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History in Free Verse

From the keyboard of James Howard Kunstler
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Originally Published on Clusterfuck Nation June 22, 2015
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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 European Central Bank (ECB) and the International Monetary Fund (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. Most sickeningly you see it in a population of formerly earnest, hard-working, basically-educated people with hopes and dreams transformed into a hopeless moiling underclass of tattooed savages dressed in baby clothes devoting their leisure hours (i.e. all their time) to drug-seeking and the erasure of sexual boundaries.

That shocking social and political bankruptcy has, so far, acted as the sinkhole for all America’s financial degeneracy and the entropy it generates. The financial class (the 1 percent who own 40-plus percent of the financialized economy) must think it’s immune to the consequences of its activities, namely racketeering of one kind or another — criminal misconduct and accounting fraud in the service of money-grubbing. They must truly believe that risk has been offloaded into the ring-fenced concentration camps of capital: the derivatives pools. But risk, like rust, never sleeps and can’t be so easily contained. The obstreperous claims of debt only die down with the acknowledged disappearance of wealth, as when a bottom-feeding collection agency attempts to collect a few cents on the dollar of a car loan gone bad.

The US Federal Reserve, like the European Central Bank, sits atop a vault of bonds representing a colossal aggregate promise to repay debt that can never be repaid. Their loss of value will come to be seen for what it is: the disappearance of national wealth. We’ll have our moment, too, when the 50-gallon can full of cement can’t be kicked down the road another inch. It might come when Europe sets the example for a loss of faith in a system run to crime and rot.

 

 

James Howard Kunstler is the author of many books including (non-fiction) The Geography of Nowhere, The City in Mind: Notes on the Urban Condition, Home from Nowhere, The Long Emergency, and Too Much Magic: Wishful Thinking, Technology and the Fate of the Nation. His novels include World Made By Hand, The Witch of Hebron, Maggie Darling — A Modern Romance, The Halloween Ball, an Embarrassment of Riches, and many others. He has published three novellas with Water Street Press: Manhattan Gothic, A Christmas Orphan, and The Flight of Mehetabel.

EuroSoap

Off the keyboard of John Ward

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Published on The Slog on March 20, 2015

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TSIPRAS/MERKEL SUMMIT: You thought Greek politics complicated? Wait until you tot up the seismic splits in the EU

Take a close look at the timeline since Thursday night’s mini-summit marathon between Alexis Tsipras and Angela Merkel.

After a 3am Friday finish, German Chancellor Angela Merkel described the meeting as “good and constructive,” but warned that the Greek government will have to meet commitments before it can access EU money. She gave Syriza exactly seven days to offer fully detailed “reform” proposals to Troika2, and then left clutching several haunches of Venison and 683 sausages for her beloved fridge.

A few hours later, however, Jean-Claude Juncker – the President of the European Commission (EC) – announced a completely unconditional 2 billion euro contribution immediately available to Greece to boost growth, tackle youth unemployment and help with the “humanitarian crisis”. Juncker said the cash for this would come from “unused EU development funds”.

When I called the EC press office this afternoon and asked how this circle might be squared, there was much scurrying about and promises of getting back to me…none of which materialised.

Those EU schisms in full

This is what’s really going on here: pissed off by the degree to which Germany and the Troikanauts are increasingly adopting the Führerprinzip in relation to EU affairs, the EC as led by J-CJ is doing everything in its power to be good-cop to Greece in general, and Tsipras in particular. This is a good old-fashioned Nazi Party power struggle, and there is every opportunity for Athens to exploit it.

But equally, we must remember that on another level entirely, Francois Hollande of France got away almost scot-free last week on deficit failures that far outweigh those of Greece….but was forced to bring in Troika-demanded laws about tax evasion…and ECB diktats about bank liquidity. This has not gone down well in his Party.

The Parti Socialiste de France doesn’t like this crap because (like many of us) they foresee the wholesale handing over of millions of votes to Marine Le Pen’s Front Nationale.

So then: we have the EC at war with Berlin and Troika2, plus France at war with Frankfurt. But just when you thought you had it sussed, more fractures appear.

For Wolfgang Schäuble is at war with Merkel over his single-minded obsession to become Supreme Leader of the as yet unformed Fiskalunion…and fighting a second front against Mario Draghi’s ECB, which in turn is fighting on another front entirely with Jens Weidemann and the German Central Bank…who rightly think that Draghula is working not for the euro, but a planned eurodollar spookily approaching parity with, um, the euro. And Merkel too distrusts the ECB boss’s motives….preferring as she does to keep her options open on the subject of which way to jump in the Dollar v Rublenimbi chasm.

Confused? You will be after this latest episode of Eurosoap. But there are far more plot lines and faultlines to develop before your confusion is comprehensively constructed.

There is the coming UK election, and the increasing likelihood of the ‘biggest’ Party needing to do a deal with EU-secessionists. There is the growing secessionist and europhobic tendency in Italy. There is Podemos support in Spain growing with every act of defiance from Greece. There is the Austro-German bank collapse epidemiology threatening everyone from Santander to Deutsche. And there remains the implacable unwillingness of Viktor Orban in Hungary to have anything to do with globalism in general, or the euro in particular.

Face facts: the EU is imploding.

 

The Last, Great Run For The U.S. Dollar

Off the keyboard of Michael Snyder

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Published on The Economic Collapse on March 10, 2015

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The Death Of The Euro And 74 Trillion In Currency Derivatives At Risk

Dollars Euros - Public DomainAre we on the verge of an unprecedented global currency crisis?  On Tuesday, the euro briefly fell below $1.07 for the first time in almost a dozen years.  And the U.S. dollar continues to surge against almost every other major global currency.  The U.S. dollar index has now risen an astounding 23 percent in just the last eight months.  That is the fastest pace that the U.S. dollar has risen since 1981.  You might be tempted to think that a stronger U.S. dollar is good news, but it isn’t.  A strong U.S. dollar hurts U.S. exports, thus harming our economy.  In addition, a weak U.S. dollar has fueled tremendous expansion in emerging markets around the planet over the past decade or so.  When the dollar becomes a lot stronger, it becomes much more difficult for those countries to borrow more money and repay old debts.  In other words, the emerging market “boom” is about to become a bust.  Not only that, it is important to keep in mind that global financial institutions bet a tremendous amount of money on currency movements.  According to the Bank for International Settlements, 74 trillion dollars in derivatives are tied to the value of the U.S. dollar, the value of the euro and the value of other global currencies.  When currency rates start flying around all over the place, you can rest assured that someone out there is losing an enormous amount of money.  If this derivatives bubble ends up imploding, there won’t be enough money in the entire world to bail everyone out.

Do you remember what happened the last time the U.S. dollar went on a great run like this?

As you can see from the chart below, it was in mid-2008, and what followed was the worst financial crisis since the Great Depression…

Dollar Index 2015

A rapidly rising U.S. dollar is extremely deflationary for the overall global economy.

This is a huge red flag, and yet hardly anyone is talking about it.

Meanwhile, the euro continues to spiral into oblivion…

Euro U.S. Dollar

How many times have I said it?  The euro is heading to all-time lows.  It is going to go to parity with the U.S. dollar, and then it is eventually going to go below parity.

This is going to cause massive headaches in the financial world.

The Europeans are attempting to cure their economic problems by creating tremendous amounts of new money.  It is the European version of quantitative easing, but it is having some very nasty side effects.

The markets are starting to realize that if the value of the U.S. dollar continues to surge, it is ultimately going to be very bad for stocks.  In fact, the strength of the U.S. dollar is being cited as the primary reason for the Dow’s 332 point decline on Tuesday

The Dow Jones industrial average fell more than 300 points to below the index’s 50-day moving average, wiping out gains for the year. The S&P 500 also closed in the red for the year and breached its 50-day moving average, which is an indicator of the market trend. Only the Nasdaq held onto gains of 2.61 percent for the year.

There’s “concern that energy and the strength in the dollar will somehow be negative for the equities,” said Art Hogan, chief market strategist at Wunderlich Securities. He noted that the speed of the dollar’s surge was the greatest market driver, amid mixed economic data and concerns about the Federal Reserve raising interest rates.

And as I noted above, when the U.S. dollar rises the things that we export to other nations become more expensive and that hurts our businesses.

This is so basic that even the White House understands it

Despite reassurance from The Fed that a strengthening dollar is positive for US jobs, The White House has now issued a statement that a “strengthening USD is a headwind for US growth.”

But even more important, a surging U.S. dollar makes it more difficult for emerging markets all over the world to borrow new money and to repay old debts.  This is especially true for nations that heavily rely on exporting commodities

It becomes especially ugly for emerging market economies that produce commodities. Many emerging market countries rely on their natural resources for growth and haven’t yet developed more advanced industries. As the products of their principal industries decline in value, foreign investors remove available credit while their currency is declining against the U.S. dollar. They don’t just find it difficult to pay their debt – it is impossible.

It has been estimated that emerging markets have borrowed more than 3 trillion dollars since the last financial crisis.

But now the process that created the emerging markets “boom” is starting to go into reverse.

The global economy is fueled by cheap dollars.  So if the U.S. dollar continues to rise, that is not going to be good news for anyone.

And of course the biggest potential threat of all is the 74 trillion dollar currency derivatives bubble which could end up bursting at any time.

The sophisticated computer algorithms that financial institutions use to trade currency derivatives are ultimately based on human assumptions.  When currencies move very little and the waters are calm in global financial markets, those algorithms tend to work really, really well.

But when the unexpected happens, some of the largest financial firms in the world can implode seemingly overnight.

Just remember what happened to Lehman Brothers back in 2008.  Unexpected events can cripple financial giants in just a matter of hours.

Today, there are five U.S. banks that each have more than 40 trillion dollars of total exposure to derivatives of all types.  Those five banks are JPMorgan Chase, Bank of America, Goldman Sachs, Citibank and Morgan Stanley.

By transforming Wall Street into a gigantic casino, those banks have been able to make enormous amounts of money.

But they are constantly performing a high wire act.  One of these days, their reckless gambling is going to come back to haunt them, and the entire global financial system is going to be severely harmed as a result.

As I have said so many times before, derivatives are going to be at the heart of the next great global financial crisis.

And thanks to the wild movement of global currencies in recent months, there are now more than 74 trillion dollars in currency derivatives at risk.

Anyone that cannot see trouble on the horizon at this point is being willingly blind.

Memo to Varoufakis

Off the keyboard of John Ward

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Published on The Slog on February 26, 2015

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Memo to Varoufakis: Game theory is fine, but this isn’t a game.

Yanis Varoufakis was caught in the headlights last Friday: he should stop denying it

https://hat4uk.files.wordpress.com/2015/02/varoufheadlinghts.pngThe anti-‘deal’ leaks from the ECB, Berlin, the IMF and Brussels have been in full flow since Tuesday evening. It’s all terribly predictable: a clever process of suggesting that – purely out the goodness of their hearts – Troika2 is going to cut Greece some slack….even though T2 has – to tot up the list to date – ‘grave doubts’, ‘major reservations’, ‘worries about the lack of detail’, and ‘concerns about achievability’. There is slack rope, and there is enough rope to hang oneself.

The stench of hypocrisy in all this is vomit-inducing: Greece is being set up to fail, and in the meantime the ECB will continue its covert policy of creating bank cash-flow problems…ensuring that Syriza comes across as a Skid Row lush dependent upon never-ending welfare.

From Yanis Varoufakis, the Master of Game Theory, there has been little since the sign-off beyond rationalisation. In an interview with the Irish Times’s Damian Mac Con Uladh today, Mr Varoufakis gives us:

“Good compromises don’t always satisfy everyone, and leave in a sense everyone somewhat dissatisfied. But the mandate from our party, our government and my prime minister was very straightforward. To get a deal done. So, compromise. The question is if we have compromised our basic principle. And the answer is a big, fat no….Our mandate was to struggle against this black and white, this either/or, and to create a third way….It’s a triumph for democracy and marks the end of automated austerity….Anything is better than confining us to an austerity hole where we shrink every day.”

Compare and contrast that entirely reasonable attitude with this BBC interview on February 3rd:

“”Europe in its infinite wisdom decided to deal with this bankruptcy by loading the largest loan in human history on the weakest of shoulders… What we’ve been having ever since is a kind of fiscal waterboarding that has turned this nation into a debt colony….[the Troika is] a committee built on rotten foundations…Greek democracy has chosen to stop going gently into the night. Greek democracy resolved to rage against the dying of the light….We are going to destroy the basis upon which they have built for decade after decade a system, a network that viciously sucks the energy and the economic power from everybody else in society.”

I’m being ironic: I vastly prefer the second (earlier) Varoufakis to the new relaunch. Today’s Irish Times interview shows Damian Mac Con Uladh giving Yanis an unbelievable easy ride on the subject of a fat, hairy mammoth in the room: the now well-documented way in which the Greek Finance Minister was ambushed by the Euromafia at 4.30 pm last Friday.

I recognise perfectly well that I’m breaking from the optimist pack, but then I do understand the sociopathy of that Mafia better than most Greeks. To be blunt, I think Varoufakis underestimated it; and last Friday, the breathtaking, bullying illegality of their input caught him napping.

I do not believe Syriza has bought time, I think it has sold principles. I’m sure Yanis knows all the tricks of Game Theory, but this is not a game. He is dealing with (as are we all sooner or later) a nasty and yet hopelessly splintered EU oligarchy of far greater venom than any existing in Greece. The division on the opposing side is what he missed.

