a nod to the millions of Americans who had sent emails, met with lawmakers and marched in the streets to oppose fast track and Trans-Pacific Partnership (TPP), a 12-nation pact that is being negotiated.

Trumka repeatedly boasted that never before had so many unions fought so vigorously on a trade issue – they fear TPP will cause job losses, push down wages and do little to increase worker protections in Asia. Labor’s threats to deny donations and campaign support to Democrats who embraced fast track pressured many lawmakers to vote against, and not risk labor’s ire. Fast-track authority would ease efforts to ratify TPP because it requires an up-or-down vote and prohibits amendments. Even while rejoicing, many fast-track foes voiced fears that the war was not over –House Republicans said they would seek to pass a re-worked bill next week. “I don’t think it’s over yet,” Tim Waters, political director of the United Steelworkers, told the Guardian.

“They’re trying to do everything they can to get this back on track.” Organized labor’s victory – one of its biggest triumphs in years – grew out of a new strategy the AFL-CIO adopted two years ago. Trumka announced that labor would henceforth seek to form broad coalitions out of recognition that it was no longer as powerful and was having a harder time securing legislation it supported. The anti-fast track coalition was immense – labor was at its heart, and it included environmental, faith, immigrant and food safety groups. The coalition spanned the Democratic base, including 2,000 groups, among them the American Civil Liberties Union, Consumers Union, the Electric Frontier Foundation, Friends of the Earth and the National Association for the Advancement of Colored People.

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A lot more protest will be needed.

Doubts Over EU Proposals For Saving TTIP Deal (Reuters)

The European Union has more work to do, experts say, if it hopes to seal a transatlantic trade deal that has been criticized for leaving governments open to international legal action from companies affected by changes to tax and regulation. The European Commission, the EU’s executive arm, is right now negotiating a trade and investment treaty with the United States – the Transatlantic Trade and Investment Partnership (TTIP) – that it says could add €119 billion annually to Europe’s economy and €95 billion to the US economy. However the treaty faces growing opposition in Europe from politicians, labor unions and campaign groups who fear it may prevent governments from being able to ban unsafe products or tax businesses because of a provision protecting investors’ rights.

The provision referring to “fair and equitable treatment”, was introduced to treaties decades ago to allow investors to seek redress if their assets were expropriated by governments. It allows businesses to sue via international courts that do not defer to national interests and has increasingly been used to sanction governments over everything from banning chemicals, withdrawing tax breaks or writing new environmental regulations. Matthias Fekl, French minister for trade, is especially critical of the EU’s plan to include this right to sue in tribunals in the TTIP. He said in a recent interview that France would “never allow private tribunals in the pay of multinational companies to dictate the policies of sovereign states.”

But businesses and their lobby groups have told the European Commission they object to any scaling back in their ability to sue governments or any requirement they do so in national courts. In response, the EC has redrafted parts of the trade treaty to limit the circumstances under which a claim can be made. It has also proposed a new appeals process for governments and suggested new rules for selecting arbitrators – currently mainly corporate lawyers who campaigners say are biased towards corporations. It’s not a watertight solution, some say. “There are definitely some improvements but it’s not a dramatic reform,” said Lise Johnson, Head of Investment Law and Policy at Columbia University’s Center on Sustainable Investment.

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“..the real 2014 US unemployment rate was 42.9%, not 5.5%!”

The Warren Buffett Economy – Why Its Days Are Numbered-Part 4 (David Stockman)

The Fed has generated a $50 trillion financial bubble since Alan Greenspan took the helm in August 1987. After 27 years, honest price discovery has been destroyed, thereby reducing the nerve centers of capitalism – the money and capital markets – to little more than gambling casinos. Accordingly, speculative rent-seeking in the financial arena has replaced enterprenurial innovation and supply side investment and productivity as the modus operandi of the US economy. This has resulted in a severe diminution of main street growth and a massive redistribution of windfall wealth to the tiny share of households which own most of the financial assets. Warren Buffett’s $73 billion net worth is the poster boy for this untoward state of affairs.

The massive and systematic falsification of asset prices which lies at the heart of this deformation of capitalism is a direct and unavoidable consequence of monetary central planning. That is, the pursuit of Keynesian business cycle management and stimulus through central bank interest rate pegging and massive monetization of existing public debt and other securities – especially since the latter has no purpose other than to artificially goose the price of bonds and lower their yields; and also via other indirect methods of financial asset levitation such as the Greenspan/Bernanke/Yellen doctrine of wealth effects and the implicit central bank “put” which underpins the economics of buy-the-dip speculators.[..]

At the present time, there are 210 million adult Americans between the ages of 16 and 68—to take a plausible measure of the potential work force. That amounts to 420 billion potential labor hours, if we accept the convention that all adults are at least theoretically capable of holding a full-time job (2,000 hours/year) and pulling their share of society’s need for production and work effort. By contrast, during 2014 only 240 billion hours were actually supplied to the US economy, according to the BLS estimates. Technically, therefore, there were 180 billion unemployed labor hours, meaning that the real unemployment rate was 42.9%, not 5.5%!

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Watch out below.

End of the Line: China and Germany Look Ready to Pop (Herry Dent)

The US stock market has finally hit a speed bump after more than six years of a Fed- and QE-driven rally. The S&P 500 is up 232% since March of 2009 despite this unprecedented stimulus in the feeblest economic recovery in history. But since late December 2014, US stocks have gone nowhere as investors face some growing realities. GDP, retail sales, production and exports are slowing. The dollar’s sharp rise in recent years has crushed global exports. Long term interest rates are rising consistently… what I call the beginning of the end of stimulus policies designed to keep rates low forever. Meanwhile, in just six months Germany saw its key stock market, the DAX, rise nearly 50% from mid-October into early April. Germany’s bubble has shot up 245% since March 2009 — greater than the US, despite its slower economy. It won’t last! [..]

But if Germany looks bad, there’s nothing short of “terrible” to say about China! China’s stock market makes Germany’s late-stage bubble look pathetic! China saw the shortest and steepest bubble from early 2005 to late 2007, up over 500% in less than two years. Its crash into 2008 was one of the largest, down 72%. After a “dead” market from 2010 into mid-2014, China’s stocks have literally exploded again… up 159% in a straight shot in one year while its economy and exports have continued to slow! A 48% late-stage bubble in Germany unwarranted by its demographics… 159% in China despite its weakening economy.

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Dismantle the IMF along with NATO.

IMF Says It Will Continue To Back Ukraine (DW)

The IMF stated that it can continue backing Ukraine amid stalled negotiations between Kyiv and its private creditors. Christine Lagarde, head of the Washington-based crisis lender, which had launched a four-year loan program of $17.5 billion (15.6 billion euros) in March for Ukraine’s government, said that the IMF was still encouraging a settlement in the debt talks, while highlighting that there were backup options in place. “But in the event that a negotiated settlement with private creditors is not reached and the country determines that it cannot service its debt, the fund can lend to Ukraine consistent with its lending-into-arrears policy,” Lagarde explained. “Rapid completion of the debt operation with high participation is vital for the success of the program, since Ukraine lacks the resources under the program to fully service its debts on the original terms.”

Lagarde had met with Ukrainian Prime Minister Arseniy Yatsenyuk and Finance Minister Natalie Jaresko in Washington earlier this week to discuss economic developments and implementation of economic reforms. Bloomberg Business reported that Jaresko has now been in talks with private creditors for months, seeking a write-down of its debts from creditors who had only offered delayed payments. “I believe that their program warrants the support of the international community, including the private sector, which is indispensable for the success of this program,” Lagarde said. She stressed that the IMF did not have to cut off its funding of the Ukraine government if it stopped servicing its private debts.

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Employees are counted as a liablity. Paper clips are an asset.

How One Accounting Rule Wrecked The Middle Class (Daniel Drew)

Maybe you heard your CEO say, “Our people are our greatest asset.” He’s probably lying. That’s not how he really feels about you. Despite how much management talks about “human capital” as if it were an asset, it’s not. The accounting system that the whole world uses classifies labor as an expense. Anyone who has studied accounting even briefly can see that it’s a lot of bullshit designed to appear objective. In reality, it is filled with assumptions, estimates, and sometimes, fraud. Yes, it is rule-based, but with any system, who makes the rules is often more important than the rules themselves. Accounting is the language of business, and in the mouth of a double-talking CEO, it’s just another way to promote their own interests.

One of the most insidious rules in accounting is that labor must be classified as an expense on the income statement. Actually, it should be classified as an asset on the balance sheet. The accounting profession has rigged the system against the worker. The misclassification of labor as an expense has branded every employee with a negative dollar sign. The way the accounting system defines labor causes CEOs and upper management to view employees as expendable. When profits decline, the CEO says, “It must be those damned employees dragging us down! Let’s fire a few thousand of them. That will get us on track again.”

According to current accounting rules, inanimate objects like pencils, clothing, or any type of inventory are assets, but people are expenses. The CEOs want you to believe that a pen is an asset, but a person with knowledge, skills, and experience is an expense, something that should be avoided. This is actually what they teach business students in school all around the world, and the students just accept it as fact. Have we all gone insane? We are being held captive by dumbass accountants and shrewd CEOs who realize the whole system is rigged in their favor. The proper way to account for labor would be to classify it as an asset on the balance sheet.

The employee would be valued with mark to market accounting at every reporting period, and the value would be determined by calculating the profit per employee, the average tenure, and the net present value of this amount. This would accurately account for the true value of labor. If this rule were implemented, balance sheets would be dramatically altered. Some companies that appeared valuable before might look like complete garbage. Other companies would prove to be much more valuable than previously thought.

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Here’s wondering how recent this is.

Britain Pulls Out Spies As Russia, China Crack Snowden Files (Reuters)

Britain has pulled out agents from live operations in “hostile countries” after Russia and China cracked top-secret information contained in files leaked by former US National Security Agency contractor Edward Snowden, the Sunday Times reported. Security service MI6, which operates overseas and is tasked with defending British interests, has removed agents from certain countries, the newspaper said, citing unnamed officials at the office of British Prime Minister David Cameron, the Home Office (interior ministry) and security services.

The United States wants Snowden to stand trial after he leaked classified documents, fled the country and was eventually granted asylum in Moscow in 2013. Russia and China have both managed to crack encrypted documents which contain details of secret intelligence techniques that could allow British and American spies to be identified, the newspaper said citing officials. However an official at Cameron’s office was quoted as saying that there was “no evidence of anyone being harmed.”

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The bogeyman narrative expands.

US Is Poised to Put Heavy Weaponry in Eastern Europe (NY Times)

In a significant move to deter possible Russian aggression in Europe, the Pentagon is poised to store battle tanks, infantry fighting vehicles and other heavy weapons for as many as 5,000 American troops in several Baltic and Eastern European countries, American and allied officials say. The proposal, if approved, would represent the first time since the end of the Cold War that the United States has stationed heavy military equipment in the newer NATO member nations in Eastern Europe that had once been part of the Soviet sphere of influence. Russia’s annexation of Crimea and the war in eastern Ukraine have caused alarm and prompted new military planning in NATO capitals.

It would be the most prominent of a series of moves the United States and NATO have taken to bolster forces in the region and send a clear message of resolve to allies and to Russia’s president, Vladimir V. Putin, that the United States would defend the alliance’s members closest to the Russian frontier. After the expansion of NATO to include the Baltic nations in 2004, the United States and its allies avoided the permanent stationing of equipment or troops in the east as they sought varying forms of partnership with Russia. “This is a very meaningful shift in policy,” said James G. Stavridis, a retired admiral and the former supreme allied commander of NATO, now at Tufts University.

“It provides a reasonable level of reassurance to jittery allies, although nothing is as good as troops stationed full-time on the ground, of course.” The amount of equipment included in the planning is small compared with what Russia could bring to bear against the NATO nations on or near its borders, but it would serve as a credible sign of American commitment, acting as a deterrent the way that the Berlin Brigade did after the Berlin Wall crisis in 1961. “It’s like taking NATO back to the future,” said Julianne Smith, a former defense and White House official who is now a senior fellow at the Center for a New American Security and a vice president at the consulting firm Beacon Global Strategies.

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Interesting argument.

Did Mathematician John Nash Help Invent Bitcoin? (CoinDesk)

Could John Nash, someone who had been at the forefront of mathematical and economic thought into the prospect of ‘ideal money’, be justly attributed credit for the formation of the electronic cash system of cryptocurrency? He once stated in a lecture:

“The special commodity or medium that we call money has a long and interesting history. And since we are so dependent on our use of it and so much controlled and motivated by the wish to have more of it or not to lose what we have we may become irrational in thinking about it and fail to be able to reason about it like a bout of technology, such as a radio, to be used more or less efficiently.”

Nash described the concept of ideal money as having the function of a standard of measurement and, thus, it should become comparable to the watt, the hour or a degree of temperature. He asserted an ideal form of money should provide a viable solution to the Triffin dilemma – it should serve both short-term domestic and international long-term objectives where central banking money has utterly failed (the average lifespan of a fiat currency is 27 years). Asymptotically ideal money, a concept Nash studied in depth, focuses on the fluctuations and long-term perceived value of money, where the ideal inflation rate is as close to zero as possible, without being negative (deflation). Currently, this accurately describes the economic nature of bitcoin, as it is a disinflationary money supply by design – that is, it is decreasing in its inflationary nature by halving the block reward (and new currency issuance rate) at regular intervals.

The inflation rate of bitcoin asymptotically approaches zero as we inch closer to the currency limit of 21 million units. Nash described this ideal of money as something which could provide a global savings outlet for people who would otherwise be subject to ‘bad money’, or money expected to lose value over time under conditions of inflation among other things. In a paper published in the Southern Economic Journal, Nash described a nonpolitical value standard for comparisons of value, asserting that an industrial consumption price index could be “appropriately readjusted depending on how patterns of international trade would actually evolve”. Moreover, Nash described how actors that were in control of this standard could corrupt this continuity, yet the probability of damages through corruption would be as small as the probability of politicians altering the measurements of meters and kilometers.

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And for the subsidies to pay for it.

Elon Musk Asks Permission To Put 4,000 Internet Satellites Into Orbit (Ind.)

Elon Musk has asked the government to let his private space travel company, SpaceX, put 4,000 satellites into orbit to provide internet for the earth. The PayPal founder hopes that the satellites could take on conventional internet companies by sending internet signals across the globe, allowing it to provide cheap and fast internet even to places that have traditionally struggled to get connected. It hopes to find success by both taking customers from existing internet service providers as well as getting the billions of people that can’t get online onto the internet. Musk has moved forward with the project by filing with the US Federal Communications Commission to ask to be given permission put the satellites into space.

It was first mooted at the beginning of the year, but the submission was made public by the Washington Post. The filing asks to start testing the satellites next year, according to the newspaper. After that, the service could be working in about five years. In the tests, Musk would send the satellites up on a Falcon 9 rocket, made by SpaceX. They would communicate with ground stations in the US, and establish whether those connections would be enough to send information from the ground to the satellites with enough speed and consistency to work for internet connections.

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Always over-promise.

High-Tech Solar Projects Fail To Deliver (WSJ)

Some costly high-tech solar power projects aren’t living up to promises their backers made about how much electricity they could generate. Solar-thermal technology, which uses mirrors to capture the sun’s rays, was once heralded as the advance that would overtake old fashioned solar panel farms. But a series of missteps and technical difficulties threatens to make newfangled solar-thermal technology obsolete. The $2.2 billion Ivanpah solar power project in California’s Mojave Desert is supposed to be generating more than a million megawatt-hours of electricity each year. But 15 months after starting up, the plant is producing just 40% of that, according to data from the US Energy Department.

The sprawling facility uses “power towers”–huge pillars surrounded by more than 170,000 mirrors, each bigger than a king-size bed–to capture the sun’s rays and create steam. That steam is used to generate electricity. Built by BrightSource and operated by NRG Energy, Ivanpah has been advertised as more reliable than a traditional solar panel farm, in part, because it more closely resembles conventional power plants that burn coal or natural gas. Turns out, there is a lot more to go wrong with the new technology. Replacing broken equipment and learning better ways to operate the complex assortment of machinery has stalled Ivanpah’s ability to reach full potential, said Randy Hickok, a senior vice president at NRG.

New solar-thermal technology isn’t as simple as traditional solar panel installations. Since older solar photovoltaic panels have been around for decades, they improve in efficiency and price every year, he said. “There’s a lot more on-the-job learning with Ivanpah,” Mr. Hickok said, adding that engineers have had to fix leaky tubes connected to water boilers and contend with a vibrating steam turbine that threatened nearby equipment.

One big miscalculation was that the power plant requires far more steam to run smoothly and efficiently than originally thought, according to a document filed with the California Energy Commission. Instead of ramping up the plant each day before sunrise by burning one hour’s worth of natural gas to generate steam, Ivanpah needs more than four times that much help from fossil fuels to get plant humming every morning. Another unexpected problem: not enough sun. Weather predictions for the area underestimated the amount of cloud cover that has blanketed Ivanpah since it went into service in 2013.

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Jun 072015
 
 June 7, 2015  Posted by at 10:33 am Finance Tagged with: , , , , , , , , ,  


NPC Hessick & Son Coal Co. Washington 1925

Americans Live With The Austerity Europeans Are So Concerned About (Guardian)
TiSA, TPP and TTIP Will Sideline National Laws, Wikileaks Says (Independent)
Fast-Tracking the TPP-TiSA-TTIP Trinity (Gaius Publius)
Syriza Holds Firm in Polls at 45%, Eight in 10 Still Want Euro (Kathimerini)
Varoufakis Urges Debt Relief After Tsipras Says Greece Deal Near (Bloomberg)
Putin: Speculation On Grexit Is Counterproductive (Kathimerini)
Key Points On Greek Ongoing Negotiations (Bruegel)
The Economics Of Parallel Currencies (Bruegel)
Greece And Ukraine Crises Drown Out G7 Summit Agenda (Reuters)
The Growth Of The State-Owned Trading Houses (Bloomberg)
Yellen Balks At Turning Over Files To Congress (AP)
New Toys For Flash Boys In China’s Fledgling Derivatives Market (Reuters)
All the Happy Workers (Atlantic)
Dodgy Money-Laundering Housing Deals To Come Out In The Wash (NZ Herald)
Canada Confronts Its Dark Of History Of Abuse (Guardian)
Russia ‘Never Viewed Europe As A Mistress’ – Putin (RT)
‘Third World War is Being Fought Piecemeal’: Pope Francis (RT)
Cameron, Merkel At Odds Over Plan To Settle Refugees Across Europe (Guardian)
Over 2,000 Migrants Rescued In Mediterranean Saturday, More On The Way (Reuters)

In der Not ist der Mittelweg der Tod

“If you were to ask Americans about austerity, we most likely would think you meant personal sacrifice..”

Americans Live With The Austerity Europeans Are So Concerned About (Guardian)

In 1931, James Truslow Adams, an investment banker turned Pulitzer-winning historian, wrote a book to name an idea that had been floating around since before the United States was a country. In his book, The Epic of America, Adams coined the “American Dream,” defining it as a notion “of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable.” The European upper class, he wrote, would not understand. The dream says that if you work hard enough, you can make it in the US, and it is a damnable idea if ever there was one. The dream has allowed us to ignore that our social safety net has been shredded into cobwebs, because the dream tells us that if we work hard enough, we won’t ever need a net.

And that entirely obscures reality. Stories about austerity measures in the EU don’t get much attention in the States, mainly because austerity is already our reality. Our safety net is knit together by charities and faith groups which do the work that government could more easily and efficiently accomplish. We ignore the reality that so many of our fellow citizens aren’t making it – and we ignore that the opportunity for social mobility is greater in other countries than it is here. Through the rose-colored glasses of the American Dream, the people who are falling short simply Are Not Trying Hard Enough. They’ve Earned Their Low Rung On the Ladder. Oh, and: They Are Sucking The Rest Of Us Dry.

That’s by no means the attitude of everyone, but a significant portion of our conservatives (Hello, House Speaker John Boehner. See me waving?) would have us believe that your station in life is entirely of your own making, which is nonsense. If you were to ask Americans about austerity, we most likely would think you meant personal sacrifice, and we’re not having any of that, either. Back in 1977, our then-President Jimmy Carter appeared on television in a sweater to deliver what he called an “unpleasant talk” to urge Americans to do the radical thing and turn down their thermostats. His talk was not well-received; he was not re-elected.

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It’s a simple corporate coup d’état.

