Jul 12

Today’s News July 12, 2015

  • The Great FreedomFest Debate Was Like Watching Tom and Jerry

    by Keith Weiner

     

    With apologies to his fans, Jerry is an evil little mouse who constantly pesters Tom the Cat. Tom tries and tries, but cannot seem to overpower someone who is a fraction of his size and strength.

    Watching Stephen Moore attempt to debate Paul Krugman was like that.

    The “economics” of Krugman is Keynesian economics. It consists of central planning your life by force, because market failure. And Krugman repeated this phrase “market failure” several times. Of course the solution was always government intervention.

    Here is an interesting endorsement about one of Keynes’ books.

    “Fascism entirely agrees with Mr. Maynard Keynes, despite the latter’s prominent position as a Liberal. In fact, Mr. Keynes’ excellent little book, The End of Laissez-Faire (l926) might,
    so far as it goes, serve as a useful introduction to fascist economics. There is scarcely anything to object to in it and there is much to applaud.”

    This was said by someone who knows all about fascism, Benito Mussolini. Fascism is a corporatist system. Although it has private ownership in name, it’s all under government control. Krugman is a real economic lightweight who proposed fascism for nearly everything that came up. His debate tactics consisted of context-dropping, asserting simple fallacies, and cherry-picking data.

    In the TV cartoon, Jerry would steal something and run into his mouse hole. Tom would be left whacking at the hole with a broom, in vain. At FredomFest, Krugman would say that the government must spend more to get the economy out of recession. Moore disagreed, and Krugman displayed a chart showing government spending and GDP growth rates for many countries around the world. Government spending and growth correlated very well.

    Instead of flailing away with a blunt instrument, I would have said “Seriously, Paul? What a simple fallacy. The definition of GDP includes government spending. You haven’t proven anything. It’s a tautology that if government spending goes up, GDP goes up. This is the flaw in GDP. Sometimes, rising GDP means the people are being impoverished.”

    Next, Krugman moved on to one of the central fallacies of Keynesianism. In Krugman’s words, “You just gave the logic for government deficit spending. Your spending is my income. Where is the income supposed to come from, if everyone cuts spending? Government has to make up the difference.”

    I would have said, “Seriously Paul. Again?! This is like the Broken Window fallacy [which Krugman said in 2011 “ceased to be a fallacy”]. Not all spending is consumer spending. Investment spending is important. When people slow consumption, it doesn’t mean they hoard dollar bills. They increase their bank deposits. Banks lend to promising companies. You know, that next new product or lifesaving technology? Except you don’t know it, because government spending has crowded them out.”

    In an economic downturn, people go on fewer gambling and drinking binges to Las Vegas. Krugman is basically saying that the government has to take up the slack, and go on gambling binges. Because demand shortfall.

    Shortly after telling Moore that one cannot cherry-pick one’s data, Krugman showed a graph comparing Jerry Brown’s California to Sam Brownback’s Kansas. For one year. I felt embarrassed for him, as there were sounds of amused laughter from the audience.

    Why did it come to Kansas vs. California for the year 2014 (I didn’t write the year in my notes)? It’s because Moore was defending free markets by appeal to aggregate statistics. Moore used red states as examples of freer markets, and blue for less free markets. He showed a few charts in which red states fared better than blue.

    Krugman’s cherry-picking got him safely back to his mouse hole, with Moore stuck outside, banging with a floor cleaning tool.

    You cannot defend freedom using statistics, as you cannot get a mouse out of the wallboards with a broom.

    Both Krugman and Moore were nervous speakers. Krugman was hunched a bit in on himself (though to be fair, he was in hostile territory and he knew it). Both spoke too rapidly and with a jittery character to their voices. Each has a nervous tell, with Moore incessantly taking little sips from his iced tea and Krugman playing with his fingers.

    Krugman took the lead on each issue. Moore often respond with a long caveat, which conceded the point to Krugman. For example, Krugman said that some kids are born disadvantaged, so we need to give them each $8,000 to $10,000 (per year, I assume) in free money. He actually said they “choose the wrong parents.”

    Someone please tell him that this is only possible by robbing the taxpayers. Maybe add that it will just accelerate America’s collapse into bankruptcy. Trillions in welfare spending do not fix anyone’s problems, and are actually the cause of the disadvantage Krugman discusses.

    Moore said he supports a social safety net, because America is rich, we can afford it, and it’s morally right. When the broom failed to defeat the mouse, not even Tom tried singing to Jerry.

    The topic moved to healthcare. Moore noted that government involvement has caused costs to spiral. Krugman offered another whopper. It’s because innovation.

    This is absurd, and even Krugman knows it. In computers, there’s been decades of both rapid innovation and falling prices.

    Krugman moved on to his shining moment, in the Ellsworth Toohey sense of shine. He unshrunk from his hunch, and his voice rang with moral clarity. “Obamacare is a life saver!”

    The audience booed.

    “I know someone whose life was saved by Obamacare. If you don’t know anyone like that, then I’m sorry for your narrow little world.”

    This is a faux-apology and a presumption. Who the heck is this guy to apologize to me for my life not conforming to his ideology? Not to mention, Krugman glosses over the people harmed by it. There ain’t no such thing as a free lunch, even if handout beneficiaries think there is.

    Worse yet Krugman implies that, to be moral, you must sacrifice yourself. He is cashing in on the guilt many people feel, at their own success. He’s learned that all he has to do is raise the specter that someone else is suffering, and they will concede him anything he demands.

    This being FreedomFest, and not the People’s Workers’ Party, a large majority of the audience supported Moore. However, moderator Mark Skousen asked a very clever question, “If you did not enter this room in agreement with Paul Krugman, did you change your mind as a result of what he said today?” I estimate about 50 people clapped or cheered.

    Krugman won because he appealed to people’s sense of right and wrong. Morality trumps economics any day of the week. Moore didn’t even respond to Krugman’s economic errors, much less smack down his phony judgmentalism.

  • What is a Market?

     

    By EconMatters

     

    Market Definition

    The Merriam-Webster definition for Market is the following:  

    1.  A meeting together of people for the purpose of trade by private purchase and sale and usually not by auction 
    2. The people assembled at such a meeting. This just gives a starting point for this important discussion given the philosophical crossroads that financial markets are facing in today`s evolution of economic theory with regard to social and governmental policy decisions juxtaposed against the backdrop of the underlying nature of basic financial principles.

     

    Global Volatility

    The past week saw the Chinese government take drastic measures to keep their financial market from falling further, the market has become as artificial as can be envisioned with sellers facing outright arrest for their actions.



    This really has brought to culmination the ever-trending debate of what role central banks, governments and centralized control have for financial markets. And what is the very nature of markets in general, what is their purpose, their structure, and ultimate sustainability going forward as entities.

     

    Slippery Slope of Market Evolution

    The US Central Bank has influenced market prices by lowering interest rates to zero, flooding the financial markets with massive liquidity, and outright asset purchases like treasury bonds. Japan has gone one step further in addition to buying bonds has expanded their Central Bank purchases to other financial assets like equity indexes. Many Central Banks like for example the Swiss National Bank holds shares in US equities like Apple Inc., Exxon Mobil Corp. and Johnson & Johnson to name a few of their holdings.

     

    The Role of Central Planning

    China which has long been a centrally planned government structure for economic initiatives who was trying to implement more free market reforms recently has reverted back to its fundamental nature and strategies and tried to completely control its stock market. Basically taking over every aspect of the market, forcing firms to buy stocks, closing stocks from trading, and arresting parties who wish to sell assets in the financial market.