It’s easy to define, and even easier to evidence: the Germans are fed up of the French, and losing faith in the Americans. That’s a very serious split, because the man with the most unaccountable power in the eurozone is Mario Draghi….who works for Wall Street. The French, meanwhile, bitterly resent the idea that a nasty piece of work like Wolfgang Schäuble will be eyeballing them during March…and if and when FiskalUnion ever comes to pass, telling them what they can and can’t spend 24/7. The idea that Paris has the remotest desire to acquiesce in that arrangement is ridiculous. Apart from anything else, it would hand millions of votes to both Marine Le Pen and Nigel Farage.

On top of that we have a general trend in Southern Europe towards euroscepticism: the continuing growth of Podemos in Spain, and europhobic Berlusconi attitudes in Italy. These can only be encouraged by a flat refusal by Greece to deal with the idiots who caused the problem in the first place.

This is the perspective from Syriza that I find flawed: the much bigger picture. Last week, Varoufakis focused on it, and then lost the plot on Friday. He was a refusenik, but now he’s a pragmatist.

The post I wrote earlier this week laying out the story behind this was taken down by the Blue Meanies. I am therefore eternally grateful to the half-dozen Sloggers who still had it open and used page capture to return the piece to its rightful owner. It is reproduced below for anyone who missed it first time around.

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GREECE CRISIS OPINION: TROIKA RISES FROM THE DEAD AS DRAGHI LEADS THE CHARGE, AND VAROUFAKIS EMPLOYS BRAVE FACE

Conflicting rumours surround the Syriza reform programme approval process tonight, but whatever emerges from this farcical trading of angels on a pinhead, I’m increasingly concerned as details of the humiliation process programme ‘deal’ accepted by Yanis Varoufakis last Friday come to light. I don’t actually think the five-point italic hand-tying target codicils matter a damn to be honest, because they’re all unachievable anyway.

Far more relevant is what EC behaviour has been found acceptable to the Greek Government.

Did you know, for instance, that both the Gang of Four revisions, the Friday ambush, and the ELA threats/leaks to Greek banks were driven by Draghi?

Did you know that – in a direct sideswipe at rehiring Ministerial cleaners – there is a blanket ban under the agreement on any more public sector hiring?

Did you know that, just to rub in really hard that how they think the Greeks shit on their shoes, eurogroup told Varoufakis Friday that they were “handing over the judgement process to the organisation formally known as the Troika” – Draghi’s exact words. This was a direct hit on Syriza’s refusal to deal with the Troika. “Eurogroup will leave the details to this institution, who will present their view to eurogroup” he added.

Varafoukakis told CNN this evening that it was eurogroup who wanted more time to think, not the Troika. That is very, very economical with the truth – and not how other Syriza officials see it. The Troika has made it clear to eurogroup there are things they don’t like. As Naked Capitalism reported yesterday, ‘The Greek government is required to submit a list of reforms to the Troika by the end of day Monday. If it is not approved, the Eurogroup will meet on Tuesday.’

Guess what? Earlier this evening, Greek Channel NERIT announced that the eurogroup has asked Greece to submit a revised reforms list for its meeting Tuesday morning. The Guardian carries the same story.

I’m sorry, but at the minute Yanis Varoufakis isn’t coming out of this very well. For now, I support him to the hilt: but he is either going to resist the EC/ECB/creditors Troika or he isn’t. I know perfectly well that there are many among Athenian opinion-leaders who disagree with me about this. So perhaps – to illustrate the point – I might be allowed to relate an infamous Churchillian anecdote.

In the mid 1920s, WSC found himself seated next to a lady of liberal leanings at supper. Glad to have this arch anti-Communist to herself, the socialite took him to task about strike breaking, dissembling newspaper articles about the working class, and several other genuinely unpleasant dimensions of Churchill’s curate’s egg of a personality.

As ever when in the presence of what he regarded as uppity suffragettes, Winston was cutting and dismissive, telling the woman she should stick to worrying about her children and suitable marriages for her daughters – while remaining grateful for the fact that Britain had unwisely given her the vote.

“Mr Churchill,” said the shocked supper companion, “If I were married to you, I would put poison in your wine”.

“Madam,” Churchill lisped, “if I were married to you, I would drink it”.

Think of this as the “Drop dead” period of Syriza/EU insult exchanging immediately following the election.

Back in 1927, this not entirely auspicious exchange rapidly deteriorated, such that by the time pudding arrived, the lady concerned had reached the end of whatever short tether she possessed.

“Mr Churchill,” she said loudly, “You are the last person in the world I would ever marry”.

“Madam,” WSC responded, “A small part of marriage involves procreation in the bedroom. In order to show you what my real intentions are, under what circumstance would you consent to sleep with me?” The mortified woman hesitated, and then replied.

“There is no amount of money on Earth that would so persuade me”.

“Not even,” asked Winston, “£10 million?”. She laughed out loud.

“Don’t be ridiculous, that’s more than the Poor Relief budget. No woman is worth that”.

“Very well then,” said the future war leader, “Shall we say £500?”

“That is an insult,” she responded, “what do you take me for – a common prostitute?”

“Madam,” said Winston Churchill, “We have already established your profession. At this stage, we are merely haggling about the price”.

Fast forward to 2015: that’s what has been going on since Friday afternoon between Syriza and the Troika.

I don’t buy the “lose the battle, win the war” argument. While the Troika, Wall Street, US economic colonisation, EU fascism and banking sociopathy are indeed the enemy, this is a peace time exchange, not all-out war – yet. A strategic retreat is one thing: preparedness to cling to the driftwood of credibility is merely appeasement.

I’m now informed – in the last twenty minutes by a well-placed Syriza source – that fully eight Greek Cabinet members are opposed to acceptance of the deal. For myself, I feel cheated and made to look stupid by the hidden facts and cynical spin that followed Friday’s little re-enactment of the 1938 Munich crisis. But my feelings don’t matter a jot: let  The Slog’s Saturday post stand as a testament to rushed judgement. More to the point is the reality that an opportunity to call the Troika bluff has been blown.

If Yanis Varoufakis wants to regain his dignity – and keep Syriza together – he needs to think very carefully about what Prime Minister Tsipras should be asked to accept tomorrow…and then sell to his Party. For what will it benefit a man if he buys time, yet sells his soul?

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Greece & the Eurozone Crisis

Off the keyboard of Brian Davey

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Published on FEASTA on February 17, 2015

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Note: this is an update to my shortly-to-be-published book Credo: Economic Beliefs in a World in Crisis.

The Syriza government has been elected to power in Greece with an electoral mandate to end the austerity policies imposed on Greece by the European Union, the IMF and the European Central Bank.

The first point to make about this is the obvious one that a government that has power to issue a national currency of its own can always cover a deficit – an excess of spending over tax revenues. This is because, in the end, it can print money to make up the difference. (Or, if you like the government can issue bonds and the central bank can create money to buy them). Countries entering the Eurozone lost this power and with the replacement of the Greek Drachma with the Euro so did Greek governments. The Maastricht Treaty is explicit on this – Eurozone governments cannot be funded by money creation by their own central banks. Money creation is a prerogative of the private banks in Europe, and of the European central bank . If states get into financial difficulties they can get loans, but on conditions. The conditions are taking steps to balance tax revenues and government expenditure.

With the benefit of hindsight it seems almost inevitable that Greece would fall foul of Eurozone financial rules because it had been running a government deficit since 1973 and very high deficits since the early 1980s. Much of government expenditure was used to pay for a very large military budget. After the USA, Greece spent a higher % of its GDP on the military than any other country in NATO. This is partly because of enmity with Turkey but it might also have something to do with keeping the military types happy given that Greece had emerged from a military dictatorship – so the soldiers were given lots of high tech toys to keep them sweet. A lot of these toys were bought from German arms companies who did not complain.

At the same time economic development in Greece was limited mainly to tourism and shipping. Against larger northern European nations, particularly Germany, there was little chance of competing in most forms of industrial production. Instead Greek governments used money to provide public sector jobs, generous pensions and social benefits in a form of “development” that, with hindsight, was never going to be long run sustainable. At the same time many of Greek people, like many the populations in other countries absorbed the idea that the good life was all about self-display, leisure and consumption – an idea that they might have got partly from the stream of tourists from northern Europe to whom they catered.

One commentator has described how the development model was “underpinned by a historically influenced mentality in which property counted for more than work and people admired people who possessed wealth for which they had not had to work”.[1]

In other words the inflated state was associated with a system of patronage – not unlike the systems of well connectedness between business and state that characterise most other “developed countries” – the USA, UK, Germany.

However, all clubs of power not only have insiders but they are formed over and against everyone else – and in Greece the young people excluded by this corrupt club of power organised in resistance against it. It is this that explains the rise of Syriza as a new political force. What we are witnessing with the new government in Greece is a political transformation that is also a generational change.

What has brought this about has been the radicalisation of the population as a result of a humanitarian crisis in which the old “development model” collapsed.

When they entered the Eurozone Greek governments could not continue as before. By joining the Eurozone at the rate of exchange that they did the Greek people got a lot of Euros for their converted drachma and thus plenty of purchasing power to buy lots of imported consumption goods from abroad at very favourable prices. Interest rates were also low.

Times were good – but not for long. The short Euro honeymoon prepared the collapse. The excess of imports over exports can be thought of as an “export of their purchasing power” to northern Europe and a corresponding worsening of the competition situation of the Greek economy. This made the government deficit even worse too – while Greek purchasing power was helping to boost the German economy, it was not flowing back into the Greek economy, and not flowing into domestic tax payments.

The solution which governments used was to disguise what was going on was fiddling the statistics. They fell into a deadly embrace with international financial sharks like Goldman Sachs which, with other banksters, received generous fees for disguising the true extent of the borrowing. Loans were disguised as swaps.

The global financial crisis of 2007/2008 brought the real situation out into the open with the inevitable crisis and recession. With falling tax revenues and rising government expenditure the state financial crisis got worse. The extent of the fiscal fraud was revealed. Nevertheless it was still possible in 2010 for the Greek government to refinance their deficit by again borrowing mainly from European and international banks – albeit at much increased rates of interest. Paying these very high rates of interest then made the government deficit even worse. As so often happens in economics a self reinforcing vicious spiral was occurring.

The subsequent bail out loans made available to Greece by the European Union were mainly used to pay off these bank loans – with only a part going to cover an underlying deficit (ie the part that did not include servicing and repaying bank debt). It was thus not  “Lazy greeks” who were being bailed out  but the banks of Germany, France and Holland. However the ordinary people of Greece were now on the hook to pay back European taxpayers whose governments had made available taxpayer money so that European banks did not make a loss.

The austerity policies imposed in Greece have, in turn, produced a humanitarian crisis and a collapse in its national income. Unsurprisingly, a country whose national income has fallen by 25% is even less able to pay its taxes and its debts and a new political force has been elected to reject a policy direction that is both futile and creating massive distress.

One of the themes of my book is that of bias – economic textbooks claim that economists describe the world as it is rather than describing the world as it should be. There is a claim that economists are aware of the “fact” – “Value” distinction and that they stick to the facts rather than express their values.

Unfortunately, “bias” is not so easily banished as that. When you try to explain the world it involves a choice of where to look for explanations, as well as a choice of the directions and issues you do not to look at. In a political-economic crisis there are conflicts and thus at least two points of view. There are at least two ways of explaining things. Typically the two explanatory narratives have little in common and are about different things. What then happens is that people are pressured to take sides and exposed to arguments where protagonists reduce the complexity of the situation dramatically – this is particularly the case when the public relations industry and the popular press seek to simplify. Then it becomes “Lazy Greeks who will not pay their debts” versus “Greedy bullying Germans”.

If it is almost impossible to avoid “bias” one can at least be explicit about where one is coming from. What interests me, since economics is supposed to be about wellbeing, is the measurement of wellbeing through public health data. When we use public health data to look at the Greek situation what is immediately clear is that there is a “humanitarian crisis”. Instead of measuring wellbeing with a nebulous idea of “happiness” we can use instead use actual mental health data – with statistics for suicides and depression telling us what is going on in .

In this regard firstly, the prevalence of major depressive disorders in Greece has more than doubled from 2008 to 2011, with people facing serious economic problems being most at risk [2]

Secondly increasing numbers of people are killing themselves. A study published in the British Medical Journal tells us that:.

“In 30 years, the highest months of suicide in Greece occurred in 2012. The passage of new austerity measures in June 2011 marked the beginning of significant, abrupt and sustained increases in total suicides (+35.7%, p<0.001) and male suicides (+18.5%, p<0.01). Sensitivity analyses that figured in undercounting of suicides also found a significant, abrupt and sustained increase in June 2011 (+20.5%, p<0.001). Suicides by men in Greece also underwent a significant, abrupt and sustained increase in October 2008 when the Greek recession began (+13.1%, p<0.01), and an abrupt but temporary increase in April 2012 following a public suicide committed in response to austerity conditions (+29.7%, p<0.05). Suicides by women in Greece also underwent an abrupt and sustained increase in May 2011 following austerity-related events (+35.8%, p<0.05). One prosperity-related event, the January 2002 launch of the Euro in Greece, marked an abrupt but temporary decrease in male suicides (−27.1%, p<0.05).”[3]

So let’s be clear on that. Suicides went down when the euro was introduced and went up – not only when the recession started (suicide rates went up all over the world during the recession) but also particularly when the austerity policies were introduced.

