And so the 2015 season of the Greek drama is coming to a close following last night's vote in Greek parliament to vote the country into even more austerity than was the case before Syriza was voted into power with promises of removing all austerity, even with Europe - which formally admits Greece is unsustainable in its current debt configuration - now terminally split on how to proceed, with Germany's finmin still calling for a "temporary Grexit", the IMF demanding massive debt haircuts, while the rest of Europe (and not so happy if one is Finnish or Dutch) just happy to kick the can for the third time.
As a result, the world’s economy is now based upon unsound banks dealing in unsound currencies. Both have degenerated considerably from their origins.
Just when the Chinese plunge protection team (and "arrest shortie" task force) seemed to be finally getting "malicious selling" under control, first we saw a crack yesterday when the composite broke the surge of the past three days as a result of yet another spike in margin debt funded purchases, but it was last night's reminder that "good news is bad news" that really confused the stock trading farmers and grandmas, which goalseeked Chinese economic "data" beat across the board, with Q2 GDP coming solidly above expectations at 7.0%, and retail sales and industrial production both beating, but in the process raising doubts that the PBOC will continue supporting stocks.
Just when you thought it was safe to buy Greek Banks (which it is not!) based on the mainstream media narrative that Greece is now fixed, ekathimerini reports that not only are deposits flying out the door at unprecedented pace (albeit stalled by capital controls) but non-performing loans have increased dramatically in the last few weeks as hundreds of households and enterprises have stopped making their repayments either due to a genuine inability to pay or because of the general uncertainty in the economy that has seen transactions freeze.
In his Pulitzer-Prize-winning book, Lords of Finance, the economist Liaquat Ahamad tells the story of how four central bankers, driven by staunch adherence to the gold standard, “broke the world” and triggered the Great Depression. Today’s central bankers largely share a new conventional wisdom – about the benefits of loose monetary policy. Are monetary policymakers poised to break the world again?
Unlike previous quarters when JPM's earnings release was a jumble of legal addbacks, MBS charge offs and loan-loss reserve releases, this time it was positively tame by comparison.
Fragmenting ammunition does a lot more damage and thus has more "stopping power" than full metal jacket ammo, so one might reasonably suspect that the Army’s goal in giving every soldier a magazine full of hollow points is simply to increase the kill rate. Not so, says the Army - it’s all about preventing collateral damage.
The whole thing feels a bit like the summer of 2008 all over. Once again, the global economy is weakening, a significant crisis has erupted, and temporary solutions to said crisis are being hailed as a success.
Despite the euphoria in global equity markets, The FT's Wolfgang Munchau - once one of the keenest euro enthusiasts - warns regime change is coming in Europe. The actions of the creditors has "destroyed the eurozone as we know it and demolished the idea of a monetary union as a step towards a democratic political union," Munchau exclaims, fearing they have "demoted the eurozone into a toxic fixed exchange-rate system, with a shared single currency, run in the interests of Germany, held together by the threat of absolute destitution for those who challenge the prevailing order." He concludes rather ominously, "we will soon be asking ourselves whether this new eurozone, in which the strong push around the weak, can be sustainable."
... It was on the table. And that means that to some extent, the genie is now out of the bottle. Brussels is officially discussing how to engineer Greece’s departure. The euro is not irreversible. Clearly, they will not do “whatever it takes” to keep it together.
"This is definitely the most difficult time to be an asset allocator," warns GMO's James Montier, telling conference attendees in Munich that he hasn't been this risk-averse since 2008. Having warned six months ago that "stocks are hideously expensive...in a central bank sponsored bubble," Montier sees three different "hellish" scenarios and as CityWire reports, warns investors, "I think it's best to stand a bit and hold onto some dry powder," despite the groupthink idolatry being practiced around the world.
“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.
"Schäuble is convinced that as things stand, he needs a Grexit to clear the air, one way or another. Suddenly, a permanently unsustainable Greek public debt, without which the risk of Grexit would fade, has acquired a new usefulness for Schauble. What do I mean by that? Based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone."