Greece

Tomorrow, A Process Will Be Started...

A very soon tomorrow will bring the decision of the Fed concerning tapering into focus. Ok, a kind of fuzzy, hard to see and wispy focus. The one thing that we can assure you of is that whatever is to come our way it will not be a singular event. You will hear from the imbibers of Cool Aid and other mischievous reality altering drinks that it could be a one-off event. Tomorrow a process will be started, it will probably go in fits and starts but do not blind yourself; it will be the beginning of the journey to cut back on the propping up of the markets by the Fed.

Italy Public Debt Will Rise More Than Expected Next Year; Spain Debt Also Rises To Record

For all complaints about painful, unprecedented (f)austerity, the PIIGS (even those with restructured debt such as Greece) sure have no problems raking up debt at a record pace. Over the weekend, Spanish Expansion reported that Spanish official debt (ignoring the contingent liabilities) just hit a new record. "The debt of the whole general government reached 942.8 billion euros in the second quarter, representing an increase of 17.1% compared to the same period last year. Debt to GDP of 92.2% exceeds the limit set by the government for 2013..." Moments ago, it was Italy's turn to show that with employment still plunging, the only thing rising in Europe is total debt. From Reuters, which cites a draft Treasury document it just obtained: "Italy's public debt will rise next year to a new record of 132.2 percent of output, up from a previous forecast of 129.0 percent."

Gone Fisch(er)-ing; And The 'Summers' Of Our Discontent

It had become clear that the President's own political base in the Senate were not going to support Mr. Summer's ascendancy. The eye of the Press will now turn to Mr. Kohn, Ms. Yellen, who does not seem to have the support of Mr. Obama, and the long, though interesting shot, of Stanley Fischer. Mr. Obama appears to be easing into a lame duck presidency far earlier than once thought and the reality of Obamacare will hit Main Street on October 1 which may tip the scales further out of his control. It may not be either the best of times or the worst of times but very volatile times that mark this week.

Syria: The Summary And What's Next

From Berlin to Ankara and even Damascus, the questions seem to be the same: Has the world order as we know it in the post-war era come to an end? What will the world look like without the United States in the role of superpower and ‘boss’?

Merkel Wins Bellwether Vote As Coalition Partner Founders; Anti-Euro Party Ascent Could Derail Coalition

There was good and bad news for Angela Merkel as today's exit polls from the Bavaria (GDP of $619 billion, bigger than the output of Poland or Austria) state elections - the bellwether vote ahead of next weekend's federal elections (previewed here) - were released. On one hand, the CDU's sister party, the Christian Social Union or CSU, was set to win a majority in Bavarian state elections (where the CDU does not contest the ballot), giving the incumbent a boost as she heads into the final week of her campaign before a national vote Bloomberg reports.  But the surprise of the day was the strong showing of the The Free Voters, who want Greece to exit the euro, oppose euro-area bailouts and want to trim the power of the European Union, won 8.5 percent, the ZDF projection showed. It is precisely the ascent of anti-Euro powers that could upset the final election "arithmetic" in jeopardy. As Reuters reports, "a new anti-euro party could enter Germany's national parliament after an election next week, pollsters said on Sunday, potentially upsetting Chancellor Angela Merkel's hopes of returning to power with her current coalition partner."

Marc To Market's picture

US Fed's exit plan poses a critical dilemma and underscores important contradictions.  The calendar says Europe should be talking about exits too--as aid packages for Spanish banks, and Ireland and Portugal are to wind down in the coming year--yet more rather than less assistance may be neeed.  

Greek Public Workers No Longer Owed A Vacation For Using A Computer

Confused why despite numerous rounds of bailouts, a sovereign debt restructuring, an imminent bail-in, and years of so-called austerity, Greek debt is once again "Rising At Its Fastest Rate Since March 2010"? Maybe anecdotes such as the following will put the big picture in context: as reported by the BBC, Greek civil servants will no longer have an additional six days of extra holidays each year. What was the reason for the nearly full week of vacation time? Why using a computer. "The privilege was granted in 1989 to all who worked on a computer for more than five hours a day. However, Reform Minister Kyriakos Mitsotakis, speaking on Greek TV, said the custom "belonged to another era." What is shocking is that nearly four years after the first Greek bailout of May 2010, this custom from "another era" was still active and public workers were happy to partake in its generosity. Ironically, since now the perks from using a computer are no longer there, watch the Greek economy flounder even faster as instead of playing solitaire, Greek finmin workers migrate to playing tic-tac-toe on paper, not to mention using an Abacus to calculate just how much better than the IMF expectations, Greek 2022 debt/GDP will end up being.

