International Monetary Fund

Greece says it will not default because it has made a perfectly circular argument against default, and we all know that Circular Reasoning Works Because Circular Reasoning Works Because...
Greece is Guaranteed to Default. It's shouldn't even be up for debate since it is simple math: 2+2=4, not 3. I've laid it all out for you below, complete with the requisite advanced mathematical formulae (2+2...)

• French government says China backs Lagarde for IMF (Reuters)
• ...but, China has actually not backed Lagarde (WSJ)
• “You Americans Are Funny” — You Start an IMF (Forbes)
• Norquist Emerges as Barrier to U.S. Debt Deal (Bloomberg)
• Scarcity, Usefulness, and Getting an Edge (Hussman)
• Bullard Says Fed May Keep Rates, Balance-Sheet Steady to Assess Economy (Bloomberg)
• For Global Steel Industry, China Poses Guessing Game (WSJ)
• Goldman Finding Third Time a Charm in Russia (Bloomberg)
• Greece Will Accelerate State Asset Sales to Stem Debt Crisis as Bonds Drop (Bloomberg)
• It can go wrong? It will go wrong (WaPo)

The Greek bankruptcy, pardon, sovereign liability management exercise, pardon reprofiling, is once again front and center in the news this morning, after Moody's had some words of caution about a broad spillover effect in Europe should Greece file. From Reuters: "A Greek debt default would hurt other peripheral euro zone states and could push Portugal and Ireland into junk territory, Moody's said on Tuesday, warning it would classify most forms of restructuring as a default.  "A Greek default would be highly destabilising and would have implications for the creditworthiness of issuers across Europe," Moody's Investors Service's chief credit officer in the region, Alastair Wilson, told Reuters in a telephone interview. "This would result in more highly polarised credit worthiness and ratings among euro zone sovereigns, with the stronger countries retaining very high ratings and the weaker countries struggling to remain in investment grade." And yet a Greek bankruptcy seems increasingly more inevitable after a brand new fissure has now appeared in the government, after the chief opposition, New Democracy, party leader Antonis Samaras said he would oppose the latest round of austerity which, nonetheless, must pass in order for Greece to not run out of funds in 2 months, as we previously reported, and finally set off the dominoes. While the political bickering will likely hit fever pitch, and result in new and increasingly more violent protests in Athens, it is likely that austerity will pass as western banks are licking their chops at acquiring Greek "privatized" assets, at least when it comes to infrastructure and real estate, banks not so much, at below cost prices.

The DSK soap opera continues. The latest revelations about the alleged rape that occurred last Saturday at the Sofitel now detail the specific language attemptedly used by the former IMF head, in what is becoming apparent was nothing more than a case of entitlement gone horribly wrong, and unchecked, thus encouraged, for many years. Per Fox news: "Dominique Strauss-Kahn told a New York hotel maid, “Don’t you know who I am! Don’t you know who I am?” while pinning her down during the alleged sexual assault, law enforcement sources close to the investigation told FoxNews.com. The 32-year-old African immigrant repeatedly told her alleged attacker, “Please, please stop. No!” Strauss-Kahn allegedly responded: “No, baby. Don’t worry, you’re not going to lose your job. Please, baby, don’t worry,” Strauss-Kahn responded, according to investigators. “Don’t you know who I am? Don’t you know who I am?." As usual, with most opinions on the matter appear to have been already determined well in advance of the actual jury trial, the one reasonable assumption is to take everything with a grain of salt.

What a difference a year makes. It was just over a year ago that Greece received its first (and certainly not last) $1 trillion + bailout package from the EU, the ECB and the IMF. Just over 12 months later, all those who peddled Greek bonds to the rest of the world (ahem Germany) are now furiously backtracking, having finally realized what we, and everyone else with half a brain realized from the beginning: it's over for the euro. But fine, let's kick the can down the road for a few more months, which will allow banks, with access to interest-free central bank capital, to literally steal Greece's soon to be privatized assets for pennies on the dollar, and then send the carcass, now picked dry, to the international bankruptcy court. In the meantime, we would like expose all the idiots who like various anchors on Comcast's bubblevision channel, pitched Greek paper to hapless investors, only to see losses (this is not some speculative asset - this is fixed income) of over 40% in one year, and for some reason continue to have a podium from which to spread their lunacy, greed and outright stupidity.

US President Barack Obama and First Lady Michelle Obama have arrived in Moneygall, Ireland, officially, for a short visit and to visit his ancestral home. Follow live coverage here. Good thing the world is not imploding in the meantime.

Answer: Much more than you think...

A few weeks ago, the entire world was made aware that nobody in Europe is to be trusted any longer after Jean Claude Jun(c)ker admitted he lied to the media ahead of what Spiegel had leaked earlier was a "secret" meeting to kick Greece out of the eurozone (turned out to be only half true - Greece was not and will not be kicked out... voluntarily). The purpose for the lie: "self-preservation." Today, in a much anticipated showdown between the magazine (which Greece said would sue for spreading salacious, yet true, rumors), and the bureaucrat, we learn that it is not Goldman, but Europe, that is doing God's work by lying on a daily basis about the Greek insolvency: "The most important commandment is not to inflict harm on others. Although it isn't stated quite that way in the Ten Commandments, it follows from them. The finance ministers of several Euro Group nations had agreed to meet on Friday with the president of the European Central Bank (ECB), Jean-Claude Trichet. Because the financial markets in Europe were still open and trading was still underway on Wall Street, we had to deny the existence of the meeting. Otherwise the course of the euro against the dollar, which had already fallen as a result of your report, would have plunged disastrously." Ah yes, doing God's will by focusing on the greater good, which is making sure those EURUSD longs are not impaired. If this is not confirmation that Europe is run by sociopaths, then nothing is. All this, and much more, including such pearls as "If the donkey were a cat it could climb a tree. But it is not a cat" read the full surreal interview below.