TiSA, TPP and TTIP Will Sideline National Laws, Wikileaks Says (Independent)

Wikileaks has warned that governments negotiating a far-reaching global service agreement are ‘surrendering a large part of their global sovereignty’ and exacerbating the social inequality of poorer countries in the process. The Trade in Services Agreement exposed in a 17 document dump by Wikileaks on Thursday relates to ongoing negotiations to lock market liberalisations into global law. If a country like China wanted to join, it would have to scrap all discriminatory practices against foreign firms – so discrimination against a foreign firm opening a hospital in China would be banned, for example. Under the agreement, retailers like Zara or Marks & Spencers would have the right to open stores in any of the signing countries and be treated like domestic companies.

A nationalised service, such as the British telecoms industry in the eighties, would have to ensure it was not harming competition under these terms. “Nothing it will do to extend the liberalisation but it locks in those rules in case of a coup d’etat,” Hosuk Lee-Makiyama, director of European Centre for International Political Economy (ECIPE) and a leading author on trade diplomacy, told The Independent. However he said that fears the trade agreements will lead to the dismantling of the NHS are unfounded. “Do people really think that countries far more progressive than UK (EU countries like France, Germany or Sweden) would ever accept something that threatens their social welfare model? Do people really believe that Obama would put Obamacare up for negotiation?” Lee-Makiyama said.

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“TiSA protects the right of big money players to make a profit from “services..”

Fast-Tracking the TPP-TiSA-TTIP Trinity (Gaius Publius)

Fast Track is not just a path to TPP … it’s evil all on its own. There’s now another leaked “trade” deal, called TISA, and Fast Track will “fast-track” that one too. Want your municipal water service privatized? How about your government postal service? Read on. Most of the coverage of the Fast Track bill (formally called “Trade Promotion Authority” or TPA) moving through Congress is about how it will “grease the skids” for passage of TPP, the “next NAFTA” trade deal with 11 other Pacific rim countries. But as we pointed out here, TPA will grease the skids for anything the President sends to Congress as a “trade” bill — anything. One of the “trade” deals being negotiated now, which only the wonks have heard about, is called TISA, or Trade In Services Agreement. Fast Track legislation, if approved, will grease the TISA skids as well.

Why do you care? Because (a) TISA is also being negotiated in secret, like TPP; (b) TISA chapters have been recently leaked by Wikileaks; and (c) what’s revealed in those chapters should have Congress shutting the door on Fast Track faster and tighter than you’d shut the door on an invading army of rats headed for your apartment. Congress won’t shut that door on its own — the rats in this metaphor have bought most of its members — but it should. So it falls to us to force them. Stop Fast Track and you stop all these “trade” deals. (Joseph Stiglitz will explain below why I keep putting “trade” in quotes.) What’s TISA? It’s worse than TPP. As you read the following, keep the word “services” in mind. TISA protects the right of big money players to make a profit from “services,” any and all of them.

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How many leading European parties even have 45%?

Syriza Holds Firm in Polls at 45%, Eight in 10 Still Want Euro (Kathimerini)

An opinion poll published over the weekend showed Syriza holding a strong lead of 23.6% over New Democracy, while eight in 10 Greeks said they wanted to remain in the eurozone. According to the poll by Metron Analysis, if elections were held now, 45% of Greeks would vote for Syriza and 21.4% for ND. Such a result would allow Syriza, which co-governs with the right-wing Independent Greeks, to rule autonomously. Potami garnered 6.1%, followed by Golden Dawn on 4.4%, the Communist Party with 4.3%, ANEL with 3.2% and PASOK falling below the 3% threshold to enter Parliament with 2.9%. The survey found that 79% of Greeks want to stay in the eurozone. Nearly half (47%) said Greece should accept a proposal by creditors to secure loans, with 35% saying it should rebuff the plan. A total of 59% said they were satisfied with the government’s style of negotiation.

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Europe must get serious. They can’t afford to let the mess get bigger. But they don’t realize that.

Varoufakis Urges Debt Relief After Tsipras Says Greece Deal Near (Bloomberg)

Greek Finance Minister Yanis Varoufakis rejected the latest proposal from his country’s creditors and urged them to instead consider debt relief. “As finance minister, I’ll refuse to put my signature on a deal” such as the one that’s being proposed, Varoufakis told Proto Thema newspaper. “We will not sign a deal that extends this self-feeding crisis of the last five years.” His comments come a day after Prime Minister Alexis Tsipras decried the “clearly unrealistic” demands being made, even as he said the two sides were closer to a deal. A Greek plan, submitted about the same time, is still on the table and awaiting feedback, a Greek government official said by e-mail on Saturday, asking not to be identified in line with policy. [..]

Varoufakis said what was needed was “a debt restructuring that will make Greek debt sustainable, without a cost for the creditors.” He said cutting pensions was “not a reform” and what is instead needed is an investment plan. Frustration is growing. After listening to Tsipras address lawmakers on Friday night, Slovak Finance Minister Peter Kazimir said he wondered “whether this is the same Tsipras who was in Brussels and Berlin this week.” Kazimir, who commented on his social media account, said “debt restructuring is not on the table.” In a sign of how little maneuvering room there is, Greece on Thursday notified the IMF that a €300 million payment due Friday would be deferred and bundled with three more payments at the end of June. [..]

“Tsipras has his back against the wall,” said Miranda Xafa, a former Greek representative to the IMF who runs a consultancy in Athens. “If a deal is not reached next week, in time for parliamentary approval of the deal, we are staring at disorderly default, deposit withdrawals, capital controls, and social unrest. I think a deal is in the making.” Tsipras on Friday said voters are urging the government to not “succumb to the irrational, blackmailing demands of our creditors.” Even with those comments, he said Greece is “closer to a deal than ever before.” “I’m sure that in the coming days our realistic and consistent position will be vindicated,” he said.

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Putin must be stunned at what Brussels is doing.

Putin: Speculation On Grexit Is Counterproductive (Kathimerini)

Greece has the sovereign right to decide which unions and zones it wishes to be a member of, Russian President Vladimir Putin told Italian daily Corriere della Sera. In an interview published on Saturday, Putin highlighted the historically close ties and good partnership between his country and Greece. He added that Russia was developing its relationship with the country “independently of whether Greece is a member of the European Union, NATO or the eurozone.”

On the subject of whether or not Russia would be willing to assist Greece on both a political and a financial level in case of a possible eurozone exit, Putin noted that trying to guess the future would be a mistake as well as “counterproductive for both the European and the Greek economies.” The Russian president’s comments on Greece followed a discussion via telephone with Greek Prime Minister Alexis Tsipras on Friday during which the two leaders talked about cooperation in the energy sector. The two men also agreed to meet in Saint Petersburg during a business conference scheduled to take place in Russian’s second-largest city on June 18 to 20.

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Vast differences still linger. And Syriza has no room to give in.

Key Points On Greek Ongoing Negotiations (Bruegel)

Greek negotiations will continue next week, after Greece asked to bundle all June IMF payments at the end of the month. In the meantime, the finding of a common ground between Greece and its creditors is not yet in sight. The primary surplus issue is where positions seem to have converged the most, with the creditors moving significantly closer to the Greek position. On the VAT, the Greek government appears to have taken a U-turn compared to the proposals rumoured last month and positions on pensions and labour market remain still very far apart, with no immediate solution evident from the documents.

The negotiations over next week will be further complicated by the fact that the Greek proposal includes a section on the restructuring of its debt vis-à-vis the creditors. The details of the plan have been clarified in another leaked paper, which was published by the FT this morning. Many of the restructuring elements had been hinted at or heard before, during these months of negotiations: the plan would include (i) a buyback of the debt owed to the ECB with a ESM loan; (ii) IMF partial buyback with SMP profits; (iii) additional re profiling of the Greek Loan Facility; (iv) splitting EFSF loans in two and substitute half with a perpetuity.

None of these seems to be politically acceptable at the moment: IMF has previously appeared in favor of debt relief, provided it is done on the EU side of Greek debt; the GLF and EFSF terms have already been eased substantially and the perpetuity idea looks hardly digestible in Berlin; the ECB president Mario Draghi said yesterday that the ECB expects timely and full repayment of the SMP; and political support for the ECB/ESM swap idea looks elusive. Given the postponement of IMF payments, the hard deadline becomes the redemption of debt due to the ECB in July. But for the agreement to be signed off nationally and money to be disbursed on time, a deal should be reached sooner. Time is running out, and options would start to look scarce, even to the most resourceful Ulysses.

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Chances of a parallel currency in Greece are rising fast: “..a source of liquidity for the governments that is outside the bond markets, does not involve the banks and lies outside any of the restrictions..”

The Economics Of Parallel Currencies (Bruegel)

What’s at stake: As Greece faces a severe shortage of euros, the idea of introducing a parallel currency used for some domestic transactions – while keeping the euro in place for existing bank deposits and for foreign transactions – has made a comeback. Although historical examples of parallel currencies exist, the analysis of the idea remains in its infancy. It remains unclear whether and how one could find the right mechanics. Biagio Bossone and Marco Cattaneo write that according to several recent media reports, both the Greek government and the ECB are taking into consideration the possibility (for Greece) to issue a parallel domestic currency to pay for government expenditures, including civil servant salaries, pensions, etc. This could happen in the coming weeks as Greece faces a severe shortage of euros. A new domestic currency would help make payments to public employees and pensioners while freeing up the euros needed to pay out creditors.

Ludwig Schuster writes that at the present time, we are talking about around thirty recent proposals calling for a parallel currency in the eurozone, and these have been coming from very different backgrounds. While specific proposals have been mentioned now and again in the media, the response has been barely discernible. Ludwig Schuster writes that the idea of parallel currencies was discussed before the creation of the euro. It was, for example, proposed to first introduce the euro complementary to the national currencies, to soften the transition to complete integration. As we now know, the political decision-makers went down a different path. Similarly, following reunification, the German Federal Government decided to take the Ostmark out of circulation after introducing the Deutschmark instead of keeping it as a secondary currency during a transition phase (the then Minister of Finance, Oskar Lafontaine, was unable to gain support for this idea).

John Cochrane writes that in modern financial markets, a country doesn’t even need the right to print money in order to, well, print money! Bonds are money these days. Greece can print up small-denomination zero-coupon bearer bonds, essentially IOUs. Gavyn Davies writes these IOUs would not formally be given the status of legal tender, since this is explicitly against the terms of the treaties. Yanis Varousfakis writes that the great advantage of such schemes is that it creates a source of liquidity for the governments that is outside the bond markets, does not involve the banks and lies outside any of the restrictions imposed by European institutions. Biagio Bossone and Marco Cattaneo write that the introduction of a Greek parallel currency could take place in at least two ways. The first avenue would be for Greece to issue IOUs, i.e., promises to pay to the bearer euros upon a future time expiration. Basically, these IOUs would be euro denominated debt obligations issued and used to replace euros to pay salaries, pensions, etc.

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17.000 police to protect 7 ‘leaders’…

Greece And Ukraine Crises Drown Out G7 Summit Agenda (Reuters)

Leaders from the Group of Seven (G7) industrial nations meet on Sunday in the Bavarian Alps for a summit overshadowed by Greece’s debt crisis and ongoing violence in Ukraine. Host Angela Merkel is hoping to secure commitments from her G7 guests to tackle global warming to build momentum in the run-up to a major United Nations climate summit in Paris in December. The German agenda also foresees discussions on global health issues, from Ebola to antibiotics and tropical diseases. But on the evening before the German chancellor welcomes the leaders of Britain, Canada, France, Italy, Japan and the United States, she and French President Francois Hollande were forced into their fourth emergency phone call in 10 days with Greek Prime Minister Alexis Tsipras to try to break a deadlock between Athens and its international creditors.

The two sides have been wrangling for months over the terms of a cash-for-reform deal for Greece. Without aid from euro zone partners and the IMF, Greece could default on its loans within weeks, possibly forcing it out of the currency bloc. An upsurge of violence in eastern Ukraine will also play a prominent role at the meeting at Schloss Elmau, a luxury hotel perched in the picturesque mountains of southern Germany near the Austrian border. European monitors have blamed the bloodshed on Russian-backed separatists and the leaders could decide at the summit to send a strong message to President Vladimir Putin, who was frozen out of what used to be the G8 after Moscow’s annexation of Crimea last year.

Ahead of the gathering, thousands of anti-G7 protesters marched in the nearby town of Garmisch-Partenkirchen on Saturday. There were sporadic clashes with police and several marchers were taken to hospital with injuries, but the violence was minor compared to some previous summits. The Germans have deployed 17,000 police around the former winter Olympic games venue at the foot of Germany’s highest mountain, the Zugspitze. Another 2,000 are on stand-by across the border in Austria.

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Arguably, the TTP et al treaties will end this too.

The Growth Of The State-Owned Trading Houses (Bloomberg)

When Azerbaijan’s Socar took over the storied commodity trader Phibro this year, it put a stamp on a new trend: the emergence of giant state enterprises to buy and sell natural resources. Azerbaijan is not alone: Saudi Arabia, China, Oman, Thailand and Russia are also building or expanding government-owned firms to procure and market commodities directly, bypassing the traditional oil and grain traders such as Glencore, Cargill, Vitol Group and Trafigura. “Countries want to secure the offtake of their production or they want to secure supplies,” Socar Trading Chief Executive Officer Arzu Azimov said in an interview. “There is a trend of national companies building trading arms. The new cadre of state trading houses has deep pockets and lofty ambitions.

They have built their capabilities through acquisitions and rapid organic growth, often poaching executives from U.S. and European competitors to do it. And over time, they could damage the business model of the current dominant groups. “The growth of the state-owned traders is making it harder for the established houses,” said Andrew Montague-Fuller, director of energy consultants Molten Group. Socar purchased the remnants of Phibro in March. The U.S. firm, which once owned investment bank Salomon Brothers and dominated commodity markets for most of the past century, had been scaling back for a decade.

Commodity houses serve as the middlemen of global trade, controlling the flow of fuels, grains and metals between groups such as Exxon Mobil and FedEx or coffee farmers in Africa and Nestle. Executives from non-state traders have given a guarded welcome to the new entities. “State-owned trading houses are a new source of competition and will undoubtedly change the market dynamics, but will also create opportunities and will be clients for trading firms,” said Pierre Lorinet, chief financial officer of Trafigura. That’s because the new houses don’t yet have the capacity to handle all aspects of trading. Yet the threat from large new rivals is obvious, with the state firms eating into the commodity flows of the traditional traders and enjoying privileged access to the natural resources of the countries that own them.

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Who governs the nation, you said?

Yellen Balks At Turning Over Files To Congress (AP)

Federal Reserve Chair Janet Yellen is balking at turning over some of the documents ordered by a key House lawmaker in his investigation of a possible leak of market-sensitive information. Yellen has told Rep. Jeb Hensarling, R-Texas, who heads the House Financial Services Committee, that she can’t provide some documents sought by his subpoena because doing so could jeopardize a criminal investigation by the Justice Department and the Fed’s watchdog inspector general. Yellen said the inspector general has told the Fed that the documents in question – which include records related to an earlier internal review by the Fed’s general counsel – should not be provided.

“The Federal Reserve is mindful that we must not impede that open criminal investigation,” Yellen wrote in a letter to Hensarling Thursday. The move escalated a months-long battle between the Fed chair and the lawmaker over an alleged leak in 2012 of interest-rate information to a financial newsletter. Hensarling, a vocal critic of the Fed, issued a subpoena to the central bank last month, saying it had repeatedly failed to adequately respond to the panel’s questions and requests for documents. He has said that his committee is trying to determine whether or not the Fed’s probe was dropped at the request of several members of its policymaking body.

The Fed told the committee in March that its own investigation found no evidence that sensitive information was deliberately leaked from the September 2012 interest-rate policy meeting. Any disclosure of information on Fed policymakers’ views appeared to have been “unintentional or careless” and did not contain details of policy proposals, the Fed concluded. An aide to Hensarling said the central bank has “not provided a valid legal justification for its failure to provide complete and adequate responses to the committee.” “The Fed once again is acting in a manner that can only be characterized as resistant to accountability, transparency and oversight,” Jeff Emerson, an aide to Hensarling, said in a statement.

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Creating bigger losses.

New Toys For Flash Boys In China’s Fledgling Derivatives Market (Reuters)

The rapid liberalization of Chinese derivatives markets has attracted a new breed of creative traders employing complex trading strategies that can generate quick profits – and an extra dollop of risk – in China’s runaway stock boom.
Brokerages and fund managers are investing in mathematics whizzes and hardware, and moving servers onto trading floors to gain precious microseconds dealing in new options and futures contracts, helping China’s CSI300 index become the world’s most traded equity futures contract in May. The introduction of new derivative products is intended to help investors hedge risk, but it also gives rise to the kind of sophisticated trading strategies that have made quick-trading “flash boys” notorious in the United States and Europe.

For the most part the strategies and the traders employing them are untested in China, where the derivatives market barely existed five years ago, and slick automated trading strategies can produce horrific crashes when they go wrong. “Currently, there are many hedging tools in the market, but liquidity and stability is still a problem the hedge fund industry needs to address,” Hong Lei, deputy head of China’s Asset Management Association, told an industry forum last month. “China’s market is highly inefficient, which means it’s relatively easy to produce absolute returns,” said Ken Zhu, Chairman and CEO of hedge fund firm Scientific Investment.

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“..around 20% of employees in North America and Europe are “actively disengaged.”

All the Happy Workers (Atlantic)

The end of capitalism has often been imagined as a crisis of epic proportions. Perhaps a financial crisis will occur that is so vast not even government finances can rescue the system. Maybe the rising anger of exploited individuals will gradually congeal into a political movement, leading to revolution. Might some single ecological disaster bring the system to a halt? Most optimistically, capitalism might be so innovative that it will eventually produce its own superior successor, through technological invention. But in the years that have followed the demise of state socialism in the early 1990s, a more lackluster possibility has arisen. What if the greatest threat to capitalism, at least in the liberal West, is simply lack of enthusiasm and activity? What if, rather than inciting violence or explicit refusal, contemporary capitalism is just met with a yawn?

From a political point of view, this would be somewhat disappointing. Yet it is no less of an obstacle for the longer-term viability of capitalism. Without a certain level of commitment on the part of employees, businesses run into some very tangible problems, which soon show up in their profits. This fear has gripped the imaginations of managers and policymakers in recent years, and not without reason. Various studies of employee engagement have highlighted the economic costs of allowing workers to become mentally withdrawn from their jobs. Gallup conducts frequent and wide-ranging studies in this area and has found that only 13% of the global workforce is properly “engaged,” while around 20% of employees in North America and Europe are “actively disengaged.” They estimate that active disengagement costs the U.S. economy as much as $550 billion a year.

Disengagement is believed to manifest itself in absenteeism, sickness and—sometimes more problematic—presenteeism, in which employees come into the office purely to be physically present. A Canadian study suggests over a quarter of workplace absence is due to general burnout, rather than sickness. Few private-sector managers are required to negotiate with unions any longer, but nearly all of them confront a much trickier challenge, of dealing with employees who are regularly absent, unmotivated, or suffering from persistent, low-level mental-health problems. Resistance to work no longer manifests itself in organized voice or outright refusal, but in diffuse forms of apathy and chronic health problems. The border separating general ennui from clinical mental-health problems is especially challenging to managers in 21st century workplaces, seeing as it requires them to ask personal questions on matters that they are largely unqualified to deal with.

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And only now are people starting to look at where the money comes from that blows the bubbles.

Dodgy Money-Laundering Housing Deals To Come Out In The Wash (NZ Herald)

The Government’s pre-Budget announcement of its two-year “bright line” tax on capital gains surprised a few people and captured headlines. But the accompanying news that non-residents buying property would first have to open a bank account here, get an IRD number and declare their own passport and home tax details may have a bigger impact. The Government is pointing to this measure as having the most potential to reduce foreign demand for Auckland properties and Prime Minister John Key has indicated information on non-resident buying would be gathered and published. He said New Zealand tax authorities would also share these details with foreign tax authorities.

The elephant in the room of Auckland’s property debate is whether some of the money pouring into Auckland, from China in particular, is money laundering of ill-gotten funds. Without any data, the debate is fuelled by anecdote and rumour, but the issue is capturing global attention. In November, China’s President Xi Jinping asked for Key’s help to track down a number of Chinese nationals who had fled to New Zealand with allegedly corruptly obtained funds. This was part of Xi’s campaign to crack down on the “tigers and flies” officials and their cronies. Chinese authorities say New Zealand is the third most popular destination for such fugitives. The issue of money laundering from China is heating up in Australia, too, where data on how much property is bought by non-residents is collected.

More than 25% of all new and existing homes sold last year in Sydney and Melbourne were sold to non-residents, leaving many across the Tasman asking where the money came from. The investments have sparked calls for tougher laws governing money laundering. This is where the money laundering issue becomes more topical and direct for New Zealanders, and in particular the real estate agents, solicitors and accountants who handle money flowing out of China and into New Zealand. New Zealand introduced anti-money laundering rules for banks, insurers, finance companies, share brokers, fund managers and even loan sharks in 2013 that requires them to ask tougher questions about who they open accounts for and where the money comes from.