In a recession all sorts of people suffer – including some of the rich. Austerity policy induced poverty is, however, particularly directed at those who are most vulnerable. It is those who are most vulnerable that are reliant on others and on the state, so their needs are downgraded. The attack on vulnerable people is to find the resources to save those who are “too big to fail” – particularly the banks.

Austerity policies are also an attack on ordinary people because austerity is not just about economic resources, it is also an exercise in social psychology. Austerity also has elements of scapegoating. In an economic crisis a society is undergoing an immense amount of anger, fear, tension and distress. This is dangerous for the elite that has taken the society into this crisis and the emotions from the crisis must be re-directed away from them. A lot of those negative feelings are thus directed downwards, on more vulnerable people in a process of emotional displacement – in a word in scapegoating.

We have seen similar things in the UK and many countries – groups like disabled people, migrants become targets for the hatred and distress generated as people seek to manage the practicalities of their lives and relationships under more difficult conditions. Powerful emotions are generated and people wonder “who is to blame?”. Governments keen to divert discontent away from themselves work with the media to fix on groups who cannot fight back.

In my book I also described the way in which particular groups of people are pre-disposed to see “the solution” to economic problems as being in pushing around more vulnerable people – “loyal bullies” I call them. Loyal bullies get a chance to persecute people through austerity policies which appear to be exercising greater control, for example over benefit “scroungers and cheats”. An explicit ideology emerges that sees the problems of society in a lack of discipline and cheating and finds the apparent solutions in bullying, bureaucratic harassment and forms of violence. It creates growing fascist tendencies among people, petty autocrats in state bureaucracies and in the police and armed forces. In Greece this has led to the development of groups like “Golden Dawn”.

It is thus no wonder in circumstances like this that mental health problems are on the rise.

Another indicator of the crisis in Greece has been a rising trend in infant mortality which increased by 43% between 2008 and 2012.

One of the main themes of my book is that those who bear the worst consequences of economic crises are rarely the people responsible for bringing that the crisis about. The most powerful people are protected by their wel- connectedness, their favoured client status and access to friends in high places – whether in political office at home (in Greece) and abroad (in international political and financial centres) . They can get themselves bailed out or protected. That’s why responses to economic crises are all about shifting burdens downwards onto more vulnerable people.

You could not get more dramatic evidence in the Greek case than rising infant mortality – obviously infants and children have no role in economic policy formation yet in increasing numbers they pay for austerity with their lives. “Sustainability”, of course, is supposed to be about the rights of future generations – but the evidence shows that the policies increase the chance of children dying before you reach adulthood. Of course most children do survive but when they try to enter the labour market in Greece young people have found that there are no jobs for them. In 2014 youth unemployment was averaging over 50%.

When the IMF and financial technocrats visit a country you can expect a number of things – income will fall, unemployment will rise and the local healthcare system will be attacked.[4]

As a matter of fact, as a proponent of degrowth I actually do see a need for economic contraction – but austerity has a number of features that make it very different from degrowth. Austerity is about attacking the poorest, the weakest and most vulnerable – as well as asset stripping publically owned assets by forcing privatisation on governments in crisis. In Degrowth it would be those who can afford to bear the cuts who would do so while attempts are made to help the most vulnerable cope with the economic contraction. However, this is difficult to achieve in today’s globalised world since, if governments take steps against the rich and well-connected, this elite group have a large number of ways to put their money out of reach.

At the same time as the crisis in Greece was back into the news it was being revealed how the HSBC bank had been helping rich people all over the world avoid tax by setting up swiss bank accounts to put their money in them. Places like the city of London and its associated network of tax havens are all about helping rich people put their money out of reach. That means that when the Greek ruling elite felt threatened they took their money abroad. The technical term is “capital flight”.

Just how huge the sums of money involved are can be seen graphically. A look at this graph reveals that in just a few months in 2010 capital flows out of Greece were roughly of 60% of the 2014 GDP while another 30% was taken out the country in 2011. In the last 5 months of 2014 money was again leaving the country at the rate of 12% of GDP.

If you want to balance a state budget then who exactly is it that has the pockets deep enough to pay taxes with? It is the people responsible for this kind of capital flight. It is that money, shifted out of the country, that needs to be targeted. Successive Greek governments had no intention of doing that – it would have involved taking action against their cronies. In any case they did not have an administrative machinery to do it with. This is what they lost when Greece joined the euro since there can be no exchange control between countries to prevent money moving from one part of the Eurozone to another. Successive governments squeezed ordinary people and the Greek welfare state instead – and were put under pressure to put publically owned assets for sale to global financiers at a knock down price.

The results of this are entirely predictable. When people are impoverished – in the case of Greece losing 25% of GDP – they are less able to pay their debts and their taxes, not more. The debt situation has spiralled out of control and a humanitarian crisis was created. However the next act in this drama has been the election of a government of outsiders who are not part of the crony circle – with a mandate to oppose austerity in order to end the humanitarian crisis.

What happens next?

One thing we can be sure about – neo-liberal politicians in the financial centres over the world want to see Syriza fail. If Syriza are successful they will inspire people throughout southern Europe and Ireland – not to mention any other government under the thumb of the IMF. They will also want to see Syriza fail because Syriza have only one option for reform – to clean up the old corrupt elite and tax where the resources really are. There are policies that could be deployed – like land valuation taxation which would be hard to evade. But policies have to be set up. Administrative machinery has to be created and corruption rooted out. This takes time – and the new Greek government does not have time. Money is being withdrawn from the banks and from the country. To prevent that requires capital controls that the government does not have access to under European union rules. The government will run out of money shortly – and again it cannot create money under European Union rules. The kind of action that the Greek government has to take will be opposed by financial and political elites the whole world over – a new generation of outsiders, who are not compromised and co-opted, is a genuine nightmare and they must be shown to fail.

That is why I find it difficult to believe that European politicians will give any leeway or support to Greece. If Greece were now to exit the Eurozone the process would be chaotic so if I were a politician in Greece I would be playing for time and doing what Argentinian local authorities did – paying the bills with low denomination IOUs which can effectively function as a currency alongside the Euro (Patacones).Then, if the eurozone authorities rule against the Greek government’s actions it would be the European authorities that have slung Greece out and, further, an alternative quasi currency would already be in circulation.

Greek exit from the eurozone would not be painless for the Greeks because it would probably mean a devaluation of the new currency of perhaps 40%. Imported goods would be 40% more expensive. However, the experience of other countries like Argentina is that a devaluation of this sort can lead to an economic recovery. This would give the Greek government time to start working on cleaning up the corruption of the old elite. The new generation could settle in to do their job properly.

In the rest of Europe this would set a number of processes running. It is being said that Grexit would not now lead to a financial crisis as the larger European banks and financiers are no longer so exposed and Greece is, after all, one of the smaller countries in Europe.

Perhaps – however they underestimated the impact of letting Lehman Brothers go bankrupt badly. Even if the financial repercussions are small – the political repercussions in other countries in a similar situation to Greece would be huge.

Endnotes

1.

http://www.taz.de/Neue-Regierung-in-Griechenland/!154307/

2. http://www.bmj.com/content/345/bmj.e7988/rr/694119
3. Branas et al “The impact of economic austerity and prosperity events on suicide in Greece: a 30-year interrupted time-series analysis” 2nd February 2015
http://bmjopen.bmj.com/content/5/1/e005619.full?sid=2cfe20f5-31b3-4ea5-9ca5-d85645fa4ecf
4. http://www.bmj.com/content/345/bmj.e7988/rr/694119

Featured image: money in sock. Source: http://www.freeimages.com/photo/1433053. Author: Uros Kotnik

Eurosummit Breakdown

Off the keyboard of John Ward

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Published on The Slog on February 17, 2015

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Who did what and why?

As one Troika dies, another is born

Practically every Western press title and news bulletin this morning uses the word ‘defiant’ in relation to Greece’s rejection of the New Troika’s terms, and it isn’t a compliment.

The Greek contingent rejected the ‘deal’ because it wasn’t a deal, it was just the same old same old. But up until 90 minutes before closure, it had been something else. Allegedly drafted and then pushed hard by French finance minister Pierre Muscovici, the first draft (a copy of which Varoufakis still has) offered Greece more time, few targets, and then an attempt at economic growth.

It was taken off the table by yet another Troika – in most cases, remotely: Mariano Rajoy, Wolfgang Schäuble, and of course (no drum roll required) Mario Draghi. During the final day, Spanish PM Rajoy (for purely selfish political reasons, it would appear) scrambled around desperately trying to get the hawks to play more of a vulture role. His ginger-group plus the EC/ECB/Berlin/Frankfurt axis canned the original draft, and insisted on a return to all the original demands.

Then some of them briefed the press pack with pernicious spin about Greece messing them about, moving goalposts etc and being (this week’s insult of choice) “anti-European and irresponsible”. The truth is that, some time around 10.45 am CET, Varoufakis was lining himself up to sign the draft. Getting back to the realities:

– Greece cannot be allowed concessions, because Podemos would immediately demand the same (Rajoy)

– Greece’s load cannot be reduced, because then they might pay it back (Draghi)

– Greece’s flagrantly spendthrift behaviour must not be rewarded, and more austerity is the only answer (Schäuble).

So then – as many of us always suspected – the deal was scuppered by a hardline, corrupt, anti-libertarian Spaniard, a banker whose career is followed by clouds, and who retains his loyalty to Wall Street, and the residue of a tragically failed assassination attempt upon Germany’s top spook.

The only vaguely satisfying things to emerge from this charade are first, that once again the quintessence of controlling fascism that lies at the EU’s heart has been revealed; and second, the Western MSM really do not have a clue about how to handle the Greek attitude.

Four days ago, I wrote in reply to Merkel’s assertion that “Europe’s success is that it will always find a compromise”:

‘The small issue I have with this bollocks is that the movement by either side so far is tiny – in fact, barely above homoaeopathic…. In just 36 hours we have gone from “Drop Dead” to “Let’s compromise”. But where can it go from here? In my view, nowhere: the two sides are incompatible unless one or the other radically invents itself. Neither of them will do that.”

Sure enough, the Brussels Brigade reverted to type with black arts and making up new rules as they went along. And as they promised, Syriza refused to renege on its election commitments.

Watch those markets crash as the bond yields spike. The euro is dead, the EU dream has become a nightmare, and the fundamental attitude split between Berlin and Paris  is once again there for all to see.

Stay tuned.

Troika Trojan horse: Will Syriza capitulate in Greece?

Off the keyboard of Pepe Escobar
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Originally published in Russia Today on February 6, 2015

The 2015 Greek tragedy is a sorry (financial) remix of the Trojan War. But now the troika (ECB, EC, IMF) has replaced Greece, and Greece is the new Troy.

It is now crystal clear the ECB will pull no punches to turn Greece into a European failed state. The rationale: others – from Spain to even, in the near future, France – must not entertain funny ideas. Toe the austerity line, or we’ll get medieval on you.

It was so predictable that the destiny of Athens – and in fact the euro – would ultimately rest in the hands of ECB Governor Mario ‘Master of the Universe’ Draghi, purveyor of the latest QE which in thesis will grant an austerity-ravaged Europe a little extra time to pursue ‘reforms’.

Some background is essential. The troika sold Greece an economic racket, but it’s the Greek people that are paying the price. Essentially, Greece’s public debt went from private to public hands when the ECB and the IMF ‘rescued’ private (German, French, Spanish) banks. The debt, of course, ballooned. The troika intervened, not to save Greece, but to save private banking.

The ECB bought public debt from private banks for a fortune, because the ECB could not buy public debt directly from the Greek state. The icing on this layer cake is that private banks had found the cash to buy Greece’s public debt exactly from…the ECB, profiting from ultra-friendly interest rates. This is outright theft. And it’s the thieves that have been setting the rules of the game all along.

Where’s our money?

The result is that Athens is now broke. Greek Finance Minister Yanis Varoufakis at least embarked on his European tour with a sound proposal; the ECB could move €1.9 billion of profit on the back of Greek bonds; and then release other €10 billion in short-term state obligations, as well as open an emergency line to banks. From the beginning, the key point for Varoufakis was to open the way to renegotiate the €240 billion of the troika ‘rescue’ plan.

ECB hawks – as in Errki Liikanen from Finland – barred these options from the outset, insisting that without a comprehensive agreement, as in total Greek surrender, not a single euro will go to Athens.

What a drag for Prime Minister Tsipras and for Varoufakis – to embark on an European tour as supplicant beggars facing a sterling collection of silky mobsters, including EC president Jean-Claude Juncker and president of the European Council, warmonger Donald Tusk.

Next week there may be an extraordinary meeting of the Eurogroup, ahead of a sparks-will-fly European summit in Brussels on February 12.

The bottom line: it does not look good.

Varoufakis tried to put a brave face, continuing to rule out a Grexit as “hugely detrimental to Greece.”More detrimental would be in fact the Syriza party totally capitulating to the neoliberal Masters of the Universe. This will ensure Greek depression will go on forever. And yes, eventually, the fascist Golden Dawn may accede to power.

Varoufakis, in his press conference with German finance minister Wolfgang Schauble in Berlin, even as he agreed with 67 percent of the current ‘plan’, stressed – soundly – it does not tackle the excesses of corruption and rent-seeking in Greece; and everything is all about debt repayments, not putting the Greek economy back into shape.

For his part, Schauble, predictably, issued a thinly veiled threat of an “uncertain future” without a bailout program. Schauble’s now famous “we agree to disagree” was in fact hardball enveloped in velvet.