     

    The best face to put on this behavior is that panic and irrational selling has taken over the market, and that the Chinese government is just putting in a giant trading curb in the market to give participants a chance to recover, take a deep breath, and reflect more rationally on the market. The other take on these measures in that they only make things worse, and in a sense have completely broken the market, it no longer exists.

     

    Social Engineering Outcomes & Financial Markets

    But the Chinese example is just the latest and final culmination in my mind of the slippery slope of governmental and central bank intervention in financial markets. The rub is this if central banks and governments view financial markets as Wealth Creation and Social Policy Initiatives, as Bernanke himself seemed to imply with his comments on the Russell 2000 during his tenure at the helm of the Federal Reserve, then the culmination of this rabbit hole journey is that central banks and governments have to intervene forever. A consistent forever, i.e., markets have to go up at a right angle forever, every year has to be higher than the previous year. If this is modern market theory than you have to commit forever, there is no stop and start commitment! It is like debt monetization theory and utilizing inflation to monetize an ever increasing debt over time by expanding the money supply.

     

    If markets are no longer vehicles for price discovery, valuation metrics for business prospects and growth projections, or capital allocation vehicles reflecting sound business decisions by management; but rather proxy vehicles and conduits for Social Wealth Creation Policies then is doesn`t really matter if Enron is solvent or not, or a Chinese construction company is bankrupt as long as the government can make these shares appreciate each year in perpetuity. In other words to be a forever appreciating asset, and not a valuation or price discovery mechanism.

     

    Sustainable Commitment

    Therefore, two questions emerge can central banks and governments stomach or sustain this kind of commitment forever for financial markets, and will it work even if they do? And probably more importantly is this the best outcome for financial markets, i.e., would markets and financial markets in general and the overall economy be better off as a result of a different approach by central banks and government authorities over the long run?

     

    These are some of the questions that all central banks and governmental policy leaders need to think hard about right now given the trend that has been emerging lately with policy decisions in regards to financial markets.

     

    Call it whatever you want, but it isn`t a market!

    My belief is that markets are markets for a reason, whether they are financial markets, the oil market, the housing market, the local farmer`s market or the illegal drug market, that fundamental economic and financial principles of price discovery and valuation metrics determining ultimate value lie beneath what it means to actually constitute a market.

     

    What we have today are not markets, you can call a financial market a market, but they are no longer actually markets in the traditional sense of what it means to be a market. It is also my belief that ultimately the underlying financial and economic principles of market behavior and forces will prevail over central bank and governmental interventions. In the end it is just a matter of time! Markets can be influenced for a while, they can even be changed, but ultimately the core essence of what it means to be a market reasserts itself at often the least opportune moment in time.

     

    Ultimately the assets in a marketplace represent valuation instruments, price discovery vehicles over time, and any approach that tries to circumvent this process is doomed to fail over the long haul as witnessed by how many companies no longer exist on a global basis over the last 50 years. Financial Markets are not socially engineering mechanisms for wealth creation strategies by central banks or governments, they are price discovery and valuation vehicles that are ultimately beholden to the underlying laws of economics and finance. So again I ask what does it mean to be a Market?

     

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  • Guest Post: A Coming Era Of Civil Disobedience?

    Submitted by Patrick Buchanan via Buchanan.org,

    The Oklahoma Supreme Court, in a 7-2 decision, has ordered a monument of the Ten Commandments removed from the Capitol.

    Calling the Commandments “religious in nature and an integral part of the Jewish and Christian faiths,” the court said the monument must go.

    Gov. Mary Fallin has refused. And Oklahoma lawmakers instead have filed legislation to let voters cut out of their constitution the specific article the justices invoked. Some legislators want the justices impeached.

    Fallin’s action seems a harbinger of what is to come in America — an era of civil disobedience like the 1960s, where court orders are defied and laws ignored in the name of conscience and a higher law.

    Only this time, the rebellion is likely to arise from the right.

    Certainly, Americans are no strangers to lawbreaking. What else was our revolution but a rebellion to overthrow the centuries-old rule and law of king and Parliament, and establish our own?

    U.S. Supreme Court decisions have been defied, and those who defied them lionized by modernity. Thomas Jefferson freed all imprisoned under the sedition act, including those convicted in court trials presided over by Supreme Court justices. Jefferson then declared the law dead.

    Some Americans want to replace Andrew Jackson on the $20 bill with Harriet Tubman, who, defying the Dred Scott decision and fugitive slave acts, led slaves to freedom on the Underground Railroad.

    New England abolitionists backed the anti-slavery fanatic John Brown, who conducted the raid on Harpers Ferry that got him hanged but helped to precipitate a Civil War. That war was fought over whether 11 Southern states had the same right to break free of Mr. Lincoln’s Union as the 13 colonies did to break free of George III’s England.

    Millions of Americans, with untroubled consciences, defied the Volstead Act, imbibed alcohol and brought an end to Prohibition.

    In the civil rights era, defying laws mandating segregation and ignoring court orders banning demonstrations became badges of honor.

    Rosa Parks is a heroine because she refused to give up her seat on a Birmingham bus, despite the laws segregating public transit that relegated blacks to the “back of the bus.”

    In “Letter from Birmingham Jail,” Dr. King, defending civil disobedience, cited Augustine — “an unjust law is no law at all” — and Aquinas who defined an unjust law as “a human law that is not rooted in eternal law and natural law.”

    Said King, “one has a moral responsibility to disobey unjust laws.”

    But who decides what is an “unjust law”?

    If, for example, one believes that abortion is the killing of an unborn child and same-sex marriage is an abomination that violates “eternal law and natural law,” do those who believe this not have a moral right if not a “moral responsibility to disobey such laws”?

    Rosa Parks is celebrated.

    But the pizza lady who said her Christian beliefs would not permit her to cater a same-sex wedding was declared a bigot. And the LGBT crowd, crowing over its Supreme Court triumph, is writing legislation to make it a violation of federal civil rights law for that lady to refuse to cater that wedding.

    But are people who celebrate the Stonewall riots in Greenwich Village as the Mount Sinai moment of their movement really standing on solid ground to demand that we all respect the Obergefell decision as holy writ?

    And if cities, states or Congress enact laws that make it a crime not to rent to homosexuals, or to refuse services at celebrations of their unions, would not dissenting Christians stand on the same moral ground as Dr. King if they disobeyed those laws?

    Already, some businesses have refused to comply with the Obamacare mandate to provide contraceptives and abortion-inducing drugs to their employees. Priests and pastors are going to refuse to perform same-sex marriages. Churches and chapels will refuse to host them. Christian colleges and universities will deny married-couple facilities to homosexuals.

    Laws will be passed to outlaw such practices as discrimination, and those laws, which the Christians believe violate eternal law and natural law, will, as Dr. King instructed, be disobeyed.

    And the removal of tax exemptions will then be on the table.

    If a family disagreed as broadly as we Americans do on issues so fundamental as right and wrong, good and evil, the family would fall apart, the couple would divorce, and the children would go their separate ways.

    Something like that is happening in the country.

    A secession of the heart has already taken place in America, and a secession, not of states, but of people from one another, caused by divisions on social, moral, cultural, and political views and values, is taking place.

    America is disuniting, Arthur Schlesinger Jr. wrote 25 years ago.

    And for those who, when young, rejected the views, values and laws of Eisenhower’s America, what makes them think that dissenting Americans in this post-Christian and anti-Christian era will accept their laws, beliefs, values?

