Gross Domestic Product
Greece’s problem can only be truly solved if large scale debt restructuring is accepted and executed. But that would initiate a chain of events that would bring down the bloated zombie that is Wall Street. And it just so happens that this zombie rules the planet. We are all addicted to the zombie. It allows us to fool ourselves into thinking we are doing well – well, sort of -, but the longer term implications of that behavior will be devastating. We’re all going to be Greece, that’s inevitable. It’s not some maybe thing. The only thing that keeps us from realizing that is that the big media outlets have become part of the same industry that Wall Street, and the governments it controls, have full control over. And that in turn says something about the importance of what Yanis Varoufakis and Syriza are trying to accomplish. They’re taking the battle to the finance empire. And it should not be a lonely fight. Because if the international Wall Street banks succeed in Greece, some theater eerily uncomfortably near you will be next. That is cast in stone.
Seven years after the bursting of a global credit bubble resulted in the worst financial crisis since the Great Depression, debt continues to grow. In fact, as McKinsey explains in their latest report, rather than reducing indebtedness, or deleveraging, all major economies today have higher levels of borrowing relative to GDP than they did in 2007. They pinpoint three areas of emerging risk: the rise of government debt, which in some countries has reached such high levels that new ways will be needed to reduce it; the continued rise in household debt; and the quadrupling of China’s debt, fueled by real estate and shadow banking, in just seven years... that pose new risks to financial stability and may undermine global economic growth.
"It's a man-made tragedy, and the men who made it won’t fix it." So it turns out Lenin wasn’t just right that the best way to destroy the capitalist system is to debauch the currency. It’s also the best way, as Venezuela can tell you, to destroy the socialist one.
- RBA cuts interest rates to record low of 2.25% (SMH)
- RBI keeps rates on hold (Reuters), India allows banks flexibility on big projects to reboot growth (Reuters)
- BP slashes capital spending by 20% (FT)
- Greek Retreat on Writedown May Move Fight to Spending (BBG)
- Rosneft accounting move helps BP beat profit forecast (Reuters)
- Amazon in Talks to Buy Some of RadioShack's Stores (BBG)
- Behind Obama's budget proposals, a gloomy view of the future (Reuters)
- How the Justice Department, S&P Came to Terms (WSJ)
- Staples, Office Depot in Advanced Talks to Merge (WSJ)
Update, and in line with the FT report, here's Bloomberg: GREECE SAID TO DROP WRITEDOWN REQUEST AFTER OPPOSITION FROM EU
Over a week after the new Greek government came to power, it has presented its first actual proposal of how it hopes to negotiate with Europe that does not involve the infamous "debt write off", which as both Germany and the ECB have made clear, is a non-starter as it impairs the ECB's balance sheet and leads to a loss of "faith" in the money printer, the legacy monetary system and so on. So instead of yet another debt restructuring, the FT reports that Yanis Varoufakis "would no longer call for a headline write-off of Greece’s €315bn foreign debt. Rather it would request a “menu of debt swaps” to ease the burden, including two types of new bonds." Actually he still does, only he is not calling it as such.
Despite Angela Merkel's insistence on numerous occasions this past week that there will be "no debt renegotiations," it appears a schism at the core of Europe is opening. As France24 reports, following a meeting between France's finance minister Michel Sapin and Greece's finance minister Yanis Varoufakis, the press conference had a considerably more amicable tone that Friday's Dijsselbloem dissing. "France is more than prepared to support Greece," Sapin said adding that Greece’s efforts to renegotiate were "legitimate." Sapin urged a "new contract between Greece and its partners."
There is no reason to assume that this time will be different. These boom-bust sequences will continue until the economy is structurally undermined to such an extent that monetary intervention cannot even create the illusory prosperity of a capital-consuming boom anymore. The bankers applauding Draghi’s actions today will come to rue them tomorrow.
