The Endgame in Greece
Jeffrey D. Sachs
JUN 16, 2015
The Endgame in Greece
Paying for the Past: Insight from Lindsey, Fisher and Greenspan
May 22, 2015
Lawrence Lindsey: “We’re delaying a normalization of rates way, way beyond what is prudent.
We have a monetary policy that’s now in place that was adopted for the crisis conditions of 2008 and 2009. This summer we’re going to be getting the seventh year of this recovery. It’s been a lousy recovery, but it’s still the seventh year of a recovery. That is totally inappropriate.
The unemployment rate is essentially at what economists call “NAIRU” [Non-Accelerating Inflation Rate of Unemployment]… When I went to school, you’d be laughed out of the classroom if you said the right interest rate when unemployment rate was five four [5.4%] was zero - it was just the most preposterous thing you could imagine. Or that the Fed should have quintupled its balance sheet in five years. We’re at the point of absurdity. Maybe it made sense when you had a crisis. It does not make sense now. At some point what is going to happen - and this gets to my eight or nine cataclysmic number [on a scale of 1 to 10] - is that we’re going to get a series of bad numbers - a little higher inflation, higher average hourly earnings or whatever - and the market is suddenly going to say, “Oh my God, they are so far behind the curve that they will never catch up.” And the market is going to force an adjustment on the Fed that will be wrenching. That’s the cataclysmic outcome. If the Fed were to get a little bit ahead of the curve - or even maybe move a little bit closer to the curve - that’s the best we can hope for - we would mitigate that. We would phase into it gradually. And that’s why so much is at stake in the monetary policy that we adopt now…
“I used to think more highly of what they were going to do. And I’ve constantly been disappointed. So I certainly think they could mitigate it if we do very modest things now. I think the Fed will say, “Oh, we’re really serious.” When I talk to my clients, the Fed has almost no credibility when it comes to a sense that they will be able to stay on top of this ticking monetary bomb. Now, my clients are all making money. They are enjoying the party while it lasts. Nobody is complaining. That’s why things [the stock market] are going up. But they also know it will end. They don’t think the Fed is going to take it seriously. And so if you have an institution that’s lost credibility in the market, when the bad number comes in the market is going to take the Fed and the Treasury curve to task in a very painful way.”
Richard W. Fisher: “I may be the only FOMC member who would quote Van Morrison and his great song “Not Feeling it Anymore.” I just want to read you a couple lyrics: “When I was high at the party everything looked good. I was seeing through rose-colored glasses and not seeing the woods for the trees. I started out in normal operation but I just ended up in doubt.” I voted against QE3. There was a reason for it. First of all we were well on our way. In March 2009 the market started to take off. They’ve tripled…”
Alan Greenspan: “We don’t have the rest of the world out there all of the sudden saying “we’re doing far better than the United States and we will effectively succeed in moving you up.” The exchange rate tells us it’s not the case. Everyone is doing worse than we are. So we’ve got all sorts of problems which says that the sooner we come to grips with this [debt] problem - and we’re going to have to come to grips with it - or the markets will do it for us. And that is not going to be a very happy experience. The longer we wait… the more difficult it’s going to be to implement it. And there’s a presumption out there that central banks can do as they see fit. The ECB has got a problem in many respects more difficult than ours. Because if the Federal Reserve were ever to go bankrupt, we have the sovereign Credit of the United States standing behind it. But who stands behind the ECB. It’s got this other monetary transaction which has not been drawn upon, but some day it will be. And the question is if there’s a run on the European Central Bank, I’m not sure where they go. So when we talked this morning about all the problems that the United States has, we can match them abroad. And that is not a good message for the United States.”
Moderator Betty Liu: “When you see a chart like that [debt] and you see the trajectory, what do you do? How do you mitigate it?”
Lindsey: “Right now we’re artificially mitigating it through Fed purchases of bonds. That is not a sustainable proposition. So one of the things we should all be concerned about is that not only will we have to pay down that debt, but ultimately the Fed is going to have to dump the debt it now has onto the market. So there’s going to be a huge amount of supply coming on which is going to push up interest rates. We talk about 2060 and 2048 and things like that - just think about 2025. It the next President, if he or she serves two terms - will be submitting the 2025 budget. Now, interest costs, healthcare costs and Social Security will be 4.6% of GDP higher under current law than they are now in that budget if we do nothing - no increasing, nothing more generous. That’s the equivalent to a 20% across the board tax increase in all taxes. So the top tax rate would have to go from 40% to 48%. The Social Security tax rate would have to go from 15.3% to 18.3%. The corporate tax rate would have to go from 35% to 42% - just to hold things even with what’s automatically going to happen. Those are not the kind of taxes the economy can afford. So taxes are not the solution. In the end, we’re going to have to begin to attack the Social Security and healthcare cost problem and that’s going to be the ultimate way of holding down the interest costs in the debt.”
Fisher: “First, a little context: I went back and looked at what our total debt was as a nation the year that Alan Greenspan was born… In 1926, our total debt was $19.6 billion. I was born in 1949 and the total debt of the US government was $253 billion. Now if you add up the numbers - in terms of what’s held by the public and the intergovernmental holdings - we’re talking a number that’s pushing $18 Trillion. It does not include these unfunded liabilities of Medicare and Medicaid and Social Security. And also it does not include - which I believe it should - the ultimate obligation of these so-called called ‘agencies’ - Freddie, Fannie and Sallie Mae. So we’re talking about very big numbers. The real issue is what does interest do - and that chart shows - we’re going to get to a point… where interest eats up certainly as much as we spend on healthcare. If you look at the CBO’s [Congressional Budget Office] numbers and you project out forward not too far, interest and healthcare costs will be well over half the budget. In Pete’s [Peterson] opening letter… he points out that interest costs will exceed R&D, education and, very importantly, as Mike Bloomberg lectured us, infrastructure. So, we’ve put ourselves in a horrific position. And getting to the Federal Reserve - and I was part of that group, Alan [Greenspan] had exited a few years earlier - we had this huge rise while I was at the Fed from $7.7 Trillion to its current level of almost $18 Trillion. So that’s 2.5 times, a compound annual growth rate of 11% just over ten years… At some point, you have to pay the piper. The real issue is what happens when interest rates go up. CBO estimates have them just increasing gradually. Well, we’ve been suppressing the yield curve. Foreign buyers have been helping us suppress the yield curve. And I think this is the ticking time bomb of all.”
