Greece

Key Events In The Coming Week And Complete February European Calendar

With China offline celebrating its New Year, and potentially mobilizing forces in (not so) secret, and not much on the global event docket, the upcoming G20 Finance Ministers meeting in Moscow at the end of the week will be the key event for FX markets, which these days define every other aspect of risk. It should surprise nobody the last couple of weeks have seen increased attention on exchange rates and the frequent use of the “currency war” label by policymakers in many countries. No news announcements are expected at the BoJ meeting on Thursday, following the formal announcement of a 2% inflation target and an open-ended asset purchase program. On the data side, US retail sales on Wednesday will provide an important signal about the strength of the US consumer following the largest tax increase in decades. Although January auto and same store sales data was reasonably solid, new taxes will soon begin to weigh on spending. Also on Wednesday, Japan Q4 GDP will be released. On Thursday, Q4 GDP for France, Germany, Italy and the Euro area will be released. While Q4 contraction is assured, the key question mark is whether German can rebound in Q1 and avoid a full blown recession as opposed to a "brief, technical" one, as the New Normal economic term goes.

Europe: The Last Great Potemkin Village Where "The Rich Get Richer, And Poor Get Poorer"

Let’s be very clear here: this is what the euro has wrought. This destruction of the non-German industrial bases has taken place with the active complicity of the European technocrats. They did not even realize that France, the EMU’s second largest economy, for example was becoming hopelessly uncompetitive.  This is a zero sum game if there ever was one, with Germany being the main winner and the other three economies massive losers. Instead of leading to convergence in euroland economies, the euro project has led to massive divergences, with the strong getting stronger, and the weak getting weaker... The ECB has thrown enough money at the market to, for now, reduce borrowing costs and allow equity prices to rise (unfortunately so is the euro, threatening exports). This buys time—but these actions are not enough to solve the structural problems created by the euro. The private sector has shriveled in Southern Europe, as government spending  and debt has soared. If we have France, Italy and Spain together enter a debt deflation/debt trap, the crisis will be far too big for Germany to handle: and if this happens before German federal elections are held (no later than October) we could see the European political crisis revive in full force.

How A Previously Secret Collateral Transformation With The Bank Of Italy Prevented Monte Paschi's Nationalization

The endless Italian bailout story that keeps on giving, has just given some more. It turns out Italy's insolvent Banca dei Monte Paschi, which has been in the headlines for the past month due to its role as political leverage against the frontrunning Bersani bloc, and which has been bailed out openly so many times in the past 4 years we have lost track, and whose cesspool of a balance sheet disclose one after another previously secret derivative deal on an almost daily basis, can now add a previously unannounced bailout by the Bank of Italy to its list of recent historical escapades.

"China Accounts For Nearly Half Of World's New Money Supply"

After having less than half the total US deposits back in 2005, China has pumped enough cash into the economy using various public and private conduits to make even Ben Bernanke blush: between January 2005 and January 2013, Chinese bank deposits have soared by a whopping $11 trillion, rising from $4 trillion to $15 trillion! We have no idea what the real Chinese GDP number is but this expansion alone is anywhere between 200 and 300% of the real GDP as it stands now. And more: between January 2012 and January 2013 Chinese deposits rose by just over $2 trillion. In other words, while everyone focuses on Uncle Ben and his measly $1 trillion in base money creation in 2013 (while loan creation at commercial banks continues to decline), China will have created well more than double this amount of money in the current year alone!

Guest Post: Why Reforms Won't Work

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.

Greek Tax Hikes Backfire As Tax Revenues Plunge 16%

There was some hope that Greece, which for the past few months was desperately trying to show it has a primary surplus when in fact it was merely shoving unpaid bills under the rug, was at least getting its runaway deficit situation under control. This, despite what many sensible people pointed out was the return of nearly daily strikes, which meant zero government revenue as zero taxes could be levied on zero wages. Turns out the sensible people were again right, and the Greek and European propaganda machine has failed once more as the Greek Finance Ministry just reported that despite big tax hikes demanded as part of austerity measures by international lenders, tax revenues fell precipitously in January, with the Greek Finance Ministry reporting a 16 percent decrease from a year earlier, and a loss of 775 million euros, or $1.05 billion in one month. It is all downhill from here as the feedback loop of more spending cuts is activated to offset declining revenues, leading to even less revenue, and culminating with the complete collapse of Greek society.

