Jul 10

Today’s News July 10, 2015

  • The Global War On Pensions Gets Personal – Scenes From A Dying Nation

    We have been warning about the 'global war on pensioners' for a while (most recently here, here, and here) but the soul-destroying images of Greek pensioners' hopes being crushed bring that central-bank-driven repression front-and-center…

    As The Wall Street Journal reports, fear is growing in Greece as the decisive hour nears for the nation…

    Greek banks will likely run out of cash by the end of the week, two senior Greek bankers said.

     

    “Not all banks will run out of cash at once,” one of the bankers said, “but they’ll all be out within hours of each other.”

     

    …

     

    Shortages of medications are beginning to bite, compounding distress especially among older Greeks.

     

    Parents of babies and young children are stocking up on formula and other basic medications, pharmacists say.

     

    “In some cases, we have shortages because people are freaking out panic-buying. We’re trying to advise them against that,” said Mando Nikolopoulou, a pharmacist.

     

    “We’re seeing significant shortages in heart and blood-pressure medications, but I’m less worried about that because there are Greek-made generics that people can turn to when the branded ones run out for good,” she said. “But insulin, that’s critical—diabetics need it to survive, and we’re really low on stocks.”

     

    …

     

    Yiannis Konstantinidis, a 74-year-old grandfather to two little girls, refused to join the queue, even though he could have done with an extra €60 ($66)—the maximum daily withdrawal amount under capital-control rules.

     

    “I brought the kids to have a bit of fun, to buy them ice cream,” he said as 6-year-old Chryssa pulled on his hand. “They may be young but they know something’s wrong. The television is playing at home all day, there are people lining up at the banks, they’re asking me ‘what’s happening, Grandpa?’”

     

    “I just want Tsipras to get a deal, any deal, but it looks like the Europeans are fed up with us now,” Mr. Konstantinidis said, adding he had voted with the minority of Greeks who backed the creditors’ proposals, which he believed would secure the country’s euro membership despite hitting pensioners like himself hard.

    Scenes from a dying nation…

    As Martin Armstrong adds,

    All mainstream news is painting the Greeks as the bad guys and the Troika as the savior of Europe. Quite frankly, it is really disgusting. Pictures of an elderly Greek pensioner have gone viral depicting what the Troika is deliberately doing to the Greek people trying to punish them for their own failed design of the Euro in a system that is just economically unsustainable.

     

    [The images above] expose the core of the issue of how ordinary Greeks are being tormented by EU politicians who pretend to care about people. This is not a Greek debt crisis, this is a Euro Crisis and they refuse to admit that what they designed was solely for the takeover of Europe at the cost of the future of everyone from pensioners to the youth.

     

    This is just the tip of the iceberg. We are facing terrible times ahead because socialism is completely collapsing. Government employees have lined their pockets and this is precisely the end game how Rome collapsed. It was not the barbarians at the gate. It was the the Roman army was not paid and they began hailing their various generals as emperor and the attacked cities who did not support their choice sacking their own people. Only after weakening themselves, then the barbarians came in for easy pickings. If Russia really wants to take Europe, all they have to do is be patient. They will self-destruct for the Troika cannot see any change in thinking for that means they must admit that they were wrong from the outset.

    *  *  *

  • Chinese Police Officially Launch Crackdown On Stock Sellers & Rumor Spreaders

    Not only has the Chinese regulator specifically asked all listed companies to submit reports, within the next two days, on the measures they will take to prop up their shares, according to the 21st Centruy Business Herald; but, as we warned yesterday, Chinese police have begun a “nationwide action plan” to work with stock regulator CSRC to crack down on now ‘illegal’ stock and futures trading. As SCMP reports, police are checking who sold off Ping An and PetroChina stocks in last 30 minutes of trading July 8 while Government was buying to boost index… Who needs QE? This is worse, much worse…

     

    * * *

    Which explains this…

     

    *  *   *

    And here is what Rabobank thinks…

    “China managed to stage an impressive equity rebound yesterday. One could call it a dead cat bounce, but we don’t even have an entire cat, so it was more parts of a dead cat bouncing, aided by news that anyone caught selling short would be arrested.

     

    To say that doesn’t look sustainable is an understatement, especially with PPI (Producer Price Index) slipping to -4.8 per cent (Year-on-Year), and CPI (Consumer Price Index) edging up to 1.4 per cent only on vegetable prices.”

  • Are Big Banks Using Derivatives To Suppress Bullion Prices?

    Submitted by Paul Craig Roberts and Dave Kranzler via PaulCraigRoberts.org,

    We have explained on a number of occasions how the Federal Reserves’ agents, the bullion banks (principally JPMorganChase, HSBC, and Scotia) sell uncovered shorts (“naked shorts”) on the Comex (gold futures market) in order to drive down an otherwise rising price of gold. By dumping so many uncovered short contracts into the futures market, an artificial increase in “paper gold” is created, and this increase in supply drives down the price.

    This manipulation works because the hedge funds, the main purchasers of the short contracts, do not intend to take delivery of the gold represented by the contracts, settling instead in cash. This means that the banks who sold the uncovered contracts are never at risk from their inability to cover contracts in gold. At any given time, the amount of gold represented by the paper gold contracts (“open interest’) can exceed the actual amount of physical gold available for delivery, a situation that does not occur in other futures markets.

    In other words, the gold and silver futures markets are not a place where people buy and sell gold and silver. These markets are places where people speculate on price direction and where hedge funds use gold futures to hedge other bets according to the various mathematical formulas that they use. The fact that bullion prices are determined in this paper, speculative market, and not in real physical markets where people sell and acquire physical bullion, is the reason the bullion banks can drive down the price of gold and silver even though the demand for the physical metal is rising.

    For example last Tuesday the US Mint announced that it was sold out of the American Eagle one ounce silver coin. It is a contradiction of the law of supply and demand that demand is high, supply is low, and the price is falling. Such an economic anomaly can only be explained by manipulation of prices in a market where supply can be created by printing paper contracts.

    Obviously fraud and price manipulation is at work, but no heads roll. The Federal Reserve and US Treasury support this fraud and manipulation, because the suppression of precious metal prices protects the value and status of the US dollar as the world’s reserve currency and prevents gold and silver from fulfilling their role as the transmission mechanism that warns of developing financial and economic troubles. The suppression of the rising gold price suppresses the warning signal and permits the continuation of financial market bubbles and Washington’s ability to impose sanctions on other world powers that are disadvantaged by not being a reserve currency.

    It has come to our attention that over-the-counter (OTC) derivatives also play a role in price suppression and simultaneously serve to provide long positions for the bullion banks that disguise their manipulation of prices in the futures market.

    OTC derivatives are privately structured contracts created by the secretive large banks. They are a paper, or derivative, form of an underlying financial instrument or commodity. Little is known about them. Brooksley Born, the head of the Commodity Futures Trading Corporation (CFTC) during the Clinton regime said, correctly, that the derivatives needed to be regulated. However, Federal Reserve Chairman Alan Greenspan, Treasury Secretary and Deputy Secretary Robert Rubin and Lawrence Summers, and Securities and Exchange Commission (SEC) chairman Arthur Levitt, all de facto agents of the big banks, convinced Congress to prevent the CFTC from regulating OTC derivatives.

    The absence of regulation means that information is not available that would indicate the purposes for which the banks use these derivatives. When JPMorgan was investigated for its short silver position on Comex, the bank convinced the CFTC that its short position on Comex was a hedge against a long position via OTC derivatives. In other words, JPMorgan used its OTC derivatives to shield its attack on the silver price in the futures market.

    During 2015 the attack on bullion prices has intensified, driving the prices lower than they have been for years. During the first quarter of this year there was a huge upward spike in the quantity of precious metal derivatives.

    If these were long positions hedging the banks’ Comex shorts, why did the price of gold and silver decline?

    More evidence of manipulation comes from the continuing fall in the prices of gold and silver as set in paper future markets, although demand for the physical metals continues to rise even to the point that the US Mint has run out of silver coins to sell. Uncertainties arising from the Greek No vote increase systemic uncertainty. The normal response would be rising, not falling, bullion prices.

    The circumstantial evidence is that the unregulated OTC derivatives in gold and silver are not really hedges to short positions in Comex but are themselves structured as an additional attack on precious metal prices.

    If this supposition is correct, it indicates that seven years of bailing out the big banks that control the Federal Reserve and US Treasury at the expense of the US economy has threatened the US dollar to the extent that the dollar must be protected at all cost, including US regulatory tolerance of illegal activity to suppress gold and silver prices.

  • For The First Time Since It Was Mexico, California Now Has More Latinos Than Whites

    Two weeks ago, we highlighted a statistic that reflects the rapid demographic shift taking place in America. Non-Hispanic whites, Bloomberg reported, citing the Census Bureau, are no longer the majority in Americans under 5 years old. 

    Why does this matter or, perhaps more to the point, why do we mention it here? Because demographic shifts often have far-reaching consequences for the economy. Here’s what we said last month:

    Shifting demographics are affecting everything from the labor market, to homeownership, to race relations in America. 

     

    In “The ‘Illegal Immigrant’ Recovery” for instance, we documented the stunning fact that the US has added 2.3 million “foreign-born” workers, offset by just 727K “native-born” since December 2007. Because the “foreign-born” category includes both legal and illegal immigrants, it may well be that the surprise answer why America’s labor productivity has plummeted in recent years and certainly months, and why wage growth has gone precisely nowhere, is because the vast majority of all jobs since December 2007, or 75% to be specific, have gone to foreign-born workers. 