Greenspan: “We’re way underestimating our debt, as of now, largely because we are not including contingent liabilities… What is the probability, in today’s environment, that JPMorgan would be allowed to default? The answer is zero or less. Now that means that that whole balance sheet is a contingent liability. To be sure, that while it’s contingent there’s not interest payments. But ultimately that overhangs the structure, because we in so many different ways have guaranteed this, that and the other thing. It’s not only Fannie and Freddie, but it’s a whole series of financial institutions. And, regrettably, it’s also non-financial institutions. I was very much concerned when we started to guarantee everyone as being too big to fail. But at least it was in the financial area. As soon as we moved over into General Motors and various other non-financial organizations, I said what is the contingent liability of the United States… What the three of us are talking about, the path we are currently on is not going to be easily resolved. It’s going to be very difficult… The sooner we get to it the better. But I see no evidence that we’re moving in that direction.”
Lindsey: “It always ends this way. If you go back and you look at Rome. You look at the Ming Dynasty or you look at Zimbabwe - it always, always, always ends this way. And the question is how can you delay it… The end game we’re all talking about here is a very unpleasant one. It means that the financial arrangement that the state has created is no longer sustainable by society. And that’s how overly indebted societies end and they move on to a new type of arrangement. So it isn’t going to be a pretty change - if we get there. And that’s why it is so urgent that we act now. It is not just a matter of numbers. It’s a matter really of political liberty. Because the government will not voluntarily let itself go out of business. It will use all of its powers - I’m not talking about just our government but any government - will use all of its powers in order to fund itself… It isn’t hard to get the math to work for America to save itself - and that’s why I’m optimistic like my colleagues here that we could do it. But we’ve got to get on the wagon and get doing it soon because time is running out.”
My thoughts: The abhorrent dilemma facing our nation is becoming increasingly difficult to evade. As such, leading policy figures are becoming more outspoken – in some cases stunningly candid. And future readers of history will be left bewildered and appalled that key issues were in fact recognized yet policymakers lacked the fortitude to confront them.
The root cause of a complex predicament is actually rather uncomplicated: it’s called inflationism. And there’s a reason why I am not the least bit optimistic. Despite centuries of history, we’ve somehow bought into the fallacy that “money printing” can resolve structural issues (financial, economic and social). In the face of overwhelming contrary evidence, central bankers and their supporters have clung to the sophistry that they can raise prices levels – in the real economy and securities markets – and that such inflation supports system growth and stability. Central banks have overpromised and have been too content to feed fanciful notions of their omnipotence and overwhelming power. Progressively bolder “activist” central bankers were afforded way too much discretion to experiment. In the end, their inflationary policies primarily inflated asset prices and securities market speculative Bubbles. And each policy error – accommodating or, worse yet, orchestrating a new Bubble – invariably led to only bigger blunders. The greater the boom and bust the more outlandish the subsequent reflationary cycle and attendant Bubbles.
For today’s readers and for the reader in 2065, it is imperative to appreciate that the Fed (and global central bankers more generally) is today trapped. Borrowing from Larry Lindsey, “We’re at the point of absurdity.” Yet normalization from absurd rates and central bank monetization is indefinitely deferred because of fears of bursting Bubbles. The great danger of central bank controlled, market-based finance has come to fruition: central bankers see no alternative than to allow Bubbles to run wild. And unhinged markets will do what unsound markets do: go to self-reinforcing precarious excess.
The nature is unclear and the course always uncertain. The end game, however, is never in doubt. Inflationism is seductive – it sets an incredibly powerful trap. And it inevitably reaches the point of no return. If only the Fed would quickly mend its ways and begin normalizing rates. I very much wish it wasn’t too late. But these global Bubbles are not going to tolerate anything like normality.
Fed tantrum sets off biggest exodus from emerging markets since 2008
A gathering boom in the US brings forward the long-feared moment of Fed tightening, setting off dollar fears and a rush for the exits from emerging markets
By Ambrose Evans-Pritchard
6:47PM BST 12 Jun 2015
Data from the tracking agency EPFR show that equity funds in Asia, Latin America, and the emerging world bled $9.27bn in the week up to June 10, surpassing the exodus in the ‘taper tantrum’ in mid-2013 when the Fed first began to hint at monetary tightening.
The University of Michigan’s index of consumer sentiment roared back to life in June, jumping from 90.7 to 94.6. It follows news of a surge in US retail sales in May.
Small investors have been pulling funds out of emerging markets for several months but the big pension funds and institutions have until now held firm. There is a danger that these giants could suddenly start for rushing for narrow exits at the same time.
The International Monetary Fund warned in its Global Financial Stability Report in April that the asset management industry now has $76 trillion worth of investments, equal 100pc of world GDP.
These funds are prone to “herding” behaviour, and have vastly increased their holdings of emerging market bonds and equities.
The IMF fears a “liquidity storm” once the Fed starts to tighten, causing them to pull out en masse. It has repeatedly called on EM economies to beef up their defences and curb ballooning credit before it is too late. The great worry is what will happen if Fed action causes the dollar to spike dramatically and drives up global borrowing costs, transmitting a double shock through the international financial system.
This would amount to a “margin call” on $9 trillion of off-shore dollar debt, a figure that has exploded from $2 trillion fifteen years ago.
The Bank for International Settlements estimates that emerging markets now account for €4.5 trillion of this dollar debt, an unprecedented sum that escaped control over the last seven years as cheap liquidity from zero rates and quantitative easing in the West spilled into Asia, Latin America, and the rest of the EM nexus.