'Europe's A Fragile Bubble', Citi's Buiter Warns Of Unrealistic Complacency

Citi's Willem Buiter sums it all up: "...the improvement in sentiment appears to have long overshot its fundamental basis and was driven in part by unrealistic policy and growth expectations, an abundance of liquidity and an increasingly frantic search for yield. The key word in the recovery globally, and in particular in Europe, growth is fragile. To us the key word about the post summer 2012 Euro Area (EA) asset boom is that most of it is a bubble, and one which will burst at a time of its own choosing, even though we concede that ample liquidity can often keep bubbles afloat for a long time." His conclusion is self-evident, "markets materially underestimate these risks," as the EA sovereign debt and banking crisis is far from over. If anything, recent developments, notably policy complacency bred by market complacency, combined with higher political risks in a number of EA countries highlight the risks of sovereign debt restructuring and bank debt restructuring in the EA down the line.

Why "This Time Won't Be Different" For Japan In Two Charts

While Japan's recent attempt to massively reflate and break out of its "liquidity trap" - an artificial construct to explain what happens when an artificial model, created by a flawed and artificial economic theory explodes in a singularity of Econ PhD idiocy leaving billions of impoverished people in its wake, is nothing new, there are those who are rather skeptical this latest attempt to achieve what Japan has not been able to do in over 30 years will work. And while one can come up with complicated, expansive, verbose theories based on Keynesian DSGE models and other such gibberish, why this time will be different for Japan, there is a very quick and simple argument why it won't.

Person Trampled As Fight Breaks Out At Greek Free Food Handout

In yet another day marked by simply unbearable propaganda, about an hour ago an EU official pulled a Lanny Breuer and was quoted as saying that "things are going well" in Greece. Oh are they? Then perhaps the same official can explain why a clip of a scuffle breaking out at a free food handout in Greece, where one man was "trampled and injured", and where a "Reuters photographer was hit on the head with cauliflower heads" has been the most watched item on Greek TV in the past day?

Tipping Points And What The Teeter Taught Here

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.

The (Gold)Man Who Invented BRIC Says "Clear Evidence Things Getting Better" As He Resigns

The Chairman of Goldman's Asset Management group, unwise supporter of Man Utd, promoter of 'decoupling' myths, and creator of the BRIC mnemonic has decided, with everything looking so tickety-boo, to retire. Whether his great Buy BRICS fail or his BoE leadership bid fail was the final straw is unclear, but for now, the erstwhile permabull (and mocker of market skeptics) leaves us on a bright note:

  • *O'NEILL SAYS CLEAR EVIDENCE OF THINGS DOING BETTER ECONOMICALLY

20 years of 'broken record' survival and the Brit throws in his chips now - just as everything looks be taking off? Leave your farewell message below...

Greek Government Threatens Striking Seamen With Arrests Unless They Resume Work

Over the weekend we reported on the second Greek strike of the year, the first being that of subway workers which ended prematurely into its ninth day when the government threatened to arrest all strikers who had snarled traffic in Athens to a halt, this time involving Greek seamen who had left the Greek isles in geographic isolation for a week. Earlier today, the strike which had gone on for a week, was voted to be extended another 48 hours which mean ships would remain tied up in port until early Friday, while the seamen's union will meet anew to debate whether to further extend their walkout. Needless to say, the union is angry at pay arrears and government austerity policies. As of moments ago the union will be even angrier, as the government just announced it would order civil mobilization - or said otherwise, deploy the arrest threats - once again as a repeat desperate measure to halt this latest strike.

Greek Finance Minister Gets Bullet In The Mail

Now that Europe is clearly unfixed once more, it is time to shift attention back to broke Greece where as we showed yesterday things are certainly back to the "new normal" with 24 hour strikes again on the daily agenda. And just to keep it real, Greek police reported that the new Greek Finance Minister received a care package with just two contents earlier today: a bullet and a death threat.