There is no evidence as it stands that a complex negotiation of at least a few months will ensue, as Athens tries to restructure how to deal with the troika. The ECB is now tacitly playing the game that Greece is essentially doomed. Ergo, the ECB is voting down Syriza, and actually supporting fascist Golden Dawn. That’s central bank ‘democracy’ for you.

Bomb Frankfurt, anyone?

So in the end it breaks down to this; without ECB cash – at least some cash by the end of the month – Greece risks going back to the drachma without even firing a shot. And yet that’s exactly what legions across Europe are absolutely rooting for. In parallel, no wonder – from Lisbon to Rome – rumblings multiply that if the ECB would have done that to a relatively well weaponized nation, the tanks would be out in the streets (but to do what? Bomb Frankfurt?)

Varoufakis insists, “One thing we will not do is capitulate.” That would translate, essentially, into a Greek default. We’re not there – yet. In the very short term, Draghi also knows that were Athens to get some of the cash it needs short term, there would be war against the Bundesbank. It won’t happen; the ECB and the Bundesbank are partners in crime.

Once again; both the ECB and the Bundesbank came to the conclusion there is no risk of contagion even with a Grexit. So the ‘strategy’ won’t wobble; crush Greece and all’s well that ends well – as in the troika’s terminator economics trampling whole countries underfoot.

Beware of Masters of the Universe dispensing smiles. Draghi and the Zegna-clad ECB goons may dispense all the smiles in the world, but what they are graphically demonstrating once again is how toxic central banking is now enshrined as a mortal enemy of democracy.

 

Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009).

Greek Souvlaki Kabuki Roller Coaster

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Aired on the Doomstead Diner on February 11, 2015

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The Game Continues…

Snippet:

 

…Going into the weekend, the chairman of the Eurozone FinMins Jeroen DieselBOOM laid down the LAW with the Greeks, basically giving them about 10 days to either CAPITULATE or be thrown under the bus and pitched out of the Eurozone, though nobody is quite clear on how legal that is to do.

There was a decent amount of speculation in the aftermath of that that it would cause the Greeks to fold up their tent and come begging for more money, but the exact opposite occurred here, which is that by Sunday both Tspiras and Souvlakis were issuing out even MORE uncompromizing Tweets, basically threatening to bring down the entire Eurozone with them if they are flushed down the toilet.

The Clowns and Jokers in Brussel Sprouts have their Poker Face on, bluffing that the economic cascade from a Grexit can be “contained” and the rest of Europe will do just fine without Feta Cheese, so best of luck there fellas! LOL…

 

For the rest, LISTEN TO THE RANT!!!

 

In case you missed it, here is the last installment of Greek Kabuki…

Greek Debt Chicken Game

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Aired on the Doomstead Diner on February 6. 2015

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Diner Special Lunch Menu

Souvlaki                  or                    Strudle

http://d.ibtimes.co.uk/en/full/1422542/greece-yanis-varoufakis-says-ecb-talks-fruitful.jpghttp://i57.tinypic.com/2z57qtl.jpg

Snippet:

…Once again, the Greeks have taken the Center Stage in the Collapse Kabuki theater, with the newly elected Syriza Goobermint under the leadership of Alex Tspiras attempting to follow through on their many promises to throw off the Debt Choke Hold held on them by the Brussel Sprouts.

The new “Rock Star” player in the game here is the new Greek FinMin, Yanis “Souvlakis” Varoufakis. Yanis is making a lot of headlines in the Econ blogosphere since Syriza took power, first with the threat to outright default and lately with some more creative phrasing of concotions like “perpetual bonds” in some kind of new game of debt musical chairs.

On the other side of this nonsense is Yanis’ Evil Twin, the Kraut FinMin Wolfgang “Strudle” Schauble. Wolfy won’t take any shit from Yanis, and has made it clear he thinks the Greeks are responsible for every penny of the debt that the ECB and by extension the Kraut population extended to the Greeks, despite of course the reality that the Krauts never had the money before the last Greek Goobermint of Bankster Sock Puppets signed for it…

For the rest, LISTEN TO THE RANT!!!

Who CHICKENS OUT first?

Rotisserie_Chicken

Prior Rants on the Greek Debt Kabuki Theater you may have missed:

Syriza Hits the Ground Running

Off the keyboard of John Ward

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Published on The Slog on January 26, 2015

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GREECE ANALYSIS: SYRIZA HITS GROUND RUNNING AS TSIPRAS BROKERS ANEL COALITION DEAL TO SEAL MAJORITY RULE

 Prime Minister Tsipras faces a cold dawn of Monday reality

In a rapid (and smart) move that demonstrates both energy and planning, Alexis Tsipras is this morning 95% of the way into a Coalition with ANEL – better known in the West as the Independent Greeks. This is an anti-euro Party of right-wing Greek nationalists.

In going for this option, Tsipras shows that – unlike most on the Left – he can unite against a common enemy. I also suspect that his advisers see this as one dimension in an overall strategy designed to calm down bank depositors and bond markets. But shrewd or not, the new Prime Minister is going to face several waves of attack from those hostile to his election – both inside and outside Greece.

The first thing to set off screaming headlines will be the effect on the euro. Overnight, the single currency plunged down to 1.12 against the Dollar – before the weekend it was around 1.15. We should expect to see a further weakening during the day.

A second and highly likely immediate threat is a spike in Greek bond yields – pushing Greece’s borrowing costs through the roof. This will add urgency to the blatant destabilising strategy of the ECB’s Mario Draghi, who for spurious reasons announced last Thursday that Greece would be locked out of the QE programme.

A third issue is the bank withdrawals that preceded Syriza’s stunning victory yesterday. Here too, threats have been forthcoming from both Brussels and Frankfurt to cut off ELA (emergency liquidity assistance) to four big banks in Greece.

Last but not least is the worryingly high poll achieved by the Greek Nazi Party, Golden Dawn – which now becomes the third largest Party in the country with 17 seats. They will, I have no doubt, use that bloc to disrupt as much Parliamentary business as possible…and plot with the hard Right to take over should things look to be spiralling out of control.

A weak euro is technically good for Greek exports, but Syriza will of course be blamed for “beating the euro to death on its sickbed” and the pro-Euro professional classes will weigh in heavily on that angle. So then, apart from Europe-wide opprobrium, soaring borrowing costs, the chance of a Putsch and imminent bank collapses, there’s nothing at all for the new Prime Minister to worry about.

∀∀∀∀∀∀∀∀∀∀∀∀∀∀∀∀∀∀∀∀

But there is also another side to this. My own hunch is that the Greek voter really did three things in the election: first, vote for a radical change of strategy; two, kick Samaras out with the biggest boot available; and three, decide to give the new generation a chance. I looked up Tsipras’s date of birth last night, and he is of course the leader of that generation who never knew life under the Colonels’ Junta. He is also surrounded by people with zero respect for tradition: Varoufakis has already promised to “completely demolish the Greek oligarchy” as a matter of priority. Corruption in high places has been a Greek given forever; rooting it out would get approval from all but the fatties who support Samaras.

Secondly, the Greeks ignored all the EC/ECB/IMF/Juncker/Schäuble veiled threats and scaremongering. That bullying will now, without any doubt, be stepped up. I predict it will backfire, and further unite the country. Because in the light of the previous paragraph, it will play very badly against the prevailing atmosphere of ‘give them a chance’ and Troika-hatred.

I have made my view clear about Draghi: he has already decided for his own reasons to Grexit Athens from the equation: he’ll be delighted to get the euro down to Dollar parity, and supremely confident in his ability to mess up any plans Syriza have. I expressed the view strongly early last year that Tspiras should never have dropped his opposition to the euro, but it now looks to have been a wise idea: without doing that, he would never have been elected with such power – and with it he can (quite justifiably) evade blame for its collapse…he can play the Good European.

It’s too early to call this kind of stuff. But it’s good to know where the touchlines are. All we need to do now is find the ball.

∀∀∀∀∀∀∀∀∀∀∀∀∀∀∀∀∀∀∀∀

As for the poppycock streaming nonstop from Brussels-am-Berlin about the ‘zero effect’ Syriza’s success and Grexit is having or might have on the euro – indeed, the EU itself – it is beneath contempt. It will spike ALL Clubmed bond prices, keep liquidity away from Europe, confirm the europhobia in Italy, and encourage the growing Left support in Spain…where they have the added problem of Sovereign fragmentation.

In other areas too, the knock-on effect will have geopolitical consequences. Moscow will I’m sure see this development (and what must inevitably follow) as likely to move Greece more into its orbit: and you can be sure that Viktor Orban in Hungary (and Polish voters) will welcome further opposition to the juggernaut. Orban is one of the few, I think, who has not only grasped that the Brussels Bus is actually being driven by Washington, but is also prepared to talk about it openly.

In the UK, it can only spur on the UKip camp. But Nigel Farage blotted his copybook very badly last night by referring to the Syriza win as “a cry for help”. What a profoundly pompous and patronising twerp he is.

Greek Election Update

Off the keyboard of John Ward

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Published on The Slog on January 20, 2015

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GREEK ELECTIONS: Alexis Tsipras is heading for power – get over it and get behind him.

https://hat4uk.files.wordpress.com/2015/01/alexis.pngWhile 200,000 talented graduates have left a Greek population of just 13 million in the last few years, Western media, EC gargoyles and the failed Greek Establishment seem keen only to make Syriza leader Alexis Tsipras a bogey-man. Today’s piece by Andrew Lilico in the UK Telegraph is a classic of this spinning moral compass genra. But Yesterday’s polls in Greece show that the electorate isn’t having any of it: Tsipras can only be denied now by illegality. The Slog makes a plea for the men who care more for people than money to be given a chance.

Shortly before Christmas, I blogged several times about the likelihood of external forces putting pressure on the Greek electorate. I was right of course….and the blatancy of some of it should confirm to anyone who’s awake that there isn’t a scintilla of democratic soul left anywhere in Brussels, Frankfurt, Berlin or Washington. But dark internal forces have issued more than their fair share of threats and scaremongering.

Schäuble kicked off with his usual “yo muss not make ze mistakes”, and then various Sprouts, bankers and CDU fatheads jostled each other for the chance to say that Athens was courting disaster, but none of it would have the faintest effect on the euro. Bit of a disconnect there, but boneheaded irony was soon tossed aside in favour of Merkel saying renegotiation of the debt wasn’t on the radar, Draghi threatening to close every Frankfurt cash-tap in use, and business leaders on every continent warning of boil-plagues and bank collapses.

Predictably, Greeks withdrew funds from the banks in huge numbers – the self-fulfilling prophecy is a common banker tactic – but this week things have really begun to get out of hand: because now it looks 95+% certain that Syriza will play the dominant role in whatever government gets formed. In that dread context, Samaras told us of his fear that “vandals and hooligans” would surely destroy the recovery plan he had so painstakingly failed to turn into reality, right-wing ND backbenchers said they would fight rather than let Syriza take power, and Golden Dawn hinted at Colonels, putsches, juntas and civil war. Yesterday, Athens and Twitter were awash with rumours about a forced Grexit this Thursday before the election can take place.

A great deal of warning, myth and urging later, however, the latest poll still has Alexis Tsipras consolidating his lead, and unlikely to be short of coalition suitors. So now, the game has turned again – this time, to “Syriza is all over the place and will make a balls of it before collapsing in disunity”.

The piece in today’s Telegraph by Andrew Lilico (his name might be more aptly La-la-con) gives no consideration whatsoever to the subject of illegal and anti-libertarian interference in the affairs of a fellow Member State by bullies and gangsters. Instead, Mr Lilico says Syriza “doesn’t understand” the ECB’s world view, and lacks a grown-up coherent plan for dealing with the threats of the Protection racketeers.

The increasing degree to which Western media adopt this kind of insouciant amorality when dealing with World affairs concerns me far more than the idiot posturing of politicians. It reminds me of The Times (leader of the Nazi appeasement pack) telling the Czechs to stop dithering and just give Herr Hitler what he wanted in 1938. This extract is typical of the Telegraph piece, written in the light of what Lilico had heard at a Syriza press conference:

‘Overall, the impression I had was that Syriza is attempting to pitch itself as very responsible; that [of] sitting to the left of an emerging consensus that the economic programme imposed upon Greece since 2010 has failed, and something else must be tried. That “something else” must include forgiveness of Greece’s debts. But I could see nothing that I felt would appeal to a German politician or voter.’

Setting aside the obvious fact that Lilico is writing about a Party that had nothing to do with Greece’s current situation at all, the author here is clearly asking Tsipras to just please stop buggering about and name the ‘something else’ Greece needs immediately. Given Andy Pandy and his fellow economists have spectacularly failed to do this – or indeed condemn either austerity or QE – it seems to me a quite extraordinarily haughty position to take. Forgivenesss of Greek debt is precisely what is needed, and what I and others argued vehemently for from 2010 onwards.

But the sign-off sting had me boggling: whyTF should the voters of a Sovereign State give a monkeys about what CDU sausage-munching rednecks or Heinrich auf der Strasse thinks? The Greeks loathe the Germans…and it is an object lesson in Anglo-Saxon ignorance that its journalists have not realised this – or indeed ever observed the German holidaymaker’s bafflement about the attitude when in Greece.

There is a very important underlying point to this semi-rant – and if the rant dimension has been spotted as a reflection of my frustrated anger, then I’m well-pleased: it’s time more people got angry about the death of society and self-determination in favour of the 3% of wobbly-jobbly robots at the Top.