     

    As for the housing market, we recently cited data from the Urban Institute which shows that because the vast majority of new households in the next decade will be formed by minorities, and because minority groups tend to have lower homeownership rates, the overall homeownership rate in America — which has already retraced twenty years’ worth of gains — will likely slide further in the coming years.

    These are but two examples of how much demographic shifts matter. Against this backdrop we present the following chart and brief commentary from the LA Times with no further comment:

     

    The shift shouldn’t come as a surprise. State demographers had previously expected the change to occur sometime in 2013, but slow population growth pushed back projections. In January 2014, the state Department of Finance estimated the shift would take place at some point in March.

     

    Either way, the moment has officially arrived.

     

    “This is sort of the official statistical recognition of something that has been underway for almost an entire generation,” said Roberto Suro, director of the Tomás Rivera Policy Institute at USC.

     

    California is now the first large state and the third overall — after Hawaii and New Mexico — without a white plurality, according to state officials.

     

    “Where L.A. goes is where the rest of the state goes and where the rest of the country goes,” he said. “We announce, demographically speaking, the future for the rest of the country.”

  • China's Annotated Collapse Into Centrally-Planned Market Hell

    By now it is clear to everyone, even the most hardened neoliberals, that what is going on in China is nothing short of the complete collapse of a centrally-planned market into sheer chaos, a bubble which while punctuated by the occasional dead cat bounce, is now finished and it is only a matter of time before all the “nouveau riche” farmers and grandparents see all their paper profits wiped out and hopefully go silently into that good night without starting mass riots or a revolution.

    Since by some counts there are anywhere between 20 and 40 million of them, it could be a close call, one which the Politburo would dread to see to its fruition and as such the Chinese government together with the People’s Bank of China have engaged in the most desperate and unprecedented series of market bailouts, one which puts good ‘ole plain vanilla QE in the “quaint” category.

    But most curiously, it wasn’t until China literally threatened short (or any other for that matter) sellers with arrest last night, that the market finally staged a furious rebound.

    Will that rebound hold, or like every other dead cat bounce in history, fade quickly if not quietly into memory, we shall see over the next several days.

    In the meantime, for those curious what it looks like when a centrally-planned market devolves into complete chaotic hell despite the relentless intervention of the local authorities and central planners, look no further than the chart below…

     

    And while it may seem that China has literally thrown the kitchen sink at its “maliciously” crashing stock market (odd how there were no complaints about malicious buying on the way up…), the reality is that China still has quite a few tricks up its sleeve, starting with a plain vanilla rate cut, proceeding to expanded stock buybacks, a complete short-selling bank, and finally culminating with that inevitably Hail Mary of every central bank: “outright share purchasing.”

     

    The good news is that what China is doing should be a lesson to all other global markets, which to a lesser or greater extent, are all as manipulated, rigged and centrally-planned as China’s. Seen in this light, China is merely a harbinger of what is coming to a banana market near you…

  • 10 Very Strange Things That Have Happened In Just The Past Few Weeks

    Submitted by Michael Snyder via The End of The American Dream blog,

    Have you noticed that events have begun to accelerate?  Over the past few weeks, things have officially started to get very weird.  Chinese stocks are crashing, the Greek debt crisis is spiraling out of control, the New York Stock Exchange was down for about four hours on Wednesday thanks to a “technical glitch”, and global politicians have been acting very strangely.  After several years of relative calm, could it be possible that the second half of 2015 will usher in a time of chaos and confusion on a worldwide scale?  Personally, I have never been more concerned about a period of time as I am about the last six months of 2015.  And if I am right, what we have seen so far is just the tip of the iceberg.  The following are 10 very strange things that have happened in just the past few weeks…

    #1 On Wednesday, the New York Stock Exchange, United Airlines and the Wall Street Journal were all taken down by unexpected “technical glitches“.  Authorities are assuring us that hackers were not responsible for any of this.

    #2 In China, a full-blown stock market crash is unfolding.  The Shanghai Composite Index has plummeted more than 30 percent in less than a month, and the Chinese version of the NASDAQ has dropped by more than 40 percent.  The amount of “paper wealth” that has been lost in China is 15 times greater than the GDP of Greece.

    #3 Just the other day, hackers were able to hack into a German surface-to-air missile battery…

    Well, this is absolutely terrifying. According to The Local, hackers attacked a German Patriot surface-to-air missile battery, like the one shown above, stationed along the Turkish-Syria border. The cyber attack caused the battery to carryout “unexplained” orders.

     

    It’s believed that cyber attackers managed to exploit the Patriot battery in two different ways. The first exploit was through the Sensor-Shooter-Interoperability, which controls interactions between the actual, physical missile launcher and its control system, while the other was on the guidance chip. These weaknesses could have allowed the hackers to steal data or, more worryingly, actually take control of the battery.

    #4 Earlier this week, Barack Obama told reports that “we’re speeding up training of ISIL forces“…

    #5 Just a few days ago, the U.S. Mint announced that they were sold out of American Eagle silver coins on the exact same day that the price of silver hit a new low for 2015.  How does that make any sense?

    #6 On June 30th, an unexpected blood moon was seen over a significant portion of the United States.  The following is an excerpt from a recent article by Caiden Cowger…

    On June 30, 2015, a surprise blood moon appeared in the sky, that was only seen in the United States.

     

    According to the National Weather Service, large wildfires in Canada have been burning. Due to extremely high winds, smoke from these fires have traveled into the United States.

     

    According to NBC-Chattanooga, “the smoke should remain in the higher atmosphere and not affect air quality, it gives the moon and sun a rosy glow.

     

    Here’s what causes the effect:

     

    As light from the moon or sun enters the atmosphere it gets scattered by particles like water, aerosols, and in this case smoke. Green, blue, and purple colors are sent in all directions but colors with longer wavelengths like red, orange and yellow continue through the atmosphere and remain visible to the human eye.”

    #7 Even though NASA recently stated that they know of “no asteroid or comet currently on a collision course with Earth” and that “no large object is likely to strike the Earth any time in the next several hundred years“,  NASA has teamed up with the National Nuclear Security Administration to try to figure out a way to use nuclear weapons to destroy asteroids that are threatening our planet.  If there is no threat, why spend so much time and energy on this?

    #8 A couple of weeks ago, we learned that Barack Obama has issued 19 “secret directives“.  What is Obama planning, and why won’t he let the general public know about it?

    #9 This week, Pope Francis called for the creation of “a new economic and ecological world order where the goods of the Earth are shared by everyone, not just exploited by the rich.”  So exactly what would such a “world order” look like?

    #10 The Greek people just overwhelmingly voted to reject austerity, so EU officials have responded by giving the Greek government a one week deadline to come to an agreement that will include even more austerity for the Greek people.  If the Greek government does not submit, EU officials are threatening them with bankruptcy, the collapse of their banking system and expulsion from the euro.

    Things promise to only get stranger from here.  One week from today, on July 15th, a massive military exercise known as “Jade Helm” begins.  More than 1,000 members of the U.S. military will be taking part in drills that will be conducted in the states of Texas, Colorado, New Mexico, Arizona, Nevada, Utah, California, Mississippi and Florida.

    Then in September comes the end of the Shemitah year, the fourth blood moon of this tetrad, the launch of a radical new sustainable development agenda at the United Nations that is being endorsed by the Pope, and a vote on a UN Security Council resolution that would formally establish a Palestinian state.

    And that is just the stuff that we know about.

  • Chinese 'Dead Cat Bounce' Fades, "Hostile Sellers" Appear As Goldman Warns "Not Yet Fully Purged"
    • *CHINA'S SHANGHAI COMPOSITE INDEX FALLS 0.6% TO 3,687.36 AT OPEN
    • *FTSE CHINA A50 INDEX FALLS 2%

    Amid the highest level Typhoon warnings, China's stock market continues to storm as only 49% of Chinese stocks are halted (down from 54%) as local analysts fear yesterday's bounce (just like last week's) was nothing but a dead cat bounce: "bounces like today prolong the timeframe to get that final bottom in place." For the 14th day in a row margin balances declined with the pace accelerating (down 10.9% yesterday alone) for a total over 36% decline so far. Seemingly on pain of death, someone is selling Chinese stocks as CSI-300 futures opened a mere 0.2% higher then sold off – no follow through for now. Goldman warned to expect another 30% decline margin balance and concludes, China "hasn't yet fully purged."

    In case you're wondering why we bounced yesterday (aside from the death threats to shorts)… It was a very technical bounce off the 200DMA…

     

    and for now there's no follow-through…

     

    Stroms are gathering…

    • *CHINA ISSUES HIGHEST-LEVEL ALERT ON TYPHOON CHAN-HOM

    As more companies limp out from nehind the curtain of invincibility…

    • *NUMBER OF CHINESE COS HALTED FROM TRADING FALLS TO 1,422
    • *A TOTAL OF 49% OF CHINESE STOCKS ARE HALTED FROM TRADING (down from 54%)

    Goldman noted the suspensions of shares are "really the key issue…"

    With a number of stocks suspended – we've had 32 percent of the market cap being suspended – we haven't really had a clearing of price that's fully taken place and the deleveraging which has been going on hasn't yet fully purged

     

    That's really what we're looking for for a sign of a market bottom."

    Margin balances continue to plunge in accelerating manner… now down 36% from the highs…

     

    Where is all the margin concentrated (via SCMP)

    Goldman also noted margin balances still have a long way to go…

    "We think the rough equilibrium level would probably be about a trillion

     

    That would be where the margin balance relative to free float market cap would be commensurate with the level that we've got here in the U.S."

     

    Another 30% reduction in margin balances could happen in the next five days to two weeks

    And finally for some context on the week…

     

    Are you going to buy this dip?