Many of these countries were unable to defend themselves against a flood of capital, much of it on offer at a real rates of just 1pc, far too low for conditions in fast-growing countries that were then overheating. The inflows set off credit booms that are now unwinding painfully.
They leave a stock of debt that will have to be rolled over in hostile markets, if it is possible at all. The BIS says that the dollar debts of Chinese companies have jumped fivefold to at least $1.1 trillion since 2008.
Emerging markets now account for half of global GDP, twice the level in the early 1990s. They are now so large – with debts to match – that a funding crisis induced by Fed tightening could rock the whole global boat and eventually come back to haunt the US itself.
Adam Slater from Oxford Economics says these economies are already slowing down so fast that they risk tipping world into recession. Brazil and Russia are contracting, and China is slowing sharply.
“Emerging markets have shifted from being a major support to world trade growth to a significant drag. Nothing like this has been seen since the worst period of the global financial crisis in 2008-2009,” he said.
The developed world was able to contain the damage from the Asian crisis and the Russian default in 1998 by cranking up stimulus. This time that may not be so easy. “Policy rates are near zero, large-scale QE is already under way in the Eurozone and Japan, and asset prices are generally pretty elevated already,” he said.
Whether it likes it or not, the Fed is more than ever the world’s superpower central bank in an international system leveraged to the hilt in dollars. Anything it now does risks setting off a global chain-reaction.
The wrong solution
Fund managers are not like Banks
Jun 13th 2015
IMAGINE how the financial crisis of late 2016 might play out. A surge in wage inflation, caused by a tight labour market, prompts the Federal Reserve to push up interest rates more quickly than the markets expect. Both government and corporate bonds fall in price.
That creates a problem for funds that specialise in corporate debt. They had promised investors that they could redeem their holdings at any time, but the corporate-bond market is very illiquid; many bonds prove almost impossible to sell. Some funds are forced to impose “gates”, limiting fundholders’ access to their money. The restrictions cause a panic among investors, who scramble to sell all bond-fund holdings. Prices plunge, in effect closing the market for new issuers: firms find it impossible to raise new cash. Rumours about financial problems at a big fund manager start to circulate.
That scenario seems to be at the heart of a weighty consultation document issued by the Financial Stability Board (FSB), an international body charged with preserving the health of the global financial system. Regulators, it is generally agreed, were asleep at the wheel in 2005-06, when the subprime-mortgage bubble was about to pop. They are right to be thinking hard about where the next crisis will come from.
It is also pretty clear that liquidity in the bond markets has deteriorated. There have been some sharp moves in German government bonds of late. And Treasury bonds suffered a “flash crash” in October last year, with the yield on the ten-year issue falling by a third of a percentage point within minutes.
Ironically, this loss of liquidity is the result of regulations imposed after the last crisis. Banks are now obliged to hold more capital to underpin their bond-trading business, making it less profitable and them less willing to make markets. This is a neat illustration of the balloon principle: squeeze risk in one area and it will pop up somewhere else.
Identifying the problem is one thing. It is harder to justify the regulator’s putative solution: imposing extra regulation on fund managers or funds judged systemically important financial institutions (SIFIs). History suggests it is the use of borrowed money (leverage) that drives financial crises. That is why banks, which by their very nature are dependent on leverage, are usually the main source of trouble. But most fund managers do not use leverage: they are investing money on behalf of others, not putting their own balance-sheet at risk.
Hedge funds do use leverage, of course, but the FSB does not focus on them specifically. Instead it proposes special rules for any firm that manages $1 trillion or more and for specific funds that have assets of more than $200 billion. That catches two of Vanguard’s low-fee stockmarket trackers. It is hard to see either fund as a systemic risk. Meanwhile, the many sovereign-wealth funds that have more than $200 billion of assets will not be treated as SIFIs, because they are government-backed.
What about the risk of a sell-off by fund investors leading to market panic? It could happen.
But the industry’s stability has been tested twice this century: once when the dotcom bubble burst in 2000-02 and again in 2008-09 during the financial crisis. Money-market funds were a source of systemic risk in 2008. But that was because one fund “broke the buck”, imposing an unexpected loss on investors.
Investors in bond or equity funds, by contrast, do not expect fund values to be stable; they are less likely to panic when they fall. Indeed, there was no rush for the exits in 2001 or 2008, despite plunging asset values.
Nor are mutual funds (or their close relatives, exchange-traded funds, or ETFs) the dominant investors in the bond market. Around $1.83 trillion is invested in American corporate-bond mutual funds (the biggest retail market) and another $160 billion in corporate-bond ETFs. But corporate-debt issuance was $3.2 trillion last year alone. Globally, the total amount of corporate bonds outstanding, according to Thomson Reuters, a data firm, is $20.5 trillion. Even if retail funds sold all their holdings, pushing yields dramatically higher, other buyers with long-term investment horizons—such as pension funds and insurers—would surely step in and bring prices back into line.
And what would be the practical effect of turning fund managers, or individual funds, into SIFIs? If they faced higher capital charges (as banks do), these would be passed on to investors in the form of higher management fees. It surely cannot serve any useful regulatory purpose to make small savers pay more.
How to Avoid a Sino-American War
Read more at http://www.project-syndicate.org/commentary/avoid-sino-american-war-by-minghao-zhao-2015-06#M2ICkceuIxfqrymh.99
Syriza Left demands 'Icelandic' default as Greek defiance stiffens
Greek premier Alexis Tsipras threatens Europe's creditors with a "big no" unless they yield on debt servitude
By Ambrose Evans-Pritchard
4:21PM BST 14 Jun 2015
Syriza sources says measures being drafted include capital controls and the establishment of a sovereign central bank able to stand behind a new financial system. While some form of dual currency might be possible in theory, such a structure would be incompatible with euro membership and would imply a rapid return to the drachma.
Yet they also strengthen his hand as talks with EMU creditors turn increasingly dangerous, and may come to a head this week.