My point is, we have ample evidence to show that, running the EU, the following mobsters are in charge: a Goldman Sachs crook with various Italian clouds following him around, who has already lied about his Spanish banking Ponzi scheme, brutally pushed the Bundesbank and Swiss Gnomes out of his way to enable a pointlessly expensive QE exercise, and used financial blackmail to try and derail or at worst undermine the Greek electoral process; a former DDR Stasi-connected Jugendführer who has ruthlessly stitched up every rival on her way to power – including her current creature, a one-time spook in charge of interior spying who forbade Greek elections the last time around; and unelected European Commission fascists so corrupt, not even the auditors have felt able to sign off a single set of accounts in nineteen years.

Last June, Mr Lilico wrote a piece lauding his profession, which he began – without irony – as follows:

‘…economists are usually about as right as it’s possible to be. There, I said it.That shouldn’t be controversial. After all, that’s why economists get paid so much and why societies managed according to economic principles such as sound money, secure property rights and effective competition are much more prosperous than others…’

It is the neoliberal Believer in full flow. Do read the rest of the article…but only if you haven’t eaten for a few hours.

The economists who read Lilico’s Bible of abject failure understand nothing of any importance to humanity: nothing whatever. Not compassion versus money, not the human versus the machine, not up from down, not credit from balance, not good from bad, and above all, not right from wrong. They reject honour in favour of respecting those made ‘honourable’ by money.

In another absolute gem of didactic arrogance, Andrew Lilico writes, ‘Modern orthodox economics is a rich and broad field of endeavour….because orthodox tools are so powerful and fruitful. Some textbooks will tell you economics is the study of incentives. I unpack that as follows: economics is the discipline that tells you why behaviour makes sense’. Well, there you have it then: “no new ideas please, economics is settled science…now the rest of you oiks just f**k off out of the way while I continue to make you more prosperous than you deserve”.

But these people are perilously close to running the show. Don’t be afraid of Tsipras: he’s a bourgeois, good-family structural engineer. My main fear of young Alexis is that he’ll compromise too much. No: be afraid only of the carpet-bagging liberty-hijackers who know they’re right.

SWISSIE CAPITULATION!

logopodcastOff the microphone of RE

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Aired on the Doomstead Diner on January 18, 2015

titanic-sinking

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Snippet:

http://cdn.news12.com/polopoly_fs/1.5585827.1372415753!/httpImage/image.PNG_gen/derivatives/display_600/image.PNG…The folks worst hit here in the short term are the Forex traders who were short on Swissies, figuring they would stay pegged to the Euro as promised by the SNB. At least two of the currency trading firms blew up immediately after this, FXCM and Excel with losses in the $100s Millions, and somebody out there took that hit, although we don’t know precisely who that is yet. Client accounts are supposedly segregated out here, but anything caught up in the trading when this went down is now GONE. Precisely how much anyone with an account with these two firms will be able to get back out and when is an open question. No doubt quite a few folks will get Corzined on this one.

Meanwhile, over in Greece in a not entirely unrelated event, now all 4 of TBTF Greek Banks had to go to the Greek Central Bank for “Emergency Liquidity Assistance”, basically because there is an ongoing RUN of the Greek Banks and everyone with any CFS is trying to get their money OUT of them before they go Tits Up and convert everybody’s savings to New Drachmas, destined to be about IMMEDIATELY worth less than a roll of Charmin.

These banks, which Zero Hedge has reported as “systemic” have basically run OUT of collateral that even the ECB which accepts almost any stinking dogshit will accept for them to hand over a few more Euros. At first it was just 2 banks referred to as systemically important, without revealing which onesd they were. The obvious reason here that the identity of these banks is not being revealed is that would of course ACCELERATE and already ongoing diarreah attack they are undergoing and they would squirt out still more liquified Brown-25. This ploy however did not work, so now the run is on all of them. LOL…

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Euro, Yen & Oil Collapse Doom Double Feature

logopodcastOff the microphones, cameras and keyboards of Gail Tverberg, Ugo Bardi, Steve Ludlum, RE & Monsta

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Aired on the Doomstead Diner on November 11, 2014

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Yen, Euro & Oil Frostbite Falls Daily Rant

Yen, Euro and Oil Collapse Cafe Chat with Guests Gail Tverberg, Ugo Bardi and Steve Ludlum

Read more from Gail, Ugo & Steve on their Blogs

Gail Tverberg: Our Finite World

Ugo Bardi: Resource Crisis

Steve Ludlum: Economic Undertow

 

Snippets from the Analysts: (follow the Links to read full versions)

The collapse of oil prices and energy security in Europe

This is a written version of the brief talk I gave at the hearing of the EU parliament on energy security in Brussels on Nov 5, 2014. It is not a transcription, but a shortened version that tries to maintain the substance of what I said. In the picture, you can see the audience and, on the TV screen, yours truly taking the picture.

Ladies and gentlemen, first of all, let me say that it is a pleasure and an honor to be addressing this distinguished audience today. I am here as a faculty member of the University of Florence and as a member of the Club of Rome, but let me state right away that what I will tell you are my own opinions, not necessarily those of the Club of Rome or of my university.

This said, let me note that we have been discussing so far with the gas crisis and the Ukrainian situation, but I have to alert you that there is another ongoing crisis – perhaps much more worrisome – that has to do with crude oil. This crisis is being generated by the rapid fall in oil prices during the past few weeks. I have to tell you that low oil prices are NOT a good thing for the reasons that I will try to explain. In particular, low oil prices make it impossible for many oil producers to produce at a profit and that could generate big problems for the world’s economy, just as it already happened in 2008.

Oil Price Slide – No Good Way Out

The world is in a dangerous place now. A large share of oil sellers need the revenue from oil sales. They have to continue producing, regardless of how low oil prices go unless they are stopped by bankruptcy, revolution, or something else that gives them a very clear signal to stop. Producers of oil from US shale are in this category, as are most oil exporters, including many of the OPEC countries and Russia.

Some large oil companies, such as Shell and ExxonMobil, decided even before the recent drop in prices that they couldn’t make money by developing available producible resources at then-available prices, likely around $100 barrel. See my post, Beginning of the End? Oil Companies Cut Back on Spending. These large companies are in the process of trying to sell off acreage, if they can find someone to buy it. Their actions will eventually lead to a drop in oil production, but not very quickly–maybe in a couple of years.

So there is a definite time lag in slowing production–even with very low prices. In fact, if US shale production keeps rising, and Libya and Iraq keep work at getting oil production on line, we may even see an increase in world oil production, at a time when world oil production needs to decline.

Last Line of Defense …

Triangle of Doom 110114

Figure 1: Continuous WTI futures (TFC Charts, click on for big). Price convergence results in a breakdown as customers are unwilling- or unable to bid prices higher. Absent the high prices there is insufficient cash flow to enable drillers to continue operations. Today’s marginal barrels are extracted from high cost deepwater offshore plays, from tight-oil shale formations and from ‘tar’ sands: without customer credit, drillers are more dependent upon junk bond leverage than ever.

Of course, once on the borrowing treadmill, it is impossible to step off. Borrowers must run faster to stay in place, ever-increasing amounts are needed to keep pace with operating- and service costs as well as to rollover maturing legacy debt. Consumer access to credit must be considered a ‘hard limit’ to petroleum extraction along with geology. Even as drillers are able to borrow they find there are fewer ‘end users’ with available credit … onto whom the drillers can lay off their ballooning exposure.

Conventional analysis insists that fuel constraints result in higher prices due to simply supply and demand. The assumption is that consumers will always find more funds. Instead, fuel constraints reduce customer purchasing power: customers stumble first, the drillers fail afterwards. As customers’ borrowing capacity shrinks the petroleum industry has little choice but to adjust prices to meet the market which forces drillers to reduce output. At some point they fail outright. Fuel supply cuts => diminished consumer borrowing capacity => more fuel supply cuts in a vicious, self-reinforcing cycle.

 

The Double Whammy

Reverse Engineer

Over the course of the last week, we have had two MAJOR Black Swans come in for a landing.

The first one actually has been ongoing for a couple of weeks now, the collapsing price in the Oil Market, plunging from its recent “set point’ at around $90/barrel to $77 for WTI as I write this article:

The second Swan came in the form of an announcement by BoJ Chief Psycho Kuroda that the BoJ would ENGAGE Warp Drive on the Printing Press and buy up every last JGB the Nip Goobermint sells in order to meet their ever increasing need for cash.  The Yen was already sliding, this announcement however sent it on a Downhill Run worthy of an Olympic ski course.

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/11/20141103_NKY.jpg

Flip this upside down to get JPYUSD.  Nobody publishes it that way, I wonder why?

Are these two events unrelated coincidence?  Of course not.

Demand Destruction has taken hold all across the globe now, and Oil consumption is dropping everywhere.  Here in the FSoA, we’ve seen a 10% drop in gasoline consumption since 2008, and the end to this is nowhere in sight either.

Screen Shot 2014-10-27 at 11.57.00 AM

For the rest, listen to the Rant while you tend your Garden, watch the Video while you Cook Dinner, or if you don’t like Media, just read the damn articles!

 

Don’t miss our Upcoming Podcast with David Hughes, Author of the recent Drilling Deeper Report, analyzing the Fracking and Tight Oil plays in the Oil Patch.

…and that’s All the Doom, This Time until Next Time, here on the Doomstead Diner 😀

RE

Post-Eurozone Stress Test Syndrome: PESTS

Off the keyboard of John Ward

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Published on The Slog on October 27, 2014

Euro_collapse

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POST-EUROZONE STRESS TEST SYNDROME (PESTS): An update on the calumny involved

Interrogate harmonised eurobanking, and it rapidly becomes clear that the entire edifice is designed to stop capital flight. A disgruntled Slog investigates.

It’s enough to make a chap vote UKip.

You may have seen from this morning’s Slogpost that I’ve been having trouble with Ding Dong Bank – a French institution keen to profit from its totally manufactured ‘success’ in the EBA stress tests. This morning I was back in my local branch to ask why – with nearly €60,000 deposited in my accounts there – I’d been left with no liquidity during the weekend, and my bank card had been refused from Avignon to Zabalza.

The excuses for non-performance of service so far have been:

* There is a ceiling on your account withdrawals. (At €150 on €60,000?)

* The IBAN number for your transfer is wrong

* The amount you wanted to send to Poland is above the €6000 limit for foreign transfers

* For some reason, nobody raised your ceiling last time you asked us

Absent so far from any dealings with Ding Dong Bank have been “Je suis désolé” (I’m sorry). But the story changes every time I talk to these scoundrels. Today has seen yet more multivariate change of excuses:

* Your new ceiling of withdrawals was only for a month.

* You need a Gold Card to have such an account

* ALL foreign transfers have to be done personally here at the Bank.

All three have either (a) never been mentioned before now or (b) been contradicted by others in the bank.

Typically, this morning’s comment thread was full of more wiseasses telling me how daft I am to have a French bank account with more than thruppence in it. I should have assets and no money in the bank, they say. One wonders how they pay their bills, or buy the assets. In carrot futures, perhaps?

My solution (having calmed down) was simply to treat the bank as a Maginot Line: to walk round it and use people like Transferwise or UKForex. But now I discover that for euro-to-euro transfers within the EU such is impossible without paying fees to go through a bank.

Well just fancy that. Mario has introduced a fantastic new innovation called SEPA – the Single Euro Payments Area. Read this terrific blurb-bollocks from the ECB site:

‘The Single Euro Payments Area (SEPA) is a project to harmonise the way we make and process retail payments in euros….Retail payments are “everyday” payments between individuals – private persons, companies, NGOs, government agencies…..an increasing number of payments can be done entirely electronically (e.g. mobile, online banking or contactless card payments….[requiring] a clear and transparent governance structure involving all stakeholders’.

Or – reduced to two words – ‘banking monopoly’. Go to the Transferwise site, and you will see that euro2euro transfers have to use SEPA now.

This is the European Union folks – a deregulated free trade area in which there is a single currency. But the bad news is, you have to use a bank and pay their fees to send transfers from one member nation to another in euros. The only way to avoid that is to do the deal from euros to, say, Szloti, or Pounds into euros, or Dollars into Remnimbi.

Aaah, the advantages of the EU, eh? Wheelchair Wolfie Schäuble’s harmonised eurobanking system. Harmony for the bankers, cacophony for the customers.

Related recent Slogpost: The neoliberal free trade open market fascist monopoly that is Microsoft

Toward a Europe Whole & Free [to loot]

Off the keyboard of Anthony Cartalucci

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Published on Land Destroyer on July 10, 2014

PipeLinesGraphic

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July 10, 2014 (Tony Cartalucci – NEO) – When the special interests who created and direct the agenda of the European Union disagree with member states, the true nature of this supranational enterprise becomes painfully apparent – one of dictatorial special interests pursing regional policy that benefits none of its individual member states. No example of this can be clearer than the dispute that has emerged over the construction of Russia’s South Stream natural gas pipeline set to run through Bulgaria, Serbia, Hungary, and Italy.

The pipeline produces a large number of benefits for each of the nations it passes through, as well as for energy markets on either end of the pipeline. For the people and governments of these nations set to benefit most from the pipeline, the deal is an attractive, long-term investment. For the special interests that have created and currently direct the EU – on the other hand – it poses as a direct threat to their designs of continued expansion and corporate-financier hegemony beyond the collective borders of today’s EU.