     

    *  *  *

    And for those think it's over… it's not…

     

    And for China to get back to 'norms' there is considerably more left…

     

    As one local analyst warned…

    "Unfortunately, with bounces like today, this emotional and high-volume trading capitulation doesn't come to fruition. Then add to the mix the fact that half the stocks in China are halted and this bottom becomes harder to achieve," said Brett McGonegal, chief executive of Reorient Group, a Hong Kong-listed investment firm.

     

    "We were almost at the bottom and bounces like today prolong the timeframe to get that bottom in place."

     

    Charts: Bloomberg

  • New Greek Proposal Backtracks To Pre-Referendum Draft, Does Not Request Debt Haircut – Full Text

    There is nothing incrementally new or different to what we revealed earlier in the leaked Greek proposal (i.e., no actionable pension cuts, no debt "reprofiling") and as Bloomberg makes it all too clear in flashing red headlines:

    • GREEK GOVT PROPOSAL SIMILAR TO EU COMMISSION'S JUNE 26 PROPOSAL

    … or the one which 61% of the Greek people said no to.

    What's worse, the proposal will be promptly deemed as insufficient because as Merkel made clear in the past four days, the old proposal is no longer valid due to the collapse in the Greek economy since capital controls were imposed and will, ironically, have be far harsher to offset the slowdown in the economy. To make things worse, the proposed indirect (no direct ones) pension cuts, and lack of a request for debt relief will be certain to infuriate the Greek population.

    The broad strokes: a 3 year, €53.5 billion bailout program, including €35 billion of growth measures, lasting through June 30, 2018 requesting funds from the ESM, seeking to finally put the IMF off to the side.

    The program is heavy on revenue promises and lite on actual spending cuts. Greece hopes to achieve a 1% primary budget surplus in 2015, rising to 2%, 3%, and 3.5% by 2018, all of which are now impossible due to the total collapse of the economy in the past week.

    Among the tax reform will be a modest increase in corporate tax from 26% to 28%.

    The changes to the VAT system are as noted previously, keeping the VAT on hotels at 13% but raising it to 23% for restaurants; Greece also promises to eliminate discounts on islands, starting with the islands with higher incomes and which are the most popular tourist destinations.

    However, it is the pension side where the issues remain, and it is here that once again there is little actual direct reductions. Among the promises, most are the generic fluff previously agreed on:

    create strong disincentives to early retirement, incur penalties for early withdrawals, make all supplementary pension funds financed by own contributions; and so on.

    The good news for the Troika is that Greece will seek to "gradually phase out the solidarity grant (EKAS) for all pensioners by end-December 2019" – who will be impacted and when: "the top 20% of beneficiaries in March 2016." In other words another 9 months of non real action. The bad news for the Troika is that Greece will also "freeze monthly guaranteed contributory pension limits in nominal terms until 2021."

    More in the full proposal, but the truth is that while making some concessions, the Greek proposal may still be insufficient for Merkel, and certainly won't be sufficient for the IMF due to the lack of real pension cuts.

    Worse, Syriza will have to vote on this proposal tomorrow and explain to the people why nearly two thirds of them just voted No to a deal which the government itself is now hoping will pass.

    But worst of all, nowhere in the draft sent to creditors is there anything requesting or even hinting about Greek debt haircut, relief or even reprofiling.

    And all of this will happen as a massive Oxi demonstration takes place in front of government, so be on the lookout for a repeat appearance by the riotcam.

    * * *

    Full text below (via Amna)

    10/ 07/ 2015
    The full proposal submitted by the Greek government to the Eurogroup earlier on Thursday is the following:
     
    "Greece: Prior Actions
       
     
    Policy Commitments and Actions to be taken in consultation with EC/ECB/IMF staff:
     
    1. 2015 supplementary budget and 2016-19 MTFS
     
    Adopt effective as of July 1, 2015 a supplementary 2015 budget and a 2016–19 medium-term fiscal strategy, supported by a sizable and credible package of measures. The new fiscal path is premised on a primary surplus target of (1, 2, 3), and 3.5 percent of GDP in 2015, 2016, 2017 and 2018. The package includes VAT reforms (¶2), other tax policy measures (¶3), pension reforms (¶4), public administration reforms (¶5), reforms addressing shortfalls in tax collection enforcement (¶6), and other parametric measures as specified below.
     
    2. VAT reform
     
    Adopt legislation to reform the VAT system that will be effective as of July 1, 2015. The reform will target a net revenue gain of 1 percent of GDP on an annual basis from parametric changes. The new VAT system will: (i) unify the rates at a standard 23 percent rate, which will include restaurants and catering, and a reduced 13 percent rate for basic food, energy, hotels, and water (excluding sewage), and a super-reduced rate of 6 percent for pharmaceuticals, books, and theater; (ii) streamline exemptions to broaden the base and raise the tax on insurance; and (iii) Eliminate discounts on islands, starting with the islands with higher incomes and which are the most popular tourist destinations, except the most remote ones. This will be completed by end-2016, as appropriate and targeted fiscally neutral measures to compensate those inhabitants that are most in need are determined. The new VAT rates on hotels and islands will be implemented from October 2015.
     
    The increase of the VAT rate described above may be reviewed at the end of 2016, provided that equivalent additional revenues are collected through measures taken against tax evasion and to improve collectability of VAT. Any decision to review and revise shall take place in consultation with the institutions.
     
    3. Fiscal structural measures
     
    Adopt legislation to:

    • close possibilities for income tax avoidance (e.g., tighten the definition of farmers), take measures to increase the corporate income tax in 2015 and require 100 percent advance payments for corporate income and gradually for individual business income tax by 2017; phase out the preferential tax treatment of farmers in the income tax code by 2017; raise the solidarity surcharge;
    • abolish  subsidies for excise on diesel oil for farmers and better target eligibility to halve heating oil subsidies expenditure in the budget 2016;
    • in view of any revision of the zonal property values, adjust the property tax rates if necessary to safeguard the 2015 and 2016 property tax revenues at €2.65 billion and adjust the alternative minimum personal income taxation.
    • eliminate the cross-border withholding tax introduced by the installments act (law XXXX/2015) and reverse the recent amendments to the ITC in the public administration act (law XXXX/2015), including the special treatment of agricultural income.
    • adopt outstanding reforms on the codes on income tax, and tax procedures: introduce a new Criminal Law on Tax Evasion and Fraud to amend the Special Penal Law 2523/1997 and any other relevant legislation, and replace Article 55, ¶s 1 and 2, of the TPC, with a view, inter alia, to modernize and broaden the definition of tax fraud and evasion to all taxes; abolish all Code of Book and Records fines, including those levied under law 2523/1997 develop the tax framework for collective investment vehicles and their participants consistently with the ITC and in line with best practices in the EU.
    • adopt legislation to upgrade the organic budget law to: (i) introduce a framework for independent agencies; (ii) phase out ex-ante audits of the Hellenic Court of Auditors and account officers (ypologos); (iii) give GDFSs exclusive financial service capacity and GAO powers to oversee public sector finances; and (iv) phase out fiscal audit offices by January 2017.
    • increase the rate of the tonnage tax and phase out special tax treatments of the shipping industry.

    By September 2015, (i) simplify the personal income tax credit schedule; (ii) re-design and integrate into the ITC the solidarity surcharge for income of 2016 to more effectively achieve progressivity in the income tax system; (iii) issue a circular on fines to ensure the comprehensive and consistent application of the TPC; (iv) and other remaining reforms as specified in ¶9 of the IMF Country Report No. 14/151.
     
    On health care, effective as of July 1, 2015, (i) re-establish full INN prescription, without exceptions, (ii) reduce as a first step the price of all off-patent drugs to 50 percent and all generics to 32.5 percent of the patent price, by repealing the grandfathering clause for medicines already in the market in 2012, and (iii)) review and limit the prices of diagnostic tests to bring structural spending in line with claw back targets; and (iv) collect in the full the 2014 clawback for private clinics, diagnostics and pharmaceuticals, and extend their 2015 clawback ceilings to 2016.
     
    Launch the Social Welfare Review under the agreed terms of reference with the technical assistance of the World Bank to target savings of ½ percent of GDP which can help finance a fiscally neutral gradual roll-out of the GMI in January 2016.
     
    Adopt legislation to:

    • reduce the expenditure ceiling for military spending by €100 million in 2015 and by €200 million in 2016 with a targeted set of actions, including a reduction in headcount and procurement;   
    • introduce reform of the income tax code, [inter alia covering capital taxation], investment vehicles, farmers and the self- employed, etc.;
    • raise the corporate tax rate from 26% to 28%;
    • introduce tax on television advertisements;
    • announce international public tender for the acquisition of television licenses and usage related fees of relevant frequencies; and
    • extend implementation of luxury tax on recreational vessels in excess of 5 meters and increase the rate from 10% to 13%, coming into effect from the collection of 2014 income taxes and beyond;
    • extend Gross Gaming Revenues (GGR) taxation of 30% on VLT games expected to be installed at second half of 2015 and 2016;
    • generate revenues through the issuance of 4G and 5G licenses.
    • We will consider some compensating measures, in case of fiscal shortfalls: (i) Increase the tax rate to income for rents, for annual incomes below €12,000 to 15% (from 11%) with an additional revenue of €160 million and for annual incomes above €12,000 to 35% (from 33%) with an additional revenue of €40 million; (ii)  the corporate income tax will increase by an additional percentage point (i.e. from 28% to 29%) that will result in additional revenues of €130 million.

    4. Pension reform
     
    The Authorities recognise that the pension system is unsustainable and needs fundamental reforms. This is why they will implement in full the 2010 pension reform law (3863/2010), and implement in full or replace/adjust the sustainability factors for supplementary and lump-sum pensions from the 2012 reform as a part of the new pension reform in October 2015 to achieve equivalent savings and take further steps to improve the pension system.
     