    Why should they?

  • Schauble Proposes "5 Year Grexit With Humanitarian Support"

    As we await the verdict on whether Greece will be in or out, here are the earlier comments from the Eurozone finance ministers and others attending the Eurogroup meeting, via Reuters:
     
    GERMAN FINANCE MINISTER WOLFGANG SCHAEUBLE

    • “We will have exceptionally difficult negotiations.”
    • “The problem is that that there was a situation at the end of the year that was very hopeful, despite all the scepticism of previous years, and that this was destroyed in an incredible way in the last months and hours.
    • “We are dealing with financing gaps which exceed everything we have dealt with in the past.”
    • “We are talking about a completely new three-year programme.”

     
    LUXEMBOURG FINANCE MINISTER PIERRE GRAMEGNA

    • “We, as Luxembourg, because we hold the EU presidency right now, are definitely ready to discuss debt restructuring, finalising is another issue.”

     
    SLOVAKIAN FINANCE MINISTER PETER KAZIMIR

    • “I see a huge problem with DSA (debt sustainability analysis), so long-term sustainability of the Greek debt. So now we will see what the institutions will bring on the table, what kind of finances and we have to assess it… This package would be appropriate for the completion of the second programme, but I’m afraid this is not enough for the third programme, for the ESM programme.”

     
    EUROGROUP CHAIRMAN AND DUTCH FINANCE MINISTER JEROEN DIJSSELBLOEM

    • “We are still far away. It looks quite complicated. On both content and the more complicated question of trust, even if it’s all good on paper the question is whether it will get off the ground and will it happen. So I think we are facing a difficult negotiation.”
    • Will you talk about debt relief?
    • “I don’t know we will get to that.”
    • “There is still a lot of criticism on the proposal, reform side, fiscal side, and there is of course a major issue of trust. Can the Greek government be trusted to do what they are promising, to actually implement in coming weeks, months and years. I think those are the key issues that will be addressed today.”
    • (For Greeks to regain trust) “Well, they will have to listen to the ministers and the institutions first and see what improvements are needed. And they will have to show very very strong commitments to rebuild that trust.”

     
    FRENCH FINANCE MINISTER MICHEL SAPIN

    • “Confidence has been ruined by every Greek government over many years which have sometimes made promises without making good on them at all. Today we need to have confidence again, to have certainty that decisions which are spoken of are decisions which are actually taken by the Greek government.
    • On debt restructuring: “France has always said there is no taboo about the debt. We have the right to talk about the debt.”
    • We don’t want there to be reduction in the nominal value of the debt because that is a red line for many of the member states in the Eurogroup.
    • “France … is a link, and we will play this linking role to the very end.”

     
    ITALIAN ECONOMY AND FINANCE PIER CARLO PADOAN

    • “I expect a long finance ministers meeting on Greece. It is not very easy but we will do all we can.”
    • “The purpose of this meeting is to kick off negotiations on ESM which is a medium-term, very demanding programme and we are all here with open minds to reach an OK, a green light to start negotiations. The government, the Greek Parliament and the Greek people are positive towards starting what is the beginning of a negotiation. It is not about striking a deal tonight.”

     
    MALTESE FINANCE MINISTER EDWARD SCICLUNA

    • “This (Greek issue) has to be solved today because it is a question of coming up with this framework which gives assurance to the finance ministers.”

     
    IRISH FINANCE MINISTER MICHAEL NOONAN

    • “The Greek paper was silent on banking. Obviously the Greek banks are in difficulty now and it’s going to be hard to put them back on an even keel, so we need a full briefing on that. Secondly I said we needed a medium term sustainable programme. Sustainability depends a lot on whether the programme is sufficient to cause the Greek economy to grow and to create jobs… It is very hard to stimulate an economy when on the demand you are doing corrective work so they need more supply side initiatives which effectively means a lot of reform which doesn’t seem to be built into the programme.”
    • “I think the trust is now being rebuilt in the relationship with Greece. I would hope that trust would continue to be rebuilt today. That’s pretty important also.”

     
    EUROPEAN COMMISSION VICE-PRESIDENT VALDIS DOMBROVSKIS

    • “It must be said that we are clearly making progress and the Greek government’s proposal actually is pretty much along the lines of what the institutions’ proposal was before the referendum. So clearly we see there is a willingness of the Greek to reach an agreement and also the vote in parliament showed that there is a parliamentary majority to move ahead with this programme.”
    • “What we should be discussing today is basically about giving a mandate to the European Commission in liaison with the ECB and in close cooperation with the IMF to start negotiations about this ESM programme.”

     
    AUSTRIAN FINANCE MINISTER HANS JOERG SCHELLING

    • Asked about whether he was positive on a deal: “Yes and no. Of course it is a step ahead that Greece has finally delivered, surprisingly what was already agreed before and surprisingly after the referendum. What is missing are the details. The biggest item we have to talk about is what guarantees Greece can give to implement what has been agreed. We have seen for five years now that such lists are sent, but the implementing measures never happen.”

    DUTCH JUNIOR FINANCE MINISTER ERIC WIEBES

    • “The Greeks have clearly made a step forward but at the same time we see that the institutions are critical of the plan, the missing specificities and they see that the plan is weaker in some areas than it should be. It is their suggestion to only start negotiations when these conditions are further filled in.
    • At the same time, many governments, mine too, have serious concerns about the commitment of the Greek government and also the power of the implementation. That has been the weak point because after all, we are discussing a proposal from the Greek government that was fiercely rejected a week ago, and that is a serious concern.
    • (On what the Greeks can do further) we have to discuss that. Clearly there has to be made a step that enables trust with all the financing parties. (What happens if there is no agreement tonight) That is basically up to the Greek government.”

     
    IMF MANAGING DIRECTOR CHRISTINE LAGARDE

    • “I think we are here to make a lot more progress.”

     
    EUROPEAN ECONOMIC AFFAIRS COMMISSIONER PIERRE MOSCOVICI

    “Since the start, the European Commission had the objective, that of the integrity of the euro. It was to keep a reformed Greece in the euro zone.”
    “I note that the Greek government has made significant gestures.”
    “We (the creditors) have said the Greek reform programme could constitute a basis for a new programme.”
    “Our general sentiment is that there need to be reforms, solid reforms, reforms appropriate to the Greek authorities and reforms that are implemented as soon as possible.”

    * * *

    And here are the punchlines:

    First the Finns:

    • Finnish Parliament Committee Opposes Greek Aid Talks
    • Greek proposals don’t warrant negotiations on new bailout, public broadcaster YLE says, citing unnamed sources.
    • Finnish parliament’s Grand Committee adopted position regarding Greek bailout request on Saturday; stance won’t be published ahead of Eurogroup debate in Brussels, state secretary Olli-Pekka Heinonen told local media
    • MP Paavo Arhinmaki, head of Left Alliance, told Helsingin Sanomat newspaper he left dissenting opinion at Grand Committee meeting; said Greek govt proposals “could be basis to start talks”

    And now, Greek nemesis #1, Schauble via Bloomberg:

    • SCHAEUBLE PROPOSES TIME-LIMITED `GREXIT’: FAZ.
    • SCHAEUBLE SUGGESTS 5-YR GREXIT, HUMANITARIAN SUPPORT: FAZ

    More from German Focus, google translated:

    The German Finance Ministry has communicated its negative assessment of the Greek proposals to other Euro countries on Saturday. “These proposals are missing centrally important areas of reform to modernize the country and to advance on the long term economic growth and sustainable development,” it said in the one-sided position paper, which was present at the Frankfurter Allgemeine Sonntagszeitung (FAS). Therefore they could “not be the basis for a completely new, three-year ESM program”.