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What a dark tale.

Canada Confronts Its Dark Of History Of Abuse (Guardian)

Sue Caribou contracts pneumonia once a year, like clockwork. The recurring illness stems from her childhood years at one of Canada’s horrific residential schools. “I was thrown into a cold shower every night, sometimes after being raped”, the frail 50-year-old indigenous mother of six said, matter-of-factly. Caribou was snatched from her parents’ house in 1972 by the state-funded, church-run Indian Residential School system that brutally attempted to assimilate native children for over a century. She was only seven years old. “We had to stand like soldiers while singing the national anthem, otherwise, we would be beaten up”, she recalled. Caribou said Catholic missionaries physically and sexually abused her until 1979 at the Guy Hill institution, in the east of the province of Manitoba.

She said she was called a “dog”, was forced to eat rotten vegetables and was forbidden to speak her native language of Cree. “I vowed to myself that if I ever get out alive of that horrible place, I would speak up and fight for our rights”, she said. Her voice and that of 150,000 other residential school pupils was finally heard across the nation this week as Canada faced one of the darkest chapters in its history. The head of the Truth and Reconciliation Commission (TRC), set up to examine the school system’s legacy, did not mince his words when he unveiled his landmark report. “Canada clearly participated in a period of cultural genocide”, declared Justice Murray Sinclair to cries and applause of survivors in Ottawa.

Although prime minister Stephen Harper apologised for the school system in 2008 (as did the Roman Catholic Church in 2009), his government has always denied that it was a form of genocide. Many survivors who gathered in Ottawa felt empowered for the first time in their life after hearing findings of the six-year-long commission. It feels like our story is validated at last and is out there for the world to see”, said a tearful 58 year-old Cindy Tom-Lindley, who is executive director of the Indian Residential School Survivor Society in British Columbia. “We were too scared as children to speak out. So to give our testimonies to the commission was liberating and emotional.”

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The west has only one, entirely fictional, narrative left.

Russia ‘Never Viewed Europe As A Mistress’ – Putin (RT)

Russia has never sought a no-obligation kind of relationship with Europe, and has always called for a serious partnership, President Vladimir Putin said in an interview that touched on EU sanctions, energy disputes and severed business ties with Ukraine. “We have never viewed Europe as a mistress,” Putin told Il Corriere della Sera on the eve of his visit to Italy. “I am quite serious now. We have always proposed a serious relationship. But now I have the impression that Europe has actually been trying to establish material-based relations with us, and solely for its own gain.” Putin said the “deterioration in relations” between Moscow and the EU states was not Russia’s fault. “This was not our choice,” Putin said.

“It was dictated to us by our partners. It was not we who introduced restrictions on trade and economic activities. Rather, we were the target and we had to respond with retaliatory, protective measures.” The Russian president recalled the “notorious” Third Energy Package and Brussels’ denial of access for Russian nuclear energy products to the European market – despite all the existing agreements. The EU is also reluctant to acknowledge the legitimacy of Russia’s integration attempts on the territory of the former USSR, initially the Customs Union, which was later succeeded by the Eurasian Economic Union. “It is all right when integration takes place in Europe, but if we do the same in the territory of the former Soviet Union, they try to explain it by Russia’s desire to restore an empire,” Putin said. “I don’t understand the reasons for such an approach.”

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“..in the context of global communications, we sense an atmosphere of war..”

‘Third World War is Being Fought Piecemeal’: Pope Francis (RT)

Pope Francis has attacked what he called “the atmosphere of war,” which he believes is hampering the world. He also attacked those profiteering from war and those engaging in arms sales, as he led a mass in Bosnia on Saturday. Francis received a joyous welcome from around 100,000 people who lined the streets of Sarajevo, Bosnia’s capital, as his motorcade made its way to the national stadium, where the pontiff celebrated mass for a mainly Catholic audience of around 65,000, speaking in Italian. Many conflicts across the planet amount to “a kind of Third World War being fought piecemeal and, in the context of global communications, we sense an atmosphere of war,” the pontiff said, according to AFP.

“Some wish to incite and foment this atmosphere deliberately,” he added, attacking those who want to foster division for political ends or profit from war through arms dealing. “But war means children, women and the elderly in refugee camps; it means forced displacement, destroyed houses, streets and factories: above all countless shattered lives.” “You know this well having experienced it here,” he added, alluding to the wars that preceded the break-up of the former Yugoslavia in the early 1990s. Security was tight, with thousands of police officers lining the route taken by the pope. Shops and cafes were closed, while local residents were told not to open their windows or stand on their balconies. Just prior to the visit, Islamists claiming to be members of the Islamic State (IS, formerly ISIS/ISIL) called for Muslims to take-up jihad in the Balkans.

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Fiddling as they drown.

Cameron, Merkel At Odds Over Plan To Settle Refugees Across Europe (Guardian)

David Cameron is set to clash with Angela Merkel at the G7 summit over her plans for a pan-EU distribution of the migrants coming across the Mediterranean from north Africa, with the British prime minister insistent that such measures will only encourage the traffickers. The German chancellor has said that finding a way forward on the migration crisis will be a priority during the two-day talks starting in Bavaria on Sunday. She has previously said there should be a new EU system that distributes asylum seekers to member states based on their population and economic strength. Merkel is expected to make further such calls in the days to come.

Downing Street, however, insists that it will not go along with any such plans. Government officials claim they would deal only with the symptoms and not the cause of the humanitarian disaster. One government official said: “The more the traffickers see that people are being resettled, the greater the incentive there is for them.” As part of his freshly announced agenda of tackling corruption, officials said Cameron would instead argue that attempts to dismantle the human trafficking networks should remain the focus, although the idea of an EU military force destroying boats in the Mediterranean has been rejected by the Libyan authorities. The prime minister of the government in Tripoli said recently that he was ready to repel any such action, likening it to the “colonial mentality” of the Italian occupiers of Libya last century.

A Downing Street source said talks with the authorities in Tripoli were ongoing, but would not be drawn on suggestions that the EU would go ahead without Libya’s approval. “We are not there yet,” the source said. However, Hilary Benn, the shadow foreign secretary, suggested that the government could not rely on Labour’s support if it sought to go ahead with such military plans. Benn told the Observer: “The movement of migrants across the Mediterranean has now reached crisis point. As we know, thousands of innocent people have died and hundreds of thousands of others have been put at risk.” But although he was clear traffickers were to blame, he said, it was essential that “any action taken to deal with that trade is backed by the UN security council, has clear rules of engagement and has the consent of the relevant Libyan authorities”.

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500,000 people are reported to wait in Lybia to make the crossing.

Over 2,000 Migrants Rescued In Mediterranean Saturday, More On The Way (Reuters)

More than 2,000 migrants were rescued from five wooden boats in the Mediterranean on Saturday and as many as seven other vessels have been reported at sea, the privately funded Migrant Offshore Aid Station (MOAS) and Italy’s coastguard said. “MOAS coordinated the rescue of over 2,000 people together with Italian, Irish and Germany ships,” the group tweeted. The migrants were packed onto wooden fishing boats in the Mediterranean off the Libyan coast. Italy’s coastguard, which coordinates sea rescue efforts in from Rome, could not confirm the number of migrants who had been saved so far, but said about a dozen different migrant boats had been reported and rescue operations were ongoing. “We have several assets at work,” a coastguard spokesman said.

During the first five months of the year, there were 46,500 sea arrivals in Italy, a 12% increase on the same period of last year, the UN refugee agency said. Italy’s government projects 200,000 will come this year, up from 170,000 in 2014. The summer months are usually the busiest period for departures because the calm seas make the crossing easier. This year growing anarchy in Libya – the last point on one of the main transit routes to Europe – is giving free hand to people smugglers who make an average of €80,000 from each boatload, according to an ongoing investigation by an Italian court. MOAS, which is operating a privately funded rescue operation with Doctors without Borders, said its Phoenix ship plucked 372 mostly Eritreans from one boat. The Italian navy said one of its ships was still trying to remove about 560 from a wooden boat, while another navy ship has finished rescuing 316 from yet another.

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Jun 062015
 
 June 6, 2015  Posted by at 11:19 am Finance Tagged with: , , , , , , ,  


NPC L.E. White Coal Co. yards, Washington 1922

America Is A Ponzi Scheme: A Commencement Speech For The Scammed (Tom)
IMF Has Betrayed Its Mission In Greece, Captive To Eurozone Creditors (AEP)
Why The Battle Between Athens And Brussels Matters To All Of You (Andreou)
Greece’s Creditors Need A Dose Of Reality (Joe Stiglitz)
Greece: Time For Default And Debt Restructuring (Forbes
Greek PM Rejects ‘Absurd’ Proposal From Creditors (Reuters)
EU To Lend Greece €35 Billion If It Agrees To Reforms – Juncker (RT)
Leaked: Greece’s New Debt Restructuring Plan (FT)
The Blindness Of The European Powers (Jacques Sapir)
The Economic Consequences Of Austerity (Amartya Sen)
The Ready Cyclist And Our Great Collision (Nikos Konstandaras)
Could A Digi-Drachma Avert A Grexit? (Reuters)
New Zealand Heading Toward ‘Social And Housing Apartheid’ (NZ Herald)
UK Housing: The £24 Billion Property Puzzle (FT)
Japan’s Peter Pan Problem (Pesek)
Emerging Markets Are Caught Up In The Bond Rout (CNBC)
‘Russia Would Attack NATO Only In A Mad Person’s Dream’ – Putin (RT)
60% of China’s Underground Water ‘Not Fit For Human Contact’ (RT)

Does America understand how it’s dumbing itself down? If you make education, what future do you have?

America Is A Ponzi Scheme: A Commencement Speech For The Scammed (Tom)

It couldn’t be a sunnier, more beautiful day to exit your lives — or enter them — depending on how you care to look at it. After all, here you are four years later in your graduation togs with your parents looking on, waiting to celebrate. The question is: Celebrate what exactly? In possibly the last graduation speech of 2015, I know I should begin by praising your grit, your essential character, your determination to get this far. But today, it’s money, not character, that’s on my mind. For so many of you, I suspect, your education has been a classic scam and you’re not even attending a “for profit” college — an institution of higher learning, that is, officially set up to take you for a ride.

Maybe this is the moment, then, to begin your actual education by looking back and asking yourself what you should really have learned on this campus and what you should expect in the scams — I mean, years — to come. Many of you — those whose parents didn’t have money — undoubtedly entered these stately grounds four years ago in relatively straitened circumstances. In an America in which corporate profits have risen impressively, it’s been springtime for billionaires, but when it comes to ordinary Americans, wages have been relatively stagnant, jobs (the good ones, anyway) generally in flight, and times not exactly of the best. Here was a figure that recently caught my eye, speaking of the world you’re about to step into: in 2014, the average CEO received 373 times the compensation of the average worker. Three and a half decades ago, that number was a significant but not awe-inspiring 42 times.

Still, you probably arrived here eager and not yet in debt. Today, we know that the class that preceded you was the most indebted in the history of higher education, and you’ll surely break that “record.” And no wonder, with college tuitions still rising wildly (up 1,120% since 1978). Judging by last year’s numbers, about 70% of you had to take out loans simply to make it through here, to educate yourself. That figure was a more modest 45% two decades ago. On average, you will have rung up least $33,000 in debt and for some of you the numbers will be much higher. That, by the way, is more than double what it was those same two decades ago.

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Eye-opening critique by Ambrose.

IMF Has Betrayed Its Mission In Greece, Captive To Eurozone Creditors (AEP)

The International Monetary Fund is in very serious trouble. Events have reached a point in Greece where the Fund’s own credibility and long-term survival are at stake. The Greeks are not withholding a €300m payment to the IMF because they have run out of money, though they soon will do. Five key players in the radical-Left Syriza movement – meeting in the Maximus Mansion in Athens yesterday – took an ice-cold, calculated, and carefully-considered decision not to pay. They knew exactly what they were doing. The IMF’s Christine Lagarde was caught badly off guard. Staff officials in Washington were stunned. On one level, the “bundling” of €1.6bn of payments due to the IMF in June is just a technical shuffle, albeit invoking a procedure last used by Zambia for different reasons in the 1980s.

In reality it is a warning shot, and a dangerous escalation for all parties. Syriza’s leaders are letting it be known that they are so angry, and so driven by a sense of injustice, that they may indeed default to the IMF on June 30 and in doing so place the institution in the invidious position of explaining to its 188 member countries why it has lost their money so carelessly, and why it has made such a colossal hash of its affairs. The Greeks accuse the IMF of colluding in an EMU-imposed austerity regime that breaches the Fund’s own rules and is in open contradiction with five years of analysis by its own excellent research department and chief economist, Olivier Blanchard. Greece’s public debt is 180pc of GDP. The loans are in a currency that the country does not control. It is therefore foreign currency debt.

The IMF knows that Greece cannot possibly pay this down by draconian austerity – the policy already implemented for five years with such self-defeating effects – and the longer it pretends otherwise, the more its authority drains away. It is has pushed for debt relief behind closed doors but only half-heartedly, unwilling to confront the EMU creditor powers head on. Objectively, it is acting as an imperialist lackey – as Greek Marxists might say. Indeed, it has brought about the worst possible outcome. The Fund’s man on the ground in Athens – Poul Thomsen – has pushed the austerity agenda with a curious passion that shocks even officials in the European Commission, pussy cats by comparison. This would be justifiable (sort of) if the other side of the usual IMF bargain were available: debt relief and devaluation.

This is how IMF programmes normally work: impose tough reforms but also wipe the slate clean on debt and restore crippled countries to external viability. It is a very successful formula. On the rare occasion when the IMF goes wrong it is usually because it tries to prop up a fixed change rate long past its sell-by date. All of this went out of the window in Greece. The IMF enforced brute liquidation without compensating stimulus or relief. It claimed that its policies would lead to a 2.6pc contraction of GDP in 2010 followed by brisk recovery. What in fact happened was six years of depression, a deflationary spiral, a 26pc fall GDP, 60pc youth unemployment, mass exodus of the young and the brightest, chronic hysteresis that will blight Greece’s prospects for a decade to come, and to cap it all the debt ratio exploded because of the mathematical – and predictable – denominator effect of shrinking nominal GDP..

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“..whether democratic change is possible or violent revolution is in fact the only effective option.”

Why The Battle Between Athens And Brussels Matters To All Of You (Andreou)

Conclusion: The EU/IMF have played their hand badly. By calling a bluff that wasn’t a bluff they have played themselves into a situation in which they have no win scenario and no exit strategy. They will lose. The only question now is whether they lose badly or not and whether they take Greece down with them. If this intransigence is played out, they force Greece into a new election, possible Grexit, instability, and plunge the entire continent back into recession. If they back down, Greece is seen as victorious, Podemos wins in Spain and they start the same negotiations with Iglesias, only the sums involved are larger and a resistance front in Southern Europe pushing back against imposed market liberalisation and austerity becomes a serious challenge.

They have, I think, realised this, but are still locked in a self-destructive raising of the stakes. Merkel and Hollande have noted this, which is why they have taken charge of negotiations increasingly away from the Eurogroup. The reason this matters to all is twofold. First, it forces out into the open and brings into sharp contrast the increasing divergence between the wellbeing of markets and the wellbeing of populations. Second, it marks a clear act of economic blackmail by a global de facto establishment – let’s call it “The Davos Set” – unhappy at a democratic people opting for an alternative to neoliberalism. How these tensions resolve themselves will determine whether national elections remain meaningful in any way; whether democratic change is possible or violent revolution is in fact the only effective option.

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They don’t have the know-how or intelligence to change position. All they can do is dig in their heels.

Greece’s Creditors Need A Dose Of Reality (Joe Stiglitz)

EU leaders continue to play a game of brinkmanship with the Greek government. Athens has met its creditors’ demands more than halfway. Yet Germany and Greece’s other creditors continue to demand that the country sign on to a programme proven to be a failure, and that few economists ever thought could, would, or should be implemented. The swing in Greece’s fiscal position from a large primary deficit to a surplus was almost unprecedented, but the demand that the country achieve a primary surplus of 4.5% of GDP was unconscionable. Unfortunately, at the time that the “troika” first included this irresponsible demand in the international financial programme for Greece, the country’s authorities had no choice but to accede to it.

The folly of continuing to pursue this programme is particularly acute, given the 25% decline in GDP that Greece has endured since the beginning of the crisis. The troika badly misjudged the macroeconomic effects of the programme they imposed. According to their published forecasts, they believed that, by cutting wages and accepting other austerity measures, Greek exports would increase and the economy would quickly return to growth. They also believed that the first debt restructuring would lead to debt sustainability. The troika’s forecasts have been wrong, and repeatedly so. And not by a little, but by an enormous amount. Greece’s voters were right to demand a change in course, and their government is right to refuse to sign on to a deeply flawed programme.

Having said that, there is room for a deal: Greece has made clear its willingness to engage in continued economic overhaul, and has welcomed Europe’s help in implementing some of them. A dose of reality on the part of Greece’s creditors – about what is achievable and about the macroeconomic consequences of different fiscal and structural changes – could provide the basis of an agreement that would be good not only for Greece, but for all of Europe. Some in Europe, especially in Germany, seem nonchalant about a Greek exit from the eurozone. The market has, they claim, already “priced in” such a rupture. Some even suggest it would be good for the monetary union. I believe such views significantly underestimate the current and future risks involved. A similar degree of complacency was evident in the US before the collapse of Lehman Brothers in September 2008.

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“Ideally, a default by the Greek government should be the first step of a wonderful era of recovery and prosperity..”

Greece: Time For Default And Debt Restructuring (Forbes

[..] who was getting “bailed out”? It was mostly foreign banks. Over time, as the Greek debt matured (instead of a default and 50% writedown), holders of the debt were paid in full, and the Greek government’s debt was gradually transferred to the “troika” lenders, and indirectly the bag-holding taxpayers of Europe. Not surprisingly, some members of the Greek parliament are now arguing that at least some of the Greek government’s debt constitutes “odious debt,” a legal term which justified the government of Ecuador’s debt default in 2009. In addition, the Greek government in 2012 conducted a recapitalization of Greek banks, totaling €48.2 billion, or 24.8% of GDP.

The Greek government did get some equity in trade for its €48 billion (which it obtained in the form of troika “bailout” loan), although this equity is likely to go to zero if the Greek government defaults on its bonds, likely resulting in terminal insolvency among Greek banks, if existing insolvency and deposit flight doesn’t kill them first. Who was bailed out? Where did the €48 billion go? To the banks’ creditors, including foreign banks.Odious? I have to hold my nose just to write this stuff down. None of it is new either; you would find most of the same elements in the Latin American sovereign debt crises of the 1980s.

The end result of all this is that the Greek government’s debt today, totaling €313 billion, consists of €64 billion of domestically-issued bonds, €15 billion of short-term notes, €2.7 billion of foreign-issued bonds and securitizations, €212 billion of “bailout” loans, and €5.0 billion of other external loans. In short, the total foreign exposure by private entities (banks) to the Greek government is, today, about €7.6 billion. Thus, if this swelling pile of debt is eventually written down by 70%, the €220 billion loss will get eaten by the innocent taxpayers of Europe, rather than the privately-owned banks. Actually, the money has already been lost, as the only way to avoid a default at this point is for the taxpayers of Europe to continue to loan Greece’s government more money.

There’s some talk that a default by the Greek government would require “leaving the eurozone,” whatever that means, and perhaps not using the euro. This is mostly just globalist propaganda, along with the notion that a Greek default would also require future “federalization” of Europe. Just look at that NBER list of 153 debt restructurings, none of which required, or was followed by, any “federalization.” There is no reason that Greece can’t continue to use euros as the basis of commerce, just as dollarized Ecuador continued to use dollars as the basis of commerce after the government’s 2009 default.

Ideally, a default by the Greek government should be the first step of a wonderful era of recovery and prosperity, just as was the case in Russia after its default in 1998. By following the Magic Formula (Low Taxes, Stable Money) after the default, along with other reforms, Greeks can become wealthier than Germans in less than twenty years.

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And it is absurd.

Greek PM Rejects ‘Absurd’ Proposal From Creditors (Reuters)

Greece’s government rejects an “absurd” and “unrealistic” proposal from creditors and hopes it will be withdrawn, Prime Minister Alexis Tsipras said on Friday as he called on lenders to accept a rival proposal from Athens instead. Tsipras was presented with a tough compromise proposal for aid from lenders that crossed many of his “red lines” this week, including tax hikes, privatizations and pension reform, quickly sparking outrage from his leftist Syriza party. In an uncompromising speech to parliament, Tsipras said a proposal by Athens made earlier this week was the only realistic basis for a deal and accused Europe of failing to understand that Greek lawmakers could not vote for more austerity.