    Effective from July 1, 2015 the authorities will phase-in reforms that would deliver estimated permanent savings of ¼-½ percent of GDP in 2015 and 1 percent of GDP on a full year basis in 2016 and thereafter by adopting legislation to:
     

    • create strong disincentives to early retirement, including the adjustment of early retirement penalties, and through a gradual elimination of grandfathering to statutory retirement age and early retirement pathways progressively adapting to the limit of statutory retirement age of 67 years, or 62 and 40 years of contributions by 2022, applicable for all those retiring (except arduous professions, and mothers with children with disability) with immediate application;
    • adopt legislation so that withdrawals from the Social Insurance Fund will incur an annual penalty, for those affected by the extension of the retirement age period, equivalent to 10 percent on top of the current penalty of 6 percent;
    • integrate into ETEA all supplementary pension funds and ensure that, starting January 1, 2015, all supplementary pension funds are only financed by own contributions;
    • better target social pensions by increasing OGA uninsured pension;
    • Gradually phase out the solidarity grant (EKAS) for all pensioners by end-December 2019. This shall be legislated immediately and shall start as regards the top 20% of beneficiaries in March 2016 with the modalities of the phase out to be agreed with the institutions;
    • freeze monthly guaranteed contributory pension limits in nominal terms until 2021;
    • provide to people retiring after 30 June 2015 the basic, guaranteed contributory, and means tested pensions only at the attainment of the statutory normal retirement age of currently 67 years;
    • increase the health contributions for pensioners from 4% to 6% on average and extend it to supplementary pensions;
    • phase out all state-financed exemptions and harmonize contribution rules for all pension funds with the structure of contributions to IKA from 1 July 2015;

    Moreover, in order to restore the sustainability of the pension system, the authorities will by 31 October 2015, legislate further reforms to take effect from 1 January  2016; (i) specific design and parametric improvements to establish a closer link between contributions and benefits; (ii) broaden and modernize the contribution and pension base for all self-employed, including by switching from notional to actual income, subject to minimum required contribution rules; (iii) revise and rationalize all different systems of basic, guaranteed contributory and means tested pension components, taking into account incentives to work and contribute; (iv) the main elements of a comprehensive SSFs consolidation, including any remaining harmonization of contribution and benefit payment rules and procedures across all funds; (v) abolish all nuisance charges financing pensions and offset by reducing benefits or increasing contributions in specific funds to take effect from 31 October 2015; and (vi) harmonize pension benefit rules of the agricultural fund (OGA) with the rest of the pension system in a pro rata manner, unless OGA is merged into other funds. The consolidation of social insurance funds will take place by end 2017. In 2015, the process will be activated through legislation to consolidate the social insurance funds under a single entity and the operational consolidation will have been completed by 31 December 2016. Further reductions in the operating costs and a more effective management of fund resources including improved balancing of needs between better-off and poorer-off funds will be actively encouraged.
     
    The authorities will adopt legislation to fully offset the fiscal effects of the implementation of court rulings on the 2012 pension reform.
     
    In parallel to the reform of the pension system, a Social Welfare Review will be carried out to ensure fairness of the various reforms.
     
    The institutions are prepared to take into account other parametric measures within the pension system of equivalent effect to replace some of the measures mentioned above, taking into account their impact on growth, and provided that such measures are presented to the institutions during the design phase and are sufficiently concrete and quantifiable, and in the absence of this the default option is what is specified above.
     
     
    5. Public Administration, Justice and Anti Corruption
     
    Adopt legislation to:

    • reform the unified wage grid, effective 1 January, 2016, setting the key parameters in a fiscally neutral manner and consistent with the agreed wage bill targets and with comprehensive application across the public sector, including decompressing the wage distribution across the wage spectrumin connection with the skill, performance and responsibility of staff. (The authorities will also adopt legislation to rationalise the specialised wage grids, by end-November 2015);
    • align non-wage benefits such as leave arrangements, per diems, travel allowances and perks, with best practices in the EU, effective 1 January 2016;
    • establish within the new MTFS ceilings for the wage bill and the level of public employment consistent with achieving the fiscal targets and ensuring a declining path of the wage bill relative to GDP until 2019;
    • hire managers and assess performance of all employees (with the aim to complete the hiring of new managers by 31 December 2015 subsequent to a review process)
    • introduce a new permanent mobility scheme applied by Q4 2015. The scheme will promote the use of job description and will be linked with an online database that will include all current vacancies. Final decision on employee mobility will be taken by each service concerned. This will rationalize the allocation of resources as well as the staffing across the General Government.
    • reform the Civil Procedure Code, in line with previous agreements;  introduce measures to reduce the backlog of cases in administrative courts; work closely with European institutions and technical assistance on e-justice, mediation and judicial statistics
    • strengthen the governance of ELSTAT. It shall cover (i) the role and structure of the Advisory bodies of the Hellenic Statistical System, including the recasting of the Council of ELSS to an advisory Committee of the ELSS, and the role of the Good Practice Advisory Committee (GPAC); (ii) the recruitment procedure for the President of ELSTAT, to ensure that a President of the highest professional calibre is recruited, following transparent procedures and selection criteria; (iii) the involvement of ELSTAT as appropriate in any legislative or other legal proposal pertaining to any statistical matter; (iv) other issues that impact the independence of ELSTAT, including financial autonomy, the empowerment of ELSTAT to reallocate existing permanent posts and to hire staff where it is needed and to hire specialised scientific personnel, and the classification of the institution as a fiscal policy body in the recent law 4270/2014; role and powers of Bank of Greece in statistics in line with European legislation.
    • Publish a revised Strategic Plan against Corruption by 31 July 2015. Amend and implement the legal framework for the declaration of assets and financing of the political parties and adopt legislation insulating financial crime and anti-corruption investigations from political intervention in individual cases.

     
    Moreover, in collaboration with the OECD, the Authorities will:

    • Strengthen controls in public entities and especially SOEs. Empower the Line Ministries to perform robust audit and control inspections to supervised entities including SOEs.
    • Strengthen controls and internal audit processes in high spending Local Government Institutions and their supervised legal entities.
    • Strengthen controls in public and private investment cases funded either by national or co-funded by other sources, public works and public procurement (e.g. in health sector, SDIT).
    • Strengthen transparency and control processes and skills in tax and customs authorities.
    • Assess major risks in the public procurement cycle, taking in consideration the recent developments (Central Purchasing and e-Procurement: KHMDHS and ESHDHS) and the need to have a clear governance framework. Develop strategy according to the assessment(Q4 2015)
    • Implement strategy to mitigate public procurement risks.(Q1 2016)
    • Assess 2 specific sectors, Health and Public Works in order to understand the existing constrains related to corruption and waste risks and propose measures to address them. Develop and implement strategy. (Q4 2015)

     
    6. Tax administration
     
    Take the following actions to:

    • Adopt legislation to establish an autonomous revenue agency, that specifies: (i) the agency’s legal form, organization, status, and scope; (ii) the powers and functions of the CEO and the independent Board of Governors; (iii) the relationship to the Minister of Finance and other government entities; (iv) the agency’s human resource flexibility and relationship to the civil service; (v) budget autonomy, with own GDFS and a new funding formula to align incentives with revenue collection and guarantee budget predictability and flexibility; (vi) reporting to the government and parliament; and (vii) the immediate transfer of all tax- and customs-related capacities and duties and all tax- and customs-related staff in SDOE and other entities to the agency.
    • on garnishments, adopt legislation to eliminate the 25 percent ceiling on wages and pensions and lower all thresholds of €1,500 while ensuring in all cases reasonable living conditions; accelerate procurement of IT infrastructure to automatize e-garnishment; improve tax debt write-off rules; remove tax officers’ personal liabilities for not pursuing old debt; remove restrictions on conducting audits of tax returns from 2012 subject to the external tax certificate scheme; and enforce if legally possible upfront payment collection in tax disputes.
    • amend (i) the 2014–15 tax and SSC debt instalment schemes to exclude those who fail to pay current obligations and introduce a requirement for the tax and social security administrations to shorten the duration for those with the capacity to pay earlier and introduce market-based interest rates; the LDU and KEAO will assess by September 2015 the large debtors with tax and SSC debt exceeding €1 million (e.g. verify their capacity to pay and take corrective action) and (ii) the basic instalment scheme/TPC to adjust the market-based interest rates and suspend until end-2017 third-party verification and bank guarantee requirements.
    • adopt legislation to accelerate de-registration procedures and limit VAT re-registration to protect VAT revenues and accelerate procurement of network analysis software; and provide the Presidential Decree needed for the significantly strengthening the reorganisation of the VAT enforcement section in order to strengthen VAT enforcement and combat VAT carousel fraud. The authorities will submit an application to the EU VAT Committee and prepare an assessment of the implication of an increase in the VAT threshold to €25.000.
    • combat fuel smuggling, via legislative measures for locating storage tanks (fixed or mobile);
    • Produce a comprehensive plan with technical assistance for combating tax evasion which includes (i) identification of undeclared deposits by checking bank transactions in banking institutions in Greece or abroad, (ii) introduction of  a voluntary disclosure program with appropriate sanctions, incentives and verification procedures, consistent with international best practice, and without any amnesty provisions (iii) request from EU member states to provide data on asset ownership and acquisition by Greek citizens, (iv) renew the request for technical assistance in tax administration and make full use of the resource in capacity building, (v) establish a wealth registry to improve monitoring.
    • develop a costed plan for the promotion of the use of electronic payments, making use of the EU Structural and Investment Fund;
    • Create a time series database to monitor the balance sheets of parent-subsisdiary companies to improve risk analysis criteria for transfer pricing

     
    7. Financial sector
     
    Adopt: (i) amendments to the corporate and household insolvency laws including to cover all debtors and bring the corporate insolvency law in line with the OCW law; (ii) amendments to the household insolvency law to introduce a mechanism to separate strategic defaulters from good faith debtors as well as simplify and strengthen the procedures and introduce measures to address the large backlog of cases; (iii) amendments to improve immediately the judicial framework for corporate and household insolvency matters; (iv) legislation to establish a regulated profession of insolvency administrators, not restricted to any specific profession and in line with good cross-country experience; (v) a comprehensive strategy for the financial system: this strategy will build on the strategy document from 2013, taking into account the new environment and conditions of the financial system and with a view of returning the banks in private ownership by attracting international strategic investors and to achieve a sustainable funding model over the medium term; and (vi) a holistic NPL resolution strategy, prepared with the help of a strategic consultant.
     