     

    Instead, the Treasury took two paths in the eye that remained.

     

    One way: Greece improved its proposals quickly and comprehensively, with the full support of Parliament. The Ministry suggested among other things that Greece shall transfer assets amounting to 50 billion euros to a trust fund, which it sells and thus removes debt.

     

    Way two: With Athens is negotiating a “time out”. It leaves the euro zone for at least five years and restructures its debt. However, it remains the EU Member and receives further “growth-enhancing, humanitarian and technical assistance,” says the “FAS”.

    And here’s Reuters:

    Germany’s Finance Ministry believes Greece’s latest reform proposals do not go far enough and has suggested two alternative courses for Athens including a “timeout” from the euro zone, the Frankfurter Allgemeine Sonntagszeitung (FAS) reported.

     

    “These proposals miss out important central reform areas to modernise the country and to bring economic growth and sustainable development over the long term,” the FAS quoted the ministry as writing in a position paper.

     

    Instead, the ministry set out two alternative courses for Greece. Under the first, Athens would improve its proposals quickly and transfer assets worth 50 billion euros ($56 billion) to a fund in order to pay down its debt.

     

    Under the second scenario, Greece would take a “timeout” from the euro zone of at least five years and restructure its debt, while remaining a member of the European Union.

    In other words, Germany just said kick Greece out, conditionally, for 5 years (it is not quite clear what Greece would use for currency in the meantime), quarantine it, and treat it as a third-world country until 2020. Somehow we doubt global stocks expected this outcome when they soared on Friday.

    As expected, Greece quickly denied this:

    • GREEK GOVT OFFICIAL SAYS GREXIT PLAN NOT DISCUSSED IN EUROGROUP

    And at least one member of the anti-German/austerity axis chimed in as well:

    • The idea of giving Greece a sabbatical from the euro area cannot be taken seriously, an EU official says in Brussels.
    • It is legally not feasible, makes no economic sense and is not in line with political reality, official says
    • It is time now for a serious discussion and solutions, not for reactivating academic, non-practical ideas, official says
    • Official says euro suspension is old idea floated by German academic Hans-Werner Sinn

    But with Germany making its semi-officially position known, and with the reality that Greece would essentially have to abdicate sovereignty to assure Europe that it will comply with any additional bailout conditions and further spending cut demands (of which there will be plenty), just what is the other “serious solution” alternative here?

  • Artist's Impression Of The Next Greek Bailout

    One way or another, this is what happens…

     

     

    h/t @RudyHavenstein

  • "There Is Going To Be A Taper Tantrum In Latin America… It Is Inescapable"

    Authored by Patrick Gillespie via CNNMoney.com,

    Greece needs a bailout and China’s stock market is in meltdown mode. But the global economy has another rising red flag: Latin America.

    Every major Latin American economy is slowing down or shrinking. The World Bank predicts this will be Latin America’s worst year of growth since the financial crisis. As if that’s not dire enough, the world’s two worst performing stock markets are in the region as well.

    And things could get even uglier later this year for Latin America, a region which is double the economic size of India.

    “The weakness in Latin America is reflecting the weaker global outlook,” says Win Thin, senior economist at Brown Brothers Harriman.

    The ‘most vulnerable’: After years of checkered progress, Latin America is the “most vulnerable” region to China’s sputtering economy and market meltdown, experts say. It’s become a trade battleground area between the United States and China.

    China is the biggest trade partner to many Latin countries, but the U.S. has tried to reassert its presence in recent months. Still, China’s sluggish growth is pulling Latin America down with it.

    “We’re expecting very, very weak growth,” says Eugenio Aleman, senior economist at Wells Fargo Securities. “Brazil is in bad shape. Argentina isn’t much better. Chile has slowed down to a trickle…Peru is slowing down considerably.”

    That’s just the beginning. Venezuela is arguably the world’s worst economy with sky-high inflation. Next door, Colombia has the world’s worst stock market this year. Its index is down 13% so far this year. The second worst is Peru, down 12.5%. By comparison, America’s S&P 500 is flat this year. (Argentina has the world’s best stock market, but that’s more a reflection of politics than economics).

    While many are focused on Greece right now, “a deeper downturn in China remains the key external risk for Latin America,” says Neil Shearing, chief emerging market economist at Capital Economics.

     

    The big problem: The three “C’s” are weighing down Latin America: China, commodities, and currency.

    The region boomed last decade when its commodities, like iron, copper and food, were in high demand.

    But China drove that demand. Now Chinese construction companies are pumping the brakes while the government tries to stop its bleeding stock market. That means less Chinese cash is coming to Latin American countries. Oil’s tanking prices have hurt the region too.

    And then comes currency. The U.S. dollar’s strong rise this year has helped it gain a lot of ground on Latin American currencies. That makes it more expensive for Latin Americans to buy imports and, for some companies, more expensive to pay debt that’s in U.S. dollars.

    Colombia’s currency has lost 13% of its value this year against the dollar. Brazil’s real has lost 21% and Mexico’s peso continues to slide too.

    There’s likely one more punch to Latin America from the U.S. this year: the Federal Reserve’s long-awaited rate hike.

    Taper Tantrum deja vu?: Two years ago, Latin American stocks tanked when then Fed Chair Ben Bernanke announced that the Fed would end its stimulus program. After the financial crisis, the Fed put interest rates at zero, and investors went overseas to get better returns on bonds than U.S. bonds, which still give back little. A Fed rate hike could change that scenario.

    Latin America is better positioned now to weather a Fed rate hike than past ones. But there could still be an exodus of cash, experts say.

    “There is going to be a taper tantrum in Latin America,” says Aleman. “It is inescapable.”

  • TRoiKaN HoMeBoY…

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    .

    .

    I can’t describe, these words are hardly uttered

     

    You’re faker than a german hot-dog with no mustard,

     

    Give journal blisters, activist spitters, from the  Aryan brothers to the sisters,

     

    Glocks, that’s a german invention, riding with Troikan killers

     

    I walk around with a Euro crucifix upward

     

    You’re faker than a german hot-dog with no mustard,

     

    Spit heat through my teeth, smoking green for the grief,

     

    So bailout gods of rap, think i’m an ancient greek

     

    Or even more like pythagoras if we are taking it to greece,

     

    Cheeko c will make you looking back at your shoulder,because i leave

     

    But my mind is big, monetary creations are forming

     

    In greece i’d pilot a EURO chariot thru austerity skies at morning

     

    Euro river leap stream another triple  bailed Queen

     

    And when you knock knock on the door tryin to get at me mane,

     

    All you EURO niggas just trynaa say austerity  grace

     

    So many kings of EURO, you know me as the ace

     

    Im a Troik rapper that is non fiction, i got better diction than an IMF tit

     

    Now money is a service, but it’s worthless, there’s no purpose, shit,

     

    Dude Tsipras he never fit in, always faking sick

     

    Suckin my dick, writing with confidence , callin me a prick

     

    A stressed beseecher with quest for decimation and Med features.

     

    And confidence is descending, just like our Euro leaders

     

    And when you knock knock on the door tryin to get at me mane,

     

    All you EURO niggas just trynaa say austerity  grace

     

    So many kings of EURO, you know me as the ace

  • The FDIC's Plan to Raid Bank Accounts During the Next Crisis

     As we've noted previously, one of the biggest problems for the Central Banks is actual physical cash.

