International Monetary Fund

A week ago we disclosed that the second Egyptian revolution (because the first one apparently was a dud) was scheduled for May 27. As expected, this is precisely what has happened: "Thousands of Egyptians packed Cairo's Tahrir Square on Friday in what organisers called a "second revolution" to push for faster reforms and a speedy trial for ousted President Hosni Mubarak and his former aides. Activists complain of delays in putting Mubarak, his family and members of his ousted regime on trial and that the army has not restored order quickly enough to the country of 80 million. Egyptians are also demanding an end to endemic graft, one of the main grievances that drove thousands of protesters onto the streets in the uprising that began on Jan. 25. "After some 1,000 martyrs ... people do not see any change," said Mustafa Ali Menshawi, a 38-year-old accountant, who was helping marshal crowds flooding into the square." Granted there has been some change: "The only change we see is that the Mubarak metro station has been changed to the Martyrs station," he said." This is happening even as deposed president Hosni Mubarak could face the death penalty as he prepares to face charges of "pre-meditated killing" of protesters during the uprising that ousted him on Feb. 11. Yet the revolution was not a failure for all: in continuation of the tried and true "economic hitman" practice, whereby MNCs land in a country and generously provide it credit, merely to extract its resources, take control of its infrastructure, and subjugate people with unmanageable credit card interest payments, the IMF just announced it will lend $35 billion to Arab countries to "stabilize their economies." Oddly there was no reference to "humanitarian" intervention or doing god's work.

• Former ECB chief economist Otmar Issing: Greece "Cheated" to join Euro (Bloomberg)
• Fitch cuts Japan credit rating outlook to negative (Reuters)
• Japan ends 25 months of deflation (Bloomberg)
• Basel III break for banks in EU (FT)
• China holds eight percent of US debt (China Daily)
• Obama, GOP unveil competing plans for job growth (WaPo)
• Ebay and PayPal sue Google over trade secrets (Reuters)
• Greek leaders meet to resolve crisis (WSJ)
• Lagarde offers bigger voice to emerging nations (FT)
• G-8: Faster growth to spur faster debt cutting (Bloomberg)

Shill will be shills and Eric ("Inaction Jackson") Holder will be Shinola.

And some more headlines:

• EU's Juncker says IMF may not release tranche for Greece next month
• EU's Juncker says IMF needs 12-month Greek refinancing guarantee
• EU's Juncker says governments unable to make up IMF portion

Elsewhere, Greece is already planning its upcoming series of 24 hour strikes which will make sure that Greek budget deficits continue to demonstrate that only the US is worse than the Mediterranean country when it comes to balancing its books.

Only this time not with its handling of luxury hotel staff, but with its assessment of "reality":

IMF's Blanchard says inflation is a non issue for US economy

And these are the people who continue to pretend they have any relevance? Just get done with your theatrical conclave already and phase out into irrelevance already. Luckily, the "real" IMF, China, is always in the background, willing to purchase, er, bailout any (read all) European states that need a bailout.

Engage in “constructive paranoia” and structure your portfolio to take advantage of the changes sweeping through the economy, rather than fall victim to them. A bumpy journey to a “new normal”. Developed countries will see sluggish economic growth, high structural unemployment, increased regulation, and constant pressure for private sector deleveraging.

DSK's torturous stay in corporate housing for the average joe, even for those from IMF bailed out countries, is coming to an end. Next stop: a $14 million palace just purchased by the missus at 153 Franklin Street, half a block away from iconic TriBeCa eatery Bubby's. From the WSJ: "David Bookstaver, a spokesman for the state court system, said that New York Supreme Court Justice Michael Obus approved Mr. Strauss-Kahn's move to a new residence during a conference call with his defense attorneys and prosecutors on Wednesday afternoon. Mr. Bookstaver said he doesn't know where Mr. Strauss-Kahn's new residence will be or when he will be moved." Damn it sure is good to be married to a billionairess, who will do everything in her power from preventing her husband's improprieties from spilling over into her own social scene.

"A ‘91-style meltdown is almost inevitable." So says Alexei Moiseev, chief economist at VTB Capital, the investment-banking arm of Russia’s second-largest lender, discussing the imminent economic catastrophe that is sure to engulf Belarus following the surprise devaluation of the country's currency by over 50%, which we announced on Monday. "Unless Belarus heeds Russia’s call for mass privatization
of state assets, it is headed for “hyperinflation, massive un-
and under-employment, and a shutdown of production" Moiseev concludes. Ah: "privatization" as Greece is about to learn, the lovely word that describes a fire sale of assets to one's creditors, courtesy of a "globalized" new world order. Ironically, this is precisely the warning that will be lobbed at each country in the developed world, as the global race to devalue currencies, first against each other on a relative basis, and ultimately against hard currencies, or on an absolute basis, as the world realizes that there simply is not enough cash flow to cover the interest payments on a debt load, in both the public and private sectors, that continues to rise at an astronomic rate, even as the world prepares to exit from the latest transitory, centrally-planned bounce in the Great Financial Crisis-cum-Depression that started in earnest in 2007 and has been progressing ever since. Ultimately, Belarus will succumb to hyperinflation, as will each and every other government which seek to devalue its currency (hint: all of them): "Unless Belarus heeds Russia’s call for mass privatization
of state assets, it is headed for “hyperinflation, massive un-
and under-employment, and a shutdown of production,” VTB’s
Moiseev said. The ruble will slide to 10,000 per dollar, he
added." Of course, this is the primary side effect of attempting to avoid formal bankruptcy through currency devaluation. And all those who continue to believe deflation is an outcome that will be allowed by the Fed, need to look just to the former Soviet satellite to see what lies in store for everyone currently doing all in their power to devalue their currency.