    8. Labour market
     
    Launch a consultation process to review the whole range of existing labour market arrangements, taking into account best practices elsewhere in Europe. Further input to the consultation process described above will be provided by international organisations, including the ILO. The organization and timelines shall be drawn up in consultation with the institutions. In this context, legislation on a new system of collective bargaining should be ready by Q4 2015. The authorities will take actions to fight undeclared work in order to strengthen the competitiveness of legal companies and protect workers as well as tax and social security revenues.
     
     
    9. Product market
     
    Adopt legislation to:
     

    • implement  all pending recommendations of the OECD competition toolkit I, except OTC pharmaceutical products,  starting with: tourist buses, truck licenses, code of conduct for traditional foodstuff, eurocodes on building materials, and all the OECD toolkit II recommendations on beverages and petroleum products;
    • In order to foster competition and increase consumer welfare immediately launch a new competition assessment, in collaboration and with the technical support of the OECD, on wholesale trade, construction, e-commerce and media. The assessment will be concluded by Q1 2016.The recommendations will be adopted by Q2 2016.
    • open the restricted professions of engineers, notaries, actuaries, and bailiffs and liberalize the market for tourist rentals ;
    • eliminate non-reciprocal nuisance charges and align the reciprocal nuisance charges to the services provided;
    • reduce red tape, including on horizontal licensing requirements of investments and on low-risk activities as recommended by the World Bank, and administrative burden of companies based on the OECD recommendations, and (ii) establish a committee for the inter-ministerial preparation of legislation. Technical assistance of the World Bank will be sought to implement the easing of licensing requirements.
    • design electronic one-stop shops for businesses through analysing information obligations businesses have to comply with, structuring them accordingly and helping to design a project on developing the necessary ICT tools and infrastructure (Q3 2015). Setting up the institutional & co-ordination structure, identification of the business life events to be included, identification and mapping of information obligations & administrative procedures and training of officials (Q4 2015). Launch (Q1 2016)
    • adopt the reform of the gas market and its specific roadmap, and implementation should follow suit.
    • take irreversible steps (including announcement of date for submission of binding offers) to privatize the electricity transmission company, ADMIE, or provide by October 2015 an alternative scheme, with equivalent results in terms of competition, in line with the best European practices to provide full ownership unbundling from PPC, while ensuring independence. 

     
    On electricity markets, the authorities will reform the capacity payments system and other electricity market rules to avoid that some plants are forced to operate below their variable cost, and to prevent the netting of the arrears between PPC and market operator; set PPC tariffs based on costs, including replacement of the 20% discount for HV users with cost based tariffs; and notify NOME products to the European Commission. The authorities will also continue the implementation of the roadmap to the EU target model prepare a new framework for the support of renewable energies and for the implementation of energy efficiency and review energy taxation; the authorities will strengthen the electricity regulator’s financial and operational independence;
     
     
    10. Privatization

    • The Board of Directors of the Hellenic Republic Asset Development Fund will approve its Asset Development Plan which will include for privatisation all the assets under HRDAF as of 31/12/2014; and the Cabinet will endorse the plan.
    • To facilitate the completion of the tenders, the authorities will complete all government pending actions including those needed for the regional airports, TRAINOSE, Egnatia, the ports of Pireaus and Thessaloniki and Hellinikon (precise list in Technical Memorandum). This list of actions is updated regularly and the Government will ensure that all pending actions are timely implemented.
    • The government and HRADF will announce binding bid dates for Piraeus and Thessaloniki ports of no later than end-October 2015, and for TRAINOSE ROSCO, with no material changes in the terms of the tenders.
    • The government will transfer the state's shares in OTE to the HRADF.
    • Take irreversible steps for the sale of the regional airports at the current terms with the winning bidder already selected."

    *  *  *

    And the market being incapable of comprehending that this will never be passed by either The Troika or The Greek government explodes higher…

  • Jade Helm Alert: Military Denies Media Requests To Cover "Texas Takeover"

    Between Greece’s tragic, Berlin-mandated descent into the Third World and the epic meltdown in China’s equity markets, it would be easy to forget that the US government is (re)annexing Texas next week. 

    For those unaware (or for anyone who might have lost track of the US Spec Ops schedule), the military is set to kick off Jade Helm 15 next Wednesday, which means the Lonestar lockdown is less than one week away. If you’re unfamiliar with the operation, here are the barebones basics:

    Jade Helm is an eight-week joint military and Interagency Unconventional Warfare exercise conducted throughout Texas, New Mexico, Arizona, California, Nevada, Utah and Colorado. Essentially, from July 15 to September 15 some military personnel are going to take a trip out west and pretend like they are conducting covert operations overseas. 

    On the surface, that doesn’t sound too exciting, but thanks to some very unfortunate wording in an official US military slide deck and an even more unfortunate map which designates Texas as “hostile” territory (of course the same map also identifies San Diego as harboring a militant insurgency, so the US Spec Ops Command probably assumed it wouldn’t be taken literally) quite a few Texans came to believe that the federal government was up to no good with Jade Helm. 

    The situation quickly spiraled out of control and became a veritable media circus after Texas governor Greg Abbott called up the state guard and “Texas Ranger” Chuck Norris pledged to defend the state from a Navy SEAL incursion. Topping it off was former Texas lawmaker Todd Smith — a 16-year veteran of the Texas House of Representatives and self-proclaimed Last of the Fact-Based Republican Mohicans — who, in a letter to Abbott, suggested that anyone who was suspicious of the federal government’s intentions in the state was a “hysterical idiot.” 

    With just six days to go until the government begins the exercise, expect the rumor mill to come alive because as The Washington Post reports, the media will be given no access to the drills. Here’s more: 

    Jade Helm 15, the controversial Special Operations exercise that spawned a wave of conspiracy theories about a government takeover, will open next week without any media allowed to observe it, a military spokesman said.

     

    Embedded reporters won’t be permitted at any point during the exercise, in which military officials say that secretive Special Operations troops will maneuver through private and publicly owned land in several southern states. Lt. Col. Mark Lastoria, a spokesman for Army Special Operations Command, said his organization is considering allowing a small number of journalists to view selected portions of the exercise later this summer, but nothing is finalized.

     

    “All requests from the media for interviews and coverage of U.S. Army Special Operations Command personnel, organizations and events are assessed for feasibility and granted when and where possible,” Lastoria said in a statement released Wednesday to The Washington Post. “We are dedicated to communicating with the public, while balancing that against the application of operations security and other factors.”

     

    The exercise is scheduled for July 15 through September 15 and is expected to include more than 1,200 troops. Army Special Operations Command announced the exercise in March, saying its size and scope would set it apart from most training exercises. For months, some protesters have said Jade Helm is setting the stage for future martial law. 

     

    The Washington Post has several times requested access to observe the exercise, making the case to the military that first-hand media coverage would help explain the mission. Lastoria said it is not possible to allow a journalist to travel with Special Operations forces in the field, citing the isolated nature of the mission and the need to protect the identity of the forces involved.

     

    The military has granted access to Special Operations in the past, however. In one recent example, a journalist observed the exercise Robin Sage in North Carolina, writing a profile for Our State, a magazine. The exercise is considered a final test for Green Beret soldiers in training and calls for them to work through a scenario in which they organize a guerrilla force to overthrow the government of the fictional nation of Pineland.

    Got that? Basically, WaPo reasons that because one Kevin Maurer (reporting for OurState.com) was allowed to observe the imaginary overthrow of a made-up country called “Pineland” two and a half years ago in “backyard theaters of war across central North Carolina”, the paper should be allowed to observe whatever is or isn’t going on in Texas. 

    In any event, it’s clear that the military is intent on keeping prying eyes away from Jade Helm. We’ll leave it to readers to decide what that says about government accountability and transparency. 

    And to the US Spec Ops Command we say this: just because you’ve kept the media out, doesn’t mean no one is watching…

  • Baltimore Mayor Who Cracked Down On Excessive Force Fires Police Chief For Being Too Soft On Crime

    Two competing theories have emerged as to what effect the deaths of Michael Brown, Eric Garner, Walter Scott, and Freddie Gray have had on policing in America. 

    One theory, dubbed the “Ferguson Effect,” says that police officers are now more reluctant to use force to counter illegal activity for fear of prosecution or, more poignantly, for fear of finding themselves cast as the villain that catalyzes widespread civil unrest. This effect, some say, has led to a dramatic increase in violent crime throughout the country.

    Others argue that the numbers simply do not support the idea that police have become “gun shy” so to speak. The Washington Post, for instance, cites data which shows that fatal police shootings have doubled compared to historical trends, with law enforcement now killing more than two people every day in the US. 

    While it’s possible to debate which theory more closely approximates prevailing conditions across the country, what’s not up for debate is the fact that crime has spiked in Baltimore in the months since the riots.