“The proposals submitted by lenders are unrealistic,” Tsipras said, adding the offer did not take into account common ground found between the two sides during months of negotiations. “The Greek government cannot consent to absurd proposals.” In what appeared to be a threat against lenders that Greece was prepared to move unilaterally if its demands were not met, Tsipras said the government would legislate the restoration of collective bargaining rights for Greek workers – a move opposed by lenders. Still, Tsipras said he was confident that Greece is closer to a deal than ever, and the Greek proposal took needs of the creditors into account. “Time is not running out only for us, it is running out for everybody else as well,” he said. “It’s certain that in the coming days we will hear many things since we are in the final stretch.”

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Carrot and stick, both getting bigger.

EU To Lend Greece €35 Billion If It Agrees To Reforms – Juncker (RT)

The EU is ready to lend €35 billion to Greece between now and 2020 if Athens agrees to implement reforms, European Commission President Jean-Claude Juncker has said. “Greece can get a considerable sum, €35 billion euros until 2020, provided that they implemented programs that would enable our Greek friends to master these funds,” said Juncker, speaking to the members of the European Committee of the Regions on Thursday. The money is already reserved to Athens, but the allocation depends on Greek reforms, Juncker said.

As of Wednesday, five months of €7.2 billion bailout-for-reforms negotiations between Athens and international creditors had failed to produce any result. Since 2010, when Greece’s sovereign debt crisis worsened dramatically, EU and the IMF have lent the Greek government nearly €250 billion in return for brutal austerity measures that have seen the Greek people plunged into deep poverty. Despite a partial write-down of Greek debts in 2012, its public debt is currently €316 billion, 175% of GDP. This is three times the maximum permissible level of this indicator for the eurozone countries, which, according to the Stability and Growth Pact, is 60% of GDP.

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Debt relief is moving back to the forefront.

Leaked: Greece’s New Debt Restructuring Plan (FT)

The Greek government of prime minister Alexis Tsipras has long argued debt relief must be part of any new agreement to complete its current €172bn bailout. But the compromise plan drawn up by its international creditors and presented to Tsipras on Wednesday night in Brussels contains no such promise. So Athens is intending to present its own restructuring plan that the government claims will cut its burgeoning debt load from the current 180% of gross domestic product to just 93% by 2020. The plan is touched on in the 47-page counter-proposal Athens sent to its creditors Monday night. But it is given a full treatment in a new seven-page document authored by the government and entitled “Ending the Greek Crisis”.

The restructuring plan is ambitious, offering ways to reduce the amount of debt held by all four of its public-sector creditors: the ECB, which holds €27bn in Greek bonds purchased starting in 2010; the IMF, which is owed about €20bn from bailout loans; individual eurozone member states, which banded together to make €53bn bilateral loans to Athens as part of its first bailout; and the eurozone’s bailout fund, the European Financial Stability Facility, which picks up the EU’s €144bn in the current programme. If all the elements of the new plan are adopted, the Greek government reckons its debt will be back under 60% of GDP – the eurozone’s ceiling agreed under the 1992 Maastricht Treaty – by 2030.

The proposal starts with a plan for the ECB holdings, acquired as part of the central bank’s bond purchase programme that attempted to stabilise Greek borrowing costs. This idea has already been publicly articulated by finance minister Yanis Varoufakis on several occasions, and is very straightforward: the eurozone’s €500bn rescue fund, the European Stability Mechanism would loan Greece €27bn, which Athens would then use to pay off the ECB bonds. The ESM’s loans are at longer maturities and lower interest rates than the Greek bonds held by the ECB, so it’s a debt restructuring without a real debt restructuring. Two of the ECB-held bonds come due in July and August, with payments totaling €6.7bn, so figuring out a way to deal with these is a matter of urgency. The problem is, the plan is basically a bailout with no strings attached, so it’s very unlikely to fly in eurozone capitals.

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“History will tell that the true grave diggers of the European project will beAngela Merkel, Nicolas Sarkozy and François Hollande..”

The Blindness Of The European Powers (Jacques Sapir)

The nature of the problem at hand was clear since January 25th. When SYRIZA preferred to ally itself with the Independent Greeks rather than with the Europeist pseudopod The River (To Potami) it became evident for any reasonable observer that the question put to Europe would be political and not technical. But the Eurogroup and the EU preferred not to see this reality, most certainly because it questioned the very architecture which had been constructed by Germany in complicity with the French, but also the Italian and Spanish governments. One wcan never stress enough the considerable responsibility of Nicolas Sarkozy and François Hollande when they chose to align themselves with the proposals of Mrs Merkel rather than provoking a helpful crisis which would have put an end to the antidemocratic slide of Europe.

If the debate on rules of governance and the logic of austerity had taken place between 2010 and 2013, it is possible that lasting solutions could have been found to the economic as well as political crisis the Eurozone was going through. But the refusal to open such a crisis, in the name of the « preservation of the Euro», runs a strong risk to end up in its opposite: a crisis, originating in Greece and progressively spreading to all of the countries, which will end up sweeping away not only the Euro, which would not be a big loss, but also the whole of the European construction. The political blindness of the European leaders, their obstinacy in pushing ahead with policies the principles of which were nefarious from all evidence and the results gruesome, will have considerable consequences on Europe. History will tell that the true grave diggers of the European project will beAngela Merkel, Nicolas Sarkozy and François Hollande, with the help of MM Rajoy and Renzi.

Caught in their blindness, these leaders wanted to believe that Greece only wanted to renegotiate the straightjacket of servitude in which it was restrained. But what Greece wanted and still wants is an end to this straightjacket and not a replacement of some of the shackles. So we have witnessed a fundamental misapprehension developing between Athens and the other countries. Where the creditors were proposing pure formal concessions in exchange for new loans, the Greek leaders proposed important concessions, which one might even find excessive, such as on privatisations and the suspension of some social measures, but in exchange for a global treatment of the debt question, passing evidently through an annulation of part of this debt and the restructurating of another, transforming it into a 50 years debt.

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Must. Read.

The Economic Consequences Of Austerity (Amartya Sen)

On 5 June 1919, John Maynard Keynes wrote to the prime minister of Britain, David Lloyd George, “I ought to let you know that on Saturday I am slipping away from this scene of nightmare. I can do no more good here.” Thus ended Keynes’s role as the official representative of the British Treasury at the Paris Peace Conference. It liberated Keynes from complicity in the Treaty of Versailles (to be signed later that month), which he detested. Why did Keynes dislike a treaty that ended the state of war between Germany and the Allied Powers (surely a good thing)? Keynes was not, of course, complaining about the end of the world war, nor about the need for a treaty to end it, but about the terms of the treaty, and in particular the suffering and the economic turmoil forced on the defeated enemy, the Germans, through imposed austerity.

Austerity is a subject of much contemporary interest in Europe I would like to add the word unfortunately somewhere in the sentence. Actually, the book that Keynes wrote attacking the treaty, The Economic Consequences of the Peace, was very substantially about the economic consequences of imposed austerity . Germany had lost the battle already, and the treaty was about what the defeated enemy would be required to do, including what it should have to pay to the victors. The terms of this Carthaginian peace, as Keynes saw it (recollecting the Roman treatment of the defeated Carthage following the Punic wars), included the imposition of an unrealistically huge burden of reparation on Germany, a task that Germany could not carry out without ruining its economy.

As the terms also had the effect of fostering animosity between the victors and the vanquished and, in addition, would economically do no good to the rest of Europe, Keynes had nothing but contempt for the decision of the victorious four (Britain, France, Italy and the United States) to demand something from Germany that was hurtful for the vanquished and unhelpful for all. The high-minded moral rhetoric in favour of the harsh imposition of austerity on Germany that Keynes complained about came particularly from Lord Cunliffe and Lord Sumner, representing Britain on the Reparation Commission, whom Keynes liked to call ‘the Heavenly Twins’. In his parting letter to Lloyd George, Keynes added, ‘I leave the Twins to gloat over the devastation of Europe’.

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SOmething that gets overlooked all too easily: “Now we can see just how unprepared Europe was..”

The Ready Cyclist And Our Great Collision (Nikos Konstandaras)

In high school I had a physics teacher who was mad about bicycles. One day, he told us a story of how, in another town where he had lived when he was younger, he would ride down a steep hill, picking up great speed. Every day he would think of what would happen if a car suddenly blocked his path. “I’ll stand up on the pedals, I’ll jump high and I’ll land on the other side of the car,” he would tell himself, over and over. “One day,” he went on, “a car suddenly appeared out of a side street; I stood up on the pedals, I jumped high and fell on the other side. I hurt my arms, my legs, my ribs, but I didn’t break anything. I was sore, but I was alive.” I can still imagine 30 pairs of young eyes staring at him. “Always be ready for the worst,” he said and went on with a lesson on vectors.

Some 40 years later I still don’t know if the story was true, but my teacher’s words are seared into my mind. Every day as I ride my motorbike I ask myself if I am ready for anything that may come my way. Now that Greece and the rest of Europe look like they cannot avoid a collision, I wonder how the EU – this political, economic and social giant of 500 million people – had not made the slightest provision for the possibility of an accident as it sped toward further union. When Greece found itself in need in 2010, the lack of a plan not only delayed its rescue, but it also sowed the seeds of the whirlwind that Europe now faces – where a lack of trust between Greece and our partners is undermining the very spirit of unity and solidarity that is the foundation of the whole edifice. In five years we have seen a resurgence of divisions and stereotypes from Europe’s bloody past.

Now we can see just how unprepared Europe was, how it did not have the necessary rescue mechanisms nor the mentality that all its peoples were members of the same body. Even as the euro was adopted, economic union lagged, as did the necessary checks. And when “unruly” Greece became the first country to run into trouble, our partners left our country hanging for six months instead of closing ranks around it, declaring that the problem was a European one, that Europe would take care of it and would bring its errant member into line. Our partners pointed fingers at us, while inside Greece currents of anger and fear swelled up, undermining relations with our partners.

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I think perhaps the crucial question is will there be time.

Could A Digi-Drachma Avert A Grexit? (Reuters)

Greek Finance Minister Yanis Varoufakis may have been joking when he tweeted about Greece adopting bitcoin, but some financial technology geeks say an asset-backed digital currency could be a solution to the country’s cash crisis. Greece faces €1.5 billion of repayments to its creditors this month, having been locked in talks on a cash-for-reforms deal for months. Failure to agree could trigger a Greek default and potential exit from the euro zone, dealing a big blow to the supposedly irreversible currency union. In order to avoid such a “Grexit” some reckon Greece could adopt a bitcoin-like parallel digital currency with which it could pay its pensioners and public-sector workers. It could be called the “digi-drachma”, after Greece’s pre-euro currency.

But unlike bitcoin, which is totally decentralized and given value simply by its usefulness, it would be issued by the state and backed with the country’s substantial assets. “If you’ve got all these assets, why don’t you use them to back up a digital currency?” said Lee Gibson-Grant, founder of Coinstructors, a consultancy for those wanting to use bitcoin’s underlying technology – the blockchain – to start businesses. If Greece’s assets could be tokenized and issued as a digital currency, argues Gibson-Grant, public-sector wages and pensions could be paid with it. That would preserve scarce euros for repaying the country’s creditors and help avoid a sell-off of valuable assets at rock-bottom prices.

Varoufakis himself, who on April 1 tweeted a link to a satirical story that reported him as saying Greece would adopt bitcoin if a deal with its creditors could not be reached, blogged in 2014 about the possibility of a parallel “Future Tax (FT) coin”. The FT coin, said Varoufakis, an academic economist whose radical-left Syriza party was then not yet in government, would be denominated in euros but backed by future tax revenues. It would use a “bitcoin-like algorithm in order to make the system transparent, efficient and transactions-cost-free” and could provide “a source of liquidity for the governments that is outside the bond markets”. Greece’s radical left is not alone in having considered a parallel currency.

The ECB has analyzed a scenario in which Greece pays civil servants with IOUs, which would rely on future tax revenue in a similar way to the FT coin, creating a virtual second currency in the euro bloc. ECB experts decided it would not work, as public sector workers would receive payment in the IOU currency rather than in euros, putting further pressure on Greek banks because those workers were likely then to plunder their savings. Furthermore, the basis for both such ideas relies on an implicit assumption that the Greek state will not collapse — by no means guaranteed in the current climate. “This would be different to a distributed, trustless digital currency such as bitcoin, since holders would still have to trust the issuer,” said Tom Robinson, Chief Operating Officer at London-based bitcoin storage firm Elliptic.

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Better watch out: “..an increasing “ghettoisation” along ethnic and racial lines..”

New Zealand Heading Toward ‘Social And Housing Apartheid’ (NZ Herald)

New Zealand is heading towards a “social and housing apartheid” as a result of soaring house prices locking people out of the property market, a leading economist claims. New Zealand Institute of Economic Research (NZIER) principal economist Shamubeel Eaqub and his wife Selena, also an economist, argue in their new book Generation Rent, that unless serious changes are made across the housing, banking and construction sectors, New Zealand will become divided into two classes – the landed gentry and everyone else. Speaking on The Nation this morning, Mr Eaqub said the current housing market, especially in Auckland’s hot property bubble, was “creating generations of people who are priced out” of the market.

“What we have created is essentially this lost generation … these property orphans, who simply cannot get into the housing market,” he said. “So regardless of a correction in the future, you’ve still created this underclass, this segregation of society.” The situation was creating two classes in society, he said. “What we’re looking at now is essentially this landed gentry – if you’ve got mummy or daddy who own houses, you’re likely to own houses,” Mr Eaqub said. “We’re seeing this already in Auckland, where if you want to buy a house you really need help from somebody who’s been in the market for a very long time.

“We’re creating two New Zealands – this landed gentry, this wealth-generated, hereditary sort of wealth, those are the people who will be able to buy houses, and then there is the rest. “We are creating this social and housing apartheid where you’ve got these people who are the ‘generation rent’ and they’re locked out of so much of New Zealand that’s predicated itself on owning a home.” He added: “Housing apartheid is, I think, this concept that ‘generation rent’ simply cannot participate in so much of how New Zealand is set up.” Mr Eaqub also claimed there was a “growing wedge” between the two classes, and that an increasing “ghettoisation” along ethnic and racial lines was emerging in New Zealand cities.

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Not surprisingly, the FT seeks the answer in building more, and ignores the influence of speculation, buy-to-let et al in driving up prices into a bubble. Just make housing a basic human right, much better.

UK Housing: The £24 Billion Property Puzzle (FT)

The former bed and breakfast hotel close to Blackpool’s seafront has, like the northern English town itself, seen better days. The owner, Val, has been renting its 19 rooms to long-term unemployed benefit claimants since 1982. Each tenant receives £91 a week in housing benefit to subsidise their rent — meaning that Val, who likens the house to “one big family”, earns close to £90,000 a year from the state: more than three times the national average wage. Val is not alone. The seaside town’s landlords received £91m in housing benefit last year. Of the 17,500 privately rented homes more than 14,000 qualify for housing benefit, the highest proportion in the country.

The situation is being repeated around the UK, which paid £24bn in rent subsidies in 2013/14, double the amount a decade ago and the equivalent of £1 in every £4 in Britain’s budget deficit. Iain Duncan Smith, work and pensions secretary, has described the rent subsidies as part of a “dysfunctional welfare system” that often traps those it is supposed to help. Cutting benefit spending is high on the new Conservative government’s list of priorities. But anti-poverty campaigners argue that without the subsidies thousands of families would be homeless. Opponents counter that they ultimately line the pockets of neglectful landlords and fuel rising house prices by increasing their bidding power when buying homes.

“No one wakes up in the morning with the aspiration of living in a bedsit,” says Steve Matthews, director of housing for Blackpool council. “People end up in this accommodation because they are vulnerable and they have no other choice.” Val’s tenants are at the sharp end of a housing crisis. A shortfall in supply as too few houses are built, has been compounded by rising demand due to a growing population, which increased by 7.6% in the 10 years to 2013. Partly as a result London house prices per square foot are now the second highest in the world after Monaco, according to the London School of Economics’ Centre for Economic Performance.

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Abenomics is all about belief only.

Japan’s Peter Pan Problem (Pesek)

There are plenty of people in Asia who believe Haruhiko Kuroda, governor of the Bank of Japan, lives in Neverland. At the very least, economists on both sides of Japan’s deflation debate — those who worry Kuroda has weakened the yen too much, and those who believe he hasn’t done enough — think his policies have been out of touch. But it was still surprising to hear Kuroda admit on Wednesday that his policies are guided by imagination — specifically, the Japanese public’s willingness to imagine they’re working. “I trust that many of you are familiar with the story of Peter Pan, in which it says, ‘the moment you doubt whether you can fly, you cease forever to be able to do it,'” he said at a BOJ-hosted conference.

I’ll admit it’s somewhat distressing when the central banker managing the currency in which you’re paid suggests he’s relying on children’s stories for guidance. But Kuroda’s quote merits close scrutiny: It speaks volumes about why his policy of setting ultralow interest rates has failed to gain traction. Some might say Peter Pan, a boy who never grows old on the small island of Neverland, is the wrong metaphor for Japan, where 26% of the country’s 127 million citizens are over 65, and aging fast. A better reference, one could argue, is “Alice in Wonderland,” since Kuroda’s low interest rates have created a world where investors increasingly find it difficult to distinguish between illusion and reality. But in other ways, Peter Pan is an entirely apt metaphor. Just like young Peter, Kuroda’s quantitative easing program has never grown up; what was supposed to be a temporary policy increasingly seems like a permanent one.

Granted, this isn’t entirely his fault. The BOJ’s job would be much easier if Prime Minister Shinzo Abe carried out his promises of structural reform. But as much as central banking is a matter of liquidity, it’s also a confidence game. Just as theater directors are supposed to compel audiences to suspend their disbelief, Kuroda’s responsibility is to set monetary policy in a way that gives the public a feeling of hope about the economy – and induces them to increase spending. It’s on this emotional level that Kuroda is failing. Investors, particularly those overseas, seem to feel optimistic about low interest rates: They’ve driven the Nikkei up 36% over the last 12 months. But Japanese consumers don’t feel the magic and aren’t spending – inflation still hasn’t approached the BOJ’s desired 2% target.

This is where Kuroda penchant for space metaphors becomes relevant. “In order to escape from deflationary equilibrium, tremendous velocity is needed, just like when a spacecraft moves away from Earth’s strong gravitation,” he said in February. “It requires greater power than that of a satellite that moves in a stable orbit.”

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They were always sure to bear the brunt of increasing instability.

Emerging Markets Are Caught Up In The Bond Rout (CNBC)

Stocks and currencies are not the only markets caught up in the bond market turmoil this week. Emerging markets have also felt the pain, highlighting their vulnerability to events in the developed world. MSCI’s emerging market stock index was on track Friday for a third straight week of losses, while the Indonesian rupiah hit a 17-year low against the dollar earlier in the day and the Russian ruble hit a two-month low on Thursday. This week’s sell-off in global bond prices, pushing yields on U.S. Treasury and European government bonds sharply higher on changing perceptions about the inflation outlook, has spilled over into emerging markets. And analysts say it’s exacerbating the volatility at a time when jitters about the timing of a possible rise in U.S. interest rates and concern about Greece’s future in the euro zone have tempered appetite for risky assets.

“Sentiment towards emerging markets has deteriorated significantly on the back of the sell-off in government debt markets, with a sharp increase in outflows from emerging market debt funds this week,” Nicholas Spiro at Spiro Sovereign Strategy, told CNBC. “Emerging markets are facing a triple whammy of a sovereign bond sell-off, a plethora of country-specific risks (not least Greece) and an anticipated tightening in U.S. monetary policy,” he said. Analysts say that central European countries were especially vulnerable to the sell-off in German Bunds as their markets are closely correlated to price action in the euro zone. There’s also the Greece factor, with turmoil there likely to hurt the outlook for the euro zone and the emerging markets with which it has close economic and trade links.

“Clearly Greece is the big unknown at the moment. Contagion from that would probably be concentrated in parts of eastern Europe, which have the closest linkages to the euro zone,” Capital Economics’ William Jackson told CNBC. [..] Jackson at Capital Economics said Turkey and South Africa were two emerging markets to watch most closely in terms of further volatility. Turkish assets have faced additional pressure from uncertainty ahead of a weekend election that could force the ruling AK party to form a coalition. The Turkish lira traded at about 2.66 per dollar on Friday, holding near one-month lows. “On every single measure of vulnerability you can look at, Turkey usually comes near the top,” said Jackson.

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Can we all get this through to our heads now?