Mr Tsipras warned over the weekend in the clearest terms to date that Greece's creditors should not push him too far. "Our only criterion is an end to the 'memoranda of servitude' and an exit from the crisis," he said.
"If Europe wants the division and the perpetuation of servitude, we will take the plunge and issue a 'big no'. We will fight for the dignity of the people and our sovereignty," he said.
European officials examined 'war game' scenarios of a Greek default in Bratislava on Thursday, admitting for the first time that they may need a Plan B after all. "It was a preparation for the worst case. Countries wanted to know what was going on," said one participant to AFP.
The creditors argue that 'Grexit' would be suicidal for Greece. They have been negotiating on the assumption that Syriza must be bluffing, and will ultimately capitulate. Little thought has gone into possibility that key figures in Athens may be thinking along entirely different lines.
Tasos Koronaki, the party secretary, said on Sunday that attempts to split the party will fail. "The government will not enter into any agreement that is not accepted by the parliamentary group. We are more united than ever," he said.
Finance minister Yanis Varoufakis told Greek television that his country cannot accept an "unachievable fiscal plan" and warned creditors that the minimum damage from Grexit would exceed €1 trillion for the European financial system.
Yanis Varoufakis, the Greek finance minister
Syriza's Left Platform has studied the Icelandic model, extolled as a success story by the International Monetary Fund itself.
"The Greek banks must be nationalised immediately, along with the creation of a bad bank. There may have to be some restrictions on cash withdrawals," said one Syriza MP.
"The banks will go ape-s*** of course. We are aware that there will be a lot of lawsuits but at the end of the day we are a sovereign power," he said.
Deposit outflows from the banks are running near €400m a day and could at any moment turn into a national bank run. This is alarming in one sense, but it has advantages for Syriza hard-liners.
The immediate problem is landing in the lap of the European Central Bank, which has had to raise its emergency liquidity support (ELAs) for the Greek banks to €83bn. The ECB is ever further on the hook.
While Greek citizens are hiding their money in mattresses or parking it in foreign accounts, the wealth still exists and could be used to replenish new banks in the future.
"The more the deposit flight goes on, the easier Grexit will be," said one Syriza official. "It is a trump card," said another.
Syriza has a strong ideological motive to strike at the financial elites. They view the banks as the nerve centre of an entrenched oligarchy that has run the country for half a century as a family business. Forcing these institutions into bankruptcy provides cover for a socio-political purge, best understood as a revolution.
Iceland is a tempting model for Greece, but the parallel can be pushed too far. The country seized control of its three big banks - Glitnir, Kaupthing, and Landsbanki - when the crisis span out of control in late 2008.
It wiped out shareholders and defaulted to foreign creditors, setting off a storm of protest. Britain's Labour government briefly invoked anti-terror legislation. The governor of Iceland's central bank showed this reporter a document listing his institution along side al-Qaeda on the global blacklist, calling it "18th century gunboat diplomacy" by London.
Iceland's internal banking system was rebuilt from scratch under state control with public funds equal to 30pc of GDP, and was shielded by capital controls. The boards were sacked. Some executives were prosecuted.
The banks kept their old names to maintain continuity for depositors but they were essentially new institutions. Iceland gradually recovered and has since racked up impressive growth. Contrary to apocalyptic warnings, a 50pc devaluation proved to be part of the cure. The krona has since strengthened slightly against the euro.
However, Iceland has a very different society and economic structure. Quick stabilisation was possible only because the IMF and the Nordic countries stepped in with a $5bn rescue package.
Greece has already exhausted its IMF quota in the two failed rescues of 2010 and 2012, and is now at daggers drawn with the Fund's team in Athens. Some Syriza leader are demanding the head of Poul Thomsen, the IMF's programme chief.
They accuse him of working in cahoots with the oligarchy and pushing austerity beyond economic logic. The latest demands include a rise in VAT and pension cuts together worth 2pc of GDP by 2016, amounting to a pro-cyclical fiscal squeeze in an economy already in depression.
Tensions reached breaking point last week when the IMF pulled out of talks and flew back to Washington, though part of frustration is with the European institutions. It is hard to see how Greece could turn to the IMF for friendly help if the crisis leads to rupture. Much would depend on the quality of European statesmanship, and on how much political capital the US was prepared to spend sorting the problem out.
IMF representative Poul Thomsen (on the right)
The IMF's view is in any case complex. It has warned EU officials behind closed doors that it will not continue to take part in Greek loan programmes unless the creditors accept a serious reduction in Greece's public debt burden.
While Greece's interest costs are just 2.5pc of GDP at the moment, they will jump to nearer 5pc in 2022 when the current debt deal expires. The country would then be bankrupt again with little to show for a decade of austerity and depression.
Mr Tsipras faces a critical choice. If he accepts creditor demands, he may lose a large bloc of his own party and have to rely on the establishment parties to push the deal through the Greek parliament.
Such a course of action would render him a Greek version of Britain's Ramsey MacDonald, the Labour prime minister in the 1930s who enforced austerity and became the socialist figurehead of a Conservative national government.
Mr Macdonald never overcame the accusations of betrayal. He died a broken man.
Gold And Silver - Elite NWO Checkmate? US Lacks Direction
By: Michael Noonan
Saturday, June 13, 2015
The entire United States media, TV, radio, and print are massive purveyors of misinformation and lies. The truth is not allowed to exist, which is incredibly ironic, for when the public is told the truth, it is not believed for the truth does not reconcile with all of the media-fed lies. Truth is non-existent in politics where lies are protected by the Supreme Court, [if you did not already read it, see Barack Obama - Liar In Chief, Backed By Supreme Court].
Ever since the Constitutional United States of American was taken over by the de facto corporate federal government, aka THE UNITED STATES, spelled in all capitalized letters to denote its status as a corporation, the elites have been in charge of all politicians, and in a news flash for the vast uninformed public, that includes the president. We drop these occasional gems on the uninformed without providing in-depth explanations because they have been a waste of time on a public adamant in their desire to remain politically challenged.