     

    The financial system is predominantly comprised of digital money. Actual physical Dollars bills and coins only amount to $1.36 trillion. This is only a little over 10% of the $10 trillion sitting in bank accounts. And it’s a tiny fraction of the $20 trillion in stocks, $38 trillion in bonds and $58 trillion in credit instruments floating around the system.

     

    Suffice to say, if a significant percentage of people ever actually moved their money into physical cash, it could very quickly become a systemic problem.

     

    Indeed, this is precisely what caused the 2008 meltdown, when nearly 24% of the assets in Money Market funds were liquidated in the course of four weeks. The ensuing liquidity crush nearly imploded the system.

     

    Because of this, Central Banks and the regulators have declared a War on Cash in an effort to stop people trying to get their money out of the system.

     

    One policy they are considering is to put a carry tax on physical cash meaning that your Dollar bills would gradually depreciate once they were taken out of the bank. Another idea is to do away with actual physical cash completely.

     

    Perhaps the most concerning is the fact that should a “systemically important” financial entity go bust, any deposits above $250,000 located therein could be converted to equity… at which point if the company’s shares, your wealth evaporates.

     

    Indeed, the FDIC published a paper proposing precisely this back in December 2012. Below are some excerpts worth your attention:

     

    This paper focuses on the application of “top-down” resolution strategies that involve a single resolution authority applying its powers to the top of a financial group, that is, at the parent company level. The paper discusses how such a top-down strategy could be implemented for a U.S. or a U.K. financial group in a cross-border context…

     

    These strategies have been designed to enable large and complex cross- border firms to be resolved without threatening financial stability and without putting public funds at risk…

     

     

    An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company into equity. In the U.S., the new equity would become capital in one or more newly formed operating entities. …

     

    …Insured depositors themselves would remain unaffected. Uninsured deposits would be treated in line with other similarly ranked liabilities in the resolution process, with the expectation that they might be written down.

     

    http://www.fdic.gov/about/srac/2012/gsifi.pdf

     

     

    In other words… any liability at the bank is in danger of being written-down should the bank fail. And guess what? Deposits are considered liabilities according to US Banking Law. In this legal framework, depositors are creditors.

     

    So… if a large bank fails in the US, your deposits at this bank would either be “written-down” (read: disappear) or converted into equity or stock shares in the company. And once they are converted to equity you are a shareholder not a depositor… so you are no longer insured by the FDIC.

     

    So if the bank then fails (meaning its shares fall)… so does your deposit.

     

    Let’s run through this.

     

    Let’s say ABC bank fails in the US. ABC bank is too big for the FDIC to make hold. So…

     

    1)   The FDIC takes over the bank.

    2)   The bank’s managers are forced out.

    3)   The bank’s debts and liabilities are converted into equity or the bank’s stock. And yes, your deposits are considered a “liability” for the bank.

    4)   Whatever happens to the bank’s stock, affects your wealth. If the bank’s stock falls at this point because everyone has figured out the bank is in major trouble… your wealth falls too.

     

    This is precisely what has happened in Spain during the 2012 banking crisis over there. And it is perfectly legal in the US courtesy of a clause in the Dodd-Frank bill.

     

    This is just the start of a much larger strategy of declaring War on Cash.  The goal is to stop people from being able to move their money into physical cash and to keep their wealth in the financial system at all costs.

     

    Indeed, we've uncovered a secret document outlining how the Fed plans to incinerate savings to force investors away from cash and into riskier assets.

     

    We detail this paper and outline three investment strategies you can implement right now to protect your capital from the Fed's sinister plan in our Special Report Survive the Fed's War on Cash.

     

    We are making 1,000 copies available for FREE the general public.

     

    To pick up yours, swing by….

    http://www.phoenixcapitalmarketing.com/cash.html

     

    Best Regards

    Phoenix Capital Research

     

     

     

  • Putin's Latest Thoughts On Greece And A Greek Exit From The Euro

    Earlier today we showed one, less than official, interpretation of what may be going on in the Kremlin at this moment. And since a Grexit, despite Friday’s relief rally, suddenly seems all too real (even if it is a “temporary” one, which by the way was first suggested by Hans-Werner Sinn back in 2012 which means that the “hard money” is now running the show in Europe) the topic of just what Putin thinks about Greece in European limbo (or rather its naval bases) becomes pertinent all over again.

    Luckily, we know precisely how Putin feels about Greece and a potential Grexit, because it was just yesterday following the BRICS and Shanghai Cooperation Organisation summits in Ufa, the among many other things, Putin talked about precisely this issue. Here is the excerpt from the official transcript.

    Question: Darya Stanislavets, RIA Novosti, Prime. Greece is going through a serious crisis. It has not yet reached an agreement with its creditors. You met with Mr Tsipras [Greek Prime Minister Alexis Tsipras] in St Petersburg and spoke to him on the telephone after the referendum. Did Athens ask Russia for financial assistance? Did Russia promise such assistance? Is Russia able and willing to provide such assistance given its own economic difficulties? Could such assistance be provided, for example, by the New Development Bank?

     

    Also, what do you personally think about the Greek creditors’ proposals? If you were in Mr Tsipras’s shoes, would you accept or reject them?

    Vladimir Putin: Russia of course can provide assistance to its partners no matter what. Despite Russia’s economic difficulties, the fundamentals of our economic situation today are such that we are in a position to do this. What’s more, we do provide it to certain countries.

     

    Regarding Greece, we have a special relationship of spiritual kinship and religious and historical affinity with it. However, Greece is an EU country, and within the bounds of its obligations, it is conducting rather complicated negotiations with its partners in united Europe. Mr Tsipras has not asked us for any assistance. This is only natural, because the figures are too high.

     

    We know what is on the table, and fundamental decisions have to be taken. This is not even a matter of money. It is a matter of economic development principles and the principles of resolving these problems with their partners in the foreseeable future. We have already said – I have said it in public – that of course the Greeks can be blamed for everything but if they committed violations, where was the European Commission? Why did it not correct the activity of previous Greek governments? Why did they grant bonuses and loans? Why did they allow it to keep such a low profile on taxation in certain sectors of the economy? Why were there such big subsidies for the islands? And so on and so forth. Where were they earlier? So, there is something to discuss, and the Greek government has something to argue about.

     

    Furthermore, when one powerful currency is used in a number of countries with different levels of economic development, then the country is unable to regulate either its finances or its economic situation via currency mechanisms. Greece cannot devalue the euro, can it? It’s impossible.

     

    It does not have this tool or the possibility of drawing more tourists, while tourism is one of Greece’s principal industries – in the context of its obligations within the Schengen zone. It has to limit its agricultural production because it has to stay within the quotas set by Brussels, and it has to limit fishing and many other things. In other words, there are limitations but there are also advantages in EU membership, related to soft loans, bonuses and so on. This, however, is the sovereign choice of the Greek leadership and the Greek people. This does not directly affect us but indirectly, of course, it affects all of Europe and Russia, despite the fact that we are not an EU member, because we have extensive trade and economic ties with Europe, while Europe is our number one trade and economic partner. Naturally, we are watching this very closely and with a certain measure of anxiety, but we still hope that the crisis will be resolved in the very near future.

    Is most certainly will be, and as Putin will admit, Greece can export much more to Russia if its currency was far weaker. Say, for example, this one.