‘Russia Would Attack NATO Only In A Mad Person’s Dream’ – Putin (RT)

Russia is not building up its offensive military capabilities overseas and is only responding to security threats caused by US and NATO military expansion on its borders, Russian President Vladimir Putin told Italian outlet Il Corriere della Sera. Speaking to the paper on the eve of his visit to Italy, Putin stressed that one should not take the ongoing Russian aggression scaremongering in the West seriously, as a global military conflict is unimaginable in the modern world. “I think that only an insane person and only in a dream can imagine that Russia would suddenly attack NATO. I think some countries are simply taking advantage of people’s fears with regard to Russia. They just want to play the role of front-line countries that should receive some supplementary military, economic, financial or some other aid”, Putin said.

Certain countries could be deliberately nurturing such fears, he added, saying that hypothetically the US could need an external threat to maintain its leadership in the Atlantic community. Iran is clearly not very scary or big enough for this, Putin noted with irony. Russia’s President invited the journalists to compare the global military presence of Russia and the US/NATO, as well as their military spending levels. He also urged them to look at the steps each side has taken in connection with the Anti-Ballistic Missile Treaty since the collapse of the Soviet Union. Russia’s military policy is not global, offensive, or aggressive, Putin stressed, adding that Russia has virtually no bases abroad, and the few that do exist are remnants of its Soviet past.

He explained that there were small contingents of Russian armed forces in Tajikistan on the border with Afghanistan, mainly due to the high terrorist threat in the area. There is an airbase in Kyrgyzstan, which was opened at request of the Kyrgyz authorities to deal with a terrorist threat there. Russia also has a military unit in Armenia, which was set up to help maintain stability in the region, not to counter any outside threat. In fact, Russia has been working towards downsizing its global military presence, while the US has been doing the exact opposite. “We have dismantled our bases in various regions of the world, including Cuba, Vietnam, and so on”, the president stressed. I invite you to publish a world map in your newspaper and to mark all the US military bases on it. You will see the difference.

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That’s not human consumption, but human contact.

60% of China’s Underground Water ‘Not Fit For Human Contact’ (RT)

About 60% of underground water in China, and one-third of its surface water, have been rated unfit for human contact last year, according to the environment ministry in Beijing. The ministry said in a statement that water quality is getting worse, and the ministry classified 61.5% of underground water at nearly 5,000 monitoring sites as “relatively poor” or “very poor.” In 2013, the figure stood at 59.6%. The fact that the water is unfit for human contact means that it can only be used for industrial purposes or irrigation. The water supplies are classified into six grades, with only 3.4% of 968 monitoring sites of surface water meeting the highest “Grade I” standard. A total of 63.1% was reported to be suitable for human use, rated “Grade III” or above.

China is currently carrying out a “war on pollution” campaign, to deal with environmental issues. In particular, in April, the government in Beijing pledged to increase the %age of good quality water sources up to 70% in seven main river basins, and to more than 93% in urban drinking supplies, by 2020. Also, a prohibition on water-polluting plants in industries – such as oil refining and paper production – is set to come into effect by the end of 2016. Air pollution also remains one of the most serious issues in China, the ministry said in its statement. Just 16 of the 161 major Chinese cities satisfied the national standard for clean air in 2014, statistics demonstrated, local news agencies reported. The other 145 cities – over 90% all in all – failed to meet the requirements.

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May 262015
 
 May 26, 2015  Posted by at 10:18 am Finance Tagged with: , , , , , , , , , ,  


Walker Evans Vicksburg, Mississippi. “Vicksburg Negroes and shop front.” 1936

We Must Protect Our Children From Austerity (Guardian)
Greek Hospitals Out Of Painkillers, Scissors And Sheets Due To Austerity (RT)
The Key To A Greek Economic Revival Has To Be An End To Austerity (Münchau)
Austerity Is the Only Deal-Breaker (Yanis Varoufakis)
Greece Is All But Bankrupt (NY Times)
The World Is Drowning In Debt, Warns Goldman Sachs (Telegraph)
Investors Are Playing A ‘Greater Fool’ Game (George Magnus)
Weak Productivity Turns Into A Problem Of Global Proportions (FT)
Greece, the EU and the IMF Are Dancing With Death (Coppola)
Greek PM Convenes Emergency Meeting Of His Bailout Team (Guardian)
Greece’s Governing Left Divided Over Debt Terms (WSJ)
IMF’s Blanchard Says Greek Budget Proposals Will Not Provide (Reuters)
Germany And France Agree Closer Eurozone Ties Without Treaty Change (Guardian)
UK’s Cameron Tells EC President That Europe Must Change (Reuters)
Banks as Felons, or Criminality Lite (NY Times)
China Warned Over ‘Insane’ Plans For New Nuclear Power Plants (Guardian)
Yesterday’s Tomorrowland (Jim Kunstler)
Flawed Science Triggers U-Turn On Cholesterol Fears (Daily Mail)
EU Dropped Pesticide Laws Due To US Pressure Over TTIP (Guardian)

I think it’s more that we need to protect them from our own greed.

We Must Protect Our Children From Austerity (Guardian)

The definition of a decadent society is one that destroys its own future, knowing full well the terrible consequences. On that basis, Britain is truly degenerate. Just look at how it trashes its children and teenagers. Our young are the very people on whom the rest of us will one day come to depend – to care for us, and to earn the country’s income. Rather than mere lifestyle accessories, to be slotted in alongside handbags and cars, they represent our best hope. This human truth has sustained societies around the world and down the ages. Yet in austerity Britain, children have been chucked to the bottom of the pile. They have been robbed of their rightful benefits. And the support they could once draw upon – everything from Sure Start centres to youth clubs to mental-health workers – has been hacked back.

Hyperbole? I really wish it were. Instead, I am merely repeating what professionals in field after field, from social care to mental health, are saying – and what the expert analysis shows. The landmark study of the social effects of David Cameron’s austerity was produced at the start of this year by a team of academics led by Professor John Hills at the London School of Economics. They found that the biggest victims of the spending cuts made since 2010 were children, and their parents: “Tax-benefit reforms hit families with children under five harder than any other household type. Those with a baby were especially affected.” None of this was accidental. Treasury officials stick each prospective change in tax and benefits under a Whitehall microscope – which is why so few budgets are an omnishambles.

When making their cuts, Cameron and George Osborne would have known that children and babies would suffer most – and proceeded regardless. Remember that next time you catch some commentator talking with great gravitas but little policy detail about the new compassionate Conservatism. Two things stand out in Cameron’s assault on children: it is precisely the opposite of what he promised, and exactly the reverse of what he himself knows any prime minister should be doing. Before coming to office, the Conservative leader unveiled a poster of a handsome tot: “Dad’s nose, mum’s eyes, Gordon Brown’s debt.” The whole point of cuts was “because we believe children like this deserve better”. One parliament later, the Trussell Trust reports that more than a third of the one million food parcels it gave out last year were for children.

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Due to our own lack of morals?!

Greek Hospitals Out Of Painkillers, Scissors And Sheets Due To Austerity (RT)

Hospitals across Greece are lacking the most essential supplies, including painkillers, scissors and sheets, as years of economic meltdown have left the country’s healthcare system in a desperate state. The number of uninsured Greeks has reached 2.5 million compared to 500,000 in the pre-crisis year of 2008, the Times reported. Healthcare spending has dropped by 25% since 2009, leading to shortages of medical equipment and a lack of funds to pay nurses’ salaries. The country spends around €11 billion annually on its public healthcare system, which is one of the lowest rates in the EU.

According to media reports, some Greek patients have had to undergo painful medical procedures without anesthetics. People have also been turned away from hospitals, as they didn’t even have the equipment to measure their blood pressure, the newspaper learned. On one occasion, a patient was even asked to bring his own sheets to the infirmary from home. A trainee surgeon at KAT state hospital in Athens described the situation at his hospital as being at the “breaking point”. “There is no money to repair medical equipment, no money for ambulances to use for petrol, no money to hire nurses and no money to buy modern surgical supplies,” he told the Times.

In April, the new Syriza government vowed to battle the “barbaric conditions” in public hospitals, as well as corruption in the healthcare sector. Despite money shortages, Greek authorities abolished the €5 fee to visit state hospitals and have pledged to hire an additional 4,500 healthcare workers. “We want to turn the health sector from a victim of the bailouts, a victim of austerity, into a fundamental right for every resident of this country and we commit to do so at any cost,” Alexis Tsipras, the Greek Prime Minister, said. “We will not tolerate the exploitation of human pain,” Tsipras stressed.

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“..the creditors are responsible for the current mess by insisting on an economically illiterate adjustment programme.”

The Key To A Greek Economic Revival Has To Be An End To Austerity (Münchau)

It is all up to Alexis Tsipras now. The Greek prime minister will decide soon whether or not he wants a deal with his creditors that would allow Athens to service its debt. If he says “no”, Greece will default. At that point, it is possible the country will have to leave the eurozone. What should he do? He will know his own political constraints. I will focus on the economics. The short answer is: if the deal is reasonable, he should accept. So where is the line between reasonable and unreasonable? The rough answer is whatever it takes to end the uncertainty. No investor is going to put their money into Greece so long as there is a threat of Grexit – a Greek exit from the eurozone. For an agreement to be viable, it would need to reduce the probability of Grexit to zero.

The same applies to the policies needed if Mr Tsipras says “no”. On that day he would need a brilliant economic plan. So what economic criteria should he apply to evaluate any offer? The single most important part of the agreement concerns the fiscal adjustment that Greece’s creditors are asking Athens to undertake. The variable to look out for is the primary surplus – the fiscal balance before payment of interest on debt: essentially the money a country has for debt servicing. There is no such thing as an objectively right or wrong number. But experience shows that large primary surpluses are politically unsustainable. It was the unsustainability of the previous agreement between Greece, its European creditors and the IMF that brought Syriza to power.

I heard a respected expert on this issue recently proclaim that a primary surplus of 2.5% of gross domestic product would probably work. The Greeks have demanded 1.5%, which is a reasonable opening bid. One of the so-called “non-papers” – the documents officials leak without leaving fingerprints – that are circulating among the negotiators had mentioned a figure of 3.5%, which strikes me as too high. A primary surplus of 4.5%, as was demanded from 2016 onwards by the previous loan agreement, is plainly ludicrous.

Greek economic mismanagement brought about the crisis in 2010, but the creditors are responsible for the current mess by insisting on an economically illiterate adjustment programme. They had not taken into account the fact that Greece is a relatively closed economy. This means that most of its GDP is produced and consumed at home. If you force such an economy into extreme austerity during a recession, it stays trapped. The key to a Greek economic revival has to be an end to austerity. This is why Grexit is not necessarily a solution, either, since it might bring even more fiscal consolidation. Greece would be cut off from international capital markets and unable to run a deficit.

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” Relative to the rest of the countries on the eurozone periphery, Greece was subjected to at least twice the austerity. There is nothing more to it than that.”

Austerity Is the Only Deal-Breaker (Yanis Varoufakis)

A common fallacy pervades coverage in the world’s media of the negotiations between the Greek government and its creditors. The fallacy, exemplified in a recent commentary by Philip Stephens of the Financial Times, is that, “Athens is unable or unwilling – or both – to implement an economic reform program.” Once this fallacy is presented as fact, it is only natural that coverage highlights how our government is, in Stephens’s words, “squandering the trust and goodwill of its eurozone partners.” But the reality of the talks is very different. Our government is keen to implement an agenda that includes all of the economic reforms emphasized by European economic think tanks.

Moreover, we are uniquely able to maintain the Greek public’s support for a sound economic program. Consider what that means: an independent tax agency; reasonable primary fiscal surpluses forever; a sensible and ambitious privatization program, combined with a development agency that harnesses public assets to create investment flows; genuine pension reform that ensures the social-security system’s long-term sustainability; liberalization of markets for goods and services, etc. So, if our government is willing to embrace the reforms that our partners expect, why have the negotiations not produced an agreement? Where is the sticking point?

The problem is simple: Greece’s creditors insist on even greater austerity for this year and beyond – an approach that would impede recovery, obstruct growth, worsen the debt-deflationary cycle, and, in the end, erode Greeks’ willingness and ability to see through the reform agenda that the country so desperately needs. Our government cannot – and will not – accept a cure that has proven itself over five long years to be worse than the disease. Our creditors’ insistence on greater austerity is subtle yet steadfast. It can be found in their demand that Greece maintain unsustainably high primary surpluses (more than 2% of GDP in 2016 and exceeding 2.5%, or even 3%, for every year thereafter).

To achieve this, we are supposed to increase the overall burden of value-added tax on the private sector, cut already diminished pensions across the board; and compensate for low privatization proceeds (owing to depressed asset prices) with “equivalent” fiscal consolidation measures. The view that Greece has not achieved sufficient fiscal consolidation is not just false; it is patently absurd. The accompanying figure not only illustrates this; it also succinctly addresses the question of why Greece has not done as well as, say, Spain, Portugal, Ireland, or Cyprus in the years since the 2008 financial crisis. Relative to the rest of the countries on the eurozone periphery, Greece was subjected to at least twice the austerity. There is nothing more to it than that.

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Heart rendering. “Maybe the crisis makes us better people — but these better people will die if the crisis continues.” “They can take their money,” he said, using an expletive. “I feel ashamed to be a European.”

Greece Is All But Bankrupt (NY Times)

Bulldozers lie abandoned on city streets. Exhausted surgeons operate through the night. And the wealthy bail out broke police departments. A nearly bankrupt Greece is taking desperate measures to preserve cash. Absent a last-minute deal with its creditors, the nation will run out of money early next month. Two weeks ago, Greece nearly defaulted on a debt payment of €750 million to the IMF. For the rest of this month, Greece should be able to cover daily cash deficits of around €100 million, government ministers say. Starting June 5, however, these shortfalls will rise sharply, to around €400 million as another I.M.F. obligation comes due. They will then double in size on June 8 and 9. “At that point it is all over,” said a senior Greek finance official.

On Sunday, the interior minister, Nikos Voutsis, said that there would not be enough money to pay the I.M.F. if there was no deal by June 5. In a society that has lived off the generosity of the government for decades, the cash crisis has already had a shattering impact. Universities, hospitals and municipalities are struggling to provide basic services, and the country’s underfunded security apparatus is losing its battle against an influx of illegal immigrants. In effect, analysts say, Greece is already operating as a bankrupt state. The government’s call to conserve funds has been far-reaching. All embassies and consulates — as well as municipalities throughout the country — have been told to forward surplus funds to Athens. Hospitals and schools face strict orders not to hire doctors and teachers.

And national security officials complain they are under intense pressure to keep air and sea missions to a minimum, at a time when migrants from Africa and the Middle East are rushing to Greece’s shores. Even the swelling ranks of investment bankers, lawyers and consultants advising the Finance Ministry have been told that, for now at least, their work is to be considered pro bono. Since its first bailout in 2010, Greece has been forced by its creditors to cut spending by €28 billion — quite a sum in a €179 billion economy. A proportional dose of austerity applied to the United States, for example, would come to $2.6 trillion.

=============

Sitting at his desk at the start of yet another 20-hour-plus workday, Theodoros Giannaros, the head of Elpis Hospital in Athens, chain-smoked cigarettes and signed off on a pile of spending requests that he said he knew would not be fulfilled. Since he started work at the hospital in 2010, Mr. Giannaros has seen his salary shrink to €1,200 a month, from €7,400. His annual budget, once €20 million, is now €6 million, and the number of practicing doctors has been reduced to 200 from 250. Like almost everyone in Greece, he is making do with less. The hospital recycles instruments; buys the cheapest surgical gloves on the market (they occasionally rip in the middle of operations, he says); and uses primarily generic drugs. “We have learned that we can live with a lot of money and survive with nothing,” he said.

“Maybe the crisis makes us better people — but these better people will die if the crisis continues.” Mr. Giannaros, who is 58, says he recently suffered a heart attack from the constant stress. But he says it is his surgeons he worries about most. In aging, depression-ridden Greece, treating the 150 or so patients that come to his hospital each day has put an extraordinary strain on his shrinking corps of doctors. The fact that many have begun to strike because they are not getting paid for overtime makes matters worse. Striding across the hospital grounds, Mr. Giannaros waved over his star surgeon, Dimitris Tsantzalos. How many operations did you do last year, he asked. “About 1,500,” said Dr. Tsantzalos, who, with his strapping build, seems younger than his 63 years. Recently he says he put in a month of consecutive 20-hour days and, not surprisingly, confesses to exhaustion. “I am burnt out,” he said. “It’s very dangerous for the patients.”

A week later, a tragedy struck Mr. Giannaros: His 26-year-old son, Patrick, committed suicide by jumping in front of an Athens subway train. “There was just an emptiness in front of him,” Mr. Giannaros said between wrenching sobs in a brief telephone conversation. “The emptiness of the future they have taken away from us.” His son had finished university studies and, unable to find work in a country where more than half the young are jobless, was helping Mr. Giannaros at the hospital. “He saw no future, no way to help his family,” Mr. Giannaros said. “Now God has found him a job — as an angel.” While Mr. Giannaros said he understood the importance of staying current with important creditors like the I.M.F., he said enough was enough. “They can take their money,” he said, using an expletive. “I feel ashamed to be a European.”

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Nothing new.

The World Is Drowning In Debt, Warns Goldman Sachs (Telegraph)

The world is sinking under too much debt and an ageing global population means countries’ debt piles are in danger of growing out of control, the European chief executive of Goldman Sachs Asset Management has warned. Andrew Wilson, head of Europe, Middle East and Africa (EMEA), said growing debt piles around the world posed one of the biggest threats to the global economy. “There is too much debt and this represents a risk to economies. Consequently, there is a clear need to generate growth to work that debt off but, as demographics change, new ways of thinking at a policy level are required to do this,” he said.

“The demographics in most major economies – including the US, in Europe and Japan – are a major issue – and present us with the question of how we are going to pay down the huge debt burden. With life expectancy increasing rapidly, we no longer have the young, working populations required to sustain a debt-driven economic model in the same way as we’ve managed to do in the past.” Mr Wilson used Japan, where gross government debt has climbed above 200pc of gross domestic product (GDP), as an example of where the ageing population could demographics were working against them. “[This] is evidently not sustainable over the long term,” he said.

The Organisation of Economic Co-operation and Development (OECD) has also sounded out a warning about Japan’s growing debt pile. The think-tank said gross government debt was on course to balloon to more than 400pc by 2040 if the government did not carry out reforms. Angel Gurria, the OECD’s secretary-general, said monetary stimulus and stronger growth alone would not be enough to haul the economy out of its two-decade malaise. “Japan’s future prospects depend on ensuring fiscal sustainability over the long term. With a budget deficit of around 8pc of GDP, the debt ratio is set to rise further into uncharted territory,” he said.

Others have warned privately that Japan’s debt mountain is unsustainable. “The crunch point is when it starts to run a current account deficit,” said one senior banker. “When they stop running a current account surplus and they need our money to survive, we’re not going to lend to them at 30 or 40 basis points.”

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Why insist on calling them investors?

Investors Are Playing A ‘Greater Fool’ Game (George Magnus)

Speculative euphoria, even when encouraged by central banks, is defined by the way it ends — not with a whimper but with a bang. In this context, the so-called Bund “tantrum” may be no more than a hiccup in the context of deeply anomalous financial market conditions. Investors are still chasing low or negative yields in bond markets, fairly or fully valued equity markets, and rising property markets. Yet, it seems increasingly that, long-term investors aside, they are playing a greater fool game. One of the biggest anomalies in global financial markets is the persistence of zero real, or inflation-adjusted, policy rates in most advanced economies and zero or negative real bond yields alongside a surge in the volume of public and private debt that shows no sign of subsiding.

The Bank for International Settlements has mapped a 50% rise in debt outstanding in the world’s 12 largest economies since 2007 to more than $125tn at the end of 2014. A recently published McKinsey report on debt, covering 47 countries, highlighted an increase over the same period of $57tn to about $200bn, or a rise of about 20% of GDP to just under 290% of GDP. While developed markets accounted for the lion’s share of the build-up in debt up to the financial crisis and still dominate the aggregate debt-to-GDP league table, it is in emerging countries, least affected by the financial crisis, that debt has erupted since 2008. The most significant shift has occurred in Asia ex Japan, especially China, where aggregate debt to GDP has quadrupled over the past decade and the limits to debt capacity are fast approaching.

While domestic credit rises at twice the rate of money GDP growth, the toxic combination of rising leverage and slowing growth will continue to erode the nation’s ability to sustain debt accumulation. Eventually the authorities will have to clamp down on credit expansion. Global bond and equity markets remain largely oblivious to the relentless rise in indebtedness. The commonly accepted but also questionable narrative is that the Fed is severely constrained when it comes to raising policy rates, the ECB and the Bank of Japan remain committed to quantitative easing, and China is accelerating the pace of monetary accommodation. Cheap money, therefore, is around for the foreseeable future, and asset price inflation, even with occasional wobbles, is a given.