A corporation is a fiction. It is created by state governments, and as just mentioned, all corporations are spelled in all capitalized letters. Have you ever noticed how your driver's license has your named spelled in all capitalized letters? Voter registration? Birth/death/ marriage certificate? Because all governments are corporate fictions, they can only deal with other corporate fictions. Whether you know it or not, believe it or not, as far as any and all government are concerned, you are a corporate fiction, not human. You lose that form when dealing with government on any level.
The corporate government is answerable to the moneychangers, the banking elites who own and run this country, the UK, EU, Canada, Australia, et al. Voting is an illusion for the masses who believe otherwise. Who is really in charge? A relatively small number of faceless people who own and are behind the entire world banking system.
Obama forced his Obamacare through against widespread public rejection. It is nothing more than giving the medical industry, Big Pharma, total control over the healthcare system and total control over what you will be charged, and one of the largest increases in family expenses over the past year or more has been the skyrocketing costs of healthcare, coupled with a commensurate decline in actual health care by doctors/hospitals. Do you still think Obama had the US public in mind? His sole purpose is to serve corporate interests.
On a smaller scale, last week, Texas police shut down a lemonade stand run by two sisters, ages 7 and 8. They wanted to earn some money to buy their dad a father's day gift. They did not have a license permit to sell lemonade.
The Obama Department Of Justice has been unable to find any wrongdoing in all the Too Big To Fail Banks since he has been in office, despite all the massive mortgage fraud, the displacement of countless millions of homeowners that resulted, but two kids got nailed for not having a permit to sell lemonade.
How about the 11 year-old boy whose parents were delayed getting home? He did not have a house key, so he played basketball in his back yard for about 90 minutes. Some neighbor called the police.
When the parents arrived, they were arrested, strip-searched, and finger printed, spending a night in jail for child neglect. It was almost a month before the boy and his 4 year-old bother were reunited with their parents. Both kids were taken by Child Protection Services.
How about that neighbor? Why not go over and ask the child if he were okay, or invite the child to stay at the neighbor's house until the parents arrived? Nope. The idiot called the police and created havoc for this family that is still on-going. This is life in America.
No one, or very few have any direction. Politicians are directed by money-interests, fed by the elites.
On a global scale, the IMF, Germany, EU are playing Greece in order to strip that already impoverished country of as much of its remaining assets as possible. It is our mistake to call this Kabuki theater. It is simply the theater of the absurd.
Germany's Machiavellian position to publicly huff and puff over Greece's unwillingness to repay debts and engage in yet more austerity, over the past several months, has helped to keep the Euro dollar low, thereby making its exports cheaper. With the recent announcement of Deutsche Bank's leaders resigning, like rats deserting a sinking ship, their escape may be tied to the "Grexit" situation.
Deutsche Bank has over $75 trillion in derivatives exposure, which is 20 times larger than the German GDP. All banks are unofficially bankrupt with their Ponzi fiat schemes and run amok financial wheeling and dealing, especially in off-balance sheet derivatives that have no hope of ever being resolved.
If it takes a Greek default to force Deutsche Bank into public insolvency, "Go Greece!"
Push those bankers into bankruptcy. Start the domino-effect of bringing down the bankers like a house of cards. May they all rot in hell for the damage they have wrought on the rest of the world. None of them cared about the path of destruction being left behind, as long as they got their bonuses and added wealth in the process.
People should also stop blaming the Greeks as freeloaders, unwilling to pay their debts. The "money," actually digitalized "currency" created out of thin air by the IMF, never existed until it was "loaned" to Greece. Greece received Ponzi fiat and has to pay back actual real [still Ponzi fiat] money, with interest, to elite's IMF that created the fiat as a bookkeeping sleight of hand. The EU, IMF, and Germany all knew Greece would never be able to pay back what was "loaned." The whole thing was a charade to enslave Greece, and not only Greece. Think PIIGS.
Always, always follow the "money." The entire Western banking system, from the BIS, IMF, and every other member central bank is the NWO master plan to enslave the world under a single digital currency. Cash will disappear. Everyone's financial records will be known by the banking elite. This is Big Brother squared by a factor of 100, 1,000, pick a number, it does not matter.
The plan is to make the overtly aggressive and war-minded corporate US, and by extension the lap dog EU, ultimately the major problem creator, a task already accomplished, while China, Russia, with all of their financial dealings, plus their acquisition of vast amounts of gold and silver, establishing the Asian Axis, Silk Road, AIIB, BRICS and its Development Bank, etc, appear to be the new takeover winners. All of this is being orchestrated by the elites through the BIS, IMF to complete the takedown of the fiat US "dollar" to be replaced by a new monetary system, maybe Special Drawing Rights [SDRs]? Who knows? One thing is certain: it will lead to the establishment of a One World Currency.
Check mate, by the NWO.
As of today, there is a small wrinkle in the NWO progress of their head pimp, Barack Obama, for passing the Trans Pacific Partnership [TPP], Transatlantic trade & Investment Partnership [TTIP], and Trade In Services Agreement [TISA], just got derailed and the Obama full court press to pass his agenda on a "fast track" basis, meaning no one could know what the contents of the deals included, was slam-dunked against him.
The TPP does not include China or Russia. How can there be a "Pacific Partnership" without the two largest economies? The TTIP is purportedly a "free trade" deal with the crumbling de facto EU. The Obama administration is ever so clever in its diplomatic idiocy to try to pass these deals without public knowledge/consent because if the details were known he would be impeached for his attempted treason against this country. As a purported constitutional lawyer, Obama has to know that each of his proposed trade deals would give corporations the right to sue any individual, federal state, county and/or municipality for loss of potential income if that corporation were prevented from conducting its unwanted business. This completely violates Article III of the Constitution.
This is the dysfunctional world created by the international bankers who control everything, money, governments, media, all major corporations, and the mess keeps getting messier and decidedly worse.
If you do not own gold and/or silver, the above are some of the best reasons for pulling a China or Russia and buying as much as you can reasonably handle. When the Western world unravels economically, and it is in the process, already, one of your only means for financial viability will be having gold or silver to sustain you as others see their paper fiat and other "paper assets" become worthless.
