Corruption

Just like for Alice, Spain's farcical kickback and bribery scandal's rabbit hole just keeps getting deeper. This morning El Pais reports that the alleged providers of payments to the government (via the kickback fraud) - known as 'Gurtel' - received an unprecedented EUR115mm in government contracts. With more than 70 people facing charges ranging from money laundering to bribing a public official, Rajoy's efforts at coming clean have fallen on deaf ears as 79% of Spaniards are dissatisfied with the explanations. This follows a weekend of disclosures including the fact that Rajoy gave himself a 32% pay rise up to 2011 as he push austerity down the throats of his people. As El Pais notes, "...The only thing that is clear is that most of the recipients of payments on the former treasurer’s list have admitted that they accepted money in cash...." The sad political truth is, as Deutsche notes, the likeliest course of action at this stage, in our view, is that on the basis of the internal investigation, Rajoy may go as far as letting go some members of his cabinet, but we think that he will protect the “hard nucleus” of his administration and will not resign. It appears, as they note, that the Spanish government's room for maneuver (over further austerity) is significantly diminished.

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The following rather stunning documentary provides a critical insight into what Europe (and Argentina once again) could well be progressing towards. There is a reason we highlight the 'scariest chart in Europe' as that of youth unemployment and with the central banks printing money at ever increasing paces and the next round of global competitive devaluation beginning, the debt slaves will suffer ever more. In 2001, Argentina collapsed; after many years of apathy in the country, the insurrection exploded. As TopDocumentary notes, the spontaneous revolt of 'faceless' people meant saucepans were being banged in every neighborhood. What happened to Argentina? How was it possible that in so rich a country so many people were hungry? The country had been ransacked by a new form of aggression, committed in a time of peace and in a democracy. Ever since independence, almost 200 years ago, Argentina’s foreign debt has been a source of impoverishment and corruption and the biggest scandals. This foreign debt always went hand in hand with big business, and with the complicity of nearly every government. The policy of indebtedness gave rise in Argentina to generations of technocrats and bureaucrats, who favored banks and international corporations over their own country. It didn't end well then, and it won't end well this time...

Sometimes, it feels good to hope. But since last September, nothing has really changed. At least not fundamentally. The zero-interest rate policies were going to encourage share buybacks, dividend payments and any method to allow the extraction of whatever real value is still available to extract from corporations/businesses by their owners. This meant leverage was going to increase, unemployment would remain high, capital expenditures were going to decrease and the risk of defaults was to going to rise. A year later, all these symptoms are starting to surface. One more reason to avoid stocks and be long gold. But in my view, it will take longer than many believe, for these imbalances to burst "...As long as the people of the EU put up with this situation and the EU Council (…) effectively kills democracy at the national level AND as long as the Fed continues to extend US dollar swaps, this status quo will remain… Whenever the political sustainability of the EU is challenged, we will see a run for liquidity... The trend is for asset inflation, and will last as long as the people of the EU and the US do not challenge the political status quo..." Unemployment and the tolerance of those unemployed will tell us when the time has come.

Corruption only works as long as the benefits of being “on the take” outweigh the consequences of getting caught. As soon as the consequences become real (namely someone gets in major trouble), then everyone starts to talk. This process has now begun in Spain.

The list of public/private institutions that desperately need structural reform is long: the Pentagon, healthcare (a.k.a. sickcare), Social Security, the complex mish-mash of programs that make up the Welfare State, the 73,000 page tax code, public pensions and the financial sector, to name just the top few. Regardless of the need for reform, it isn't going to happen for these structural reasons.

Thus, we find that Europe’s primary political market props (EU leaders including ECB head Mario Draghi) are coming unraveled at the precise time that EU banks are showing warning signs and the most important EU economies are heading sharply south.

“Facts do not cease to exist because they are ignored.” – Aldous Huxley

The entire system is corrupt to its core. Both political parties, regulatory agencies, Wall Street, the Federal Reserve, and mainstream media are participants in this enormous fraud. They grow more desperate and bold by the day. The lies, misinformation and propaganda being spewed on a daily basis become more outrageous and audacious. They are using the Big Lie method on a grand scale. They frantically need to lure the muppets into the stock market and the housing market to keep the game going a little longer. You can sense we are reaching a tipping point. The system they have created is mathematically unsustainable. Therefore, it will not be sustained.

Some phrases are endowed with immediately recognizable symbolism.  When we hear them, we instantly know who and what the phrases are referring to, and can even gain a greater depth of understanding to a particular situation just by applying them. Throughout history there have always been people who were right, and usually a “majority” that were wrong, on any single issue.  Defenders of institutionalized ignorance argue constantly that truth is “relative”, and that they should not be criticized for having their own "opinions".  They use this relativism as a cover for their unwillingness to admit a lack of knowledge. What they fail to understand is that their “opinions” were never theirs to hold.  What they believe has merely been conditioned into them.  They are willing to embrace the system no matter how unjust, because their entire identity is predicated on its continued existence. We call them sheeple... Sheeple are puppets in the game of political reconstruction, and their job is to cheerlead the establishment and to drown out all honest voices.

An equivalent amount for the US would be if it were discovered that members of Congress fled the US last year taking $300 BILLION them. Bear in mind, if you added up the total net worth of every politician in Washington you wouldn’t come even close to $300 billion.

Down over a point in the long bond. Up almost a point in the long bond. Equities down more than 100 points. Equities up almost 100 points. All of this in the span of two days. Nothing was particularly new; no event popped up on the radar screen, no black swan swopped in from the horizon to startle the markets and anyone observing the markets may well ask, reasonably ask, just what the heck is going on. First, in my mind, we are getting a pretty good signal that the markets are running out of steam and that the collective vision of the way forward is murky. We are in a fragile state; near a tipping point. Please remember, however, that there are two components to additional debt and the markets have only focused on one side of the equation which is the interest rate variable.

Worldwide, politicians are not exactly famous for honesty. However, Europe is a very special case… where just about everyone is lying on just about everything involving the economy and banking system.

Press conference from hell, slugfest about corruption, even in Germany

The financial world is used to bubbles. We like to speak about them, point to them, bet upon their comings and goings and wave facts and figures about them like wild men when we appear in the media. It is the way of the markets. We have had bubbles in Real Estate, dot.com, bonds, stock markets and all kinds of other singular spaces. What we are faced with now is also a bubble but one unlike we have ever seen before because all of the major central banks have acted in concert which pumped money in from everywhere while, at the same time, limited what could be done with our new found small bits of paper because they playing field was leveled by distortion en masse. I would say that the entire financial system, every market, every space is in a bubble as a result of what they central banks have done.

In case there was any doubt that the European circus could get any more ridiculous, here comes Spain's uber-unpopular Prime Minister Mariano Rajoy, already embroiled in a massive kickback political scandal, with a quote that just blows everyone away: "I repeat what I said Saturday: everything that has been said about me and my colleagues in the party is untrue, except for some things that have been published by some media outlets." And scene as your frontal lobe explodes.