    Some attribute this to a dynamic similar to the Ferguson Effect, while some say it is the inevitable result of an increased supply of prescription painkillers which flooded the streets after pharmacies were looted during the city’s “purge,” but whatever the cause, Baltimore Mayor Stephanie Rawlings-Blake has had enough. Here’s more from NBC:

    Baltimore Mayor Stephanie Rawlings-Blake replaced the city’s police commissioner on Wednesday, saying the city needed to be more focused on suppressing a spike in violence in the months since the death of a man in police custody.

     

    Rawlings-Blake said the police department under Commissioner Anthony Batts had become too preoccupied with internal politics and not enough with stemming a surge in shootings and killings.

     

    “This was not an easy decision, but it is one that is in the best interest of Baltimore,” the mayor said in a late afternoon news conference. “The people of Baltimore deserve better. The brave men and women of our department who put their lives on the line to make our cities deserve better.”

     

    Baltimore, historically one of America’s most violent cities, has stumbled particularly hard, ending the first six months of the year with a 48 percent increase in homicides over the same period in 2014. That trend continued into July, with 10 killings in one week, including the shooting of three people Tuesday near the city’s University of Maryland campus.

     

    Since Gray’s death, the relationship between police and the city’s high-crime communities has suffered, making it harder for cops to patrol streets and investigate cases, officials say. Arrests have plummeted, sparking accusations of a deliberate police slowdown.

     

    From April 19 to the end of June, there were 80 homicides in Baltimore, nearly double the 42 committed during the same period last year, according to an NBC News analysis of city crime data through the first half of the year. By comparison, there were 53 homicides during that period in 2013, 48 in 2012, and 45 in 2011.

     

    The firing came a day after the police union that criticized Batts’ leadership during the riots, and Batts’ own announcement of an independent review of the riot response.

     

    “It is clear that the focus has been too much on the leadership of the department and not enough on the crime fighting,” the mayor said.

     

    Rawlings-Blake introduced Deputy Police Commissioner Kevin Davis as his temporary replacement.

     

    “This is a time of refocusing and re-energizing and going after the folks who are harming this community,” Davis said.

    The irony here, of course, is that if there’s any truth at all to the “Ferguson effect” theory (and in Baltimore there probably is) law enforcement officials might be forgiven for being a bit confused as to what exactly it is they’re supposed to be doing. 

    Obviously no one is saying that police officers should simply stop doing their jobs every time an instance of alleged misconduct serves to put law enforcement under a microscope. That said, something seems a bit odd about instructing police to stand down in the middle of a riot one day and then firing the police commissioner for being too passive barely two months later. 

  • When The Going Gets Tough, The Feds Take Your Money

    Submitted by Bill Bonner via Bonner & Partners, (annotated by Acting-Man.com's Pater Tenebrarum),

    Cash is King

    LONDON, England – “Cash is king.”

    So sayeth the Wall Street Journal, reporting on the situation in Greece. The use of cash for everyday transactions has increased 44% in the last two months.

    A brief update: The Greeks spoke on Sunday. “No,” they said. “We don’t want the government-spending cuts our creditors are demanding.”

     

    CashIsKing_1

     

     

    Then the finance minister resigned, riding off on a motorcycle. Today, the Financial Times reports that the Greeks are to be given one “last chance to avoid crashing out of single currency.”

    Greek output is plunging. The banks are running out of money. And Greeks are lining up at ATMs. The government won’t let them take out more than a lousy €60 ($65) a day.

     

    greece-gdp-growth

    Greece: aborted recovery

     

    greece-corruption-index

    The only data point that is in an upward trend again since the change in government is the corruption index.

     

    An Important Breakthrough

    A fascinating article recently described how ride-sharing app Uber had “solved the major problem of capitalism.” What is the problem?

    “Trust.”

    There are millions of cars on the road. Most of them have four seats, but only one of the seats is usually occupied. And many of these private drivers would be happy to take you where you want to go, for less than what a taxi would charge.

    But you don’t get into those cars. You were told as a child never to get into a stranger’s car. You don’t know which of them you can trust to take you where you want to go.

    London’s black cabs solve the trust problem with a distinctive design and regulation. Drivers must pass the city’s legendary training course, “The Knowledge,” to get their license. When you get into a London cab, you have a high level of confidence that you will get where you are going in a professional manner.

    Uber solves the problem of trust in a different way – with an Internet-based rating system. Riders rate drivers out of five stars. Drivers rate passengers the same way. Both avoid folks with poor ratings.

     

    uber_screen_caps

    Uber app screen capture: riders are invited to rate drivers, using a 5 star system. Drivers with a rating of less than 4.6 are at risk of deactivation. The vast majority of Uber drivers has ratings between 4.7 to 4.8

     

    But capitalism made a much bigger breakthrough on the trust front thousands of years ago: It invented cash. Before modern money, transactions weren’t based on barter, as most people believe. Instead, they were based on a system of rudimentary credit.

    Without cash, you could trade only in a small group. And you had to rely on memory to recall who owed what to whom. With the advent of coinage you could trade with people you didn’t know. You gave up something. You got something – cash – in return. You could then use this cash to trade for something else later.

    This invention – money, usually based on gold or silver – was such a breakthrough, it made today’s elaborate market economies possible.

     

    silver stater

    One of the oldest coins in the world: a silver stater from the Kingdom of Lydia, led by the legendary King Croesus.

     

    Trust Is Disappearing

    But it’s only cash if you can put your hands on it. As the Greeks have just discovered, money in the bank is not cash. Cash is what you need when trust breaks down. With cash, you get optionality, as The Black Swan author Nassim Taleb puts it.

    With cash in your pocket, you can buy a gallon of gasoline or a share in a public company. It’s yours. You can do what you want with it. But cash in the bank?

    You don’t know. You have to trust that the system works… that the bank is solvent… and that it will give you back your money when you want it. Trust is rapidly disappearing in Greece. The Germans don’t trust the Greeks. The Greeks don’t trust the banks. Almost nobody trusts the government.

    What a great show! And very instructive.

    Cash is king in China, too. Chinese stocks paused yesterday after a three-week crash.  The government is doing all it can, say the state-run newspapers. But investors are wondering: Can they trust the Chinese feds to stem the bleeding?

    A Hong Kong-based fund manager is quoted as saying: “I believe the Communist party still has the final say over the stock market, even nowadays.”

    But wait, if government could stop market corrections, why do we ever have them? We don’t know. But there are times to trust… and times to distrust. There are times to own financial assets. And there is a time to own cash.

    This seems like a good time for cash …

     

    greek-greece-bank-atm-line-queue-6

    The time of deflationary confiscation is coming closer for the remaining Greek bank depositors. Those who kept their cash in safe deposit boxes at banks are out of luck too: the government has decreed they may not take it out. This is something one needs to keep in mind – if one wants to keep cash outside the banking system, one cannot leave it in a bank safe deposit box either. The government will confiscate it when push comes to shove and the banks need to be rescued.

    Photo credit: Reuters

  • Even The Economist Is Now Mocking Central Planning

    Buying stocks “is buying the Chinese Dream,” proclaimed a top brokerage after officials ‘promised’ a centrally-planned bull market for the on-the-verge-of-social-unrest-after-real-estate-collapse population… but instead they have lured them into a bear trap.

     

    Even The Economist sees the irony… as yet another centrally-planned market economy scars a generation of investors…

     

    Source: The Economist

  • Free Trade Is Quantitative Easing For The Heroin Market

    Submitted by Daniel Drew via Dark-Bid.com,

    The CDC just released a grim report about heroin abuse trends in the United States. The chart looks like the Federal Reserve's balance sheet. The report states, "During 2002-2013, heroin overdose death rates nearly quadrupled in the United States, from 0.7 deaths to 2.7 deaths per 100,000 population, with a near doubling of the rates from 2011-2013."

    Heroin Abuse

    As with any data point, there is usually a key subset group that drives the trend. The CDC elaborates,

    During 2002-2011, rates of heroin initiation were reported to be highest among males, persons aged 18-25 years, non-Hispanic whites, those with an annual household income below $20,000, and those residing in the Northeast.

    So the growing heroin epidemic is being driven by poor white millennial men living in the northeast, an area that includes the rust belt, where a once thriving manufacturing industry was decimated by free trade policies like NAFTA.

    Manufacturing Employees

    And it's not just a manufacturing industry issue. There simply are not enough jobs to go around.

    Job Shortage

    Meanwhile, Jeb Bush is making $500,000 from healthcare investments while criticizing the government policies that made those profits possible. This all seems like good investment strategy: Convince everyone that "free trade" is good, take their jobs, make them desperate enough to become heroin addicts, and then take the last bit of their money by profiting from their drug-related healthcare expenses. For some reason, the average person always seems to come out on the wrong side of quantitative easing.

  • Chart Of The Day: Bulls Better Hope It's Different This Time

    If earnings are the mother’s milk of stock bull markets, then the endless supply of talking heads bloviating on the next leg of the stock market rally being driven by a post Q1 renaissance in earnings growth (ever ready to pull out their hockey-stick forecasts) may want to look away from the following chart…

     

     

    Despite 22 years of correlations (and obvious causations), asset-gatherers and commission-takers still think this time is different and channel-stuffing and ‘if we build it, they will come’ inventory overbuilds will be bought away in a swarm of freshfaced crappy creditworthiness consumers… not this time – as peak debt is now upon us.