If you do not think that is the direction in which this world is headed, watch programs like CNBC or Bloomberg News. They tell you what you want to hear about how wonderfully well the UNITED STATES is prospering.
Buy silver. Buy gold. It may take longer than you think before the SHTF scenario comes into full bloom. You have a choice. Put your faith in worthless fiat and other worthless paper assets, or put your faith and future into hard assets that have a proven history of wealth preservation.
Governments and all politicians lie, the media lies, charts do not. Why not? Charts are comprised of all the trading activity that develops each day. They accurately chronicle all buying/selling activity and nothing more. In that regard, charts are neutral, simply depicting the net results of all active participants.
It is important to understand that if a chart causes an emotional reaction: disappointment, fear, elation, unmet expectations, none of these emotions come from the charts but come, instead, from you as the observer adding your own interpretation/reaction. We do our best to present the observable facts, some of which may lead to potential conclusions, but at no time are charts used to predict the future, ever the unknown.
The fiat Federal Reserve Note, known to the world as the "dollar," being more and more shunned by the more reality-driven, pragmatic Eastern world, is still in survival mode and will remain so until the elite's BIS/IMF system is ready to fully let that fiat lose all credibility.
As an example of dealing with facts, note the sharp increase in volume, last bar, see arrow. Volume represents the effort between buyers and sellers. When a volume bar is red, it means price closed lower that the previous close, typically denoting sellers won the battle.
When the volume bar is green, price closed higher from the previous close, credit given to buyers for prevailing in that time period.
Last week was the highest down volume for the past few years. That is an observable fact upon which all can agree. However, note the impact of that volume [effort], on last week's bar. The range was smaller than the week before, and the close was above the prior week's low.
Armed with these facts, ask yourself, if last week was the highest volume for a down week, what was the payoff for the sellers? We do not really see one, for the reasons just cited. If all of that effort produced little in the way of results, what does that say about the selling activity? Their effort is being absorbed by the stronger buyers. Here it is important to remember the trend, which is up, because the trend tends to perpetuate until it changes.
Selling efforts tend to lose potency in an uptrend. This is the logical conclusion that can be drawn from the neutral information generated by developing market activity captured in chart form. Based on this read, it makes sense to say that the trend remains in effect, and for as long as it does, price will trend higher.
The chart cannot "predict" how the market will unfold higher, just that the probability of price going higher is greater than otherwise. How to take advantage of this information is the art form of reading/interpreting a chart. That is an entirely different issue.
The dark horizontal line is called an Axis Line because price is respecting it over a protracted period of time, initially as support, now as resistance. It would not be unreasonable to say that until silver can regain above 18, it will remain in a down trend.
Of particular interest is the fact of how small last week's range was, the smallest bar since last September. Here again there is logic in the market. The range was small because sellers were unable to extend price lower, and that is true because buyers were meeting the efforts of sellers in what was a stand-off. If sellers could not move price lower, then that opens the door for buyers to rally the market next week?
Will that happen? No one knows, but the odds are more favorable for that event to occur, but that does not mean sellers cannot step up and push price lower immediately, next week. This is why charts are not predictive in nature because anything can happen. All one can do is gauge the probability of one event happening more than another.
Note where the small up slanting line to show where higher lows starts. The swing low in March was also a small range bar where the same conclusion was drawn: buyers stopped sellers from extending price lower, and that opened the door for a rally. The odds favor a similar event for next week, but not one that is guaranteed.
If you note last week's volume was still relatively high, it means sellers were making an effort, but buyers were overwhelming that effort, stopping sellers cold, at least for last week. Odds favor a rally, but one need not develop because sellers may come back in greater force and take back control. Anything can happen. It is a probabilities game.
We see the daily chart amplifying the odds for a rally next week. The first seven TDs [Trading Days] in June had the highest volume, the greatest selling effort, all but one of the TDs were red. Typically, smart money [controlling interests], sells highs where you would expect to see selling volume greater. When volume is noticeably higher at a swing low, it would be smart money doing the buying and the public selling their longs at lower prices before they [may or may not] go lower.
That increased selling effort stopped at previous support. Note the smaller rectangular bar inside the square box. There is a clustering of closes, in addition to the overlapping of bars. Experience tells us overlapping bars means balance between buyers and sellers, and from balance comes unbalance. The clustering of closes is another form of balance, a resting of price before resuming the trend preceding it or reversing direction.
The last two bars show high end closes. Closes in the upper part of a bar tells you that buyers were more dominant in that time period. If we connect these pieces of factual observations, higher volume at support, overlapping bars, a clustering of closes, upper range closes for the last two bars, the odds are more favorable for buyers over sellers.
It is a logical conclusion based solely on developing market activity.
We used it to take a small position from the long side recognizing a limited downside risk by using a protective sell stop [never trade without stops], and an unknown potential for a rally to the upside, a favorable risk/reward situation within a down trend.
Gold is slightly different, but not by much. The weekly close, two bars ago, on declining volume told us sellers were not as active as price moved lower. That opens the door for buyers to attempt to rally price higher.
In this instance, price is in a TR. Back in December 2013, there was a similar set up, but price had been in a steady decline moving into that swing low. Nothing is ever the same because the participants are totally different so price will develop differently. We just cannot know how, nor do we need to know. A trade based on favorable probability odds either works or it does not. It is that simple. Over a large enough sample of favorable trading odds, the net result will be profitable. That is the Law of Probability.
The biggest tell for us on the daily chart are the two high volume days at 1. That they occurred at the swing low, in a zone of support, is more indicative of buyers more active than sellers. The rally, last week, was weak, but that speaks to not being able to predict how a market will develop going into the future.
For disclosure, we also took a long position in paper gold, based on everything covered.
Time will tell. If it does not work, another trade potential will come along.