  • Meanwhile In Washington…

  • Economic Sanctions Cause War, Not Peace: Some Lessons From FDR's Embargo Against Japan

    Submitted by Roberts Higgs of The indepedent Institute via Contra Corner blog,

    Ask a typical American how the United States got into World War II, and he will almost certainly tell you that the Japanese attacked Pearl Harbor and the Americans fought back. Ask him why the Japanese attacked Pearl Harbor, and he will probably need some time to gather his thoughts. He might say that the Japanese were aggressive militarists who wanted to take over the world, or at least the Asia-Pacific part of it. Ask him what the United States did to provoke the Japanese, and he will probably say that the Americans did nothing: we were just minding our own business when the crazy Japanese, completely without justification, mounted a sneak attack on us, catching us totally by surprise in Hawaii on December 7, 1941.

    You can’t blame him much. For more than 60 years such beliefs have constituted the generally accepted view among Americans, the one taught in schools and depicted in movies—what “every schoolboy knows.” Unfortunately, this orthodox view is a tissue of misconceptions. Don’t bother to ask the typical American what U.S. economic warfare had to do with provoking the Japanese to mount their attack, because he won’t know. Indeed, he will have no idea what you are talking about.

    In the late nineteenth century, Japan’s economy began to grow and to industrialize rapidly. Because Japan has few natural resources, many of the burgeoning industries had to rely on imported raw materials, such as coal, iron ore or steel scrap, tin, copper, bauxite, rubber, and petroleum. Without access to such imports, many of which came from the United States or from European colonies in southeast Asia, Japan’s industrial economy would have ground to a halt. By engaging in international trade, however, the Japanese had built a moderately advanced industrial economy by 1941.

    At the same time, they also built a military-industrial complex to support an increasingly powerful army and navy. These armed forces allowed Japan to project its power into various places in the Pacific and east Asia, including Korea and northern China, much as the United States used its growing industrial might to equip armed forces that projected U.S. power into the Caribbean and Latin America, and even as far away as the Philippine Islands.

    When Franklin D. Roosevelt became president in 1933, the U.S. government fell under the control of a man who disliked the Japanese and harbored a romantic affection for the Chinese because, some writers have speculated, Roosevelt’s ancestors had made money in the China trade. Roosevelt also disliked the Germans (and of course Adolf Hitler), and he tended to favor the British in his personal relations and in world affairs. He did not pay much attention to foreign policy, however, until his New Deal began to peter out in 1937. Afterward, he relied heavily on foreign policy to fulfill his political ambitions, including his desire for reelection to an unprecedented third term.

    When Germany began to rearm and to seek Lebensraum aggressively in the late 1930s, the Roosevelt administration cooperated closely with the British and the French in measures to oppose German expansion. After World War II commenced in 1939, this U.S. assistance grew ever greater and included such measures as the so-called destroyer deal and the deceptively named Lend-Lease program. In anticipation of U.S. entry into the war, British and U.S. military staffs secretly formulated plans for joint operations. U.S. forces sought to create a war-justifying incident by cooperating with the British navy in attacks on German U-boats in the north Atlantic, but Hitler refused to take the bait, thus denying Roosevelt the pretext he craved for making the United States a full-fledged, declared belligerent—an end that the great majority of Americans opposed.

    In June 1940, Henry L. Stimson, who had been secretary of war under Taft and secretary of state under Hoover, became secretary of war again. Stimson was a lion of the Anglophile, northeastern upper crust and no friend of the Japanese. In support of the so-called Open Door Policy for China, Stimson favored the use of economic sanctions to obstruct Japan’s advance in Asia. Treasury Secretary Henry Morgenthau and Interior Secretary Harold Ickes vigorously endorsed this policy. Roosevelt hoped that such sanctions would goad the Japanese into making a rash mistake by launching a war against the United States, which would bring in Germany because Japan and Germany were allied.

    Accordingly, the Roosevelt administration, while curtly dismissing Japanese diplomatic overtures to harmonize relations, imposed a series of increasingly stringent economic sanctions on Japan. In 1939 the United States terminated the 1911 commercial treaty with Japan. “On July 2, 1940, Roosevelt signed the Export Control Act, authorizing the President to license or prohibit the export of essential defense materials.” Under this authority, “[o]n July 31, exports of aviation motor fuels and lubricants and No. 1 heavy melting iron and steel scrap were restricted.” Next, in a move aimed at Japan, Roosevelt slapped an embargo, effective October 16, “on all exports of scrap iron and steel to destinations other than Britain and the nations of the Western Hemisphere.” Finally, on July 26, 1941, Roosevelt “froze Japanese assets in the United States, thus bringing commercial relations between the nations to an effective end. One week later Roosevelt embargoed the export of such grades of oil as still were in commercial flow to Japan.” The British and the Dutch followed suit, embargoing exports to Japan from their colonies in southeast Asia.

    An Untenable Position

    Roosevelt and his subordinates knew they were putting Japan in an untenable position and that the Japanese government might well try to escape the stranglehold by going to war. Having broken the Japanese diplomatic code, the Americans knew, among many other things, what Foreign Minister Teijiro Toyoda had communicated to Ambassador Kichisaburo Nomura on July 31: “Commercial and economic relations between Japan and third countries, led by England and the United States, are gradually becoming so horribly strained that we cannot endure it much longer. Consequently, our Empire, to save its very life, must take measures to secure the raw materials of the South Seas.”

    Because American cryptographers had also broken the Japanese naval code, the leaders in Washington knew as well that Japan’s “measures” would include an attack on Pearl Harbor. Yet they withheld this critical information from the commanders in Hawaii, who might have headed off the attack or prepared themselves to defend against it. That Roosevelt and his chieftains did not ring the tocsin makes perfect sense: after all, the impending attack constituted precisely what they had been seeking for a long time. As Stimson confided to his diary after a meeting of the war cabinet on November 25, “The question was how we should maneuver them [the Japanese] into firing the first shot without allowing too much danger to ourselves.” After the attack, Stimson confessed that “my first feeling was of relief … that a crisis had come in a way which would unite all our people."

  • Meanwhile, In The Kremlin…

    “Things over in Europe sure are making me hungry”

  • Eurogroup Meeting Ends Without Agreement: "Huge Problems", "Issue Of Greek Trust Very Difficult"

    Equity markets roared higher Thursday and Friday as they ‘knew’ a deal was imminent in Greece because Tsipras appeared to backpedal. However, after someone told Merkel the truth, and “everyone knows you can’t believe” the Greeks, The Eurorgoup Meeting ends with zero agreement after 9 hours of rumor-mongering and escalating tensions. Local reporters noted the leaders could not even agree on what to disagree about as an increasing number of EU member states pushed for either a Grexit or considerably tougher sanctions austerity on the Greeks. 

     

    From the man himself…

    • *DIJSSELBLOEM SAYS TALKS ARE STILL VERY DIFFICULT
    • *DIJSSELBLOEM SAYS ISSUE OF GREEK TRUST VERY DIFFICULT
    • *DIJSSELBLOEM: `WE DON’T HAVE A SOLUTION YET’
    • *DIJSSELBLOEM SAYS `HUGE PROBLEMS’ REMAIN IN GREEK TALKS
    • *DIJSSELBLOEM: `FOR SURE IT WAS A DIFFICULT MEEETING’

    Summing up the meeting perfectly…

    As Reuters reports (rather more hopefully than many),

    Euro zone finance ministers were trying to draft a joint statement on Saturday listing further measures they want Greece to take in order to launch negotiations on a bailout Athens has requested, an EU source said.

     

    The Greek government has put forward a set of reform plans to meet conditions for a three-year loan from euro zone partners but finance ministers said they did not go far enough and several sources said the other 18 euro zone states want Athens to offer additional actions and guarantees of implementation.