Guest Post: 5 Years Of Financial Non-Reform

Five years after the collapse of Lehman Brothers triggered the largest global financial crisis since the Great Depression, outsize banking sectors have left economies shattered in Ireland, Iceland, and Cyprus. Banks in Italy, Spain, and elsewhere are not lending enough. China’s credit binge is turning into a bust. In short, the world’s financial system remains dangerous and dysfunctional. Worse, despite years of debate, no consensus about the nature of the financial system’s problems – much less how to fix them – has emerged. And that appears to reflect the banks’ political power. Unfortunately, despite the enormous harm from the financial crisis, little has changed in the politics of banking. Too many politicians and regulators put their own interests and those of “their” banks ahead of their duty to protect taxpayers and citizens. We must demand better.

Illogic In Fractional Reserve Banking

isocrates

As economist Jesús Huerta de Soto documents in his tour de force Money, Bank Credit, and Economic Cycles, government has played a leading role in fostering this banking fraud for centuries. The state is forever on the search for more resources to carry out its bidding. Cooperation with the leading money-lending institutions was an obvious route for subverting the moral means to wealth creation. Since the days of classical Greece, it was well understood that transactions of present goods fundamentally differed from those involving future goods. In practical terms, deposits for safekeeping were of considerable difference to those made for the strict purpose of lending out and garnering a return. Bankers who misappropriated funds were often found guilty of fraud and forced to pay restitution. In one recorded episode, ancient Grecian legal scholar Isocrates lambasted Athenian banker Passio for reneging on a client’s depository claim. After being entrusted to hold a select amount of money, the sly banker loaned out a portion of the funds in the hopes of earning a profit. When asked to make due on the deposit, the timid Passio pleaded to his accuser to keep the transgression “a secret so it would not be discovered he had committed fraud.”

"Nobody Knows What The F**k Is Going On..."

Financial circles in Hong Kong are buzzing today on the new Goldman Sachs projection that gold may drop below $1,000 an ounce. The central thess: since the US economy is out of the woods, there’s no longer a need for gold as a risk hedge. But as one senior-level manager at a major investment bank noted, "Nobody knows what the f**k is going on..." However, this mentality entirely misses the point of precious metals. When the hopes and dreams of the entire global financial system rest on the lies of politicians, the whims of central bankers, and the mountains of debt they have all accumulated, things could turn on a dime... tomorrow. Gold is an insurance policy. It’s a form of money that you might never need to use. But should that need ever arise, you’ll be so much better off for owning it.

Guest Post: Everything's Fixed, Everything's Great

Much to the amazement of doom-and-gloomers, everything's been fixed and as a result, everything's great. The list is impressive: China: fixed. Japan: fixed. Europe: fixed. U.S. healthcare: fixed. Africa: fixed. Mideast: well, not fixed, but no worse than a month ago, and that qualifies as fixed. Doom and gloomers have been wrong, just like Paul Krugman said. The solution to every problem is at hand: create more money and credit, in ever larger sums, until a tsunami of cash washes away all difficulties. Let's scroll through a brief summary of everything that's been fixed.

PIIGS Bonds Get Slaughtered At Close

Portuguese and Italian sovereign bond spreads have risen for four weeks in a row now (with Portugal +29bps this week alone and near 2013 wides) but the close today was unusual in its agression. Portugal had been blowing wider since yesterday, but minutes before the close today, Spain and Italy were slammed higher in yield/spread and lower in price (BMPS unwinding?) Of course European stocks didn't care - Greece up 5.6% on the week, Spain +3.3%, Italy +3%... "fixed"