06/12/2015 05:55 PM
Brewing Conflict over Greece
Germany's Finance Minister Mulls Taking on Merkel
It was a dramatic week. One in which the rumors did the rounds that Finance Minister Wolfgang Schäuble was basically as good as gone; that he had fallen out with Chancellor Merkel and was planning a coup. Then, at the end of this turbulent week, Schäuble made a joke.
He left his office at 3:15 p.m. on Thursday and headed to the Chancellery. But before he left, he mentioned to his team that Merkel might finally be about to tell him what she has in store for him. "She's probably going to strip me of my mandate," he said. He paused briefly then laughed and said he was only joking. Of course Merkel wasn't going to throw him out!
Schäuble is extremely good at shrugging off conflict with gallows humor -- a gift that has served him well throughout his lengthy career. He is well aware that a handful of Social Democrats aren't the only ones talking about the widening rift in the government. Insiders who know Merkel well are saying the same. The chancellor has to answer one of the hardest questions she's had to face since assuming office, namely, should Greece be allowed to remain in the euro, or should the whole drama be brought to a spectacular close with a Grexit.
Merkel would like Greece to remain in the euro. Not necessarily at any cost, but she's prepared to pay a high price. Schäuble is not. He is of the opinion that a Greek withdrawal from the euro zone is in Europe's best interests. Which of them is the more intransigent? Merkel, whose popularity serves as the backbone of the EU? Or Schäuble, for whom there is considerable good will among members of parliament, fed up as they are with having to approve one bailout package after another?
Schäuble is convinced that Europe can only succeed if everyone abides by the rules and Greece is prepared to accept what he calls "conditionality," in other words, that credit depends on Greece respecting the terms of its creditors. Merkel basically agrees. But a Grexit could upset the financial markets, and then what? She is reluctant to risk looking like she prioritized national interests and undermined the founding principles of the EU.
His Own Man
It's an emotionally-charged disagreement that reflects the complex relationship between two politicians who do not completely trust one another.
Schäuble is something of an éminence grise in the German government: He became a member of parliament in 1972, when Merkel was preparing to graduate from high school in Templin. In 1998, as head of the CDU/CSU parliamentary group in the Bundestag, he made Merkel his secretary general, but then became enmeshed in the CDU donations scandal. Merkel succeeded him in 2000.
Although she's the one in charge, he intermittently makes it clear that he remains his own man; that he doesn't kowtow to anyone. Appointed finance minister in 2009, Schäuble remarked that Merkel likes to surround herself with people who were uncomplicated, but that he himself was not uncomplicated. He tends to be a little derisory about Merkel, admiring her hunger for power but deeming her too hesitant when the chips are down.
The euro crisis first drove a wedge between them in 2010, when they disagreed on the International Monetary Fund's contribution to the Greek rescue fund. Schäuble was against it, on the grounds that Europe should sort out its problems by itself. Merkel, however, was keen to enlist the help of a body that has clear criteria when it comes to offering aid, and which would therefore prevent the Europeans from making one concession after another. Merkel prevailed.
But they've now traded positions. Schäuble believes that enough concessions have been made to Greece and he's bolstered by the frustration currently rife in his parliamentary group over Merkel's strategy. It will be hard for Merkel to secure majority support if he opposes her, so her fate is effectively in his hands.
Both of them understand the stakes, which is why they are both at pains to keep their disagreement under wraps. Whenever he's asked if he has fallen out with Merkel, Schäuble likes to pull a shocked expression, respond with a barrage of insults and throw out terms such as "amateur economist" -- although this isn't necessarily as bad as it sounds, given that Schäuble describes himself as a "middling economist," at least in comparison to the "great economist" Yanis Varoufakis.
Turning to Euphemisms
When it got out that Schäuble had not been invited to a recent summit at the Chancellery of the Troika, made up of the IMF, the European Commission and the European Central Bank, his spokesman Martin Jäger played down the snub. Government spokesman Steffen Seibert, meanwhile, insisted that "the Chancellor and the Finance Minister have an excellent working relationship that is both friendly and trusting."
As it happened, Schäuble had engineered the summit himself at an earlier meeting of the G7 finance ministers in Dresden. Which isn't to say that he approved of it. His displeasure was noted at the Chancellery but met with bemusement -- after all, it is the Troika's job to reach consensus on dealing with Greece, a fact it feared the Finance Ministry had forgotten.
According to government insiders, Merkel's and Schäuble's spokesmen are now spending much of their time coming up with euphemisms to obscure their bosses' disagreement.
The conflict is not about differences in their respective assessments of the situation. Merkel's people can calculate the extent of Greece's problems exactly. It's a country that in 2012 had to spend over 17 percent of its GDP on pension payments -- a figure unsurpassed anywhere else in Europe. But Athens nonetheless refuses to makes cuts. Neither Merkel nor Schäuble believe that the privatization process is making any headway and are concerned that the Greek government's erratic policies are scaring off investors. The EU Commission has revised growth predictions for this year downwards from 2.5 percent to 0.5 percent.
Where they differ is when it comes to the consequences. Schäuble is well aware that he's the embodiment of the despicable German to most Greeks, and makes an effort to curb his trademark gruffness. When he was visited in Berlin last week by Varoufakis he began their meeting by presenting him with a gift of chocolate euros that he himself had been given by a reporter from a children's TV show. "Yanis, have this nourishment for the nerves," he said. "You're going to need it."
Refusing to be Blackmailed
But once the courtesies had been dealt with, it was down to business. Varoufakis listed his objections to the Troika's proposals for what felt like the zillionth time: No, pensions can't be cut; no, value-added tax cannot be raised as Greece's creditors are demanding -- oh, and Greece would like debt relief. Rather than agreeing to cuts to the tune of €5 billion, Varoufakis asked for a new round of aid, which Schäuble's experts calculated at some €30 billion. "We have a responsibility to Europe,Wolfgang," he told his host.
For his part, Schäuble listened patiently. But he essentially has no desire left to talk to Varoufakis. He's told his people that he feels too old to keep flogging the same dead horses.
