ECB Threatens Athens With Bank Funding Cutoff If No Deal In One Month: February 28 Is Now D-Day For GreeceSubmitted by Tyler Durden on 01/31/2015 - 09:40
Earlier today the ECB's Erikki Liikanen, tired of pleasantries and dealing with what to Europe is a completely incomprehensible and illogical stance, one which is essentially a massive defection by Greece in the European "prisoner's dilemma", and which while leading to a Greek financial collapse and Grexit - both prerequisites to a subsequent Greek economic recovery unburdened by the shackles of the Euro - would also unleash a European depression, came out and directly threatened Greece that it now has 1 month until the end of February to reach a deal with the Troika, or else the ECB would cut off lending to Greek banks, in the process destroying the otherwise insolvent Greek banking sector.
Amid 'turmoiling' stock markets on Friday, CNBC's Simon Hobbs summed up the status quo's thinking on the new Greek leadership when he noted, somewhat angrily and shocked, "The Greeks are not even trying to reassure the markets," seeming to have entirely forgotten (and who can blame him in this new normal the world has been force-fed for 6 years) that political leaders are elected for the good of the people (by the people) not for the markets. Yesterday saw the clearest example yet of Europe's anger that the Greeks may choose their own path as opposed to following the EU's non-sovereign leadership's demands when the most uncomfortable moment ever caught on tape - the moment when Eurogroup chief Jeroen Dijsselbloem (he of the "template" foot in mouth disease) stood up at the end of the EU-Greece press conference, awkwardly shook hands with Greece's new finance minister, and whispered..."you have just killed the Troika," to which Varoufakis responded... "wow!"
The Czechoslovakia crisis of 1938 marked a pivotal shift in the balance of power in Central Europe, putting the major world superpowers in a collision course. The policies of one superpower in particular made inevitable what was to come less than a year later - World War II. This episode provides important historical insights on geopolitics, appeasement strategies, buffer zones, ethnic tensions – and unintended consequences.
With NIRP raging in the Eurozone and over €1.5 trillion in European government bonds trading with negative yields, many were wondering when any of this perverted bond generosity will spill over to other debtors, not just Europe's insolvent governments (who can only print negative interest debt because of the ECB's backstop that it will buy any piece of garbage for sale in the doomed monetary union). In fact just earlier today we, rhetorically, asked a logical - in as much as nothing is logical in the new normal - question: "Who will offer the first negative rate mortgage." Little did we know that just minutes after our tweet, we would learn that at least one place is already paying homeowners to take out a mortgage. That's right - the negative rate mortgage is now a reality.
When Eric Holder announced his resignation, many breathed a sigh of relief thinking it can’t get much worse, but not so fast. The authoritarian streak and rampant cronyism of the Obama administration is a well oiled machine. You didn’t think you’d get off that easily did you? Enter Loretta Lynch.
If readers need clarification on what was the primary source of spending-based "growth" for the US economy in the fourth quarter, the same source that bumped up final Q3 GDP from 3.9% to 5.0%, please ping us: we will gladly explain the chart below. And just in case it is still unclear what Americans are spending their "gas sasvings" on, here it is one more time.
"It may work out just fine, but there’s a risk to that strategy... we’re in some sense distorting what might be the normal market outcomes at some point, we’re going to have to stop doing it. At some point the pressure is going to be too great. The market forces are going to overwhelm us. We’re not going to be able to hold the line anymore. And then you get that rapid snapback in premiums as the market realizes that central banks can’t do this forever. And that’s going to cause volatility and disruption." - Charles Plosser
According to IRS estimates, there’s close to $5 trillion in individual retirement accounts in the Land of the Free. This is money that taxpayers prudently set aside for retirement, hopefully cognizant that Social Security isn’t going to be there for them. Devoid of any other easy lender, $5 trillion is far too irresistible for such a heavily indebted government to ignore. We've long warned that the government could easily nationalize a portion of all IRAs. It started happening last year with MyRA followed by the President and Treasury Secretary embarked on a blitzkrieg-style marketing campaign to pump the program... and now comes Step three..
Meet Numbeo, the world’s largest database of user contributed data about cities and countries. This infographic uses this information to show the most expensive and cheapest places to live by country. Switzerland and Norway may not surprise you as two of the most expensive countries. However, Venezuela might not have been a place that was on your radar. Of course, in retrospect, when you have inflation spiraling out of control at a rate of 64% per year, that will make things a bit pricey. Want cheap goods and services? Head over to India, Nepal, and Pakistan.
We won't go into the specific details of China's burst housing bubble, the shady underworld of its pyramid scheme wealth-management products, the fact that any hard asset in China is rehypothecated literally a countless number of times, the nuances of its deflating shadow banking system, or even the complexities of its alleged capital controls (alleged, because as a reminder, they only exist for the common folks - the really wealthy Chinese are naturally exempt from any capital flow constraints). We will point out something even more disturbing. The Offshore Yuan just hit a two-year low, reaching a level not seen since September 2012.
The Fed has been supporting the market since the late 1980s. But there is an important difference between the actions of the Fed under Yellen versus Greenspan and Bernanke. In 2008, the Fed allowed Bear Stearns and Lehman Brothers to fail. Given the massive wipeout that followed, this decision is now viewed as a dangerous mistake. Having learned their lesson, the Fed is now rushing in to support the market in response to even routine 20% drops. In this way, the Fed is acting like a value investor who demands a small margin of safety before investing.... Since 2010, however, the Fed has changed tactics. The Fed is now reacting far more quickly. Small market selloffs are followed by immediate responses. By quickly riding to the rescue, the Fed is effectively front-running value investors.
Echoing Elliott's Paul Singer's "greatest irony of politicians railing against inequality," former Reagan OMB Director David Stockman raged that when it comes to inequality, everyone can see the symptom, but "President Obama is clueless as to the cause," blasting that the problem is not capitalism, "the problem is in the Eccles Building and the 12 people sitting there thinking that zero interest rates are some magic elixir that will cause this very toubled economy to revive.! It won't, "these people are dangerous and destructive," Stockman exclaims, and sooner or later the inequality they have created is going to cause a huge political reaction.
For decades, the rest of the planet has regarded the United States as “the land of opportunity” where almost anyone can be successful if they are willing to work hard. The “American Dream” has been transformed into a very twisted game of musical chairs. With each passing year, more people are falling out of the middle class, and most of the rest are scrambling really hard to keep their own places. Something has gone horribly wrong... We are the generation that gets to witness the end of the American Dream.
Year after year, hope-strewn economists mark up GDP expectations for the year-ahead (in order to defend top-down their S&P 500 earnings forecasts and why investors should always BTFD)... and year after year, those GDP expectations are slashed drastically. Welcome to 2015...