For the hegemon, coexistence and collaboration are not options – thus the benefits of the South Stream pipeline escape them. Instead, these hegemonic special interests seek to control their own pipeline and energy markets on either side of it, and this can be seen developing along several fronts including the Southern Corridor Project, beginning in Azerbaijan along the Caspian Sea.

Energy and foreign policy expert Sinan Ulgen of the US government and corporate-financier funded Carnegie Europe think-tank complained about the disparity between the EU Commission’s stance, and that of individual EU member states in an Anadolu Agency (AA) article titled, “Russian South Stream gas pipeline divides EU,” stating:

“…the EU’s main concern about South Stream is that the project would increase its dependence on Russian gas. Last year a third of its consumed gas was supplied by Russia.

Additionally the AA article would state:

While the European Commission opposes Russia’s South Stream gas pipeline project, certain EU countries like Austria and Italy continue to openly support the world’s most expensive pipeline project, which aims to transport Russian gas by bypassing Ukraine.

For the last two years, Russia has signed bilateral agreements with Italy, Bulgaria, Serbia, Hungary, Greece, Slovenia, Austria and Croatia for the construction of the South Stream gas pipeline, which is estimated to cost nearly US$40 billion according to the Moscow Times. Gazprom recently announced however that it was abandoning construction of the Italian portion of the pipeline. 

These agreements were deemed a breach of EU anti-trust law by the European Commission in December. And, in April, following the annexation of the Crimean peninsula by Russia, the European Parliament voted for the South Stream project to be stopped.

AA would also cite another corporate-financier funded think tank, Chatham House – also complaining about EU members pursuing their own interests in contradiction to the EU Commission’s dictates. The unelected EU Commission appears to be pursing its own extraterritorial geopolitical pursuits ahead of those of the individual member states and their respective populations. That corporate-financier funded “think tanks” are focused on this “divide” and championing the EU Commission’s agenda over that of the individual EU members it allegedly represents fully exposes the EU for what it truly is, a dysfunctional supranational dictatorship.

And what is done in the name of the EU by its institutions like the EU Commission, which admittedly does not represent the best interests or desires of those it claims to represent, unfortunately and perhaps unfairly reflects on the EU as a whole. For example, and as part of the energy debate, the current EU support of the regime occupying Kiev, Ukraine, taints all of Europe, even as many EU member states attempt to move cautiously or even in opposition to the greater agenda the EU Commission and others are pursuing.

While the EU promotes itself as a bastion of freedom, stability, and prosperity, it appears increasingly more like a hegemonic bloc, dictating to, rather than acting as a representative of, the European people. The slogan “Toward a Europe Whole and Free” rings hollow when the EU Commission begins dictating policy to individual states, and curtailing progress that benefits both individual nations and their people.

The EU, in this light, appears more of an autocratic oligarchical consolidation of regional power and resources, not a democratic collaboration between nations. A slogan like “Toward a Europe Whole and Free” appears then to represent Europe, but only from the perspective of special interests seeking to loot the region collectively, rather than nation-by-nation. The dysfunction and dictatorial nature of the EU Commission and other apparatuses within the supranational bloc serve as a cautionary example for other nations seeking to construct their own alliances – from Asia’s ASEAN-AEC (Asian Economic Community), to regional alliances between Russia, China and with nations along their peripheries.

Alliances that include obligations that usurp national sovereignty are not alliances at all, they are hegemonic infiltration by special interests who would rather see a village place their valuables in a single safe for them to crack and loot, rather than take the time and trouble to rob each individual home. Europe must decide whether it will continue along a path of internal conflict with its alleged EU representatives tainting their collective populations, cultures, and histories, or reform the EU into an institution that allows collaboration and national sovereignty to exist in tandem.

Eurobanksters Pray for Jesus

Off the microphone of RE

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Aired on the Doomstead Diner on July 13, 2014

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…Back today to real Diner MEAT, the Economic Kabuki ongoing across the globe as the Jokers & Clowns in charge scramble to keep all their Balls in the Air here, rather than being strung up by them. Even Master Juggler Ray Jason could not keep so many Testicles in the air at the same time.

The latest Testicle to come crashing to earth is in Portugal, Banco Espirito Santo is now on the rocks since its parent company defaulted on some debt payments. Espirito Santo translates to Spirit of the Saint, and these folks can only hope that Jesus drops down from Heaven and multiplies the Deposits in their bank like Fishies and Loaves of Bread….

http://4.bp.blogspot.com/-HQXq-3B_U0w/UB3Z-S37cDI/AAAAAAAABF4/sUgjIYpQy-o/s1600/Jesus+Feeds+the+5000.jpg

For the rest, LISTEN TO THE RANT!

RE

Crash 2: Draghi Implicated

Off the keyboard of John Ward

Published on The Slog on June 24, 2013

dragrakept

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CRASH 2: DRAGHI IMPLICATED AS ITALY FACES CYPRUS TEMPLATE

Snake hit by rake: Draghi rumours of malpractice in 1990s and 2012 resurface…looking more solid

A report submitted earlier this year to the Corte dei Conti, Italy’s state auditors, suggests not only that Italy faces a potentially massive derivatives hit, but also that Mario Draghi may be personally implicated in those and other frauds. In particular, several appear to have been central to Italy gaining entry to the eurozone in 1999….based on clearly falsified data.

Allegations being made against Signor Draghi insist that he ‘cooked’ Italy’s debt picture when seeming to reduce Italy’s budget deficit from 7.7 % in 1995 to 2.7% by the crucial entry-qualification year, 1998. It was, by a country kilometre, the steepest debt reduction among any of the (then) eleven eurozone applicants. Draghi went on to join Goldman Sachs in 2002, and by then accusations of book-cooking were already starting to emerge. In 2005, the Bank of Italy was forced to issue a denial, but several eminent commentators found it unconvincing. In 2006, news agency Bloomberg  applied to Draghi’s mentor Jean-Claude ‘Tricky’ Trichet for the release of further information, which Trichet refused to give…again, to the consternation of a number of mainstream financial journalists.

Author Simon Johnson, for example, not only found the answers given by Draghi “unpersuasive”, he also pointed out how unlikely it was that, as a Goldman employee, the Italian had “known nothing” about the fraudulent marketing of debt cover-up assistance to the Greek Government. Pascal Canfin, Member of the Italian Parliament and former chairman of the ECON committee, grilled Draghi on how he could have known about these transactions and allowed them to go through. He was not satisfied with the answers. The New York Times reported, after Draghi’s nomination for the ECB was approved, that Supermario had marketed similar transactions to other European governments. So it’s pretty clear there have been clouds above Il Draghi’s head for some time.

Meanwhile, the present Italian Government faces  billions of euros in derivatives contract losses that it restructured at the height of the eurozone crisis, according to the Corte dei Conti report. Those having had sight of it say the document ‘sheds more light on the financial tactics that enabled the debt-laden country to enter the euro in 1999′ (linking straight back to Draghi’s time at the Italian Bank) while in turn – according to the FT – it ‘details Italy’s debt transactions and exposure in the first half of 2012, including the restructuring of eight derivatives contracts with foreign banks with a total notional value of €31.7bn’. There was a suggestion from one US source last night that Draghi is also implicated in these.

Meanwhile, new information received at The Slog suggests the Knights Template may be at it again.

Another source emailed The Slog yesterday to point out that a US banking major (unidentified as yet) has told all its staff, on Fed Treasury orders, ‘to inform the US government about all deposits emanating from Italy, from any entity, company, individual or institution, with full and complete comprehensive details of any account opening or transfer or balance in excess of $100,000′.

There is only one reason for such an order: to trace any and all bailin escapees. Yesterday, The Slog posted in Smoke Signals that Italy’s second biggest financial institution, Mediobanca, ‘has overtly warned that the country is going to need a further rescue-cum-bailin within six months at the most. “Time is running out fast,” said Mediobanca analyst, Antonio Guglielmi, “The Italian macro situation has not improved over the last quarter, rather the contrary. Some 160 large corporates in Italy are now in special crisis administration.”’

Last Saturday’s Slogpost  on Draghi’s financial power in the EU accused the EC the previous Thursday of ‘having handed absolute power to the unelected [Draghi]….at the expense of the citizen.’ I went on to accuse the ECB boss of being ‘completely unaccountable to any body or institution – elected or otherwise. Under the ECB’s Constitution guaranteed by the European Commission he is totally immune from prosecution. He cannot be removed from his position. He is obviously censoring any and all information that might reveal the true situation in the eurozone. He illegally subordinated an entire class of bondholders over the second Greek bailout. He managed and spearheaded an overt heist to steal the banking expertise and economic wellbeing of Cyprus, and in so doing committed an act of grand larceny against innocent depositors in the Island’s banks.

It looks suspiciously like Italy is heading for a Cyprus, and pretty soon. I can only repeat the bold type warning I gave then:

This is not a queue for the showers, European nations. It is the line heading directly to the extermination of your democratic rights, individual liberties, and personal wealth. There may be 27 of you and only one Draghi; but your divisions just make his job far easier. Step in the way of the Beasts now, or you will have a jackboot stepping on your face forever. 

Stay tuned.

Cyprus & The Mobsters

Off the keyboard of John Ward

Published on The Slog on March 28,  2013

CYPRUS & THE MOBSTERS: why the descent into global panic is now almost unavoidable

The Slog plots the course of a deadly global chain reaction

 

How the rape of Cyprus will torpedo the banking system

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I’ve been moving money around over the last few days. I still am, and I don’t know many people in my immediate circle who aren’t. We all seem to have the same aim: to be in the safest place with the safest currency. And the catalyst for all of us busily doing this is specifically, the Cyprus bank heist involving depositor confiscation; and leading on from that, the growing evidence that the political and financial Establishments globally have every intention of applying such glorified State theft in the future.

What I want to do in this piece is posit a hypothesis about just how nasty this could all get – and how quickly. But first let me offer you some evidence thus far that all trust in Sovereigns keeping their fingers out of our tills has disappeared for the majority of those who are awake. As I’ve said before, nothing gets Fritz, Pierre, Tommy or Vladimir off the sofa quicker than a Sovereign with a bad kleptomania habit.

Simply because French President Francois Hollande pushed through a raft of tax rises and stepped up his campaign against the rich – no obvious grand larceny involved – France suffered a surge of capital flight in the second half of 2012. The net loss in just two months was over €50 billion. Six months before that – when the Spanish situation looked dire – €100 billion flew away in ten weeks.

On Tuesday, a German opinion poll showed that only 2 in 5 Germans trust Merkel when she says their money is safe in a bank. That is incredibly significant.

Last weekend, the leader of Britain’s fast-growing anti EU Party UKip advised British expats to put their money in Spain somewhere offshore. Hardly anyone dismissed his comment as scaremongering.

Yesterday, credit agency Moody’s issued a strong advisory document to clients opining that the EC/ECB lunacy in Cyprus had set a dangerous precedent for future rescue efforts, and by definition made the region more prone to bank runs if depositors in other debt-strained countries think their money is no longer safe.

“Policymakers appear very confident that market conditions are benign enough and that they have the tools to avoid contagion to other peripheral economies and their banking systems,” Bart Oosterveld, managing director of sovereign risk at Moody’s, told Reuters,”but we think that that confidence may well be misplaced.”

Last night into the early hours, I spoke to five senior manufacturing corporates in the US. Of the five, one was already withdrawing money from Europe, three were actively considering it, and one was due to raise it at a Board meeting this Friday. None of them were doing nothing about it.

As I’ve said previously here at The Slog, the trouble with allowing a piece of Dutch Gouda like Jeroen Dijsselbloem to chair the EC’s FinMin group is that while he might be terrific with red wine and French bread, he knows less than nothing about econo-financial anthropology, and he has never worked in a proper commercial capacity. Neither he – nor Rehn, Schäuble, Asmussen, Moscovici, or the rest making up the numbers – either like or understand genuine free markets and the way they operate. They are just so many Canute courtiers telling the Fuhrerine in Berlin that she can push the waves back…or contain them in a bottle.

But Cyprus taught us how quickly the big, hot and smart money disappears. It happened so fast, in fact, that the Cyprus Bank depositors left behind – the entirely innocent in most cases – will pick up the bill. Not oligarchs, not ESMs, not ECBs, and most definitely not Berlin: just ordinary savers who have amassed €100,000 euros during a lifetime. People like this are not the self-styled élite: they’re you and me and people we know. (And if it’s not you, then you have my genuine sympathy…but it should still concern you).

So: we have some evidence. We know human nature. We see the danger. And we have a situation complicated by the fact that there is, as regards the ECB, only weekly reporting of capital flight from the eurozone. Research and experience show that this isn’t fast enough: a week is a long time in Cyprus.

For Mario Draghi, however, I’d imagine it’s too frequent: what Dracula in his dark underground cave would like is no reporting of it. But there you go: he’s stuck with it…or is he? The past is no guide to the future…especially not in the EU. Go to the ECB website, and you will note there that the Central Bank hasn’t released any financial stats for over a week now. You may also spot that the open-request search engine box has disappeared. Monetary, financial markets and balance of payments statistics haven’t been updated at all for over a month.

Yesterday’s EC FinMins document (about which Djisselbomb knew nothing, it seems) contained this rather toxic ‘Emergency Decree’ style paragraph (my emphasis):

‘Member States may introduce restrictions on capital movement, including capital controls, in certain circumstances and under strict conditions on grounds of public policy or public security. In accordance with the case law of the European Court of Justice, measures may also be introduced for overriding reasons of general public interest.’