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A problem only for the perpetual growth crowd. Why should productivity always grow? That just leads to tinkering with things like our food.

Weak Productivity Turns Into A Problem Of Global Proportions (FT)

Output per worker grew last year at its slowest rate since the millennium, with a slowdown evident in almost all regions, underscoring how the problem of lower productivity growth is now taking on global proportions. The Conference Board, a think-tank, said that based on official data on output and employment from most countries, only India and sub-Saharan Africa enjoyed faster labour productivity growth last year. Globally, the rate of growth decelerated to 2.1% in 2014, compared with an annual average of 2.6% between 1999 and 2006, it said.

Bart van Ark, the Conference Board’s chief economist, said total factor productivity, which takes account of skill levels and investment as well as the number of workers, fell 0.2% in 2014. “This is a global phenomenon and so we have to take it very seriously,” he said. Economists are increasingly identifying the problem of low global productivity as one of the greatest threats to improved living standards, in rich and poor countries alike. The fact that companies have become less efficient at converting labour, buildings and machines into goods and services is beginning to trouble policy makers around the world.

Janet Yellen cited weak US productivity as a cause of “the tepid pace of wage gains in recent years” on Friday. Also last week, George Osborne, UK chancellor, set higher productivity as the most important economic priority of the new government. “Our future prosperity depends on it,” he said. Raising productivity is seen as one of the only ways to improve living standards, at a time when advanced and some emerging economies are seeing ageing populations and a rapidly increasing retirement rate. Without stronger productivity growth, the world may have to get used to much lower rates of economic expansion.

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“Two years later, debt restructuring was on the table. And there it remains.”

Greece, The EU And The IMF Are Dancing With Death (Coppola)

Over the last few months, the world has been watching with interest and growing concern the intricate moves in the deadly dance of Greece, the EU and the IMF. The latest move in the dance comes from Greece itself. The Interior Minister has announced that Greece cannot meet scheduled debt repayments to the IMF in June. This does not mean that Greece intends not to pay. Rather, it is warning that intransigence by the EU may force it into an IMF default. It is not the first time Greece has used the “IMF default” tactic. At the beginning of May, Greece said it couldn’t pay an IMF loan repayment. Then, in a surprising move, it drained its SDR reserve account at the IMF to make the payment.

This is effectively a short-term loan at a low interest rate from the IMF to Greece. And it is Ponzi finance – lending to a borrower so that he can service existing debts to the same lender. Using the SDR account solved Greece’s immediate cash shortfall, buying time for further negotiations. But it stores up further problems in the future. The SDR account will have to be topped up at some point. Interestingly, the IMF appears to have advised Greece to use the SDR account for the payment. And this makes me wonder what strategy the IMF is playing. It seems to have decided to cooperate with Greece. Superficially, the IMF’s aim is to recover the money it has already lent to Greece. But it has another, much larger concern. The Greek crisis is threatening the IMF’s own credibility.

The IMF’s involvement in the Greek bailout was controversial from the start. It broke its own rules in order to lend to Greece in 2010, arguing that systemic risks justified lending to a country whose debt was not by any stretch of the imagination sustainable over the medium-term. It was severely criticized by members of its own board of directors, notably by emerging-market representatives who were understandably miffed at what appeared to be special treatment accorded to Greece, or more accurately, to the Eurozone’s banks. The Brazilian representative, Paulo Nogueiro Batista, observed that the program: …may be seen not as a rescue of Greece, which will have to undergo a wrenching adjustment, but as a bailout of Greece’s private debtholders, mainly European financial institutions.

And the Swiss representative tellingly asked why debt restructuring with losses for creditors was not on the table. Two years later, debt restructuring was on the table. And there it remains. The 2012 “private sector involvement” (PSI) restructuring wrote down up to 80% of the net present value of Greece’s private sector debts. But much of the debt had already been transferred to the public sector, not only as a result of the 2010 bailout but also through subsequent IMF and EU loans and ECB support of Greece’s banks. The PSI restructuring reduced Greece’s debt to just over 150% of its GDP. Everyone knew that this was inadequate. Everyone knew that the official sector would have to suffer a haircut as well, and the longer it was delayed, the more costly it would be.

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One every day.

Greek PM Convenes Emergency Meeting Of His Bailout Team (Guardian)

The high-stakes game of brinkmanship between Greece and its creditors intensified on Monday after the Greek prime minister convened an emergency meeting of his political negotiating team to avert a looming financial crisis. Amid mounting fears that Athens is close to running out of money, Alexis Tsipras said technical talks would resume to find a deal. To defuse tensions, he announced that Greece would honour its debts, though he failed to give details about how he would find the €1.6bn (£1.14bn) needed in two weeks’ time to repay an IMF loan. “We are very close to a deal,” the finance minister, Yanis Varoufakis, told reporters in Athens.

“There are many different Germans, just as there are many different Greeks,” Varoufakis added, responding to reports that Berlin would not be prepared to retreat in what has become an all-out tug of war between the two governments. Technical teams tasked with negotiating the framework of a cash-for-reform deal to keep the debt-stricken nation afloat, are now scrambling to break the deadlock of almost four months of fruitless talks. Both sides have signalled they will focus on VAT increases, expected to raise as much as €1bn for the Greek economy, when they reconvene in Brussels on Tuesday. Also on the table are pension reform, labour deregulation and the ever-incendiary topic of the primary surplus. Tsipras’s anti-austerity administration has argued vociferously that demands for a budget surplus higher than 1.5% will exacerbate the country’s economic death spiral.

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The ‘hard left’ already almost won the day. Tsipras’ room to move is shrinking.

Greece’s Governing Left Divided Over Debt Terms (WSJ)

As financial pressure mounts on Greece to sign a deal with its foreign lenders, Prime Minister Alexis Tsipras is facing what may be his biggest problem yet: the struggle within the ruling Syriza party over whether to swallow creditors’ tough terms or default. Dissent is spreading within left-wing Syriza against the economic policies Greece is likely to have to enact in return for fresh bailout funding from other eurozone governments and the IMF. The Syriza-led coalition government holds only a thin majority of 12 seats in Greece’s 300-seat Parliament, so a rebellion against a deal could easily cost Mr. Tsipras his governing majority.

Greece’s lenders are particularly worried about vocal threats by Syriza’s Left Platform, a hard-line leftist faction within the party, to reject any deal that crosses ideological “red lines” by cutting pensions or workers’ rights. Mr. Tsipras’s difficulty in selling a painful compromise to Syriza’s hard left, as well as to other parts of his ideologically diverse party, has become the largest obstacle to a deal. European officials and analysts -and privately even Greek government officials- say they don’t know whether the roughly 30 lawmakers who make up Left Platform will vote as defiantly as they talk if creditors’ terms are put before the Athens Parliament. Greece needs to agree on a list of economic policies with lenders in time to avoid defaulting on a series of loan repayments to the IMF in mid-June.

Although the government probably has enough cash to repay a €300 million loan due June 5, it almost certainly can’t meet three further payments totaling about €1.25 billion on June 12, 16 and 19, European officials say. Greece needs a deal as soon as possible so it can service its IMF debts, government spokesman Gabriel Sakellaridis told reporters on Monday. “To the extent that we are in a position to pay our obligations, we will pay our obligations,” he said, adding: “It’s the government’s responsibility to be in a position to pay its obligations.” The European Central Bank has told eurozone governments it would allow Greek banks to buy more short-term Greek government debt if an economic-overhaul agreement between Athens and creditors is imminent. That would allow Greece to survive until July, when further debts fall due and fresh bailout loans will be needed.

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That’s just lip service. We all know by now it’s about politics only.

IMF’s Blanchard Says Greek Budget Proposals Will Not Provide (Reuters)

Greece’s budget proposals are not enough to ensure a surplus this year, the IMF’s chief economist was quoted as saying on Monday. Greece was supposed to have a 3% budget surplus in 2015, but that looks unrealistic now, Olivier Blanchard told the French financial newspaper Les Echos in an interview. Lowering that surplus would lead to new financing needs, for which Greece would again need European help. That could work only if, in exchange, Greece presented a coherent programme, he said. “Considering that the most recent estimates mention a substantial budget deficit, we need credible measures to transform this into a surplus and maintain this surplus in the future,” Blanchard was quoted as saying. “This is far from being the case at the moment.”

Three weeks ago, the European Commission slashed Greek growth and surplus projections and said it expected Greece’s primary surplus – the budget balance before debt servicing costs – would be only 2.1% this year, rather than the 4.8% projected just three months earlier. It also expects the 2015 headline budget balance will deteriorate from a 1.1% surplus to a 2.1% deficit and expects the 1.6% surplus forecast for 2016 will turn into a 2.2% deficit unless policies change. “What is obvious is that the (Greek) pension system is often too generous and that there are still too many civil servants,” Blanchard told the newspaper at a central bankers’ meeting in Sintra, Portugal.

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“..French and German leaders do not have much in common with David Cameron”.

Germany And France Agree Closer Eurozone Ties Without Treaty Change (Guardian)

Germany and France have forged a pact to integrate the eurozone without reopening the EU’s treaties, in a blow to David Cameron’s referendum campaign. Sidestepping Britain’s demands to renegotiate the Lisbon treaty and Britain’s place in the EU, the German chancellor, Angela Merkel, and the French president, François Hollande, have sealed an agreement aimed at fashioning a tighter political union among the single-currency countries while operating within the confines of the existing treaty. The Franco-German proposals are to be put to an EU summit in Brussels next month, where Cameron is also to unveil his shopping list of changes needed if he is to win support for keeping Britain in the EU.

The Franco-German accord, disclosed by Le Monde newspaper, calls for eurozone reforms in four areas “developed in the framework of the current treaties in the years ahead”. Cameron has persistently called for a reopening of the treaties to enable the eurozone to integrate more closely while providing the British with a chance to reshape the UK’s relations with the EU and repatriate powers from Brussels. EU members and senior officials in Brussels have repeatedly voiced their reluctance to reopen the Lisbon treaty – the EU’s fundamental constitutional document. The Franco-German initiative, likely to be endorsed by the 25 June summit, would definitively close the door on treaty renegotiation.[..]

The Franco-German pact, agreed as the Greek debt crisis comes to a head, was finalised last week on the fringes of the EU summit in Latvia and sent to Juncker at the weekend, Le Monde reported. The summit in Riga last Friday was Cameron’s first opportunity since re-election to present his ideas to fellow EU leaders. But it appeared that Merkel and Hollande had bigger fish to fry. Juncker is preparing policy options for the June summit on how to integrate the eurozone fiscally and politically as it struggles to emerge from more than five years of crisis. The Franco-German proposals are likely to settle the direction of policy.

They talk of economic, fiscal and social convergence, combining German insistence on monetary stability with French demands for greater investment. “Additional steps are necessary to examine the political and institutional framework, common instruments and the legal basis” (of the eurozone) by the end of next year, said the document, according to Le Monde. The following year, 2017, Germany and France have general elections, narrowing the scope for negotiations with Britain. The Franco-German policy proposal, said Le Monde, “shows that French and German leaders do not have much in common with David Cameron”.

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Brexit gets closer.

UK’s Cameron Tells EC President That Europe Must Change (Reuters)

British Prime Minister David Cameron told the president of the European Commission that the country needed a new deal on Europe, before he presses his case for reforms to the bloc with other national leaders this week. Talks between Cameron and EC President Jean-Claude Juncker over dinner on Monday focused on reforming the European Union and renegotiating the UK’s ties with Brussels, a government spokeswoman said. “The prime minister underlined that the British people are not happy with the status quo and believe that the EU needs to change in order to better address their concerns,” she said. Juncker reiterated he wanted to find a “fair deal for the UK and would seek to help”, she said, and they agreed more discussions would be needed to find a way forward.

Cameron promised before the British national election earlier this month he would renegotiate Britain’s role in Europe, and hold a referendum on the country’s continuing membership of the bloc by the end of 2017. He launched his reform drive at a summit of EU and ex-Soviet states in Latvia last week, saying he was confident of winning concessions although it would not be easy. Cameron has said changes to rules on welfare benefits were an absolute requirement in any renegotiation. He wants to force EU migrants to wait four years before accessing a range of welfare benefits in Britain, and to win the power to deport out of work EU jobseekers after six months.

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“..bringing criminal charges against individuals and even sending some of them to jail would not disrupt the economy.”

Banks as Felons, or Criminality Lite (NY Times)

As of this week, Citicorp, JPMorgan Chase, Barclays and Royal Bank of Scotland are felons, having pleaded guilty on Wednesday to criminal charges of conspiring to rig the value of the world’s currencies. According to the Justice Department, the lengthy and lucrative conspiracy enabled the banks to pad their profits without regard to fairness, the law or the public good. Besides the criminal label, however, nothing much has changed for the banks. And that means nothing much has changed for the public. There is no meaningful accountability in the plea deals and, by extension, no meaningful deterrence from future wrongdoing.

In a memo to employees this week, the chief executive of Citi, Michael Corbat, called the criminal behavior “an embarrassment” — not the word most people would use to describe a felony but an apt one in light of the fact that the plea deals are essentially a spanking, nothing more. As a rule, a felony plea carries more painful consequences. For example, a publicly traded company that is guilty of a crime is supposed to lose privileges granted by the Securities and Exchange Commission to quickly raise and trade money in the capital markets. But in this instance, the plea deals were not completed until the S.E.C. gave official assurance that the banks could keep operating the same as always, despite their criminal misconduct. (One S.E.C. commissioner, Kara Stein, issued a scathing dissent from the agency’s decision to excuse the banks.)

Also, a guilty plea is usually a prelude to further action, not the “resolution” of a case, as the Justice Department has called the plea deals with the banks. To properly determine accountability for criminal conspiracy in the currency cases, prosecutors should now investigate low-level employees in the crime — traders, say — and then use information gleaned from them to push the investigation up as far as the evidence leads. No one has thus far been named or charged. Nor has there been any explanation of how such lengthy and lucrative criminal conduct could have gone unsuspected and undetected by supervisors, managers and executives. The plea deals leave open the possibility of further investigation, but the prosecutors’ light touch with the banks makes it doubtful they will follow through.

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By their own main scientist.

China Warned Over ‘Insane’ Plans For New Nuclear Power Plants (Guardian)

China’s plans for a rapid expansion of nuclear power plants are “insane” because the country is not investing enough in safety controls, a leading Chinese scientist has warned. Proposals to build plants inland, as China ends a moratorium on new generators imposed after the Fukushima disaster in March 2011, are particularly risky, the physicist He Zuoxiu said, because if there was an accident it could contaminate rivers that hundreds of millions of people rely on for water and taint groundwater supplies to vast swathes of important farmlands.

China halted the approval of new reactors in 2011 in order to review its safety standards, but gave the go-ahead in March for two new units, part of an attempt to surpass Japan’s nuclear generating capacity by 2020 and become the world’s biggest user of nuclear power a decade later. Barack Obama, the US president, recently announced plans to renew a nuclear cooperation deal with Beijing that would allow it to buy more US-designed reactors, and potentially pursue the technology to reprocess plutonium from spent fuel. The government is keen to expand nuclear generation as part of a wider effort to reduce air pollution and greenhouse gas emissions, and cut dependence on imported oil and gas.

He, who worked on China’s nuclear weapons programme, said the planned rollout is going far too fast to ensure it has the safety and monitoring expertise needed to avert an accident. “There are currently two voices on nuclear energy in China. One prioritises safety while the other prioritises development,” He told the Guardian in an interview at the Chinese Academy of Sciences, where he is still working aged 88. He spoke of risks including “corruption, poor management abilities and decision-making capabilities”. He said: “They want to build 58 (gigawatts of nuclear generating capacity) by 2020 and eventually 120 to 200. This is insane.”

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“These are the only choices for the masses: whether to be a “doomer” or a “wisher.”

Yesterday’s Tomorrowland (Jim Kunstler)

America takes pause on a big holiday weekend requiring little in the way of real devotions beyond the barbeque deck with two profoundly stupid movie entertainments that epitomize our estrangement from the troubles of the present day. First there’s Mad Max: Fury Road, which depicts the collapse of civilization as a monster car rally. They managed to get it exactly wrong. The present is the monster car show. Houston. Los Angeles. New Jersey, Beijing, Mumbai, etc. In the future, there will be no cars, gasoline-powered, electric, driverless, or otherwise. Mad Max: Fury Road is actually a perverse exercise in nostalgia, as if we’re going to miss being a nation of savages in the driver’s seat, acting out an endless and pointless competition for our little place on the highway.

The other holiday blockbuster is Disney’s Tomorrowland, another exercise in nostalgia for the present, where the idealized human life is a matrix of phone apps, robots, and holograms. Of course, anybody who had been to Disneyland back in the day remembers the old Tomorrowland installation, which eventually had to be dismantled because its vision of the future had become such a joke — starting with the idea that the human project’s most pressing task was space travel. Now, at this late date, the monster Disney corporation — a truly evil empire — sees that more money can be winkled out of the sore-beset public by persuading them that techno-utopia is at hand, if only we click our heels hard enough.

Another theme running through both films is the idea that girls can be what boys used to be, that it’s “their turn” to be masters-of-the-universe, that men are past their sell-by date and only exist to defile and humiliate females. That this message is really only a mendacious effort to rake in more money by enlarging the teen “audience share” for the reigning wishful fantasy du jour is surely lost on the culture commentators, who are so busy these days celebrating the triumph and wonder of transgender life. The reviewers are weighing these two movies on the popular pessimism / optimism scale. These are the only choices for the masses: whether to be a “doomer” or a “wisher.” Both positions are cartoon world-views that don’t provide much guidance for continuing the project of civilization, in case anyone is actually interested in that.

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“We got the dietary guidelines wrong. They’ve been wrong for decades.”

Flawed Science Triggers U-Turn On Cholesterol Fears (Daily Mail)

For decades they have been blacklisted as foods to avoid, the cause of deadly thickening of the arteries, heart disease and strokes. But the science which warned us off eating eggs – along with other high-cholesterol foods such as butter, shellfish, bacon and liver – could have been flawed, a key report in the US has found. Foods high in cholesterol have been branded a danger to human health since the 1970s – a warning that has long divided the medical establishment. A growing number of experts have been arguing there is no link between high cholesterol in food and dangerous levels of the fatty substance in the blood. Now, in a move signalling a dramatic change of stance on the issue, the US government is to accept advice to drop cholesterol from its list of ‘nutrients of concern’.

The US Department of Agriculture panel, which has been given the task of overhauling the guidelines every five years, has indicated it will bow to new research undermining the role dietary cholesterol plays in people’s heart health. Its Dietary Guidelines Advisory Committee plans to no longer warn people to avoid eggs, shellfish and other cholesterol-laden foods. The U-turn, based on a report by the committee, will undo almost 40 years of public health warnings about eating food laden with cholesterol. US cardiologist Dr Steven Nissen, of the Cleveland Clinic, said: ‘It’s the right decision. We got the dietary guidelines wrong. They’ve been wrong for decades.’ Doctors are now shifting away from warnings about cholesterol and saturated fat and focusing concern on sugar as the biggest dietary threat.

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Regard: your future.

EU Dropped Pesticide Laws Due To US Pressure Over TTIP (Guardian)

EU moves to regulate hormone-damaging chemicals linked to cancer and male infertility were shelved following pressure from US trade officials over the Transatlantic Trade and Investment Partnership (TTIP) free trade deal, newly released documents show. Draft EU criteria could have banned 31 pesticides containing endocrine disrupting chemicals (EDCs). But these were dumped amid fears of a trade backlash stoked by an aggressive US lobby push, access to information documents obtained by Pesticides Action Network (PAN) Europe show. On 26 June 2013, a high-level delegation from the American Chambers of Commerce (AmCham) visited EU trade officials to insist that the bloc drop its planned criteria for identifying EDCs in favour of a new impact study.

Minutes of the meeting show commission officials pleading that “although they want the TTIP to be successful, they would not like to be seen as lowering the EU standards”. The TTIP is a trade deal being agreed by the EU and US to remove barriers to commerce and promote free trade. Responding to the EU officials, AmCham representatives “complained about the uselessness of creating categories and thus, lists” of prohibited substances, the minutes show. The US trade representatives insisted that a risk-based approach be taken to regulation, and “emphasised the need for an impact assessment” instead.