    *  *  *

    Don’t worry though:

    • *MOSCOVICI SAYS THERE’S `ALWAYS HOPE’ AND TALKS RESUME SUNDAY

    Do these look like faces of hope?

    There is no press conference and the meeting will resume tomorrow at 11am… shortly before FX markets open.

  • Someone Told Merkel…

    Earlier today, we reported that according to Frankfurter Allgemeine Sonntagszeitung, the German finance ministry had begun circulating a document which outlined two possible courses of action for dealing with the Greek ‘problem.’

    After reviewing the “new” proposal (and by “new” we actually mean the old proposal that 61% of Greeks voted against, plus a few cosmetic changes) submitted by Greek PM Alexis Tsipras on Thursday evening, the German finance ministry said the plan was “missing centrally important areas of reform to modernize the country and to advance on the long term economic growth and sustainable development.” 

    Yes, Tsipras’ offer is “missing” important reforms, but more importantly, it seemed also to be “missing” the small detail that in addition to the €53 billion the country needs for a third sovereign bailout, Greece will also need another €10-20 billion to recapitalize the banks, something we warned about (and outlined in quite a bit of detail) on Friday in “Don’t Tell Merkel: Greek Banks Need An Additional €10-14 Billion Bailout.” Here’s what we said yesterday:

    We’re sorry to break it to Mr. Michelbach, Frau Merkel, and the German taxpayer, but that €53 billion Greece is asking for will be just the start of things and we don’t mean in the sense that Athens will one day in the not-so-distant future be back in Brussels looking for a fourth bailout (which they probably will), we mean in the sense that Greece’s beleaguered banking sector is insolvent and will need to be recapitalized one way or another with some (or all) of the funds coming directly out of the pockets of the very same EU taxpayers that are now set to fund the third Greek sovereign bailout. 

    While an extra €10-14 billion would have been bad enough, it turns out that Greek banks will actually need more along the lines of €25 billion. Here’s Reuters: 

    Euro zone finance ministers were told on Saturday that some 25 billion euros (18 billion pounds) of any bailout loan to Greece would be needed to recapitalise banks that are on the verge of collapse, sources close to the discussions said.

     

    That is more than double the amount that Athens forfeited in financial stability funds at the end of June when it walked away from talks on completing a previous bailout programme.

     

    The extra capital is needed because of the damage wrought by massive deposit withdrawals before a two-week bank holiday that was ordered on June 29, when Greece imposed capital controls to stop savers and businesses emptying their accounts.

     

    Prime Minister Alexis Tsipras applied this week for a three-year loan from the European Stability Mechanism of 53.5 billion euros. EU and IMF experts who analysed Greece’s funding needs concluded it would need some 74 billion euros, the sources said.

     

    Within that sum, sources said that about 25 billion would need to be used to bolster the balance sheets of banks ravaged by a renewed economic slump and fears that Greece would drop out of the euro single currency area.

    And indeed, it appears as though someone did tell Merkel the bad news, because as WSJ reports, and as we predicted over 24 hours ago, the extra funds for the bank recap were simply too much for Germany to bear: 

    The document, which was first reported by German weekly Frankfurter Allgemeine Sonntagszeitung, became public after the three institutions that oversee eurozone bailouts estimated the country would need an extra €74 billion ($82.55 billion) in rescue loans over the coming three years. That high figure, which includes €25 billion to recapitalize Greek banks, drew consternation from many finance ministers during Saturday’s meeting, according to two European officials.

     


     

    “The mood [is] bad,” said one person describing the atmosphere in the room.

     

    In the document, dated July 10, Germany takes a tough line on spending cuts and policy overhauls Greece submitted to its international creditors, the other eurozone countries and the International Monetary Fund late Thursday.

    So it appears as though the German finance ministry had already prepared the document and upon hearing the €25 billion bank recap figure, seized upon the collective shock among EU finance ministers to distribute its ‘commentary’ on the Greek proposal. Here’s the text of the document:

    Source:@ethevessen

    The €50 billion asset transfer suggested in the document was viewed by some EU officials as proof of Yanis Varoufakis’ contention that Germany is now simply trying its best to push Greece out of the euro. Once again, from WSJ:

    The people familiar with the document questioned the likelihood of either of the two options working. There is no process for a temporary exit from the eurozone and it is unclear where the country would get €50 billion in assets to secure the loan.


    “The 50 billion [euros] are so unrealistic that it is clear that they want the Greeks out,” one of the people said.

    As noted earlier, the Germans are not alone in their opposition to the Greek proposal and arguments discussions in Brussels have ended with no agreement. With the bailout figure now projected at €74 billion, and some rumors circulating that the final tally could be considerably higher, we’ll leave you with the following table which should tell you something about how difficult it will be to secure across-the-board support for an ESM package of that size:

  • When Money Dies

    Submitted by Paul-Martin Foss via The Carl Menger Center,

    “When Money Dies” is the title of a 1975 book by Adam Fergusson, in which he describes the downfall of the Reichsmark in Weimar Germany. A fascinating look at that period of history, one can glean quite a few useful pieces of advice on how to survive a currency crisis. But “when money dies” could also describe the current currency crisis in Greece, in which many Greeks seem to have taken those lessons from Fergusson’s account of the Weimar hyperinflation to heart.

    Even though the Greek currency crisis isn’t a traditional hyperinflationary crisis, many Greeks are trying to get their hands on, and then spend, cash. One of the fears is that bank depositors will be forced to take losses on their accounts, the so-called “haircut”. This happened in Cyprus to some larger depositors, but the fear in Greece is that people with even just a few thousand euros in their accounts might be forced to take losses of 30-50% or more. Just imagine that you have $10,000 in your bank account and overnight the government says, “Sorry, your account balance is now $5,000.” Overnight, the purchasing power of your bank account has been cut in half.

    So even though the government isn’t printing more money (yet!), the fear of a 50% devaluation of the purchasing power of bank accounts is causing Greeks to line up at ATMs to withdraw money. And because there is the additional fear that Greece may exit the euro, with unknown consequences, many people seek to convert their euros into tangible goods. Shoes, handbags, refrigerators, gold, jewelry, anything that can maintain value and be resold or bartered is fair game for those desperate not to lose all of their hard-earned savings.

    The important thing to remember here is that capital and goods are wealth, not money. You can print as much money as you want, but if it can’t buy you anything then holding or using large amounts of it cannot make you wealthy.

    During currency crises, those who have the most tangible goods are the wealthiest. When you read about the Weimar hyperinflation in Fergusson’s book, who were those who survived and thrived and who were those who suffered the most? Those who suffered were savers and retirees on fixed incomes. Once their money was completely devalued they were forced to start selling and bartering their limited possessions in order to get enough food to eat. Those who prospered were those who had gold, silver, foreign currency, and who had plenty of possessions. The more physical, tangible items you have to barter or sell, the stronger your position will be when money “dies.”

    The Greek people understand that, hence the rush to get their hands on cash and to use that cash to stock up on physical goods now. It’s almost like a perverse game of musical chairs. No one wants to be left with huge cash balances or bank account balances at the end of the game, because he with the most money will be the one who stands to lose the most.

  • Risky Loans Are 'Driving' US Auto Sales: 3 Charts

    To be sure, we’ve made no secret of our views on the state of the US auto market. 

    This year, we’ve written extensively about the proliferation of subprime lending, worrisome trends in average loan terms, and, most recently, we noted the astounding fact that in Q4 2014, the average LTV for used vehicles hit 137%.

