While regional independence is superior to both the failing European Union and the façade of special interest controlled democracy, one further action should taken by any jurisdictions that choose secession: Newly restored sovereign nations should repudiate their share of the illegitimate sovereign debt when they exit existing unions and nation-states. Created by distant banking elites buying national politicians and parliaments to load up on sovereign debts that can never be paid off, this massive national debt load is illegitimate and destructive to existing and new national economies. Governments have three ways to deal with debt loads of this magnitude: The first is hyperinflation designed to destroy the payoff value of the debt, second is the official repudiation of the debt or third, a combination of both options. Attempting to hold the bankers accountable is not an option. The first nations to repudiate sovereign debt will have the advantage; and as nations undertake this endeavor, they should keep this in mind: All government bureaucracies grow until contained, taxes rise until curtailed and politicians borrow and seek power until thrown out of office.
In a somewhat mind-blowing 'gotcha' this evening (that we saw coming from the moment the words left his lips), the Greek finance minister has been forced to admit he's a lying cheat drop claims that he had secured a two-year extension for debt repayments and an agreement with creditors over EUR13.5bn in proposed austerity measures - because HE HADN'T! As The Guardian reports, Stournaras played to stereotype perfectly (the Greeks only got in the euro thanks to off-market currency swaps to reduce debt optics off-balance sheet) by lying once again (if you lie big enough it has to stock, right?). The U-turn - which he was forced to make after Germany denied the deal (yes Zee Germans again the only ones that anyone should be listening to) - caused chaotic scenes in parliament. As we have vociferously described, and Mr. Panos confirmed, the leverage is all with the Greeks (as much as the world does not want to admit it) as one Greek official said (frighteningly honestly!):
"Even if the troika give us a negative report, what are they going to do? Are they really going to not give us the installment [to keep Greece's economy afloat] two weeks before the US elections, with everything that entails – default, bankruptcy, global market turmoil? These labour reforms will turn our country into Bangladesh. They have no fiscal benefit and will actually derail the adjustment program. The political system will collapse if we impose them. The troika is demanding that we commit suicide!"
The most important alliance within the EU, the one that has ultimately defined the union's course over the past few decades, is the French-German axis. It appears that this is no longer the case. The once so strong friendship is in danger of fraying ever since the socialist Francois Hollande has become president of France. Not only was he elected on an 'anti austerity' platform (disguised as a 'pro growth' agenda, which is of course one of the most laughable misrepresentations ever), it has turned out that his big-brother, anti-free market socialist agenda wasn't merely an electoral ploy to differentiate himself from Sarkozy. He actually means it. One thing is certain: the markets have not yet fully assimilated what is going on here.
"Preservation of Capital" must be the watchword in this market; in all markets. Any mistake made is now magnified by our very low interest rates so that any error is compounded by the ability to make back the loss. In America we are facing our national elections. In Europe we are facing a hardening of positions where the divisions between the North and the South, with France lining up with the Socialist South, are edging closer to some nation or another refusing to fund. The scheme of diversion can last only so long as real decisions with real consequences are about to be forced upon the Continent as funding must come or not come.
The world is running down a quite slippery slope in its attempt to avoid calamity. The political machines in Europe and the United States and to a real but lesser extent in China have passed the hat to their central banks because either they cannot or will not face up to the severity of their problems. This “faith based initiative” is misplaced, as liquidity and faith are driving the boat and derelict accounting is providing the fuel. The United States, having moved far past the “safety net” that has always been in place, are faced with a very real choice between Socialism and Capitalism. In Europe the problems are also of a fundamental nature as the definition of “More Europe” in Germany is decidedly different than the definition in Spain. But the fantastical belief that the Central Bank will wave it magic wand and make everything all good again is the stuff of Mommy kissing the boo-boo and everything will be just fine.
Forget the day-to-day images of riots and protests, the truth on the ground in Greece is far harsher. Just as we warned numerous times, social unrest is escalating rapidly and the extremists are gaining strength and power. One of Greece's neo-nazi Golden Dawn party MPs says "there is already civil war, and Greek society is ready - even though no-one likes this - to have a fight." The BBC's Paul Mason reports on recent demonstrations surrounding the performance of a controversial play as tensions escalated and the Golden Dawn party "de-arresting" demonstrators - pulling them from police detention, as the police do nothing. The somewhat shocking clip below points out the incredible reality that is occurring on the streets of Greece - even as EU leaders claim Greece was not a topic at the EU Summit. The people ask "if we are in a democracy or a dictatorship?" and Golden Dawn (which has 18 seats in parliament) proclaims "On the one side there will be nationalists like us, and Greeks who want our country to be as it used to be; and on the other side illegal immigrants, anarchists and all those who have destroyed Athens several times." As Mason concludes: the social and political outcome of the IMF and EU austerity program, and of the implosion of mainstream politics in Greece, looks like a catastrophe for democracy. "Europe must do something if they don't want a revival of the Third Reich again"
As the Euro infection commences, is it time to profit?