It’s already ‘later’. We're living through the period of time when that dawning recognition of limits will finally burst over the horizon, shining a very bright spotlight on a frightening number of our global society's unsustainable practices. The most urgent of them all, as far as everyone reading this is concerned, is the very uncomfortable fact that it is our system of money that is most likely to break first and hardest because its very design demands endless growth, without which collapse ensues. Central bank credibility (as fictitious as that may be) is essential to maintaining the current narrative, BUT central banks are rapidly losing their credibility (which should have happened simply via deductive reasoning a long time ago) and the strains are showing. When credibility in central bank omnipotence snaps, buckle up. Risk will get re-priced, markets will fall apart, losses will mount, and politicians will seek someone (anyone, dear God, but them) to blame.
Breaking the stranglehold of vested interests is the essential step to rebuilding an economy that isn't totally dependent on manipulated money and statistics.
China's broad stock indices were flip-flopping between gains and losses from the open (although securities firms continued to get monkey-hammered on more tightening by regulators) heading into the avalanche of data that hit at 2100ET. GDP growth - which was estimated at sub-7% based on real-time hard-date - was released/leaked 10mins early - rising 7.3% YoY in Q4 (just beating expectations of a 7.2% rise) but grew only 1.5% QoQ (missing the 1.7% expectation). Then came Retail Sales - beating by the most since May 2014 with a 11.9% YoY gain (against 11.7% expectations). Industrial Production grew at 7.9% YoY (beating expectations of 7.4% by the most since July 2013). Of course the fact that Chinese GDP growth of 7.4% YoY was the weakest since 1990 was entirely ignored as the immediate reaction was Yuan and Chinese equity strength.
The bad news is that as we also speculated, and as Greek officials tried to cover up as usual, the Greeks have resumed doing what they do best any time their country is facing a grand crisis: walking to the bank and withdrawing what little deposits they have left. Or rather running to the bank. Which brings us back to the topic of the Emergency Liquidity Assistnace, which as Kathimerini reported moments ago, at least two Greek systemic banks have reportedly resorted to, indicating that the liquidity situation in Greece is once again as dire as it was in the depth of the European collapse.
Just 13 short months ago - two months before then President Yanukovich was ousted - Russia lent Ukraine $3 billion (by buying their Eurobonds). As Reuters reports, the terms of that loan included a condition that Ukraine's total state debt should not exceed 60% of its GDP. As of last month, based on Moody's estimates, Ukraine has violated that condition with a debt-to-GDP of 72% (and will likely rise to 85% of GDP in 2015).. and so, according to Russian finance minister Anton Siluanov, "Russia has the right to demand early return of this loan." With European aid 'contingent on major reforms' and possibly taking up to 1 year, this leaves the good old IMF (i.e. the US and European taxpayer) to bridge Ukraine's 'gap' and ironically bailout Russia.
- Global Debt Crisis II – Total Global Debt to GDP Ratio Over 300% - Risk of Bail-Ins in 2015 and Beyond - Currency and Gold Wars - $1 Quadrillion “Weapons of Mass Destruction” Derivatives - Cold War II and New World Order as China and Russia Flex Geopolitical Muscles - Enter The Dragon – Paradigm Shift of China Gold Demand - Forecast 2015: None. Forecast 2020: Gold $2,500/oz and Silver $150/oz
The mainstream media narrative - that Germany is ready and prepared for Grexit and that it is no longer a threat to financial stability - is all hype, according to German opposition finance minister Joachim Poss. As Bloomberg reports, all that is mostly posturing for an electorate tired of the aid and angst Greece has demanded since 2010. Simply put, the potential for Euro instability from a Grexit is a detriment to Germany's massive benefits from the single currency - "Europe can’t afford a Greek exit," Poss concludes, complacency by Merkel is "playing with fire."
- French policewoman killed in shoot-out, hunt deepens for militant killers (Reuters)
- The Bold Charlie Hebdo Covers the Satirical Magazine Was Not Afraid to Run (BBG)
- Evans Says Fed Shouldn’t Rush Rate Rise as Inflation Undershoots (BBG)
- Oil holds above $51 as traders search for floor (Reuters)
- Gross Helps Fuel New Fund With His Own Cash (WSJ)
- ECB warns Greek funding access hinges on keeping bailout (Reuters)
- Greece Jolts QE Juggernaut as ECB Gauges Deflation Risk (BBG)
- Analysts Say There's No Telling How Low Oil Prices Could Go (BBG)
- Scientists find antibiotic that kills bugs without resistance (Reuters)