• "There isn't a person outside a mental hospital or an Ivy League faculty who believes the federal government can continue on its current fiscal trajectory, even with tax increases" (Bill Freza)
• Joplin tornado death toll hits 89: officials (Reuters)
• Asian stocks end lower; Shanghai drops 2.9%, biggest drop in more than four months (MarketWatch)
• Vote Jars Spain's Ruling Socialists (WSJ)
• Europeans Focus on Retaining Leadership of I.M.F. (NYT)
• Signs of division between IMF and Europe over bailouts (Reuters)
• U.S. Debt Limit Increase Agreement May Take Until August, Ryan Tells NBC (Bloomberg)
• Next Danger: "Splash Crash" (Barrons)
• As Lenders Hold Homes in Foreclosure, Sales Are Hurt (NYT)
• When Austerity Fails (Krugman)

It is now as if Europe is urging Greece to fail. The EU's Olli Rehn, better known as lord protector of Ireland (and now Portugal), for once said the sensible thing when he commented on Greek prospects to privatize €50 billion worth of assets: the latest condition for the country to procure additional bailout funding. In word (or two) - not good. This obviously could be a major issue because as we noted yesterday, the country now suddenly only has 2 months of cash left. So if even the very entity that imposed this condition is saying it is a moot point (something we observed yesterday), then why engage in the exercise at all? And how long before Europe (and whoever heads the IMF at that time) decides to pull the plug entirely...

Christine Lagarde's chances of heading the IMF just took a another step back. Why? Because the firm whose alumni are about to be or already are in key posts at the Fed, the ECB and the BOC, has said (through its moutpiece Jim O'Neill who "can't see how the EUR should be above 1.40" even as Thomas Stolper et al see it going to 1.55 in a year) that it is not too crazy about having a European replacement for DSK, and that "it might be better if some leadership and authority came from outside of Europe with a fresh set of independent eyes" (supposedly the fact that Lagarde has had no formaly economic academic brainwashing is not a factor). In other words, Goldman has aligned itself with China, which has made it clear that it may be wise if the next IMF leadership "reflected the New World Order." As such, the largely symbolic IMF conclave just became very interesting: while the IMF is largely a figurehead with the real backstop organization always being the Federal Reserve, Goldman appears to have just voted alongside China... and thus against Europe and the US.

Today's EUR trading session which begins in about 4 hours, may be rather violent. While on one hand we have bond-negative news out of Spain, the biggest news once again comes out of the Swiss journal NZZ, which citing greek newspaper Kahtimerini, discloses that insolvent Greece has less than two months of cash left, or enough to last it until July 18, unless a new installment in the bailout tranche is approved for the country by the now headless IMF, and the "suddenly" insolvent ECB. Insolvent, because as Spiegel will report in its headline article tomorrow, and as we have noted many times before, the bank is suddenly finding itself lending out money collateralized by now virtually D-rated bonds: something not even Trichet will be able to spin off to the increasingly malevolent media. Per Dow Jones: "Skeleton risks amounting to several hundreds of billions of euros are on the balance sheet of the European Central Bank, magazine Der Spiegel writes in a preview of its edition to be published Monday. Those risks arise because banks, above all from Greece, Ireland, Portugal and Spain, have provided as collateral asset-backed securities that are unfit for central bank loans as their debt rating is low or non-existent, the magazine says." Alas, the European central bank's dirty laundry is being exposed just as a rift between the bank and Germany: its most solvent backer, is starting to develop. Also from Dow Jones: "German Finance Minister Wolfgang Schaeuble cautioned in an interview published Sunday that there shouldn't be a conflict with the European Central Bank over a possible restructuring of Greek debt. "If in the end it should come to an extension of bonds, of course, we need the approval of the IMF and above all of the ECB. Under no circumstances should it come to a conflict with the ECB," Schaeuble told Bild am Sonntag. "I advise all of us to use restraint in public debates about this question." Several ECB officials have rejected a restructuring of Greek debt and have warned of possible catastrophic consequences, while European finance ministers are slowly warming up to the possibility of some kind of restructuring as a last resort." Thus the crunch time for Europe's latest kick the can down the road round, once again centered on a bankrupt Greece, may be coming fast, and this time with a rather furious Germany.

He could be guilty. But he deserves a fair trial, and someone's making damn sure he doesn't get one.

Ever since the DSK rape allegation surfaced, there has been an avalanche of opinions that the former head of the IMF has been "set up by vengeful Americans" and that the entire affair is nothing but a classic "Spitzer" repeat. It has gotten so far as 57% of the French population saying DSK was trapped in a plot by his enemies, a number that rises to a staggering 70% when only French socialists are queried. Well, since everyone is innocent until proven guilty, there is no point in further digging until DSK is either convicted by a jury or set free... But that does not mean that various media personalities can not have some long overdue fun at the IMF head's expense, whose past transgressions toward poor countries and "emerging economies" one can argue, dwarf his dramatic career implosion from last Saturday. And in keeping with the spirit of amusement, below is Jon Stewart's amusing takedown of the DSK situation to date.

Your concise summary of the past week's key events.