France

When the S&P, always so conveniently ahead of the curve, yesterday revised its forecast for Europe from growth in the second half of 2013 to 2014 one couldn't help but golf clap, as well as wonder if they finally started looking at the fundamental depressionary reality on the ground instead of the rating agency's infamous "models." A depressionary reality confirmed by the latest car sales number for May which just hit a fresh 20 year low.

The summit opens today for two days of public display of back-slapping and hand holding, championing the things that the west does best. The summit was preceded yesterday by the parading of 8 life-size puppets with huge heads to draw attention to poverty levels in the world.

• Obama prepares for chilly talks with Putin over Syria (Reuters)
• G8 opens amid dispute on Syria arms (FT)
• Economists Blame Fed for Higher Bond Yields (WSJ) - wait... what? Isn't the "stronger economy" to blame?
• What a novel concept - In the Czech Republic, a spying scandal has forced the PM to resign (BBG)
• Rigged-Benchmark Probes Proliferate From Singapore to UK (BBG)
• Economists Wary as Fed's Next Forecast Looms  (Hilsenleak)
• Banks Balk at New Rules for Small Loans (WSJ)
• Sporadic clashes in Turkey as Erdogan asserts authority (Reuters)

Overview of these week's key developments

Stock-market crashes saw the light of day more and more as the world became industrialized. The 19th century saw a rapid increase in their numbers.

France vetoed the launch of free-trade negotiations between the EU and the US (forgot that it racked up a big trade surplus with the US)

Liquidity overcame common sense and economic fundamentals for a time. A lot of money was made and a huge amount of leverage was put on. Everything rose with the tide. Look around you though; look carefully. We think the tide is beginning to go out. We believe recession in Europe will spread to America as the severity of the European crisis becomes more and more apparent. Upcoming economic data in France is also going to be quite troubling in my opinion and the contagion will become apparent in the United States.

• Global shares pummeled, dollar slumps as rout gathers pace (Reuters)
• Hong Kong to Handle NSA Leaker Extradition Based on Law (BBG)
• Lululemon chairman sold $50 million in stock before CEO's surprise departure (Reuters)
• Companies scramble for consumer data (FT)
• Traders Pay for an Early Peek at Key Data (WSJ)
• When innovation dies: Apple looking at bigger iPhone screens, multiple colors (Reuters)
• Washington pushed EU to dilute data protection (FT)
• Japan-U.S. drill to retake remote island kicks off (Japan Times)
• EM economies in danger of overheating, World Bank says (FT)
• Don't forget the Indian crisis: Chidambaram seeks to quell concerns over rupee (FT)

The Dirty Little Secret About Mass Surveillance: It Doesn’t Keep Us Safe

Dare 'Ye Test the Analysis To Ascertain It's Virility? Madness, I say! Sheer, Utter Madness! In other words - SYSTEMIC RISK is here, NOW!

Five Eurozone countries now have loans for half a trillion Euros. These members of the Euro currency union are receiving loans from the one of two bailout funds which are financed by the other 12 Eurozone members. Eurozone members receiving assistance from the two European rescue funds do not pay into it. That means the higher the assistance, the higher the obligations of the healthier countries. Germany already guarantees 27 percent of the loans, France 20 percent and Italy 18 percent. The rescue funds borrow capital, guaranteed by nations of the European Union, in the financial markets and then hand the money to the indebted countries. In doing this they engage in a kind of Quantitative Easing where money is printed based upon the various guarantees. None of these guarantees are counted against the liabilities of any country when the debt to GDP ratios are made public. There is a new scheme underway where bondholders would have to pay for the vast amount of any losses with the money of depositors also in question. There is no agreement yet on this plan. What can be said is that the playing field is being tilted with much more risk now placed in the hands of bond owners and depositors.

What assets will the core/Empire protect? Those of the core. What will be sacrificed? The periphery.

it appears the memo about the glorious housing recovery has bypassed the socialist paradise of France. Either that, or the concept of shared property is so advanced there, and the costs of evicting squatters so high, that all a homeless Parisian needs in order to have four walls and a roof above their heads is to find an empty office building and claim it as their own. Which is precisely what is happening. And while squatting is not a unique phenomenon to any paradise, socialist or otherwise, when a group of 16 Parisian families decided to take over a vacant 4-story building, have decided to put a little signature touch: they telegraphed their presence far and wide by placing repeated food orders so the neighbors could see the "comings-and-goings" of the delivery man (supposedly justifying their squatting), but actually went so far as to invite the French housing minister. And got her support! Socialist utopia indeed.

One look at the airplane traffic map below should be enough to convey which socialist European country has a just started a 3-day air traffic controller strike. Sure enough, as a result of the French ATC union demands for 'fairness', i.e., an elimination in the "unprecedented" cost-cutting plan, the eastern air border of France now looks like the 405 Freeway during rush hour.

The 2011 actions of the FDIC ending the safe harbor for true sales locked in a solution to TBTF