Here is the punchline from Greek nemesis #1, Schauble: SCHAEUBLE PROPOSES TIME-LIMITED `GREXIT': FAZ; SCHAEUBLE SUGGESTS 5-YR GREXIT, HUMANITARIAN SUPPORT: FAZ
In other words, Germany just said kick Greece out, conditionally, for 5 years (it is not quite clear what Greece would use for currency in the meantime), quarantine it, and treat it as a third-world country until 2020. Somehow we doubt global stocks expected this outcome when they soared on Friday...
Having corralled selling by the National Social Security fund earlier this week and after discouraging local reporters from mentioning selling in the press, China has now made it illegal for major shareholders to dump stock over the next six months.
You might be tempted to suspect that the inevitable unwind of a completely unsustainable margin mania is to blame for the brutal selling that has cost Chinese shares some $3.5 trillion in market value over the last three weeks. But you’d be wrong, according to several Chinese newspapers.
Facing an acute cash shortage and a worsening credit crunch which together threaten to leave government employees in the lurch and cut off the flow of imported goods, Kathimerini says Greece is preparing for the launch of an "alternative currency."
- A new program requiring very major structural reforms of the Greek side, and much larger than the last Juncker proposal.
- Introduction of parallel currency, primarily through promissory IOU.
- Controlled bankruptcy and leaving the euro
On the heels of Sunday’s referendum wherein Greeks essentially gave the greenlight for an unceremonious EMU exit should Europe decide to spurn the IMF and stick to a “no debt relief” policy for Athens, PM Alexis Tsipras and his newly-appointed finance minister Euclid Tsakalotos are making a final push to break the stalemate with creditors before the ATMs go dark and a supplier credit crunch creates widespread shortages of imported goods.
- Greece faces last chance to stay in euro as cash runs out (Reuters)
- Tsipras Begins Brussels Campaign to Keep Greece Inside the Euro (BBG)
- Greek Crisis Shows How Germany’s Power Polarizes Europe (WSJ)
- Eurogroup Head Dijsselbloem Calls for ‘Credible’ Greece Package (BBG)
- Europe Not Playing ‘Domino Theory’ Leaves Markets Calm on Greece (BBG)
- China stocks fall again despite support measures (Reuters)
- Chinese Trading Suspensions Freeze $1.4 Trillion of Shares Amid Rout (BBG)
- Crude Creeps Higher After Downturn (WSJ)
What do you do when two policy rate cuts, $19 billion in committed support from a hastily contrived broker consortium, and a promise of central bank funding for the expansion of margin lending all fail to quell extreme volatility in a collapsing equity market? You ban selling.
The oil price collapse of 2014-2015 began one year ago this month (Figure 1). The world crossed a boundary in which prices are not only lower now but will probably remain lower for some time. It represents a phase change like when water turns into ice: the composition is the same as before but the physical state and governing laws are different. The market must balance before things get better and prices improve. That can only happen if production falls and demand increases. That will take time. The most likely case is that oil prices will decrease in the second half of 2015 and that financial distress to all oil producers will increase. The hope and expectation that the worst is over will fade as the new reality of prolonged low oil prices is reluctantly accepted.
Every quarter ConvergEx's Nick Colas reviews a raft of unusual and less examined datasets with an eye to refining and adding perspective to the more traditional macroeconomic analyses. This quarter’s assessment of everything from large pickup truck and firearms sales to Google search autofills for “I want to buy/sell” shows a U.S. economy that is reasonably strong but growing only very slowly. The chief areas of concern: Food Stamp participation is still very high at 45.6 million Americans (14% of the total population) and indicators like used car prices and large pickup sales are flat.
- EU in last-ditch bid to Greece, urges "yes" vote to bailout (Reuters)
- In? Out? In between? A Greek legal riddle for EU (Reuters)
- Tsipras Says EU Won’t Eject Greece as Cost ‘Immense’ (BBG)
- Empty Greek ATMs Force Tourists to Stiff Santorini Cabbies (BBG)
- Anti-austerity protests in Greece as bank shutdown bites (Reuters)
- Puerto Rico governor calls for bankruptcy; adviser says island 'insolvent' (Reuters)
- Puerto Rico Urges Concessions From Creditors (WSJ)
- Hilsenrath - For Fed to Delay Rate Hikes, Global Tumult Would Need to Infect U.S. (WSJ)
Eurocrats have spent untold billions of other people’s money to save face, just so they wouldn’t have to admit that Project “Make Everyone Germany” has failed. But what they never acknowledged was that no matter how much they extend and pretend, the disease will always reach its crisis. And this financial disease is going to slay the patient. History is very clear on this point: debt kills.
- China’s Stocks Enter Bear Market as Rate Cut Fails to Stop Rout (BBG)
- Stocks Tumble Around the World on Greek Crisis (WSJ)
- Some say back to the drachma for a Greek reboot (Reuters)
- Greece Imposes Capital Controls as Fears of Grexit Grow (BBG)
- Panic Sets in Among Hardy Hedge Fund Investors Remaining in Greece (NYT)
- Euro off Greece-driven lows after SNB intervenes (Reuters)
- Western Union to close in Greece for rest of week (Reuters)
- European banks, bonds shaken by Greek turmoil (Reuters)
With the ATMs running on empty and the banks set to be closed for a week, the German foreign office has some advice for anyone traveling to Greece...