So then, strict rules…followed by, er, measures. Measures? What kind of measures guys? I suspect they mean “we can do anything we want in the public interest”. Uh-huh.

What we can already see – in the Target2 data – is that the eurozone was severely lopsided long before the Cyprus bank job. Target2, by the way, stands for Trans-European Automated Real-time Gross Settlement System. It is the much-abused payments system that conveniently enables citizens across the euro area to settle electronic transactions in euro. And at just over €500 billion, for example, TARGET2 claims on the Eurosystem are the largest and fastest growing item on the Bundesbank’s balance sheet. Very mind-concentrating if you work in Frankfurt, or rule from Berlin.

Anyway, capital flight data. With its usual prescient accuracy, PIMCO opined recently (my emphasis) that:

  • The large TARGET 2 positions developing among national central banks in the eurozone reflect capital flight from the periphery to the core, and de facto introduce transfer and burden sharing elements of a common fiscal policy.
  • Monetary policy ends up substituting for fiscal policy without going through the same democratic channels that governments’ expenditure and taxation decisions entail. Taxpayers in the eurozone are contingently liable for eventual losses incurred by the Eurosystem’s monetary policy operations.

And also, of course, they’re the ultimate payees when f**kwits at the top can’t even close a bank competently. But to the above analysis now, we need to add ‘bank depositor’ to the term ‘taxpayer’. It’s the same poor mugs, just being stung twice. The pocket-book is emptying, the salary is standing still, there’s no interest to live on, and there’s that €100K nest egg sitting in RBS. Dear God, what a nightmare thought for anyone: Stephen Hester having direct access to your money.

Nothing – and I mean nothing – directs you to eurozone capital flight data on the ECB website. It is missing from all the usual places: I’m sure it’s there somewhere, but the point is it’s not easy to find. Again, no doubt the Eunatics think this is a smart move, but it isn’t. It will just make depositors in the eurozone more suspicious. Beyond the ECB’s site, Google ‘ECB capital flight data now’ or variations on that theme, and nothing comes up beyond ancient papers or the capital leakage from Spain over a year ago.

But enough of this: deliberate bureaucratic obfuscation is not exactly news. My fear this morning is that what we’re going to see is a capital flight chain reaction that goes way beyond either Cyprus or the borders of the EU.

Within the EU itself, The Slog exclusively revealed yesterday that Djisselbloem already has a concerted, worked out process for establishing capital controls right across the eurozone. In the last 24 hours I have spoken with twenty or more opinion leaders in investment, banking and currency controls. There was a unanimity among those people that the entire eurozone will have blanket currency controls within two months at the latest…because without that, the capital flight would be irreversibly disastrous for the region. It is in fact significant that none of those with whom I spoke were even slightly surprised by The Slog’s scoop: the main fear they had was whether the eurogroup would get its act together in time to stem the outflow.

Here’s how it will develop – in my view. Many US corporations will move their eurocash back to the US. Some, however – and millions of richer US citizens – will have been alarmed by Bernanke’s yes-no-maybe-hard-to-tell-panic-not-sure ‘answer’ to a question at his last Fed press conference about Washington thieving from private bank accounts. Throughout the West and the Anglosphere, in fact, evidence built up last week to demonstrate that almost every State in those regions had a Djisselbloem Plan to steal our money, and contingency plans to control money flows.

“Given the current atmosphere,” a senior wealth adviser told me this morning, “Why would you not get your money out?”

My hunch is that the vast majority of the capital flight will go to Asia. Once there, it will do one or more of the following things: buy property, buy gold, or buy dollars. Although we are talking enormous sums of property money here, we aren’t talking about anything beyond perhaps 100,000 people: the Glitz Bricks trend I identified seven months ago will simply heat up. Thus there is unlikely to be a bubble there: but there will, I’m sure, be a rapid advance in the price of gold bullion. And the Dollar must strengthen as millions of private investors in turn see that as the best currency for their liquidity to rest in while they think about it.

Put those two factors together, and you have a major problem for US exports, and a major devaluation of Sterling. The rare (not to say unique) result of those will be a US debt and deficit getting bigger faster, and a run on the Pound coupled with declining UK exports in a depression-spiralling world. If the Fed can no longer fiddle the gold valuations (it’s an expensive process) then there will in turn be a run on America’s stock markets towards bullion, and a knackered US Bonds sector terrified by Washington’s debt trap.

You don’t have to be a rocket scientist to work out what happens next: things will get Draconian, citizens will at last get angry, and politicians everywhere will panic as they realise that citizens with less and less money simply cannot pay more and more tax. Not only will they not pay: they will finally grasp how a few gangsters and incompetents have screwed them royally.

The prow of the Titanic is out of the water. Looking at the situation today in an atmosphere of rural calm here in France, I find it very hard indeed to escape the conclusion that we are reaching the exponential acceleration stage of the econo-fiscal globalist model’s descent to the seabed.

Having so stupidly let the genie out of the bottle, Brussels-am-Berlin have at most a week to lasso the ether and get the bugger back in again. I doubt very much if they can do it.

Any more than I can blend torpedoes, Canutes, Titanics and genies into a consistent metaphor. Stay tuned.

EUNATICS & EUNUCHS

Off the keyboard of John Ward

Published on The Slog on March 16, 2013

Discuss this article at the Epicurean Delights Smorgasbord inside the Diner

Cyprus – a suitable case for treatment

The depositor haircut: German exit visa or just plain stupidity?

When I first heard of the bailout ‘solution’ for Cyprus late Friday morning, my first inclination was not to believe it. But then I remembered a conversation with a Madrid source earlier in the week (it was about the Wolfgang Schäuble v Mario Draghi dogfight) and went back to him late Friday afternoon just to check my memory of the conversation was correct. It was: he’d more or less said that it was a fight between two people on mad missions – respectively, to control European fiscal management according to German needs, and to ensure that nothing and nobody would get in the way of the euro’s survival.

On the Greek haircut question, Draghi illegally subordinated the private bondholders. Now it was Brussels-am-Berlin’s turn to subordinate the depositors in Cypriot banks. My own guess here is that Draghi knew precisely how dumb the Schäuble idea was for Cyprus (at one point in the debate, the German Finance Minister demanded depositors be wiped out to the tune of 40%) and decided to let him make an idiot of himself. So quickly were Draghi’s expectations of a bank run shared by the media, by early Saturday morning Olli Rehn was hastily promising a press conference that there wouldn’t be a repeat anywhere else in the eurozone of the tax on bank deposits that was imposed as part of Cyprus’s aid programme.

However, other interpretations are possible. Even in Berlin – even within the CDU, even in the Chancellery – nobody is entirely certain whose side Wolfgang Schäuble is really on. There are those who think he secretly supports the Bankfurt hardliners who want out of the euro. Others see him as a control freak with an unquenchable desire to run Europe’s fiscal system. A Frankfurt contact told me recently, “I’d guess that Schäuble’s plan is to slam the ECB and thus keep German losses in Cyprus to a minimum.” Based on what he wanted from the Cyprus bailout, that sounds like an increasingly accurate perception.

But does he really want to keep the euro, or did he set out to insist on doing something profoundly stupid over Cyprus in order to hasten the end of the euro….and get out with minimal damage to Berlin?

And here’s another angle: the bank run in Cyprus actually began a week ago, when Russian money began shipping out fast. Did Berlin tip Putin off as to what was about to happen?

cypriottractorThis picture was sent to me from outside a Cypriot bank today. It displays more than panic: the large vehicle featured is clearly set up to ram the bank if it looks like farmers can’t get their money out. On Tuesday morning, the banks will open in Cyprus and there will queues to withdraw money round the block. Cyprus’s own finance minister dismissed the idea of a depositor haircut only a few days ago saying  “Really and categorically – and this doesn’t only apply in the case of Cyprus but for the world over and the euro zone – there really couldn’t be a more stupid idea.”

Wolfie not only had the stupid idea, he also sold it to the others in the room. This is how crazy and/or Machiavellian things get when the endgame is just around the corner.

As to what will happen in the rest of ClubMed when their banks open, as Karl Whelan wrote in Forbes yesterday, ‘Now that people know that a depositor haircut is part of the European toolkit for dealing with banking problems, why would you sit around and wait for it to happen to you? This decision has the potential to trigger a full-scale bank run across the euro area, and such an outcome could place in question the continued existence of the euro as a common currency.’

But Whelan himself admits nothing might happen. However, he does acknowledge that the decision to tax all deposits below €100,000 shows that ordinary Cypriots are going to be hit very hard….and that this wasn’t just an attempt to shave the heads of Russian gangsters.

All I can say is that I was going to put a large six-figure sum into a eurobank next week to hedge against Sterling being openly massaged down the toilet in value. Now I’m going to put it into Dollars outside the eurozone. It seems to me that having torpoedoed the long-term bond market in Europe, the Eunatics have cast huge doubts over their willingness to guarantee deposits in the ezone banking system. Whether this is madness inflicted by angry Gods or catalysts thrown onto the fire by wily Germans is anyone’s guess. Either way, investors won’t be impressed.

Watch the Banks…

Off the keyboard of Steve from Virginia

Published on Economic Undertow on February 2, 2013

 
Discuss this article at the Epicurean Delights Smorgasbord inside the Diner

Surreality is when the top story in the New York Times is about King Cakes but the idea is to not scare the horses. Informing the readership in plain English of our ongoing unraveling might provoke uncertainty … then panic … leading to questions about why we endure so many stupid managers everywhere in the world. At the very least, the stock market — which is now near all-time highs — might decline. People might then in theory put off buying a new car or a bigger house or not take on bigger loans. Best to roll out the pastries and downplay the Israeli air strike in Syria and the widening war there or the bank nationalization in Netherlands (Washington Post):

 

Dutch state nationalizes bank and insurer SNS Reaal NV, injects 2 billion euros in capital (Associated Press)

AMSTERDAM — The Netherlands nationalized its fourth-largest bank on Friday, injecting €2 billion ($2.7 billion) to recapitalize SNS Reaal NV and head off any chance of a messy collapse that would threaten the country’s already fragile economy and financial system.

The total cost to the Dutch government will be at least €3.7 billion, Finance Minister Jeroen Dijsselbloem told a press conference. That’s almost certainly enough to ensure that the Netherlands’ budget deficit in 2013 will be higher than the 3 percent allowed under EU rules, unless the Dutch Cabinet — which has already taken a series of unpopular tax hikes and spending cuts — comes up with further austerity measures.

“This isn’t what we wanted,” Dijsselbloem said. But he added that, without the nationalization, SNS “would have gone irrevocably bankrupt,” with potentially dire consequences.

 

Ah yes, dire consequences: secured (large) lenders to the bank would have lost some money. Much better for the ordinary citizens of Netherlands to take the billions in losses. The citizens haven’t even earned the money yet, they will never know what it is they have lost! Here is the latest innovative technology in action: the finance cost-morphing time machine. The establishment endlessly promises a high-tech utopia tomorrow. What it actually delivers is invisible public bankruptcy: money that is not earned tomorrow because it was diverted to a tycoon … yesterday.
King Cake 2

High-tech time machine in operation, Pableaux Johnson (NYTimes)

 

Depositors and senior creditors (of SNS) won’t lose any money in the nationalization, the Finance Ministry said.

 

The closest the Dutch get to actual restructuring …

 

SNS shareholders will be wiped out, along with some junior creditors, including the state itself. SNS owed the government €800 million, including interest, left over from a 2008 bailout. Other junior creditors will lose around €1 billion, the ministry said. The three biggest Dutch banks, ING Groep NV, ABN Amro, and Rabobank will contribute a combined €1 billion to help save SNS — they are required to do so as under the same law by which the state guarantees their retail deposits. The nationalization shows the damage the crisis has wrought on the oversize Dutch financial sector and means that three of the five biggest banks in the country have now come under state control since the start of the crisis: ABN Amro was merged with the former Fortis and both were nationalized back in 2008. In addition, ING received several bailouts which have still not been fully repaid. Only Rabobank, a banking cooperative, has not yet needed state aid.

 

Big-bank shutdowns are historical indicators of greater finance system failures-to-come. This dynamic has been in force as recently as 2007 with the collapse of el cheap-o mortgage origination firms and two of Bear-Stearns’ hedge funds. The entire mortgage industry, shadow-banking and then Bear-Stearns itself all fell into the pit shortly thereafter. During the entire period there was a soaring stock market and soothing bromides from the establishment …

Attention must be paid to stumbling banks while the happy talk about ‘growth’ and ‘recovery’ is ignored.

The propping up of key-men works for modest periods only. Cures or resolutions must be put in the place of the props … since 1980 or so nothing has been done other than to entrench the status quo, expand credit and inflate serial asset price ‘bubbles’. Finance has not evolved, it has become an unchanging dead weight, a gigantic millstone around the corpse of modernity … ossified finance has become the final manifestation of ‘progress’. To support banks and the industrial welfare queens there are cheap loans offered by central banks, the laundering of assets, bailouts of businesses belonging to ‘special friends’ (owners) of corrupt government officials. All of this is accompanied by loud public proclamations of better times that are sure to come, tomorrow.

It is always tomorrow … when the positive outcomes are certain to emerge! As a fair exchange businessmen will poison the atmosphere and the ocean so that progress can take place. Meanwhile the key-men multiply like rabbits while the props diminish or crack under the strain.