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May 242015
 
 May 24, 2015  Posted by at 9:27 am Finance Tagged with: , , , , , , , ,  


Harris&Ewing Underwood Typewriter Co., Washington, DC 1919

Borders Closing And Banks In Retreat; Is Globalisation Dead? (Guardian)
Capitalism Is Killing America’s Morals, Our Future (Paul B. Farrell)
America Has Become a “Banana Republic Run by Wall Street Criminals” (MM)
Tsipras Reiterates Red Lines But Faces Revolt Within Syriza (Kathimerini)
Europe Said to Weigh Contingency Plans in Greece Impasse (Bloomberg)
Neither Grexit Nor A Dual Currency Will Solve Greece’s Problems (Matthes)
Hotel Contracts With A ‘Greek Default Clause’ (Kathimerini)
The Migrant Crisis on Greece’s Islands (New Yorker)
Spain’s New Political Forces Seek To Make History (DW)
Podemos Changing Spain’s Political Map (Telesur)
Eurozone Countries Should Unite For Economic Reforms: Mario Draghi (Reuters)
Structural Reforms, Inflation And Monetary Policy (Mario Draghi)
Draghi and Fischer Reject Claim Central Banks Are Too Politicised (FT)
The Other One Per Cent (Economist)
Secret Pentagon Report Reveals West Saw ISIS As Strategic Asset (Nafeez Ahmed)
Germany Won’t Comment on Reported ‘Deep Freeze’ With US Intelligence (Reuters)
Leaked Report Profiles Military, Police Members Of US Biker Gangs (Intercept)

Globalization is a times of plenty phenomenon.

Borders Closing And Banks In Retreat; Is Globalisation Dead? (Guardian)

Globalisation is under attack. It was meant to be the unstoppable economic force bringing prosperity to rich and poor alike, but that was before the financial crisis ripped up the rulebook. For the past four years, international trade flows have increased more slowly than global GDP – “an outcome unprecedented in postwar history”, as analyst Michael Pearce of Capital Economics put it in a recent note. Crisis-scarred global banks are retreating from risky cross-border lending, and multinationals are casting a sceptical eye over foreign opportunities as geopolitical tensions simmer. Populist politicians in a string of countries, not least the UK, are playing on public fears about migrant workers undermining their pay.

Global trade flows are still expanding: but they have never regained the breakneck pace of the 1990s and early 2000s. In the innocent days before the Great Recession, the dismantling of trade barriers between nation states often seemed inevitable. Yet more than 13 years after the Doha round of multilateral trade talks kicked off, with the aim of binding developing countries more closely into the international system, the idea of a global trade deal remains locked in the deep freeze. Some analysts are starting to ask: has globalisation come to a halt? The lesson many governments and companies learned from the turmoil that followed the collapse of Lehman Brothers was that there are risks to being too unthinkingly exposed to the ebbs and flows of the international system.

“There’s quite a fundamental shift going on here,” says Professor Simon Evenett, an expert on trade at the University of St Gallen in Switzerland. “You can’t say it’s across the board, but there are some sectors where globalisation is in substantial retreat.” He points to steel, for example, where his recent research shows that trade flows have never returned to pre-2007 levels. “I think the direction of travel is depressing,” he says.

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“..the logic of buying and selling no longer applies to material goods alone. It increasingly governs the whole of life.”

Capitalism Is Killing America’s Morals, Our Future (Paul B. Farrell)

Yes, capitalism is working … for the Forbes Global Billionaires whose ranks swelled from 322 in 2000 to 1,826 in 2015. Billionaires control the vast majority of the world’s wealth, 67 billionaires already own half the world’s assets; by 2100 we’ll have 11 trillionaires, while American worker income has stagnated for a generation. But for the vast majority of the world, capitalism is a failure. Over a billion live on less than two dollars a day. In his “Capital in the Twenty-First Century,” economist Thomas Piketty warns the inequality gap is toxic, dangerous. As global population explodes from 7 billion to 10 billion by 2050, food production will deteriorate. Pope Francis adds, “Inequality is the root of social ills,” fueling more hunger, revolutions, wars.

For years we’ve been asking: Why does the capitalist brain blindly drive down this irrational path of self-destruction? We found someone who brilliantly explains why free market capitalism is hell-bent on destroying itself and the world along with it: Harvard philosopher Michael Sandel, author of the new best seller, “What Money Can’t Buy: The Moral Limits of Markets,” and his earlier classic, “Justice: What’s the Right Thing to Do?” For more than three decades Sandel’s been teaching us why capitalism is undermining human morality … and why we keep denying this insanity. Why do we bargain away our moral soul? His classes number over a thousand. You can even take his course online free. He even summarized capitalism’s takeover of America’s conscience in “What Isn’t for Sale?” in the Atlantic. Listen:

“Without being fully aware of the shift, Americans have drifted from having a market economy to becoming a market society … where almost everything is up for sale … a way of life where market values seep into almost every sphere of life and sometimes crowd out or corrode important values, nonmarket values.” His course should be required for Wall Street insiders, corporate CEOs and all 95 million Main Street investors. Here’s a short synopsis:

“The years leading up to the financial crisis of 2008 were a heady time of market faith and deregulation — an era of market triumphalism,” says Sandel. “The era began in the early 1980s, when Ronald Reagan and Margaret Thatcher proclaimed their conviction that markets, not government, held the key to prosperity and freedom.” And in the 1990s with the “market-friendly liberalism of Bill Clinton and Tony Blair, who moderated but consolidated the faith that markets are the primary means for achieving the public good.”

So today, “almost everything can be bought and sold.” Today “markets, and market values, have come to govern our lives as never before. We did not arrive at this condition through any deliberate choice. It is almost as if it came upon us,” says Sandel. Over the years, “market values were coming to play a greater and greater role in social life. Economics was becoming an imperial domain. Today, the logic of buying and selling no longer applies to material goods alone. It increasingly governs the whole of life.”

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“..big banks have now paid more than $60 billion in fines over the past two years.”

America Has Become a “Banana Republic Run by Wall Street Criminals” (MM)

Wall Street criminals just won’t stop misbehaving. The latest crime was exposed Wednesday. Five of the biggest names in global finance agreed to pay billions to settle lawsuits alleging they illegally gamed the $5 trillion-a-day foreign exchange market. JPMorgan Chase, Citigroup, Barclays, UBS, and RBSpleaded guilty and settled for fines totaling roughly $5.7 billion. A sixth bank, Bank of America, will pay $210 million after being fined by the Fed. With this week’s settlements, big banks have now paid more than $60 billion in fines over the past two years.

“America has become a banana republic run by Wall Street criminals,” Money Morning Capital Wave Strategist Shah Gilani said on Wednesday. Of course, history dictates the fines will have no actual effect on business practices. “We all know the big banks are above the law,” Gilani said. “They are convicted, they admit their guilt (sometimes), and no one goes to jail – they just pay more fines.” Not including this week’s, just look at a few of the settlements too-big-to-fail banks have shelled out in the last five years alone:

In 2015, Deutsche Bank paid a $2.5 billion fine for manipulating benchmark interest rates.
In 2014, Credit Suisse paid $2.6 billion to the U.S. Justice Department for conspiring to aid tax evasion. It was the first financial institution in more than a decade to plead guilty to a crime.
In 2013, Bank of America, JPMorgan, Wells Fargo, and ten other banks paid $9.3 billion to the Office of the Comptroller of the Currency and the Federal Reserve for foreclosure abuses.
In 2013, JPMorgan paid $13 billion to the U.S. Justice Department for mortgage security fraud.
In 2012, JPMorgan, Wells Fargo & Co., Bank of America, Citigroup, and Ally Financial paid $25 billion in penalties for foreclosure abuses.
In 2012, HSBC paid $1.9 billion to U.S. authorities for shoddy money laundering regulations. It was the third time since 2003 HSBC assured the government it would correct its policies.
In 2012, UBS paid $1.5 billion and admitted it manipulated interbank lending rates.
In 2011, Bank of America paid $8.5 billion to mortgage bond holders related to Countrywide.

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Resistance will grow.

Tsipras Reiterates Red Lines But Faces Revolt Within Syriza (Kathimerini)

After a busy week of talks with European leaders aimed at securing support for a deal for Greece, Prime Minister Alexis Tsipras faces challenges on the home front amid tensions with SYRIZA over the terms such an agreement would entail. In a speech to his party’s central committee on Saturday, Tsipras said Greece is “in the final stretch of negotiations” and is ready to accept a “viable agreement” with its creditors but not on “humiliating terms.” He ruled out submitting to irrational demands on value-added tax rates and further labor reform, and called on lenders to make “necessary concessions.” “We have made concessions but we also have red lines,” he said, claiming that some foreign officials were counting on the talks failing.

Although Tsipras reiterated his commitment to the party’s so-called red lines in negotiations, pressure from within SYRIZA not to capitulate to creditors has grown amid rumors that a deal is in the works. In particular, members of the radical Left Platform led by Energy Minister Panayiotis Lafazanis have refused to approve any deal that departs from the party’s pre-election promises. The faction has been working on a counter-proposal for alternative sources of funding. Tsipras and other front-line cabinet members, meanwhile, remain focused on a deal by early June when the country’s next debt repayment to its creditors is due.

But as negotiations continue to drag, sources suggest that the likeliest scenario is a two-stage deal despite Tsipras’s recent insistence on the need for a “comprehensive agreement.” The two-stage deal would comprise an initial agreement that would unlock a portion of rescue loans in exchange for some reforms, most likely tax increases, to keep the country solvent; the second part of the deal would tackle the thorny issues of pension and labor sector reform.

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“The problem is that Alexis Tsipras is riding a scooter and Wolfgang Schaeuble is driving an armored BMW.”

Europe Said to Weigh Contingency Plans in Greece Impasse (Bloomberg)

German Finance Minister Wolfgang Schaeuble raised the possibility that Greece may need a parallel currency and European officials are making contingency plans for the Greek banking system as talks on unlocking aid remain stuck. Schaeuble mentioned the idea of parallel currencies at a recent meeting without endorsing it, according to two people who attended. The European Commission is looking at how to manage the possible failure of Greek financial firms and other events that may cause investor losses, two other people said. With Greece’s final €7.2 billion bailout installment on hold, Prime Minister Alexis Tsipras’s latest attempt to bypass finance ministers and secure a political deal failed on Friday.

As Greece faces payment deadlines in the next two weeks, some European policy makers are preparing for the worst while upholding the goal of keeping Greece in the euro. “We need to have the strongest and most complete agreement possible now to secure and facilitate talks for the next deadlines,” French President Francois Hollande said Friday in Riga, Latvia, after he and German Chancellor Angela Merkel met Tsipras. Merkel said there’s “a whole lot to do.” Merkel and Hollande this week gave Tsipras until the end of May to reach a deal to free up aid in return for policy changes demanded by Greece’s creditor. As time runs short, his government has to pay monthly salaries and pensions by next Friday and repay about €300 million to the IMF a week later.

Negotiators from Greece and its creditors are continuing technical talks in the so-called Brussels Group “over the coming days in order to accelerate progress,” European Commission spokeswoman Mina Andreeva said in Brussels on Friday. While Merkel and Schaeuble say they want to keep Greece in the 19-nation currency union, the finance minister has also said he wouldn’t rule out a Greek exit. Germany is “ready to take this brinkmanship very far,” with Schaeuble in the role of “attack dog,” Jacob Funk Kirkegaard, senior fellow at the Peterson Institute for International Economics in Washington, said by phone. “We’re in this game of chicken. The problem is that Alexis Tsipras is riding a scooter and Wolfgang Schaeuble is driving an armored BMW.”

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No matter what happens, it won’t be easy. Not for Greece and not for Eruope.

Neither Grexit Nor A Dual Currency Will Solve Greece’s Problems (Matthes)

A Grexit or the introduction of a dual currency is not a solution to Greece’s problems. On the contrary, it would be a worst-case scenario for Greece in the short term. Only in the medium to longer term, the resulting devaluation and improvement of price competitiveness would help businesses active in the export and import substitution sectors. For the euro area, a Grexit or dual currency would be a signal that the currency union is not made forever, even if the situation is much different from 2010-2012 as contagion effects to other euro periphery countries hardly exist today. The negative short-term impact from a Grexit or from a dual currency would push the Greek economy into a very deep crisis and lead to further impoverishment.

The Greek financial sector, which is already rather weak, would be severely affected, particularly by further withdrawals of euros from bank accounts in the course of bank runs (among other aspects). Capital controls can only partly stop this from happening. The problems of the financial sector would lead to a further drying up of credit supply and the danger of bank insolvencies. The risk of insolvency would go much beyond the banking sector and also include businesses and particularly the state. All private and public economic actors with sizeable debts in euros and under foreign law (debt which could not be converted to the new or dual currency) would suffer from higher debt counted in the dual or new currency. This is so because the dual or new currency would devaluate to a large degree versus the euro.

Imagine the balance sheet of a bank or of a company with significant euro debts under foreign law: These liabilities would remain in euro but significant parts of the assets would be converted to the dual or new currency, which then devaluates. This would cut a deep hole in the balance sheet and could well lead to insolvency. A government default is most likely, because foreign debts would remain to a large extent in euros but tax revenues would increasingly come from the new or dual currency. Insolvencies and the drying up of credit supply would lead to a significant rise in unemployment, costing even more people their job. A government default could mean that public wages and pensions cannot be paid for a certain period of time or only in the new weak currency. Moreover, the fiscal problems would further aggravate the state of the economy and of banks that hold government bonds.

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Thank the troika.

Hotel Contracts With A ‘Greek Default Clause’ (Kathimerini)

After the drachma clauses seen in tourism contracts, foreign tour operators are now forcing hoteliers in Greece to sign contracts with a Greek default clause. Foreign organizers of international conferences have been introducing default clauses to contracts forcing the non-payment of compensation in case the country defaults and they decide to cancel their events. That clause is reminiscent of insurance contracts which stop short of providing for compensation in case of natural disasters, acts of terrorism etc. Kathimerini understands that already one conference organizer, who is to hold an event in this country with the participation of foreign delegates next month, has imposed a “default clause” on the hotel enterprise in order to sign a contract, sparing him from having to pay compensation for canceling the event if Greece defaults.

In the next couple of months hoteliers will, as usual, also have to sign the bulk of their 2016 contracts with representatives of foreign tour operators. Some operators have already told Greek hoteliers that they require extra safety clauses in case the country drops out of the eurozone. Furthermore, the financial terms of contracts will depend on the planned value-added tax hikes on tourism. Hoteliers wonder on what terms they will be asked to sign the contracts, to what extent they can impose price hikes on tour operators and how they will retain their rates competitive in comparison with the hotel rates of other countries such as Turkey, Spain etc.

Representatives of tourism associations estimate that in the event more taxes are introduced, small and medium-sized hotel enterprises – which account for the majority of the country’s accommodation capacity – will see their negotiating position weakened against their foreign clients. The possibility of a VAT hike in Greece has also generated interest in the country’s rivals. A Lesvos hotelier reported that Turkish peers keep asking about any news on a VAT increase on Greek tourism for 2016, saying that a significant price increase on the Greek tourism package would signify a direct advantage for the neighboring country’s tourism market.

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A comprehensive EU approach? Not going to happen.

The Migrant Crisis on Greece’s Islands (New Yorker)

Greece, like Italy and Malta, has long been an entry point into the European Union for refugees and economic migrants making the journey by sea. This year, the Greek government expects a massive wave of migrants on the Aegean islands and Crete, fuelled by the protracted war in Syria. The Eastern Mediterranean route is not as deadly for migrants: thirty-one people are known to have drowned in the Aegean Sea this year, compared with an estimated eighteen hundred in the Central Mediterranean, according to figures from the International Organization for Migration. But the number of people arriving in Greece this year rivals the number of those coming to Italy: The I.O.M. says that at least 30,400 migrants have arrived in Greece as of May 12th, compared with thirty-four hundred in all of 2014.

At least 35,100 have arrived this year in Italy. Southern European countries have often felt poorly served by the Dublin Regulation, which dictates that the E.U. nations where migrants first arrive are ultimately responsible for them. Camino Mortera-Martinez and Rem Korteweg of the Centre for European Reform say that a deep divide between Northern and Southern E.U. states has resulted. “Northern member states want an asylum policy that keeps migrants in the South but treats them humanely,” they wrote recently, “while Southern member-states want the North to share the burden by accepting more migrants. The Mediterranean refugee crisis shows that this system is unsustainable.”

What’s also unsustainable, according to Eugenio Ambrosi, who directs the I.O.M.’s regional office for the European Union, Norway, and Switzerland, is the fact that migration has become an electoral issue “easily manipulated by populists who know that fear wins votes.” E.U. politicians have dithered on drafting a common migration and asylum policy because they’re worried about how voters will react. “There’s this attitude of: if your neighbor’s house is on fire, you watch and hope somebody else takes care of them so you don’t have to feed them and give them a blanket,” he said.

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Ciudadanos is taking votes away from Podemos.

Spain’s New Political Forces Seek To Make History (DW)

Outside a municipal sports building in Alcala de Henares, a small city east of Madrid, crowds are gathering and clusters of balloons are bobbing in the breeze. Just ahead of local elections across Spain, supporters of the new party, Ciudadanos, or “Citizens,” are in high spirits, believing that its phenomenal rise in recent months will soon make it one of the country’s most prominent political forces. Inside, a few minutes later, the party’s 35-year-old leader, Albert Rivera, bounds onto the stage to deliver a powerful message to his electoral rivals. “Some don’t understand what is happening in Spain – we’re not just facing an election day, we’re facing a new era,” he says.

“Whoever can’t understand that isn’t capable of leading the change. Spain is not doing well, it’s only doing well for a few.” This promise by a generation of young Spanish politicians to deliver a “new era” has already altered the country’s political landscape. But on Sunday, when elections are held for control of town and city halls across Spain and for 13 of its 17 regional parliaments, the political map is expected to be drastically redrawn. For the last three-and-a-half decades, the conservative Popular Party (PP) and the Socialists have dominated Spanish politics in a rigid two-party system. But the recent economic crisis and a torrent of corruption scandals have threatened to break that duopoly for the first time in Spain’s democratic period.

Ciudadanos and another new party with a young leadership, Podemos, or “We Can” in Spanish, are the beneficiaries of Spaniards’ disenchantment with the status quo and national polls show them in a four-way virtual tie with the PP and the Socialists. “This election represents a revolution because we’re going to go from having just two parties which are capable of governing, to having a political map on which there are four parties, all of which are capable of governing,” says Jose Ignacio Torreblanca, a political scientist who recently published a book about Podemos.

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Elections today.

Podemos Changing Spain’s Political Map (Telesur)

Pablo Iglesias, leader of the new left-wing party Podemos, says his movement has already “contributed to changing the Spanish political map. We can say that we have made irreversible changes. Nothing will ever be the same again.” Iglesias describes Podemos as a response to a “regime crisis,” in Spain in the aftermath of the global economic crisis and deep austerity politics and that Podemos was born out of “enormous frustration with the economic and political elites, He explained that the rise of Latin American left governments over the past decade represented a “fundamental reference” to the party, but one that cannot be easily reproduced.

While in the beginning, Podemos leaders believed that “a ‘Latin-Americanization’ of Southern Europe” was occurring, reality soon showed that European states were “very strong” meaning “the possibility of transformation |was| very limited.” In Iglesias’ opinion, this difficulty in creating such change explains why the party’s number two, Juan Carlos Monedero, recently resigned from the leadership. But he stressed the important role that social movement have in creating change, explaining that “these social movements allow |the party leaders| to go further, politically, in |their| demands,” referring to the movements against evictions in Spain, for example, or the movements defending education and public health. He added that criticism was a positive pattern inside the party, yet stressing that his leadership was backed by a great consensus.

Regarding differences with the situation in Greece, where the leftist Syriza now forms the government, Iglesias highlighted that because the economic crisis hit Greece much harder than in Spain, “the weakness of the state and the forces in power in Greece were greater,” making it easier for Syriza to make gains. He believes that the political and media establishment feared even more the rise of Podemos than Syriza because of Spain’s greater economic weight.

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See below for link to the text of Draghi’s address.

Eurozone Countries Should Unite For Economic Reforms: Mario Draghi (Reuters)

ECB President Mario Draghi has urged euro zone countries to unite in the task of reforming the bloc’s economies, saying sharing sovereignty was an opportunity and not a threat. Draghi is pushing governments not to waste the time ECB money printing has bought them. Saturday’s appeal to indebted countries to clean up their finances came the day after he warned growth would remain low in the face of unemployment and low investment. In a message read to attendees at a conference in Rome, he said countries should act quickly on recommendations the central bank has made to complete economic and monetary union, many of which have not been carried out.

“The current situation in the euro area demonstrates that this delay could be dangerous,” Draghi said, according to a text of the address released by the ECB, while acknowledging progress had been made, for example with banking union. But private risks need to be shared within the euro zone, with financial integration improving access to credit for companies and leading to a complete capital markets union, Draghi said. Draghi called for stricter and more transparent adherence to existing budgetary rules to help close the gaps among member states in employment, growth and productivity, but said this alone would not be enough.

