Democracy Under Fire: Troika Looks To Force Greek Political "Reshuffle"

It is becoming increasingly clear that the Syriza show will ultimately have to be canceled in Greece (or at least recast) if the country intends to find a long-term solution that allows for stable relations with European creditors, but as we noted on Wednesday, it may be time for Greeks to ask themselves if binding their fate to Europe is in their best interests. Indeed, it's time to take a hard look at the political ramifications of the June 5 IMF deadline and ask if the troika will, in the final analysis, be successful in using financial leverage to undermine the democratic process.

Frontrunning: May 21

  • Once-Unthinkable Criminal Pleas by U.S. Banks Get Investor ‘Meh’ (BBG)
  • The E-Mail That Helped Catch Barclays: ‘ISDAfix Is Manipulated’ (BBG)
  • CFTC Said Preparing ISDAfix Probe Talks in Weeks: Credit Markets (BBG)
  • Islamic State takes control of Syria's Palmyra in westward advance (Reuters)
  • Tensions High as Greece Gets Smallest Aid Rise Yet (BBG)
  • The Rise of the $50,000 Rental (BBG)
  • U.S. says South China Sea reclamations stoke instability (Reuters)
  • First Hanergy Now Goldin: Hong Kong Stocks Drop Like Stones (BBG)

Despite Weak Economic Data Overnight, Futures Slide On Rate Hike Concerns

The big news overnight was neither the Chinese manufacturing PMI miss nor the just as unpleasant (and important) German manufacturing and service PMI misses, but that speculation about a rate hike continues to grow louder despite the abysmal economic data lately, with the latest vote of support of a 25 bps rate increase coming from Goldman which overnight updated its "Fed staff model" and found surprisingly little slack in the economy suggesting that the recent push to blame reality for not complying with economist models (and hence the need for double seasonal adjustments) is gaining steam, and as we first suggested earlier this week, it may just happen that the Fed completely ignores recent data, and pushes on to tighten conditions, if only to rerun the great Trichet experiment of the summer of 2011 when the smallest of rate hikes resulted in a double dip recession.

"Go Now!": China Threatens US Spy Planes In South China Sea

There's trouble brewing in The South China Sea, where Beijing has been using "scores of dredgers" to turn reefs into islands in the Spratly archipelago. Reports that Washington is looking into options for countering China's island-building project, have set up a contentious scenario that culminated in Beijing advising the US to "refrain from provocative action" in the area. Now, China is telling US surveillance planes to "Go now!"

Portugal's "Left-Wing" Forces Threaten Troika Revolt

"Europe faces the risk of a second revolt by Left-wing forces in the South after Portugal’s Socialist Party vowed to defy austerity demands from the country’s creditors and block any further sackings of public officials", The Telegraph reports. In sum, the reason why concessions (any concessions) to the Greeks are a non-starter in Athens' negotiations with creditors is that the IMF, the European Commission, and most especially Germany, want to send a clear message to any other 'leftist radicals' who may be thinking about using the "one move and the idea of EMU indissolubility gets it" routine as a way to negotiate for breathing room on austerity pledges, will get exactly nowhere and will have a very unpleasant time on the way.

JPM Warns UK Referendum More Likely In 2016 Than 2017 - The Pros & Cons Of Brexit

JPMorgan expects U.K. won’t delay the promised in out referendum on EU membership until 2017 but will put the issue to vote in late 2016 instead. Given the ruling Conservatives have only a small majority, any legislation could fail if euro skeptics within the party vote against it, suggesting the party leadership will want to get the issue resolved sooner rather than later. The prospect of a vote could weigh on the economy, again arguing for an earlier vote, so here are the pros and cons of Brexit simplified...

Is Martial Law Justified If ISIS Attacks?

We do not have to choose between liberty and security. We can have both, and we can provide it for ourselves as our own protectors. Sheepdogs be damned. Each citizen is his first and best line of defense. Only when the American people take on the philosophy of self-defense rather than government reliance will we be free of fear from terrorism and free of fear from tyrannical government. This is the answer to the propaganda of militarization. ISIS does not matter. It is what we ultimately do about ISIS or similar threats that matters, and martial law is not the answer.

Despite Weaker-Than-Expected PMI, Chinese Stocks Stumble

Chinese Manufacturing PMI missed expectations, printing a contractrionary 49.1 (against 49.3 expectatons) for the 3rd month in a row. While this was a small pick up from last month's 48.9 print, it hardly signals 'success' for the various easing efforts unleashed upon an all-knowing investing public. After yesterday's weakness in Chinese stocks, one would think a disappointing PMI was just the ticket to send investors wild with buying in anticipation of more easing, but now, Chinese stocks have erased early modest gains and are fading back...

Militarization Is More Than Tanks & Rifles: It’s a Cultural Disease, Acclimating Citizens To Life In A Police State

The problems we’re grappling with have been building for more than 40 years. They’re not going to go away overnight, and they certainly will not be resolved by a report that instructs the police to simply adopt different tactics to accomplish the same results - i.e., maintain the government’s power, control and wealth at all costs. This is the sad reality of life in the American police state.

 

Putin Pans Ukraine's Debt Moratorium As "De Facto Default", Threatens Court

In exactly a month, Ukraine will owe Russia a $75 million debt coupon payment. Finance Minister Anton Siluanov told reporters in Moscow today that "if they miss the payment, we will use our right to go to court." Then it got serious, as Vladimir Putin instructed Russian Prime Minister Dmitry Medvedev to assume control of Ukraine's repayment of its $3-billion debt in Eurobonds that Russia bought in 2013, slamming Ukraine's bill allowing them to impose a moratorium on foreign debt repayments as a de facto announcement of default. As one market participant warned, "I would wait until after June 20 to go forward with" any moratorium, as "if Russia takes Ukraine to court, that might be an incentive for other creditors to go down the same route."

4 Factors Signaling Volatility Will Return With A Vengeance

The uncertainty surrounding the inevitability, if not the exact timing, of multiple and possibly overlapping volatility drivers is itself a source of volatility. For the average person, these signs can be scary. Taking steps to avoid the circus as much as possible, such as extracting money from the markets, securing personal assets, and waiting out the swings, can be a source of emotional comfort and future financial stability.

In India, Gold Is Not Only Money But Now Pays Interest

Despite Bernanke's previous protestations that "gold is not money... it is tradition," in an effort to mobilise 20,000 tonnes of unproductive gold owned by Indian households into cash, Reuters reports that - after unveiling the gold monetisation scheme on Feb 28th, India's FinMin Arun Jaitley released bank guidelines overnight on interest rates, reserve and liquidity ratios. The scheme "allows gold to become a dynamic, fungible asset in the hands of gold savers," offering incentives (interest payable in gold) to convince households, who sometimes have little faith in financial institutions, to break the tradition and hand over gold passed down the generations.

"This Divergence Is At The Root Of Most American Economic Problems"

Since 1979, hourly pay for the vast majority of American workers has not only lagged behind growth at the very top of the distribution and thus behind average wage growth, but has also diverged from economy-wide productivity, as shown in Figure M. This divergence is at the root of numerous American economic challenges

Our Social Depression

The consequences of economic stagnation are not limited to finance: stagnation is causing a social depression.

China Bails Out Brazil In $50 Billion Regional Power Grab

On the heels of pledging $46 billion in infrastructure aid to Pakistan, China is set to invest as much as $50 billion in Brazil including $10 billion on a cross-mountain railway that will connect Latin America's largest economy with Peru's ports in what Premier Li calls "a new road to Asia." The move is a dramatic example of China's growing foothold in what is ostensibly Washington's strongest sphere of influence.