  • A Union Divided: "More Europe" Means "More Germany"

    The tense division in Europe's union are becoming increasingly evident. Between Greece's "no" vote, yesterday's EU Parliament outbursts, and today's German parliament commentary it is clear that, as Bloomberg reports, the centerpiece of Merkel’s cure for Europe – fiscal retrenchment – has catalyzed her in the eyes of many as despite her calm but firm entreaties, an economic bully. “The lesson of this crisis is more Europe, not less Europe,” Angela Merkel said in 2012 as the integrity of the region’s monetary union was threatened by financial instability, but many, like Greece, have come to understand "more Europe" means something different: "more Germany."

     

    As Bloomberg reports,

    “The lesson of this crisis is more Europe, not less Europe,” Angela Merkel said in 2012 as the integrity of the region’s monetary union was threatened by financial instability, touched off by Greek debt, that was spreading through the euro zone’s weaker economies. By “more Europe,” the German chancellor meant a deepening of the continent’s noble mission—peaceful integration to ensure prosperity and democracy—of which the common currency, the euro, is the ultimate symbol.

     

    In the intervening three years, Greeks have come to understand “more Europe” as something different: “more Germany.” That was one of the few clear messages sent in a referendum on July 5 that had everything to do with Greek voters’ views on how Merkel had imposed her vision of Europe on the zone and if their troubled nation would be better served as part of its grand project, or not.

    The centerpiece of Merkel’s cure for Europe was fiscal retrenchment.

    It was an almost maniacal drive for reduced budget deficits and debt levels—the targets for which were already enshrined in euro zone agreements—combined with reforms to labor markets and welfare programs. Merkel believed that such policies would strengthen the euro zone’s financial position and competitiveness. The medicine may be bitter, but in the end, like an ailing patient, Europe would rise from its sickbed with renewed vigor.

    The result has been stagnation.

    Merkel’s insistence on a hard line isn’t masochism, just politics. One poll released in early July showed that 85 percent of Germans surveyed opposed making concessions to Greece. Merkel has faced resistance to a softer line from within her ruling coalition. Amid the recent bailout negotiations, one lawmaker from Merkel’s Christian Democratic Union derided the euro zone’s policy toward Greece as a “financial carousel.” Her hard-nosed finance minister, Wolfgang Schaüble, once said that Greece “cannot be a bottomless pit.” Such attitudes are fostered by a widespread perception among Germans that Greece is unworthy of their aid. “NEIN,” blasted a headline in the tabloid Bild earlier this year. “No more billions for greedy Greeks!” it insisted. Even the referendum results produced little sympathy. Shortly after the vote, Georg Fahrenschon, head of the association of German savings banks, said “the Greek people have spoken out against the foundations and rules of the single currency bloc.”

     

    Such sentiments have hindered efforts to tackle the crisis from the start.

    That German view—the euro zone’s problems aren’t of Germany’s making—has dictated Berlin’s approach toward the crisis. Merkel has played the unrelenting taskmaster, treating her beleaguered neighbors not as partners, but as spoiled children who could be set right only by the rod.

    Last year, French President François Hollande and Italian Prime Minister Matteo Renzi advocated greater flexibility in the austerity program to promote job creation. “If everyone does austerity, we’ll have even slower growth,” Hollande groused in October. Merkel would have none of it. “We have had times in Europe with very high deficits and yet no growth, so we must learn from the past,” she said. When some European leaders proposed “eurobonds,” instruments backed by the zone to ease financing costs on individual states, Merkel rejected the idea.

     

    Even the IMF, in a June report on Greece’s finances, deemed the country’s debt load “unsustainable” and recommended relief. Merkel accepted only minor concessions to bailout demands, insisting that the Greeks impose further tax hikes and public spending cuts. She labeled her offer “generous.”

    Is it any wonder, then, that the Greeks said no?

    They may be only the first. Joblessness and recession have persuaded other voters in Europe to seek a new course. Gaining popularity in Spain, where unemployment is 22.5 percent, is the leftist political movement Podemos, which also seeks a fairer deal from the rest of Europe. “The problem isn’t Greece, the problem is Europe,” Podemos’s chief, Pablo Iglesias, said in late June. In Italy, Beppe Grillo, leader of the anti-establishment Five Star Movement, called for a referendum to decide if Italy should remain in the monetary union.

    Europe’s leaders characterized a no verdict in the Greek referendum as a vote against the idea of Europe. In fact, the resounding no was a vote against the existing harsh reality of membership in present-day Europe.

    As Bloomberg concludes, unless Europeans act as partners in their grand quest for solidarity, they will end up with less Europe, not more.

     

  • 3 Things: Correction, Interest Rates & Oil Prices

    Submitted by Lance Roberts via STA Wealth Management,

    Stocks: Is It Over Yet?

    While yesterday's suspension of trading on the New York Stock Exchange drew attention to the plunge in equity prices, the reality is that stocks have been in a correction since the all-time highs posted back in May. Of course, until yesterday's headlines, you may not have realized that the correction was in process as it has been "as slow as a turtle running in peanut butter."

    As Michael Kahn wrote at Barron's yesterday:

    "After months of sideways action and false moves, the Standard & Poor's 500 finally scored a true technical breakdown. It moved below the pattern that had held it in check since February, taken out the May low, and now dipped below the more important 200-day moving average for the second day in a row.

     

    In technical circles, the positive reversal of fortune left sizable 'hammers' on Japanese candlestick charts. In candle-speak, the market is hammering out a bottom and after a two-month slide it did look that it was time for a rebound. But as with many chart patterns, confirmation in the form of upside follow-through was needed to prove that the market had found a floor. That was not to be"

    The first chart is a DAILY chart of the S&P 500 index. The black dashed line is the 150-day moving average that has acted as primary support for the bull market advance (with the exception of the post QE3 end tantrum in October) since December, 2012. Importantly, after the markets failed to maintain its bullish consolidation (rising red dashed line) that began earlier this year, the subsequent breakdown found support at the long-term bullish trend. Unfortunately, the oversold bounce failed at the previous bullish consolidation support line, turned down and broke through the long-term bullish trend.

    Unlike the break of the long-term bullish trend in October of last year, which quickly recovered and scored new highs, that has not been the case as late. Each attempt to break back above the long-term bullish trend has failed so far.

    SP500-Daily-TechnicalAnalysis-070915

    If we slow the price volatility down by looking at a WEEKLY chart, a very similar pattern emerges. The bullish market consolidation, long-term supports, and the recent breakdown are all evident. It is also worth noting that a majority of indicators are registering a "sell signal" which suggests that, at least in the near term, prices are likely headed lower.

    SP500-Weekly-TechnicalAnalysis-070915

    As shown in both charts above, the 2040 level is currently acting as critical support for the market. If the bull market cycle is to continue, the market must hold that level and move to new highs very soon. Another failure at lower highs, as in June, will confirm the current downtrend and suggest lower price levels in the not so distant future. Michael makes a good point on this:

    "In the past, any time the Fed assured the market it would not rush to raise rates, stocks benefited. Banks are telling us now that may not be true anymore. Weak fundamentals, rather than low interest rates, may be the driver over the coming months.

     

    The question for investors is whether this is a correction or the end of the cyclical bull market that began in 2009. Unfortunately, the answer is still not known although it is very likely that cash should be an important part of any portfolio at this time."

    I agree with that statement. I am not suggesting that investors become overly defensive in portfolio allocations currently. The market is getting oversold on both a short and intermediate term basis which provides the "fuel" for a reflexive bounce. That rally should likely be used to rebalance portfolio allocations, reduce aggressive "risk" postures and raise some cash to hedge against further turmoil until markets provide a more stable investment environment.

    At least things are starting to get interesting.

    Like I Said, Rates Aren't Going Anywhere

    I have consistently pushed back against the mainstream notion that longer-term interest rates were going to rise simply because the economic underpinnings do not support higher rates. To wit:

    "With economic growth running at exceptionally low rates, along with inflationary pressures and monetary velocity, interest rates will remain range-bound at low levels for quite some time. This is simply because interest rates are a reflection of the demand for credit over time, in weak economic environment higher rates cannot be sustained."

    Interest-Rates-050815

    "Therefore, the recent uptick, as recommended in last weekend’s newsletter, is now a buying opportunity for bonds."

    What perplexes me about the mainstream media is that while they focus on every facet of trading the market in stocks, they give little notice to the investing side of fixed income.

    As investors, we buy stocks because we think that the overall market is going to rise. This is why we benchmark our portfolio to some nebulous index that has absolutely nothing to do with our specific risk tolerances, goals and, most importantly, time horizons. However, just as the stock market index is used to gauge levels of "risk" exposure in stocks, interest rates provide exactly the same analysis for fixed income.

    The chart below, which I often discuss in the free weekly e-newsletter, shows the technical trading model for fixed income in portfolios.

    InterestRates-Weekly-TechnicalAnalysis-070915

    The circles highlight periods when interest rates have become extremely overbought or oversold. Unlike the stock market, interest rates have an inverse relationship to bond prices (as interest rates rise, bond prices fall) therefore, when rates are overbought, bonds are oversold and should be bought.

    Note: This analysis is less important if you are buying individual bonds and holding them until maturity. However, for the majority of investors that are using bond funds and bond ETF's, this analysis becomes critically important especially in navigating a long-term sideways trading range for rates going forward. (Read this for reasoning why rates are stuck over the next decade.)

    As shown above, the recent move higher in interest rates was simply a bounce from the extremely oversold levels witnessed at the beginning of this year when rates fell to 1.7%. However, despite the media's ongoing calls that the "great bond bull" was dead, the reality is that rates completed a very traditional 61.8% retracement of decline from April of last year.

    Given the current weakness in economic data, the overbought condition in rates currently, and the rising issues in China, it is highly likely that rates will potentially retest their lows by the end of this year. Regardless, investors need to start paying attention to the developing trading range of interest rates in the future.

