Creditors

Neither control for its own sake, nor bail-ins, are the primary drivers of going cashless. It's something more serious than power or loot.

"Starr alleges in its own right and on behalf of other AIG shareholders that the Government’s actions in acquiring control of AIG constituted a taking without just compensation and an illegal exaction, both in violation of the Fifth Amendment to the U.S. Constitution.... Having considered the entire record, the Court finds in Starr’s favor on the illegal exaction claim. As the Court noted during closing arguments, a troubling feature of this outcome is that the Government is able to avoid any damages notwithstanding its plain violations of the Federal Reserve Act. "

-  U.S. Court of Claims Judge Thomas Wheeler

Just as we hinted earlier when we reported that the ECB may use the "nuclear option" on Wednesday and yank Greek ELA, here comes German Suddeutsche Zeiting with a report that Eurozone countries have reached a Greek emergency plan which calls for the imposition of capital controls on Greece if no deal is concluded by the weekend.

It's quite simple really. Here is Draghi:

• DRAGHI SAYS BALL LIES SQUARELY IN CAMP OF GREEK GOVERNMENT

And moments before this statement, here was the Greek government:

• GREEK GOVT AWAITS INVITATION BY CREDITORS TO TALKS: STATEMENT

QED

When I look at the whole financial sector, I feel like on the Titanic. We’re fighting about deck chairs..

With talks between Greece and creditors at what appears to be an intractable stalemate, Germany's EU Commissioner warns that a "state of emergency" could leave Greeks without energy and medicine. Meanwhile, PM Alexis Tsipras has pledged to defend democracy "in the place where it was born."

• Tsipras Hardens Greek Stance After Collapse of Talks (BBG)
• Obama Fights to Save Trade Bill (WSJ)
• German Stock Market Pain Seen Just Beginning Should Greece Exit (BBG)
• Russia to boost forces in western flank if U.S. stations arms in east Europe (Reuters)
• Lab Nears Settlement Over Pricey Medicare Drug Tests (WSJ)
• China's $358 Billion in Margin Loans Points to Next Bear Market (BBG)
• Draghi Faces EU Court Ruling on 2012 Bond Plan as Greece Teeters (BBG)
• Sex, lies and debt potentially exposed by U.S. data hack (Reuters)

European shares remain lower, close to intraday lows, with the banks and autos sectors underperforming and food & beverage, retail outperforming. Tsipras hardens Greek stance after collapse of bailout talks. The Italian and Swedish markets are the worst-performing larger bourses, the U.K. the best. The euro is weaker against the dollar. Greek 10yr bond yields rise; Spanish yields increase. Commodities decline, with copper, nickel underperforming and natural gas outperforming. U.S. Empire manufacturing, net TIC flows, NAHB housing market index, industrial production, capacity  utilization due later.

The lack of faith in central bank trustworthiness is spreading. First Germany, then Holland, and Austria, and now - as we noted was possible previously - Texas has enacted a Bill to repatriate $1 billion of gold from The NY Fed's vaults to a newly established state gold bullion depository..."People have this image of Texas as big and powerful … so for a lot of people, this is exactly where they would want to go with their gold," and the Bill includes a section to prevent forced seizure from the Federal Government.  Is this the first step down a road to secession?

"Over the last couple of decades, we have been engaged in an enormous national experiment, taking impressionable and often ignorant teenagers and young adults and seeing just how much student loan debt they can handle.There is a practical question at hand for people who feel as if they are in over their heads: Is it ever a good idea to try to beat the system by openly defying it and refusing to repay the debt that you willingly took on?"

The writing was already on the wall after several EU officials expressed reservations about the feasibility of striking any sort of compromise with Greece’s negotiating team in Brussels on Sunday, and now it’s official. Talks have once again ended with no deal as the Greeks are standing their ground on pension cuts and VAT hikes.

Irrespective of the political wrangling going on behind the scenes both in Athens and in Brussels, a terminal bank run could plunge Greece into a crisis faster than politicians can react, an eventuality which would have to be met with capital controls. As FT reports, Athens is "running out of options" to avoid a Cyprus repeat.

As we enter Sunday and what may well be the last possibility to get deal done before the "accidental" Grexit scenario is put in play, we thought our Greek readers would be interested to learn that while Lagarde's "apolitical" IMF is digging in tooth and nail against giving Greece even the smallest amount of breathing room, the equivalent of half an our of a typical daily Fed POMO notional amount, yesterday the same Lagarde said that the IMF "could lend to Ukraine even if Ukraine determines it cannot service its debt."

Spiegle traces the history of German Chancellor Angela Merkel's relationship with FinMin Wolfgang Schaeuble who is leading the opposition against further aid for a Greek government he views as unwilling to accept economic realities. As the rift between the two deepens, Schaeuble has instructed the German finance ministry to draw up plans that would limit the fallout from a sovereign default.

"If we have a sustainable solution, regardless of how difficult the compromise is, we will bear the burden because the only criteria are exiting the crisis and the bailouts."