For now, the markets seem to be pricing in an eventual orderly resolution of the Greek debt crisis. As long as a unified and clear solution remains elusive to the Euro Zone, euro would continue to weaken against the dollar, while gold would prosper on fear and uncertainty.

About a month ago Belgium's biggest bank, and as is now well known one of the most active borrowers at the Fed's discount window in the days following the Lehman crisis, issued €3.2 billion in FRNs with a two year maturity that had an odd feature: an ultra short term put feature (as the Bloomberg screen shows below, puttable June 26, 2011 at par) which can be exercised up to 33 days ahead of the put day (underwritten by Barclays, Citi and MS) or in other words, today. Well, as our source has told us, following recent downgrades of virtually all banks with Greek exposure (a topic further pursed by the below IFR article), the two largest investors in the bond: Blackrock, which owns the bulk or about €2.6 billion, and Barclays (among others) have exercised their put option. The speculation is that "either someone knows something or had a very rapid change of heart" and concludes that "this should make the whole funding thing relevant again" especially since banks continue to rely on the ECB exclusively for short-term liquidity needs. Also possible a jump in Fed Discount Window borrowings if the ECB is unable or unwilling to cross-collateralize even more Greek debt exposure. The advice: "start watching Libor/Euribor and the Forwards basis" for some near-term volatility. If this is confirmed, look for any/all other comparable short-term put deals to suddenly spring the investor option to pull their capital, and the domino avalanche to set off in earnest.

The loudest warning to date. From Reuters:

• EU Commissioner Damanaki says Greece's Eurozone membership is at risk
• EU Commissioner Damanaki says Greece must agree on tough measures or return to Drachma, according to state news agency

Incidentally, Greece would like nothing more than to return to the Drachma. And here are the next steps...

• France's Lagarde launches IMF bid, BRICs complain (Reuters)
• Greek assets could go to ‘fund of experts’ (FT)... and gold "could" go to central banks
• U.K. Economy Grew 0.5% in First Quarter (Bloomberg)
• OECD cuts Japan GDP forecast again, urges easy monetary policy (Reuters)
• Kan targets structural issues after quake (FT)
• Shanghai Composite down 10% in six weeks, officially enters correction territory (FT)
• Banks Face $17 Billion in Suits Over Foreclosures (WSJ)
• EU Juncker: Still In Favor Of 'Reprofiling' Greek Sovereign Debt (WSJ)

Europe’s debt crisis has seen gold prices climb to new record highs in euros and British pounds at EUR 1,087.80/oz and GBP 944.93/oz respectively. Contagion concerns are mounting due to the failure of the ECB, the IMF and respective governments to tackle the sovereign debt crisis.
The scale of the debt crisis effecting Greece, Ireland, Italy, Belgium, Portugal and Spain is leading to growing concerns of a knock on deleterious impact on European banks and the global banking system. Gold should also be supported today by the OECD’s warning regarding the U.S. and Japan’s very poor fiscal situations and their lack of credible plans to tackle high and spiraling budget deficits. Silver’s fundamentals remain even stronger than gold’s and the recent paper driven sell off due to a series of margin calls and heavy selling on the COMEX appears to be over.

A few days ago we presented a realistic, if somewhat somber, outlook of what would happen when (not if) Greece finally pulls the plug on its vegetative existence, and its paralyzed body will no longer serve as a breeding ground for maggots of the financial innovation variety. Today, we present a far more comedic one, courtesy of the ECB's Christian Noyer, who makes it all too clear: Europe is not in it to bail out itself and its banks which would topple like a house of undercapitalized, under-MTMed, and uber mismarked cards, but only to protect those poor sad souls of Greece from the "Horror" that would be unleashed when a Greek free fall bankruptcy finally arrives. Truly, the humanist ECB is doing god's work on earth. Try not to laugh while reading this.

Today, France tried the oldest trick in the diplomatic book, presenting what it wishes was reality as reality, when it said that China had backed its candidate for the IMF presidency under Christine Lagarde. That's great, only it's totally false. Not only has China not endorsed Lagarde, but according to a statement just released by Jianxiong He of China, as well as every other BRIC, the developing world has just put its stake in the ground and is firmly behind a non-European candidate, stating that "we also believe that adequate representation of emerging
market and developing members in the Fund’s management is critical to
its legitimacy and effectiveness." Not surprisingly, the BRICs reference an old promise by none other than Jun(c)ker which "declared that “the next managing
director will certainly not be a European” and that “in the Euro group
and among EU finance ministers, everyone is aware that Strauss-Kahn will
probably be the last European to become director of the IMF in the
foreseeable future”." By creating the BRICs (and South Africa which is a co-signator of the statement), Goldman may have just created a New New World Order Frankenstein monster which will refuse to blindly go with the demands of its now insolvent master. In the meantime, the diplomatic faux pas by the French, if anything, will merely antagonize China, which has so far refused to unpeg the CNY only due to demand by the US to do precisely that, as any accession to foreign demands would be seen by China, and its billion plus producers (and eventual consumers), as a sign of weakness.