There are banks and bank-like entities faltering in China, in Spain, as well as Italy, where the Banca Monte dei Paschi di Siena SpA is underwater due to self-dealing and looks ripe for failure. All of these situations have the potential to upend the economic applecart. Of course, there are the parallel political scandals in all of these countries including China. One must not overlook the Greek and Cyprus problems … or the foreign exchange ‘war’ that is underway between the US, the eurozone, China, Japan and Korea.

The term ‘Dutch’ can be replaced with the name of just about any country …

 

‘France is totally bankrupt’: French jobs minister Michel Sapin embarrasses Francois Hollande with shocking statement on state of the country’s economy …

 

Spain is shocked … shocked! The economy of France is a Ponzi scheme where the funds/capital of other countries is taken in exchange for empty promises … gambling and fashion have bankrupted the country, there is nothing left for France but to become Greece.
Car Sales 012713

Figure 1: Charts of car sales here and there from the New York Times: sales nose-dive in Europe. Sales are dependent upon the constant addition of credit-plus central bank moral hazard … as these offer diminished returns there is nothing to support sales

 

Industrial production figures exclude construction, and reflect the change in each month from the average of 2006 figures. Car sales figures exclude light trucks, and are based on sales volumes in the United States and on registrations of new cars in Europe and Japan. They reflect the total for each 12-month period compared with the 2006 total. (Sources: Bloomberg, Haver Analytics, Ward’s Automotive, European Automobile Manufacturers’ Association)

 

Autos and other capital-extinguishing goods are collateral for our money, they are the tangible ‘products’ for- and by which we devour our pitiful remnants of real capital … We can continue to destroy capital only if we lie to ourselves about its nature. Currently, we insist that capital is money instead of resources. This is false: money is loans and nothing more. When capital is loans, there are insignificant consequences to its destruction. Old loans are easily replaced with new ones. Only when capital is something that must be dug out of the ground with great effort … does its fleeting existence within our state of affairs become an economic embarrassment … then an indictment.

Meanwhile, finance is losing its ability to paint capital destruction as ‘productive-appearing’ and to thereby prop it up. Here is the greatest key-man failure! The more effort expended to keep the current regime of capital destruction ‘growing’ the faster the costs accumulate … capital is extinguished with one hand while greater claims against the same capital are made with the other.
Productivity of Debt 020113

Figure 2: What sort of un-balanced sheet is this? Here are diminished returns made graphic … the declining productivity of US debt, as $300+ billion borrowed dollars ‘buys’ a $5 billion dollar decline in GDP (by Zero Hedge). This decline can be ignored as long as … the stock market keeps rising! (click on the image to see it in its entirety)

Meanwhile, from the ‘Let The Eat King Cake’ department … in China, (Patrick Chovanek):

 

What Causes Revolutions? A surprising number of people in China have been writing and talking about “revolution”. First came word, in November, that China’s new leaders have been advising their colleagues to read Alexis de Tocqueville’s classic book on the French Revolution, L’Ancien Régime et la Révolution (The Old Regime and the Revolution), which subsequently has shot to the top of China’s best seller lists. Just this past week, Chinese scholar Zhao Dinxing, a sociology professor at the University of Chicago, felt the need to publish an article (in Chinese) laying out the reasons China won’t have a revolution (you can read an English summary here). Minxin Pei, on the other hand, thinks it will.

 

This is like the German high command during the Barbarossa winter of 1941 re-reading Armand De Caulaincourt’s classic account of Napoleon’s doomed 1812 Russian campaign. Sentries that have frozen to death tend to focus the mind: so do the endless rounds of Chinese outrages and miscalculations. Doubts about China’s enterprise are growing … in China, where such doubts matter most.

What would a China revolution look like? Pundits offer a political story about the Communist Party but the problems are economic: the failure of Chinese business ‘success’. Any revolution would certainly take some form of public rejection of automobiles … otherwise there would be no real revolution at all. Such a radical change is unlikely at the moment … The Chinese love their cars … the passage of time and the ongoing bankruptcy of China will do the heavy lifting. The Revolution will come after China becomes Greece.

What must be watched are the banks which are saddled with US$ trillions of bad loans, mostly for ‘capital investment’ which in this case means redundant factories, showy-but-useless public infrastructure and property developments. None of these things can or do pay for themselves, they require endless rounds of new loans … the result being pyramiding debts. Amazingly, it has taken the Chinese only 20 years to reach the profound level of insolvency that has taken the West 400 years to achieve. It is hard to see the Chinese expanding their particular form of capital investment Ponzi scheme … and the accompanying smog … for another 20 years.

The Chinese are not the only folks struggling with air quality: the smog is worse in India … for many of the same reasons as China. The smog is also bad in Athens … Greeks are putting heating oil into their cars and heating their houses with stolen wood.

Another finance debacle in the making is Japan’s desire to ‘Whip Deflation Now’ and depreciate the yen all at once, (Bruce Krasting):
EURUSDJPN 020113

Figure 3: The chart looks like the Yen has weakened in lockstep with both the Euro and the Dollar. But when you look at the scale, you see that the Yen has lost 22% against the Euro, while it has only given up 13% versus the dollar. From this you might conclude that the logical next step is for the USDYEN to “catch up” to to what has happened with the EURYEN. This thinking takes you in the direction of USDYEN 100. But … the FX markets don’t work like that. If USDYEN moved to 100 while the EURYEN remained “stable” around 122, then the EURUSD rate HAS to fall to 1.22 (-9%).

Sorry, that’s not in the cards.

 

Depreciation from ¥80 to the dollar to ¥100 means a ‘Great Leap Upward’ in Japanese fuel prices because the country has no native sources of petroleum or other fuels. Japan beggars itself instead of its neighbors: whatever the country hopes to earn by exports is offset by the increased cost of the fuel it must import. At the same time, dollar-fuel prices are increasing because of ‘growth’ propaganda, moral hazard for petroleum ‘investors’ as well as threats of war in petroleum producing regions. With depreciation and higher producer costs the Japanese driver can look forward to paying a deflationary 30% or greater premium for fuel compared to the rest of the world. Certainly, here is conservation by other means!

The foregoing omits systemic risk to Japanese banking and finance which cannot be easily measured. The smallest error can have shattering consequences. For example, the Bank of Japan central bank can be perceived by the marketplace to be making unsecured loans … that is, loans in excess of collateral that it takes on as security. If this is so, the central bank is instantly insolvent … as are other Japanese banks and for the same reason: bad loans and excess leverage! Keep in mind, the only reason why a central bank would think of offering unsecured loans is if the country’s commercial banks are insolvent and unable to lend. The outcome is no effective lender of last resort to guarantee bank liabilities: a run occurs as depositors hustle to remove funds from a defunct system. In this light the recent months’ acquisitions of overseas companies by Japanese businesses is ominous.

There is also the issue whether Middle Eastern suppliers will accept a strongly depreciated yen or if they will demand another form or payment (dollars). The Japanese are playing with fire, looking for an easy, conventional approach that cannot possibly work as intended. Whatever the country attempts there are unintended consequences … which often cannot be discerned until after the attempts are made and it is too late to change course.

What the establishment in Japan fails to understand is the effort to accelerate consumption — either within the country or by trading partners — offers sharply diminished returns. This is because irretrievable capital is consumed instead of rapidly multiplying ‘money’. Because of consumption over the course of decades real capital has become more costly relative to the amounts that can be lent against the consumption process. When returns become negative … the country in question instantly enjoys a Greek-like national bankruptcy.

The bankruptcy is permanent, by the way … the only way for a Greece to become prosperous again is for another country to become more bankrupt than Greece is now.

This net-negative process may indeed be underway in Japan as what it exports must be imported first then subjected to entropy-creating industrial-commercial processes. Every process exacts a thermodynamic levy or ‘tax’, certainly export goods cost Japan more in energy losses than what Japan imports.

A country can make water flow uphill by pushing costs onto unwitting trading partners by way of foreign exchange and leverage against that partner’s account. Japan’s trade surplus — which has subsidized Japan for decades — is nothing more than faulty bookkeeping and overseas loans. Japan has pushed its energy costs onto its customers: the attempt at depreciation is an effort to restart the pushing process.

Meanwhile, all the other consuming countries in the world desire to depreciate their own currencies as well! More of Japan’s customers are broke, they cannot afford to subsidize Japan’s waste any more … or their own.

Certainly, there must be intelligent, perceptive analysts in France, America, China and Japan … however the power of habit and wishful thinking is very strong and the current lesson of Greece being played out on the public stage in real time … is ignored.

While countries beggar their trading partners, many of the same countries are bent on outright theft. War intensifies in the Middle East, in Africa, it stirs off the coast of revolutionary China … every place there is oil or oil consumption that can be ‘exported’ to countries such as the United States. The outcome is increased war premium (Bloomberg):

 

Commodity Units Price Change % Change Contract Time(ET)
Crude Oil (WTI) USD/bbl. 97.97 +0.48 +0.49% Mar 13 11:45:10
Crude Oil (Brent) USD/bbl. 116.96 +1.42 +1.23% Mar 13 11:45:16
RBOB Gasoline USd/gal. 302.58 +2.21 +0.73% Mar 13 17:15:00

 

Crude prices increase until the customers cannot borrow any more … from here it looks that $120 Brent will be where customers are shut out of the market. Ugly noises from the banks are the indicator.
King Cake 1

King cake is a New Orleans tradition served on Fat Tuesday before Mardi Gras. King cake by Sara, who clearly knows how to bake a good one! Any recipe will do as long as it includes sugar. A small plastic doll stuck into the cake after removal from the oven. Note: there are no such things as ‘clashing colors’ in New Orleans …

The survivors of the current state of affairs are those small businesses that do not require credit and can obtain organic returns. As for the others, let them eat king cake.

Knarf plays the Doomer Blues

https://image.freepik.com/free-icon/musical-notes-symbols_318-29778.jpg

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Event Update For 2019-12-09http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.htmlThe [...]

With fusion energy perpetually 20 years away we now also perpetually have [fill in the blank] years [...]

My mea culpa for having inadvertently neglected FF2F for so long, and an update on the upcoming post [...]

NYC plans to undertake the swindle of the civilisation by suing the companies that have enabled it t [...]

MbS, the personification of the age-old pre-revolutionary scenario in which an expiring regime attem [...]

Daily Doom Photo

man-watching-tv

Sustainability

  • Peak Surfer
  • SUN
  • Transition Voice

Our Final Exam in Madrid"Why are we hauling giant container shiploads of Christmas decorations from Vietnam to England? [...]

First cut of the Madrid climate summit"“Buying an offset to fly here is absurd. It takes decades for a tree to grow enough to recoup [...]

"The drift towards near-term human extinction must be averted at all costs."I confess. I a [...]

"Since 2005, winters in Mexico have been my Hemingway Machine."  As winter descends upon m [...]

Waterboarding Flounder"Serious oxygen loss between 100 and 600-meter depths is expected to cover 59–80% of the ocean [...]

The folks at Windward have been doing great work at living sustainably for many years now.  Part of [...]

 The Daily SUN☼ Building a Better Tomorrow by Sustaining Universal Needs April 3, 2017 Powering Down [...]

Off the keyboard of Bob Montgomery Follow us on Twitter @doomstead666 Friend us on Facebook Publishe [...]

Visit SUN on Facebook Here [...]

What extinction crisis? Believe it or not, there are still climate science deniers out there. And th [...]

My new book, Abolish Oil Now, will talk about why the climate movement has failed and what we can do [...]

A new climate protest movement out of the UK has taken Europe by storm and made governments sit down [...]

The success of Apollo 11 flipped the American public from skeptics to fans. The climate movement nee [...]

Today's movement to abolish fossil fuels can learn from two different paths that the British an [...]

Top Commentariats

  • Our Finite World
  • Economic Undertow

Not terribly surprising! Companies maximize return to shareholders. I recently received a note from [...]

Interesting video! A person might think that after word of the problems involved, the message might [...]

https://www.spglobal.com/marketintelligence/en/news-insights/trending/q_Gxj71eJ1pYQi3OiHXdgQ2 This a [...]

I'm not sure how the price of extracting Australian coal competes with Russia, indonesia, or Ch [...]

The conference was a remarkable success. Rousing speeches were made. Angry fingers were waved. And a [...]

Trump was born in 1946 so he's another stinkin' Boomer. Bernie and Biden were born during [...]

The millennial consensus is that Boomer is more a state of mind than an age. A lot of older millenni [...]

Bill Clinton was first boomer president, followed by Bush, Obama, and Trump. True, neither candidate [...]

Biden and Bernie are members of the Silent Generation. Neither one is a boomer. I think Trump is on [...]

RE Economics

Going Cashless

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Simplifying the Final Countdown

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Bond Market Collapse and the Banning of Cash

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Do Central Bankers Recognize there is NO GROWTH?

Discuss this article @ the ECONOMICS TABLE inside the...

Singularity of the Dollar

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Kurrency Kollapse: To Print or Not To Print?

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SWISSIE CAPITULATION!

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Of Heat Sinks & Debt Sinks: A Thermodynamic View of Money

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Merry Doomy Christmas

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Peak Customers: The Final Liquidation Sale

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Collapse Fiction

Useful Links

Technical Journals

Thermal environmental design in an outdoor space is discussed by focusing on the proper selection an [...]

The present work shows the experimental evidence carried out on a pilot scale and demonstrating the [...]

Climate change is expected to affect the occurrence of forest pests. This study depicts a method to [...]

The grapevine (Vitis vinifera, L.) has been long since recognized as an ozone-sensitive plant. Ozone [...]

Climate change imposes great challenges on the built heritage sector by increasing the risks of ener [...]