Moreover, Varoufakis no longer has much say in Athens now that Prime Minister Alexis Tsipras has begun negotiating with creditors himself.
There is nothing Schäuble hates more than being superfluous to discussions. So he told Varoufakis that he had no mandate to negotiate, nor did the chancellor. The Greeks could only talk to the Troika, he stressed, and a political decision could only be made if the Troika accepts the Greek proposals.
However, as far as Schäuble can tell, the Greeks show no signs of progress -- at least not to the extent he deems necessary. He believes that the Greek rescue only makes sense if there is a realistic chance that the country can get back on its feet. Schäuble is eager to rescue the euro, but not to rescue a country that has opted to live at the expense of others and thereby to jeopardize the currency.
Nor will he allow himself to be blackmailed, and in his eyes, that's exactly what Varoufakis' tireless reiteration of Germany's responsibility for keeping the EU together amounts to. After his meeting with Schäuble, Varoufakis gave a talk at the French Cathedral in the heart of Berlin, and called upon Merkel to make what he termed a "speech of hope" to the Greek people. To Schäuble's ears, the appeal sounded suspiciously like a call to pay up, already!
Good Cop, Bad Cop
Officially, the differences between Schäuble and Merkel are explained away as a reflection of their respective tasks. It's Schäuble's job to hold the purse strings and Merkel's to keep an eye on what's happening on the international stage. Will Putin be getting a foot in the door if the euro zone cuts the rope on Greece? Will the country turn into a failed state in the middle of Europe if it no longer has the euro?
This isn't just a matter of good cop, bad cop. Unlike Merkel, Schäuble doesn't need to worry about looking as though he doesn't care enough about Europe. He wrote the book on the EU, penning papers on how to intensify the union when Merkel was still only a freshly-minted member of the cabinet. She, by contrast, has often been confronted by accusations that her EU policy is austerity-driven and nothing else. In terms of Europe, she lacks Schäuble's street cred.
Within the ranks of the CDU, it's often been said that Merkel is squandering Helmut Kohl's legacy.
But this is somewhat unfair, given that it was Kohl's often mawkish brand of politics -- that often neglected to do the math - that allowed the euro's built-in flaws. Merkel, on the other hand, turned European policy back into a national issue. She herself never harbored dreams of a European federation.
So far, Merkel has never been overly bothered about going down in the history books. But if she does end up hounding Greece out of the euro, the development will certainly be more than a footnote.
Which is one possible reason for her hesitancy. She, not Schäuble, will be the one who has to deal with the inevitable criticism and attacks.
A Sinister Agenda?
That's why she's so annoyed with Schäuble. And he is suspected of having more sinister motives. Could he be out to destroy Kohl's legacy because he has been denied the opportunity to build on it himself? It's a stretch, to be sure, but the fact that many in the CDU are thinking in such Shakespearean terms suggests that they are keeping a close eye on Schäuble.
If he wanted to, Schäuble could easily drum up support for a rebellion against Merkel. In February, when the Bundestag voted to extend financial aid to Greece, over 100 members of parliament stressed it was for the last time -- and only voted in favor of the extension because Schäuble had made his position on Greece clear. Were he to give it the thumbs down, Merkel will have a tough time persuading her party otherwise.
A recent meeting of the CDU parliamentary faction illustrated the extent to which parliament is on Schäuble's side. The session would normally begin with the finance minister giving a brief summary of the state of negotiations with Athens, but this time he merely told his listeners that he had nothing to report. "The situation is the same as it was two weeks ago," he said. "There's been no change."
A wave of mirth went through the room, with parliamentarians laughing in agreement. They knew exactly what he meant: He had lost faith that the Greeks would find a sensible solution.
But first and foremost, he was implying that Merkel's involvement had failed to move things along. Schäuble knows full well that the chancellor is not at liberty to bail out anyone as she sees fit. She has to take the IMF into consideration, as well as her counterparts in Germany's partner countries -- some of whom make Schäuble look like he's positively soft on Greece.
Merkel could see the effect of Schäuble's comment and chose not to respond with her own version of events. But she can only hope that he refrains from starting a rebellion. She knows how stubborn he is, but ultimately, he has always ended up toeing the line. He owes his longevity to his resilience. He put up with forever being Kohl's crown prince, and he put up with Merkel passing him over and appointing Horst Köhler president. The expectation in Merkel's circles is that he will now put up with her decision on Greece -- reluctantly, perhaps, but he will be loyal nonetheless.
There is much to back up this theory. "The finance minister needs to accept that the chancellor might not always agree with him," he said in the fall of 2009, shortly after he assumed office.
But now that he will be turning 73 this September, he might no longer feel he needs to be as agreeable. Being obstinate, after all, is the prerogative of the elderly.
Les doy cordialmente la bienvenida a este Blog informativo con artículos, análisis y comentarios de publicaciones especializadas y especialmente seleccionadas, principalmente sobre temas económicos, financieros y políticos de actualidad, que esperamos y deseamos, sean de su máximo interés, utilidad y conveniencia.
Pensamos que solo comprendiendo cabalmente el presente, es que podemos proyectarnos acertadamente hacia el futuro.
Gonzalo Raffo de Lavalle
Las convicciones son mas peligrosos enemigos de la verdad que las mentiras.
Quien conoce su ignorancia revela la mas profunda sabiduría. Quien ignora su ignorancia vive en la mas profunda ilusión.
“There are decades when nothing happens and there are weeks when decades happen.”
Vladimir Ilyich Lenin
You only find out who is swimming naked when the tide goes out.
No soy alguien que sabe, sino alguien que busca.
Only Gold is money. Everything else is debt.
Las grandes almas tienen voluntades; las débiles tan solo deseos.
Quien no lo ha dado todo no ha dado nada.
History repeats itself, first as tragedy, second as farce.
We are travelers on a cosmic journey, stardust, swirling and dancing in the eddies and whirlpools of infinity. Life is eternal. We have stopped for a moment to encounter each other, to meet, to love, to share.This is a precious moment. It is a little parenthesis in eternity.
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