Countries should observe common standards when implementing structural reforms but also take a country-specific approach, as part of a process of “convergence in the capacity of our economies to resist shocks and grow together”. Thirdly, Draghi said the euro zone should ask whether it had done enough to safeguard the possibility of using budgetary policy to counter the economic cycle, concluding: “I think not.” Many European countries realised only after the debt crisis exploded that their sovereign right to choose their own economic policy would be limited in the monetary union, Draghi said. But working to ensure long-term stability meant sharing control, Draghi said. “What can appear to be a threat is actually an opportunity,” he said.

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Full speech with graphs etc.

Structural Reforms, Inflation And Monetary Policy (Mario Draghi)

Structural and cyclical policies – including monetary policy – are heavily interdependent. Structural reforms increase both potential output and the resilience of the economy to shocks. This makes structural reforms relevant for any central bank, but especially in a monetary union. For members of monetary union resilience is crucial to avoid that shocks lead to consistently higher unemployment, and over time, permanent economic divergence. It therefore has direct implications for price stability, and is no less relevant for the integrity of the euro area. This is why the ECB has frequently called for stronger common governance of structural reforms that would make resilience part of our common DNA.

Structural reforms are equally important for their effect on growth. Potential growth is today estimated to be below 1% in the euro area and is projected to remain well below pre-crisis growth rates. This would mean that a significant share of the economic losses in the crisis would become permanent, with structural unemployment staying above 10% and youth unemployment elevated. It would also make it harder to work through the debt overhang still present in some countries. Finally, low potential growth can have a direct impact on the tools available to monetary policy, as it increases the likelihood that the central bank runs into the lower bound and has to resort recurrently to unconventional policies to meet its mandate.

But the euro area’s weak long-term performance also provides an opportunity. Since many economies are distant from the frontier of best practice, the gains from structural reforms are easier to achieve and the potential magnitude of those gains is greater. There is a large untapped potential in the euro area for substantially higher output, employment and welfare. And the fact that monetary policy is today at the lower bound, and the recovery still fragile, is not, as some argue, a reason for reforms to be delayed.

This is because the short-term costs and benefits of reforms depend critically on how they are implemented. If structural reforms are credible, their positive effects can be felt quickly even in a weak demand environment. The same is true if the type of reforms is carefully chosen. And our accommodative monetary policy means that the benefits of reforms will materialise faster, creating the ideal conditions for them to succeed. It is the combination of these demand and supply policies that will deliver lasting stability and prosperity.

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Independence is not a matter of interpretation, gentlemen.

Draghi and Fischer Reject Claim Central Banks Are Too Politicised (FT)

Two of the world’s most senior central bankers have hit back at charges that they have become too politicised, saying their calls for governments to take more aggressive steps to steer their economies towards a full recovery were necessary. Mario Draghi, the president of the ECB, and Stanley Fischer, the US Federal Reserve’s vice-chair, also disputed the idea that unelected technocrats should refrain from commenting on governments’ economic policies. The remarks, at the ECB’s annual conference in Sintra, came after Mr Draghi on Thursday called on lawmakers in the eurozone to implement politically unpopular structural reforms, or face years of weak economic growth. The ECB president on Saturday said his calls were appropriate in a monetary union where growth prospects had been badly damaged by governments’ resistance to economic reforms.

Mr Draghi said it was the central bank’s responsibility to comment if governments’ inaction on structural reforms was creating divergence in growth and unemployment within the eurozone, which undermined the existence of the currency area. “In a monetary union you can’t afford to have large and increasing structural divergences,” the ECB president said. “They tend to become explosive.” Mr Draghi’s defence of the central bank came after Paul De Grauwe, an academic at the London School of Economics, challenged his calls for structural reforms earlier in the week. Mr De Grauwe said central banks’ push for governments to take steps that removed people’s job protection would expose monetary policy makers to criticism over their independence to set interest rates.

The ECB president said central banks had a long tradition of commenting on governments’ economic policies, and that they had been right to speak out against wage indexation in the 1970s and fiscal excesses in earlier decades. He said central banks had been wrong to keep quiet on the deregulation of the financial sector. “We all wish central bankers had spoken out more when regulation was dismantled before the crisis,” Mr Draghi said. A lack of structural reform was having much more of an impact on poor European growth than in the US, he added. Mr Fischer said central bankers should think about structural reforms “in the context of what’s the expected growth rate in the economy”. The Fed vice-chair said it was appropriate for monetary policy makers to comment on spending in infrastructure and education because of the impact it had on US growth.

“There is general agreement that US infrastructure could do with a lot of investment. You just have to go on trains in the US or Europe to figure that out,” Mr Fischer told the audience of top academics and policy makers in Sintra on Saturday. He acknowledged there were limits on what was appropriate, saying he would “never talk about whether the defence budget was appropriate”. The passing of the Dodd-Frank Act was a “very massive change in the structure of the financial sector” and was “very important for financial stability going ahead”. Haruhiko Kuroda, the governor of the Bank of Japan who joined Mr Draghi and Mr Fischer on the panel, said he expected inflation to reach 2% around the first half of the 2016 fiscal year.

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Waht makes India’s expats so successful? Provided, of course, that you see income levels as the measure of success.

The Other One Per Cent (Economist)

Part of the secret of China’s success in the past four decades or so has been the clever use of its diaspora. Chinese manufacturers in Hong Kong who had long supplied American partners moved to the mainland and set up factories. Chinese nationals who succeeded abroad brought home trusted contacts, networks, experience, standards, technology and capital. India could do with more of that. Over 27m people of Indian origin, including some temporary migrants, live overseas, many of them in the Gulf. They remit $70 billion a year to their home country, more than any other group of expats. That adds up to 3.5% of India’s GDP, outstripping foreign direct investment. The biggest potential lies with the diaspora in the West. Mr Modi seems to be aware of that.

He has been courting it on visits to America, Australia, Germany and Canada, holding big rallies. Indians abroad heavily backed him in last year’s election, sending millions of dollars as well as people to help. Even in remote corners of Uttar Pradesh, your correspondent bumped into jovial volunteers with American accents. Indians in America are the most promising. They are increasingly prominent in tech companies, on Wall Street and in government, especially in the state department. Around 1% of America’s population, over 3.3m people, are “Asian Indians”. Perhaps 150,000 more arrive each year, and 90% of them stay permanently. Devesh Kapur, who has studied them, talks of a “flood”. He says over half of all Indian-born people in America arrived there after 2000. On the usual measures of success they outstrip all other minorities, including Jewish-Americans.

They are educated and rich. In 2012 some 42% held first or higher degrees; average family income was over $100,000, roughly double that of white Americans (see chart). Over two-thirds of them hold high-status jobs. They have done so well that many migrants from Pakistan or Bangladesh like to call themselves Indian, hoping that some of the stardust will rub off on them. The stereotype of Indians as keeping shops or running motels in their adopted country is thus outdated. An IT professional from Andhra Pradesh would be far more typical. Since the turn of the century America has slurped in highly skilled graduates as fast as India can produce them. America’s H-1B employment visa for skilled professionals tells the story. In a book under review by a publisher, provisionally entitled “The Other One Per Cent”, Mr Kapur and his co-authors note that between 1997 and 2013 half of those visas went to Indians. Since 2009 the share has been more than two-thirds.

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And now there’s proof. What will happen with it?

Secret Pentagon Report Reveals West Saw ISIS As Strategic Asset (Nafeez Ahmed)

A declassified secret US government document obtained by the conservative public interest law firm, Judicial Watch, shows that Western governments deliberately allied with al-Qaeda and other Islamist extremist groups to topple Syrian dictator Bashir al-Assad. The document reveals that in coordination with the Gulf states and Turkey, the West intentionally sponsored violent Islamist groups to destabilize Assad, despite anticipating that doing so could lead to the emergence of an ‘Islamic State’ in Iraq and Syria (ISIS). According to the newly declassified US document, the Pentagon foresaw the likely rise of the ‘Islamic State’ as a direct consequence of the strategy, but described this outcome as a strategic opportunity to “isolate the Syrian regime.”

The revelations contradict the official line of Western government on their policies in Syria, and raise disturbing questions about secret Western support for violent extremists abroad, while using the burgeoning threat of terror to justify excessive mass surveillance and crackdowns on civil liberties at home. Among the batch of documents obtained by Judicial Watch through a federal lawsuit, released earlier this week, is a US Defense Intelligence Agency (DIA) document then classified as “secret,” dated 12th August 2012. The DIA provides military intelligence in support of planners, policymakers and operations for the US Department of Defense and intelligence community. So far, media reporting has focused on the evidence that the Obama administration knew of arms supplies from a Libyan terrorist stronghold to rebels in Syria.

Some outlets have reported the US intelligence community’s internal prediction of the rise of ISIS. Yet none have accurately acknowledged the disturbing details exposing how the West knowingly fostered a sectarian, al-Qaeda-driven rebellion in Syria. Charles Shoebridge, a former British Army and Metropolitan Police counter-terrorism intelligence officer, said: “Given the political leanings of the organisation that obtained these documents, it’s unsurprising that the main emphasis given to them thus far has been an attempt to embarrass Hilary Clinton regarding what was known about the attack on the US consulate in Benghazi in 2012. However, the documents also contain far less publicized revelations that raise vitally important questions of the West’s governments and media in their support of Syria’s rebellion.”

The newly declassified DIA document from 2012 confirms that the main component of the anti-Assad rebel forces by this time comprised Islamist insurgents affiliated to groups that would lead to the emergence of ISIS. Despite this, these groups were to continue receiving support from Western militaries and their regional allies. Noting that “the Salafist [sic], the Muslim Brotherhood, and AQI [al-Qaeda in Iraq] are the major forces driving the insurgency in Syria,” the document states that “the West, Gulf countries, and Turkey support the opposition,” while Russia, China and Iran “support the [Assad] regime.” The 7-page DIA document states that al-Qaeda in Iraq (AQI), the precursor to the ‘Islamic State in Iraq,’ (ISI) which became the ‘Islamic State in Iraq and Syria,’ “supported the Syrian opposition from the beginning, both ideologically and through the media.”

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Digging a deeper hole. Germans want to know.

Germany Won’t Comment on Reported ‘Deep Freeze’ With US Intelligence (Reuters)

The German government declined to comment on a report that U.S. intelligence agencies were reviewing their cooperation with German counterparts and had dropped joint projects due to concerns secret information was being leaked by lawmakers. Bild newspaper reported on Saturday that U.S. spy chief James Clapper had ordered the review because secret documents related to the BND’s cooperation with the United States were being leaked to media from a German parliamentary committee. A spokesman for the U.S. embassy in Berlin said it does not comment on intelligence matters.

Allegations the BND intelligence agency helped the National Security Agency (NSA) spy on European companies and officials has been major news in Germany for weeks. It has strained Chancellor Angela Merkel’s coalition and damaged her popularity. “The German government puts great faith in the intelligence cooperation with the United States to protect our citizens,” a government spokesman said when asked about the Bild report. “The government doesn’t comment on the details of that cooperation in public but rather in parliament committees.” The newspaper said it had seen documents in which Clapper, director of national intelligence, expressed concern that information on the cooperation from Merkel’s chancellery to the parliamentary committee was leaked and harmed U.S. interests.

Clapper said Germany could no longer be trusted with secret documents, according to Bild, and as long as that is the case U.S. intelligence agencies should examine where to limit or cancel cooperation with Germany. Bild quoted a U.S. official saying the leaks were worse than those attributed to former NSA contractor Edward Snowden. “What the German government is now doing is more dangerous than what Snowden did,” the U.S. official was quoted saying.

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Lovely.

Leaked Report Profiles Military, Police Members Of US Biker Gangs (Intercept)

Nuclear power plant technicians, senior military officers, FBI contractors and an employee of “a highly-secretive Department of Defense agency” with a Top Secret clearance. Those are just a few of the more than 100 people with sensitive military and government connections that law enforcement is tracking because they are linked to “outlaw motorcycle gangs.” A year before the deadly Texas shootout that killed nine people on May 17, a lengthy report by the Bureau of Alcohol, Tobacco, Firearms and Explosives detailed the involvement of U.S. military personnel and government employees in outlaw motorcycle gangs, or OMGs.

The report lays out, in almost obsessive detail, the extent to which OMG members are represented in nearly every part of the military, and in federal and local government, from police and fire departments to state utility agencies. Specific examples from the report include dozens of Defense Department contractors with Secret or Top Secret clearances; multiple FBI contractors; radiological technicians with security clearances; U.S. Department of Homeland Security employees; Army, Navy and Air Force active-duty personnel, including from the special operations force community; and police officers. “The OMG community continues to spread its tentacles throughout all facets of government,” the report says.

The relationship between OMGs and law enforcement has come under scrutiny after it became known that law enforcement were on site in Waco bracing for conflict. The 40-page report, “OMGs and the Military 2014,” issued by ATF’s Office of Strategic Intelligence and Information in July of last year, warned of the escalating violence of these gangs. “Their insatiable appetite for dominance has led to shootings, assaults and malicious attacks across the globe. OMGs continue to maim and murder over territory,” the report said. “As tensions escalate, brazen shootings are occurring in broad daylight.”

The ATF report is based on intelligence gathered by dozens of law enforcement and military intelligence agencies, and identifies about 100 alleged associates of the country’s most violent outlaw motorcycle gangs and support clubs who have worked in sensitive government or military positions. Those gangs “continue to court active-duty military personnel and government workers, both civilians and contractors, for their knowledge, reliable income, tactical skills and dedication to a cause,” according to the report. “Through our extensive analysis, it has been revealed that a large number of support clubs are utilizing active-duty military personnel and U.S. Department of Defense (DOD) contractors and employees to spread their tentacles across the United States.”

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May 182015
 
 May 18, 2015  Posted by at 1:36 pm Finance Tagged with: , , , , , , , , ,  


Esther Bubley Soldiers with their girls at the Indianapolis bus station 1943

Whenever secret or confidential information or documents are leaked to the press, the first question should always be who leaked it and why. That’s often more important than the contents of what has been leaked. And since there’s been a lot of hullabaloo about a leaked document the past two days, here’s a closer look. Spoiler alert: the document(s) don’t reveal much of anything new, despite the hullabaloo.

On Saturday, Paul Mason at Channel 4 in Britain posted an IMF document(s) that according to him says, among other things, that the IMF expects a June 5 Grexit – in one form or another – if there is no agreement before that date between Athens and its creditors, ‘the institutions’ (of which the IMF itself is one).

The leaking is simply what it is as long as we don’t know the how and why. But the question will remain why somebody takes the risk to leak something only a small and select group of people are privy to. Is it leaked because it’s politically important, does Paul Mason pay a lot of money for leaks? Or is it perhaps an intentional leak, in this case ordered by IMF higher-ups? And if so, for what reason? A veiled threat?

Fact is that when you look through the documents Mason published, you notice that he adds his own interpretation to them. Mason, to whom documents seem to be leaked on a regular basis – he wrote about 2 more leaked documents 3 months ago – for instance suggests quite strongly in his write up at Channel 4 that June 5th is the date for a possible default.

However, the documents don’t mention that date. They only talk about June, not June 5. Mason writes about IMF ‘staff’: “They point to the €1.5 billion due to the IMF in June as the first vulnerable payment.”

The €1.5 billion is not one payment, though. The first June payment, at least according to a Bloomberg overview , which is indeed scheduled for June 5, is ‘only’ €310 million. There are then subsequent payments to the IMF scheduled on June 12 (€348 million), June 16 (€581 million), and June 19 (another €348 million). These are rough numbers, there are slightly different ones doing the rounds; still, they’ll do.

But June 5 is by no means carved in stone as a default date (€310 million might be feasible for Athens), though Mason does make it seem like that. Every single day counts now in the negotiations. And a €310 million payment on June 5 would buy Greece at least another week. Which may prove crucial. For both sides of the negotiating table. Greece might even miss one or two payments; the consequences of such a move would be mainly a political decision, meaning there’s some room to move.

We noticed, by the way, another example of ‘Masonic’ interpretation in the video that accompanies the article. In it, Mason claims (at about 1:10) that “..the writer of this document thinks Greek pensions are too generous even now.” While it’s possible that he talked to the writer, or received additional information that he doesn’t mention, fact is that the document doesn’t corroborate his statement in the video. There’s no mention of this claim. Maybe it’s Paul Mason’s own opinion?! Take a listen:

The main sticking points with the ‘institutions’ now seem to be ‘labor reform’ (i.e. down with the unions -how IMF can you get?-) and pensions. Syriza has once again said this morning that it refuses to cave in on either. And there’s also the case of the 4000 or so re-hired cleaning ladies and school guards. The well-paid negotiators from Brussels and Washington want them out of their poorly paid jobs again. Not going to happen on Tsipras’ watch.

Yanis Varoufakis has already made clear what Syriza thinks should be done with the debt it owes to Europe: it should be swapped for paper with a repayment schedule that stretches way into the future. Looking at (re)payment schedules, it becomes clear this is not just a hollow idea. If Europe would allow for such a swap, Greece’s debt picture would change radically overnight. It would take away a large part of the burden this year:

And when this year is over, everything looks a lot sunnier:

The biggest speedbump in Greece’s repayment schedule is summer 2015. Take that away and things look completely different. All the institutions need to do is to provide Greece with some leeway. It’s very possible to do so. If the EC, ECB and IMF decide not to allow for that leeway, there can -again- be only one conclusion, as I said before: Greece Is Now Just A Political Issue.

The ‘big kahuna’ issue for Syriza has been, ever since it won the elections in late January, that its voters want something seemingly impossible: an end to austerity combined with continued membership of the eurozone. ‘The institutions’ won’t let Greece have both. Which has a lot to do with the fact that polls show continued support for euro membership in Greece; it’s one big hammer that Tsipras can be banged over the head with, day after day.

‘The institutions’, and indeed the international media, expect Greece to cave in to their demands for more austerity at the ‘final moment’, because the alternative would not only be horrific – at least presumably -, it would go against the wishes of the Greek people. What not a lot of people seem to understand is that Syriza can’t give in, because it would mean the end of Syriza.

However, if the institutions force a Greece default, that would bring a potential disintegration of the eurozone much closer than it is today. And whoever says they’re confident it can be contained are delusional liars. The risks for all three, EC, ECB and IMF, would far outstrip the few billion euros on which they may receive repayment a few years later. And they should not want these risks. Not if they have functioning neurons left.

But the biggest threat to the negotiations may not come from the institutions after all. It may well come from inside Syriza. As the Greek Analyst site reported this morning:

Call For “Rupture Now” By The Political Secretariat & Central Committee Of Syriza

Prominent members of the Central Committee and the Political Secretariat of Syriza are preparing an event for tomorrow, Tuesday May 19. Quoting from the event description, as well as the title of the invitation-pamphlet, the message of the event seems quite clear: “the only way out [of the impasse] is the choice of rupture with the lenders.” :

The Moment of Truth For Syriza: “Rupture now with the lenders.”

The moment of truth has arrived. The lenders are pressuring the government to sign a Memorandum agreement of neoliberal strategy (privatizations, demolition of the insurance-pension system and of the labour rights, ENFIA, VAT tax, etc.)

It turns out that the agreement of the 20th of February facilitated, objectively, this attack and “creative ambiguity” favored the powerful. The assumption that a radical program of anti-austerity can be build with the tolerance of the neoliberal steering wheels of the Eurozone proved wrong. Now, we are moving to the critical hour of decisions for the government, the party of SYRIZA, and the social majority.

We need to choose between the signing of the looming austerity agreement and the rupture with the lenders. SYRIZA cannot be turned into a party of austerity; neither can the government implement the Memorandum. This is the reason why, both domestically and abroad, proposals for the internal “cleansing” of SYRIZA and governmental solutions for “national unity” are put on the table.

For all those reasons, the only way out is the choice of rupture with the lenders. With a suspension of repayments [of the debt], measures that restrict the “freedom” of capital flight, governmental control over the banks, taxation of capital and of the rich for the financing of pro-people measures, support of this policy with any and all possible means, and with the possible break from the EMU.

For all of the above, we invite you to discuss in the open event of Rproject on Tuesday 19/5 in 7:00pm at ESIEA. Today, the future of workers, unemployed, pensioners, young people is judged. And at the same time, the future of the Radical Left in Greece, but also internationally.

Anatole Kaletsky thinks Syriza will blink. I saw that a few days ago with all of its assumptions and I thought: whatever. I don’t even think Kaletsky knows what Syriza is. There are too many opinions and too many assumptions out there that see the negotiations as just that: negotiations (that will end badly for Tsipras and Varoufakis). But Syriza is not just another thirteen in a dozen political party. It comes with principles that it will not and cannot sell to the highest bidder. That, more than anything else, makes this a political issue.