    We presented what perhaps marked our most unequivocal statement to date on why the market looks dangerously frothy in “Auto Sales Reach 10 Year Highs On Record Credit, Record Loan Terms, & Record Ignorance.” In that post, the absurdities plaguing the US auto market were laid bare for all to see. Here’s a recap: 

    • Average loan term for new cars is now 67 months — a record.
    • Average loan term for used cars is now 62 months — a record.
    • Loans with terms from 74 to 84 months made up 30%  of all new vehicle financing — a record.
    • Loans with terms from 74 to 84 months made up 16% of all used vehicle financing — a record.
    • The average amount financed for a new vehicle was $28,711 — a record.
    • The average payment for new vehicles was $488 — a record.
    • The percentage of all new vehicles financed accounted for by leases was 31.46% — a record.

    It’s against this backdrop that we bring you the following three charts from BofAML’s H1 review of trends in the ABS market. As you’ll see, below, the move towards riskier lending is quite clear. 

    First, note that auto ABS issuance is set to hit record highs in 2015.

    Next, consider that the percentage of prime loans backing new supply is now at an all-time low. 

    Finally, here’s a look at the percentage of new financing extended to non-prime borrowers. As BofAML observes, the prime segements are losing share.

  • Conspiracy Fact: How The Government Conducted 239 Secret Bioweapon Experiments On The American People

    Submitted by Mike Krieger via Liberty Blitzkrieg blog,

    It all began in late September of 1950, when over a few days, a Navy vessel used giant hoses to spray a fog of two kinds of bacteria, Serratia marcescens and Bacillus globigii — both believed at the time to be harmless — out into the fog, where they disappeared and spread over the city.

     

    The unsuspecting residents of San Francisco certainly could not consent to the military’s germ warfare test, and there’s good evidence that it could have caused the death of at least one resident of the city, Edward Nevin, and hospitalized 10 others.

     

    Over the next 20 years, the military would conduct 239 “germ warfare” tests over populated areas, according to news reports from the 1970s.

     

    These tests included the large-scale releases of bacteria in the New York City subway system, on the Pennsylvania Turnpike, and in National Airport just outside Washington, D.C.

     

    – From the MSN article: ‘One of the Largest Human Experiments in History’ was Conducted on the Unsuspecting Residents of San Francisco

    Regular readers of this site will be well aware of various conspiracy facts concerning a multitude of shady activities by the U.S. government, both past and present. But did you know that beginning in 1950, the U.S. government conducted a series of secret bioweapon experiments on an unsuspecting American public? Didn’t think so.

    We now learn that :

     One fact many may not know about San Francisco’s fog is that in 1950, the US military conducted a test to see whether it could be used to help spread a biological weapon in a “simulated germ warfare attack.” This was just the start of many such tests around the country that would go on in secret for years.

     

    The test was a success, as Rebecca Kreston explains over at Discover Magazine, and also “one of the largest human experiments in history.” But as she writes, it was also “one of the largest offenses of the Nuremberg Code since its inception.” The code stipulates that “voluntary, informed consent” is required for research participants, and that experiments that might lead to death or disabling injury are unacceptable.

    So it only took five years after the end of World War II for the U.S. to break the Nuremberg code. Can you even begin to imagine what it is willing to do in 2015 with the current crop of mindbogglingly unethical, corrupt politicians in power?

    The unsuspecting residents of San Francisco certainly could not consent to the military’s germ warfare test, and there’s good evidence that it could have caused the death of at least one resident of the city, Edward Nevin, and hospitalized 10 others.

     

    This is a crazy story, one that seems like it must be a conspiracy theory. An internet search will reveal plenty of misinformation and unbelievable conjecture about these experiments. But the core of this incredible tale is documented and true.

     

    It all began in late September of 1950, when over a few days, a Navy vessel used giant hoses to spray a fog of two kinds of bacteria, Serratia marcescens and Bacillus globigii — both believed at the time to be harmless — out into the fog, where they disappeared and spread over the city.

     

    “It was noted that a successful BW [biological warfare] attack on this area can be launched from the sea, and that effective dosages can be produced over relatively large areas,” concluded a later-declassified military report, cited by the Wall Street Journal.

     

    Over the next 20 years, the military would conduct 239 “germ warfare” tests over populated areas, according to news reports from the 1970s (after the secret tests had been revealed) in The New York Times, Washington Post, Associated Press and other publications (via Lexis-Nexis), and also detailed in congressional testimony from the 1970s.

     

    These tests included the large-scale releases of bacteria in the New York City subway system, on the Pennsylvania Turnpike, and in National Airport just outside Washington, D.C.

     

    In a 1994 congressional testimony, Cole said that none of this had been revealed to the public until a 1976 newspaper story revealed the story of a few of the first experiments — though at least a Senate subcommittee had heard testimony about experiments in New York City in 1975, according to a 1995 Newsday report.

     

    In 1950, the first Edward Nevin had been recovering from a prostate surgery when he suddenly fell ill with a severe urinary tract infection containing Serratia marcescens, that theoretically harmless bacteria that’s known for turning bread red in color. The bacteria had reportedly never been found in the hospital before and was rare in the Bay Area (and in California in general).

     

    The bacteria spread to Nevin’s heart and he died a few weeks later.

    Now here’s where it gets downright terrifying. The government claims it is immune from deaths related to any secret government tests on the public. Freedom.

    Nevin’s grandson tried to sue the government for wrongful death, but the court held that the government was immune to a lawsuit for negligence and that they were justified in conducting tests without subjects’ knowledge. According to the Wall Street Journal, the Army stated that infections must have occurred inside the hospital and the US Attorney argued that they had to conduct tests in a populated area to see how a biological agent would affect that area.

    Take a step back and imagine if you were alive in 1950. Five years after the Allies’ glorious victory in World War II, and someone told you the U.S. government was conducting bioweapon experiments on the American public in secret. Not only would you not believe it, you’d think this person was a complete and total lunatic. Now try to imagine what they are undoubtably doing right now.

  • Finland Echoes Germany, Wants Greece Out; Five Other Nations Back Grexit

    Initially it was just an unconfirmed report circulating in the German FAS media that the local FinMin had proposed a “temporary Grexit” option. Then it got some more traction when a ZDF journalist reported that it was much more than just speculation…

    It now appears that this was not only not a rumor, but Schauble’s sentiment is contagious: moments ago Finnish broadcaster MTV reported that first Finland, and then the Eurozone’s smaller, if somewhat more solvent nations, Estonia, Lithuania, Slovakia, Slovenia and even the Netherlands, support the German position on temporarily suspending Greece’ Euro membership.

    But… Schauble may just be following Merkel’s orders, as the two are mmerely playing good cop, bad cop.

    Finnish Kauppalehti confirms that the Finns party leader Timo Soini just said no to more Greek bailouts:

    Minister for Foreign Affairs Timo Soini According to the Finnish Government does not allow for supporting the Greek. “The starting point is of course the fact that Finland’s responsibilities do not grow. It is a government program entry,” Foreign Minister Timo Soini commented on a possible third rescue package for Greece to Ilta-Sanomat.

    In which case one can forget Grexit: at this point of total diplomatic failure, one should be worried how long before all the other insolvent, if actively pretending to be doing ok, PIIGS have before the wrath of “Northern Europe” turns their way. As for Greece, it now appears just a matter of time.

  • Border Insecurity (In 1 Cartoon)

    Presented with no comment.

    Source: Investors.com

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