    Oil Prices & Energy Stocks

    Besides interest rates, I also cover oil and energy prices on a regular basis in the weekly e-newsletter. Two week's ago I stated the following:

    "There are very few signs that the drop in oil prices, and subsequent pain to energy-related investments is over. As shown in the chart below, there is still a significant divergence between energy-related investments and the underlying commodity price. These two will likely reconnect at some point in the future as oil prices drop towards the high 40's potentially later this summer.

     

    Secondly, energy related investments have experienced the first of most likely several 'dead cat' bounces that will plague energy investments into the near future. There is still WAY too much exuberance due to "recency bias" to make energy a viable investment opportunity longer term. More pain in the sector will be required to flush out speculators before longer term investments can be made. There will be a good opportunity in the future, it most likely isn't now."

    The chart below shows the previous high correlation, as would be expected, between energy stocks and oil prices. The divergence in early 2014 is what prompted my call then to begin reducing exposure to energy stocks. While energy stocks are attempting to complete a 61.8% retracement and hold some level of support, the gap between oil prices and energy-related investments has yet to be filled.

    Oil-Weekly-TechnicalAnalysis-070915

    There is still a significant amount of unwinding left in the energy space as production is still far outstripping demand. If the collapse in China continues, it is possible that oil prices could drop into the low $40's putting additional pressure on energy company related earnings.

    Furthermore, exuberance is still high. Great buying opportunities come when the markets become convinced that oil prices and energy companies are "eternally dead." We are not there just yet.

  • Nobel Prize-Winning Economist Demands US Taxpayers "Show Humanity & Save Greece"

    When the going gets tough, the taxed get going and that is what Nobel Prize winning economist Joseph Stiglitz thinks should happen. In a Time op-ed, Stiglitz warns (likely correctly) that if Greece continues with austerity, it would be depression without end; and so his solution is simple… "The U.S. was generous with Germany as we defeated it. Now, it is time for the U.S. to be generous with our friends in Greece in their time of need, as they have been crushed for the second time in a century by Germany, this time with the support of the troika." Strawman much?

     

    Via Time.com,

     If Greece continues with austerity, it would be depression without end

     

     

    As the Greek saga continues, many have marveled at Germany’s chutzpah. It received, in real terms, one of the largest bailout and debt reduction in history and unconditional aid from the U.S. in the Marshall Plan. And yet it refuses even to discuss debt relief. Many, too, have marveled at how Germany has done so well in the propaganda game, selling an image of a long-failed state that refuses to go along with the minimal conditions demanded in return for generous aid.

     

    The facts prove otherwise: From the mid-90’s to the beginning of the crisis, the Greek economy was growing at a faster rate than the EU average (3.9% vs 2.4%). The Greeks took austerity to heart, slashing expenditures and increasing taxes. They even achieved a primary surplus (that is, tax revenues exceeded expenditures excluding interest payments), and their fiscal position would have been truly impressive had they not gone into depression. Their depression—25% decline in GDP and 25% unemployment, with youth unemployment twice that—is because they did what was demanded of them, not because of their failure to do so. It was the predictable and predicted response to the austerity.

     

    The question now is: What’s next, assuming (as seems ever more likely) they are effectively thrown out of the euro? It’s likely that the European Central Bank will refuse to do its job—as the Central Bank for Greece, it should do what every central bank is supposed to do, act as a lender of last resort. And if it refuses to do that, Greece will have no option but to create a parallel currency. The ECB has already begun tightening the screws, making access to funds more and more difficult.

     

    This is not the end of the world: Currencies come and go. The euro is just a 16-year-old experiment, poorly designed and engineered not to work—in a crisis money flows from the weak country’s banks to the strong, leading to divergence. GDP today is more than 17% below where it would have been had the relatively modest growth trajectory of Europe before the euro just continued. I believe the euro has much to do with this disappointing performance.

     

    Managing the transition from the euro to the Greek euro may not be easy, but Argentina and others have shown how it can be done. The government would recapitalize the banks in the new currency, continue with capital controls, restrict bank withdrawals, and facilitate the transfer of money within the banking system from one party to another. The money inside the banking system would be slightly discounted (i.e. worth slightly less than cash—in the case of Argentina, the discount was a few percentage points for ordinary transactions). Pensioners would need to get special treatment.

     

    Meanwhile, Greece would begin the process of debt restructuring: Even the IMF says that it’s absolutely necessary. The Greeks might take a page from Argentina, exchanging current bonds for GDP-linked bonds, where payments increase with Greece’s prosperity. Such bonds align the incentives of debtors and creditors (unlike the current system, where Germany benefits from the weaknesses in Greece).

     

    Greece can easily survive without the funds from the IMF and the eurozone. Greece has done such a good job of adjusting its economy that, apart from what it’s paying to service the debt, it has a surplus. It isn’t even dependent on the IMF and the eurozone for foreign exchange: At least before the most recent stranglehold that Greece’s creditors had imposed, it was running a current account surplus of 1%—5% if we exclude oil exports. (What it was buying abroad in imports was 1% less than what it was selling in exports.) Especially if oil prices remain low, and if its lower “new” exchange rate attracts more tourists and encourages exports, it can weather the storm.

     

    After Argentina restructured its debt and devalued, it grew rapidly—the fastest rate of growth around the world except for China—from its crisis until the global financial crisis of 2008. Every country is different. Economists debate about how responsive exports and imports are to changes in exchange rates. Argentina benefited from a large increase in exports as a result of the commodity boom. There are, however, some striking similarities: Both countries were being strangled by austerity. Both countries under the IMF programs saw rising unemployment, poverty, and immense suffering. Had Argentina continued with austerity, there would have just been more of the same. The Argentina people rose up and said no. So, too, for Greece: If Greece continues with austerity, it would be depression without end.

     

    The U.S. was generous with Germany as we defeated it. Now, it is time for the U.S. to be generous with our friends in Greece in their time of need, as they have been crushed for the second time in a century by Germany, this time with the support of the troika. At a technical level, the Federal Reserve needs to create a swap line with Greece’s central bank, which—as a result of the default of the ECB in fulfilling its responsibilities—will have to take on once again the role of lender of last resort. Greece needs unconditional humanitarian aid; it needs Americans to buy its products, take vacations there, and show a solidarity with Greece and a humanity that its European partners were not able to display.

    *  *  *

    How long before this strawman becomes policy? What we have been told is a storm in a teacup by every asset manager under the sun now appears to be paniccing policymakers on both sides of the pond.

    • *U.S. WANTS TO SEE GREECE WORK ISSUES OUT WITH CREDITORS: KIRBY
    • *U.S. WANTS TO SEE DEBT SUSTAINABILITY IN GREECE: KIRBY
    • *LEW SAYS GREECE'S DEBT IS NOT SUSTAINABLE
    • *LEW: THERE IS STILL SOLUTION AVAILABLE IN GREECE

     

  • Bonds Thumped, Stocks Pump-n-Dump'd As Grexit Fear Tops China Cheer

    Today summed up…

    What started out so well… ended not so well… Some Malicious People Sold!!!

     

    Because today's rally was predicated on this!!!!

    Cash indices opened at the highs of the day and never looked back as the algos lifted The Dow green for the week for a few seconds of stop running… CNBC's Kelly Evans seriously said "We are finishing off the hghs today"…!!

     

    On the week, Nasdaq is worst…

     

    It's called Central Planning for a reason – crucially every attempt was made to keep S&P above 2055.93 (200DMA) and Dow above 17695 (200DMA) – IT FAILED!!!

     

    AAPL appeared to mini flash crash late on with very heavy volume (maybe China weakness and iWatch disaster is weighing?)… and had an ugly day… AAPL is nearing its 200DMA at 118.72

     

     

    Greek stock ETFs ramped today as did European stocks (thanks to SNB's helping hand) but Greek bonds traded for the first time in 2 weeks and it was ugkly…

     

    Something snapped at the US Open – The dollar rallied and US Stocks and Bonds were dumped…

     

    Treasuries were sold from the close last night and the dumping accelerated as US opened and once again after the weak 30Y auction… This was the 2nd worst day for 30Y yields since Nov 2013…+13bps

     

    The USDollar flatlined through Asia then dipped and ripped on Europe's open…

     

    As yet again SNB smashed swissy lower, buying USDs and enabling the ramp…

     

    Despite the dollar strength, commodities all gained on the day…

     

    Charts: Bloomberg

    Bonus Chart: It's different for now…

  • What Happens Next In Greece (In 2 Simple Charts)

    Over the course of six painful months, negotiations between Athens and Brussels have produced innumerable “deadlines”, “ultimatums”, and “last chance” summits, none of which have produced a lasting deal or a Grexit. In fact, until the deposit outflows started to accelerate and Greek PM Alexis Tsipras took the dramatic step of putting creditors’ proposal to a popular vote, many observers were beginning to lose interest, perhaps believing that the farce might just continue indefinitely. 

    This Sunday however, is being billed as the day; the deadline to end all deadlines and the very last chance for Athens to remain in the EMU. Meanwhile, pressure on Tsipras — who, according to The Telegraph, likely thought he would be drinking beer with Varoufakis over quiet lunches by now — is building from both sides, with far-left Energy Minister Panagiotis Lafazanis swearing that the “referendum ‘no’ vote is not going to become a humiliating ‘yes'”, and Germany showing few signs of weakness. The intractable nature of the situation was brought into sharp relief earlier when MNI described Tsipras’ “new” proposal which, by all appearances, looks as though it will be unacceptable to Germany and to the harlinders within Syriza.

    In an effort to help cut through the confusion, we you bring you the following two graphics which shed some light on what lies ahead regardless of what transpires between now and Monday.

    From Deutsche Bank:

    From Bloomberg:

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