International Monetary Fund
Whether or not the IMF intended to use a Greek credit event to destabilize Europe as the greek government first alleged, or whether this was "nonsense" as Lagarde responded to Tsipras letter, is irrelevant - ultimately the underlying premise was whether or not Greece gets debt relief, something the IMF has been insisting on since the third bailout package. And as is well-known, it was Germany - not Greece - that stood in the IMF's way. So after a terse weekend in which relations between Greece and the IMF devolved once again to frigidly sub-zero levels, moments ago Germany chimed in with its position, which can be summed up in another familiar word: "nein".
In a leaked transcript, IMF staffers are caught on tape suggesting that a threat of an imminent financial catastrophe was needed to force other players into accepting its measures such as cutting Greek pensions and working conditions, or as Bloomberg puts it, "considering a plan to cause a credit event in Greece and destabilize Europe."
Greek politicians wasted no time in seeking a response from the IMF over the leaked transcript released earlier today by Wikileaks suggesting the IMF may threaten to pull out of the country's bailout as a tactic to force European lenders to more offer debt relief, and which according to the Greek government was "interpreted as revealing an IMF effort to blackmail Athens with a possible credit event to force it to give in on pension cuts which it has rejected."
In the wake of the August 11 "surprise" yuan devaluation, all anyone wanted to talk about was the rapidity with which China was liquidating its FX reserves. Before long, everyone realized that the headline number was a proxy for capital flight out of China. That made Beijing uncomfortable and so, the PBoC found more "creative" ways to intervene in FX markets. Now, the IMF wants clarity.
Growth now is slowing because of all of the entropy issues involved. People in China cannot stand any more pollution. Too many laborers in developed countries are being marginalized by globalization and by competition with ever more intelligent machines that can replace much of the function of humans. None of this would be a problem, except that we have a huge amount of debt that needs to be repaid with interest, and we need commodity prices to rise high enough to encourage production. If these problems are not fixed, the whole system will collapse, even though there seems to be a surplus of energy products.
Whatever Trump is, his popularity does indicate a rising tide of discontent within the U.S. The damage to America has for the most part already been done, and there will be no avoiding the consequences. That said, how we rebuild can still be determined. No political leader including Trump will ever be able to heal the American system or the American psyche, but the efforts of millions of independent and liberty minded Americans can. We have a long and terrible struggle ahead of us, but to look at it from an “optimistic” perspective, at least Americans are becoming sick of the status quo. That is a start.
For the thousands of new entrants into the oilfield services (OFS) industry in the past 15 years - both workers and companies – if you didn’t know what senior secured lending covenants were a year ago, you sure do now. Many new borrowers are enduring a painful education on the legal implications of the lending documents they signed. There is said to be lots of capital on the sidelines looking for deals. OFS owners and managers up against a debt wall should consider finding some.
Many investors today are not very familiar with market history and tend to live only in the day-to-day mainstream narrative while watching little red and green graphs move up and down. This is not so much an issue in a relatively stable economic environment. The problem is, today we live in the most unstable economic conditions possible.
While "greed was good" in the '80s, it appears "gold is good" in the new normal. As much as the barbarous relic is despised by all the mainstream money-peddlers in public (aside from those who have left the familia like Alan Greenspan), it seems to be loved in private. Central banks have been net buyers of gold for eight straight years, according to IMF estimates, the longest streak since the first troops were deployed in The Vietnam War.
"Investor hopes of coordinated G20 policy actions proved to be pure fantasy... It’s every country for themselves." Use any rally this week to move to the lowest level of equity exposure for this part of the cycle.
This week’s reading list is a collection of articles from people who have been “getting it right” for the last few years. While they are often dismissed by the media because they disagree with “mainstream thinking,” it is quite apparent they had a better grasp of the issues in the end.
- Europe shrugs off pre-G20 China stocks slump, sterling steadies (Reuters)
- China Unveils Its Deliverables for G-20 -- And No Plaza Pact (BBG)
- Foreign Money Could Be Slow to Enter China’s Bond Markets (WSJ)
- China Urged to Stomach Much Higher Fiscal Deficit (WSJ)
- Trump's Momentum Has Republicans in Congress Confused and Cowed (BBG)
A decade ago John Perkins exposed the world to the ugly reality of Washington's "Economic Hit Men." Now he is back, exposing the fact that the evil empire has the world in the grip of a "death economy," concluding that "we need a revolution" in order "to bury the death economy and birth the life economy." But, as Paul Craig Roberts adds, don’t look to politicians, neoliberal economists, and presstitutes for any help.
The bear will soon be arriving in earnest, marauding through the canyons of Wall Street while red in tooth and claw. Our monetary central planners, of course, will once again - for the third time this century - be utterly shocked and unprepared. That’s because they have spent the better part of two decades deforming, distorting, denuding and destroying what were once serviceably free financial markets. Yet they remain as clueless as ever about the financial time bombs this inexorably fosters.
Following The Bank of Japan's voyage into NIRP never-never-land, the market has sent a clear signal of its displeasure and now a growing number of Japanese officials (and former officials) are questioning Kuroda and Abe's Peter-Pan-ic dream that 'they' can fly. Having called for sub-zero rates more than two decades ago, Takeshi Fujimaki, the Japanese banker turned opposition lawmaker, warns "The BOJ is trapped," now that QQE efforts have flattened the yield curve, since "if the curve is steep, banks can make profits even at negative rates. It was a mistake to adopt negative rates after QQE." But it is Fujimaki's parting comment that should have most concerned, "Japan has ballooning debt and the BOJ is financing debt, that’s the problem... it will bust and there will be hyperinflation."