The World Gold Council issued a summary on gold’s price performance in various currencies during the third quarter. The report looks at influences that monetary policies and central bank actions have on gold. Gold’s 11.1% USD/oz return in 3Q was in response to central bank stimulus measures. Volatility decreased and generally correlated with other assets. Central banks announced a continuation of their unconventional monetary policy programmes in Q3 which mainly are used to lower borrowing costs and supporting financial markets.Financial assets have responded to central bank policy announcements, but gold's reaction has been the strongest. There is a consensus that these policies drive investment into gold purely due to inflation-risk impact. The World Gold Council believes that there are not one but four principal factors that provide further support to the investment case for gold: Inflation risk, Medium-term tail-risk from imbalances, Currency debasement and uncertainty, and Low real rates and emerging market real rate differentials.
A report from German news magazine Der Spiegel states that Iran's latest effort to disrupt key shipping lanes through the Strait of Hormuz may be to cause a massive oil spill. Code-named Murky Water, the operation may serve to force a temporary respite from sanctions targeting the country's energy sector. Iraqi leader Saddam Hussein tried a similar tactic during the first Gulf War to deter invading U.S. forces. If the German report is true, the Iranian operation could be a sign of Tehran's dwindling options.
Chatter is that Rajoy is waiting for conditions to get worse so he can garner easier terms for a Spanish Bailout and seek a compromise whereby he can take a rescue with honor intact has been found. But broadly speaking, confusion reigns in Europe as we wonder how the European Elites will fudge a third bailout for Greece and the fact that the IMF (as we noted here) have admitted that austerity doesn't work how they thought it should/would. But don't expect anything sudden to replace austerity – it remains the only option today, though the debate has begun. So what about something utterly radical such as Gavyn Davies in the FT yesterday where he wrote: “One radical option which is now being discussed is to cancel (or, in polite language, “restructure”) part of the government debt that has been acquired by the central banks as a consequence of quantitative easing (QE).” How will the central bank be recapitalised if it writes off its assets without money printing – why not when inflationary expectations are low? And what would it do to banks?
- Hillary Clinton Accepts Blame for Benghazi (WSJ)
- In Reversal, Cash Leaks Out of China (WSJ)
- Spain Considers EU Credit Line (WSJ)
- China criticizes new EU sanctions on Iran, calls for talks (Reuters)
- Portugal sees third year of recession in 2013 budget (Reuters)
- Greek PM says confident Athens will secure aid tranche (Reuters)
- Fears over US mortgages dominance (FT)
- Fed officials offer divergent views on inflation risks (Reuters)
- China Credit Card Romney Assails Gives Way to Japan (Bloomberg)
- Fed's Williams: Fed Actions Will Improve Growth (WSJ)
- Rothschild Quits Bumi to Fight Bakries’ $1.2 Billion Offer (Bloomberg)
Spain Is Losing Its People, Catalonia Fights For Independence, And The EU Gets Pushed Into The ConflictSubmitted by testosteronepit on 10/15/2012 21:40 -0500
Catalonia’s independence “would do away with Spain” - Justice Minister
UPDATE: Nigel Farage 'Must-See' rant on the' destruction of nation state democracy'
The need to convince any and all that will listen (and one's own self) that the Euro project must be preserved at all costs has never been so obviously politicized as the Nobel crony committee 'blessing' the European Union for bringing peace to a continent at war. While a laudable thing of itself, as JPMorgan's Michael Cembalest notes, by 1954, Germany had already become a stable, liberal, democratic society in one of the most amazing transformations in history given what preceded it ten years earlier. Whether the Marshall Plan helped this, it seems indisputable that conditions for a lasting peace in Europe were already in place by 1954. The notion that the Euro is needed to cement these gains appears to be more about the ambition of specific political movements in Europe/Brussels than anything else. The irony of the Nobel Peace Prize for Europe is that as shown below, it comes at a time of rising social stress, extremist politics, and a deterioration of trust in the very union that is supposed to be providing the social cement.
"The European Union is a horrible, stupid project. The idea that unification would create an economy that could compete with China and be more like the United States is pure garbage. What ruined China, throughout history, is the top-down state. What made Europe great was the diversity: political and economic. Having the same currency, the euro, was a terrible idea. It encouraged everyone to borrow to the hilt. The most stable country in the history of mankind, and probably the most boring, by the way, is Switzerland. It’s not even a city-state environment; it’s a municipal state. Most decisions are made at the local level, which allows for distributed errors that don’t adversely affect the wider system. Meanwhile, people want a united Europe, more alignment, and look at the problems. The solution is right in the middle of Europe — Switzerland. It’s not united! It doesn’t have a Brussels! It doesn’t need one."
From a "Europe in pieces" to a "Europe of peace" and back?