International Monetary Fund

Eurozone taxpayers and the IMF are left wondering what their bailout funds have been spent on in Greece. The Hellenic Financial Stability Fund (HFSF) has spent EUR38bn (or 75% of its total) bolstering the capital of Greece's four biggest banks (and winding down eight small lenders). The EUR50bn fund looks set to be drained further  - despite the banks comments that costs have been cut, funds raised, and assets sold - as non-performing loans continue to surge. About a quarter of all loans are non-performing and that share is likely to increase as the country's six-year recession, which has wiped out over a quarter of the economy, shows little sign of abating. Have no fear though, since stress tests will be carried out later this year to establish whether Greek banks have more capital needs. Of course the key question is - just where were these rescue funds diverted within the bank shells.

While this story is not Friday humor, it may explain the preponderance of "erect hockeystick" formations in IMF's legacy projection charts. Former IMF head Dominique Strauss-Kahn is no stranger to sexual scandal - in fact Anthony Weiner may learn a thing or two from the man who once upon a time was said would be France's next president. However, being charged with "aggravated pimping" may be a new low even for DSK, or new high if in the New Normal it is finally 50 Cent who sets ethical and moral standards. The reason for the lawsuit is that during numerous sex parties which DSK had attended in various cities over the years, there were prostitutes also present, often times in groups.

A troubling trend has emerged among Japan’s elderly – who represent around a quarter of its 128 million citizens – which is closely bound up with the nation’s greater demographic problems at hand. For the first time ever, Japanese aged 65 and up account for a higher percentage of shoplifting cases than do the country’s teens. Abe's upper-house election win this weekend makes the situation worse. Facing the reality of increasing strain on a shrinking workforce, Abe plans to cut welfare in August, rather than increase government help for the nation’s burgeoning elderly population. With this cut, theft among the elderly could very well increase.

Sovereign debt is the bonds that are issued by national governments in foreign currencies with the intent to finance a country’s growth. The risk involved is determined by whether that country is a developed or a developing country, whether that country has a stable government or not and the sovereign-credit ratings that are attributed by agencies to that country’s economy.

Recent dramatic declines in gold prices and strong redemptions from physical ETFs (such as the GLD) have been interpreted by the financial press as indicating the end of the gold bull market. Conversely, our analysis of the supply and demand dynamics underlying the gold market does not support this interpretation. As we have shown in previous articles, the past decade has seen a large discrepancy between the available gold supply and sales. Many recent events suggest that the Central Banks are getting close to the end of their supplies and that the physical market for gold is becoming increasingly tight. The recent sell-off was all orchestrated to increase supply and tame demand. We believe that central planners are now running out of options to suppress the gold price. After taking a pause, the secular gold bull market is set to continue.

The recent decline in gold prices and the drain from physical ETFs have been interpreted by the media as signaling the end of the gold bull market. However, our analysis of the supply and demand dynamics underlying the gold market does not support this thesis. In our view, the bullion banks’ fractional gold deposit system is testing its limits. Too much paper gold exists for the amount of physical gold available. Demand from emerging markets, who do not settle for paper gold, has perturbed the status quo. Thus, our recommendation to investors is the following: empty unallocated gold accounts and redeem your gold in physical form (while you still can).

"Perhaps the success that central bankers had in preventing the collapse of the financial system after the crisis secured them the public's trust to go further into the deeper waters of quantitative easing. Could success at rescuing the banks have also mislead some central bankers into thinking they had the Midas touch? So a combination of public confidence, tinged with central-banker hubris could explain the foray into quantitative easing. Yet this too seems only a partial explanation. For few amongst the lay public were happy that the bankers were rescued, and many on Main Street did not understand why the financial system had to be saved when their own employers were laying off workers or closing down." - Raghuram Rajan

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It wouldn't be the new normal if the collapse in Q2 US GDP to sub-1% wasn't met by a new record high in the Dow Jones. And it certainly wouldn't be the new abnormal if a day of resplendent green in European bourses didn't have some "matching" economic news out of that perpetual reminder that Keynesianism in the end always fails: Greece. Luckily, validating that all is unwell and stocks can proceed to soar to record highs unbothered, on one hand the Greek Statistics Office reported that Greek unemployment in April just rose to a new all time high of 26.9%, up from 26.8% in March, and up from 23.1% a year ago, while Kathimerini reports that Non-performing loans: those perpetual thorns of insolvency in bank balance sheets, just surged to €66 billion, amounting to a whopping 29% at the end of March from a "manageable" 24.2% at end-December. That's a ridiculous 20% increase in total NPLs in three months that was only exposed due to the Troika's stress testing! Just how atrocious is the reality on European bank books anyway?

It has all gone belly up if we look at the EU and we are honest. Yes, they might be trying to paper of the cracks and yes they might be shoving some super strong glue in their to stop everyone pulling in different directions, but if they are really truthful about it, the EU28 (now that Croatia has become a member since July 1st 2013)

As the EU agrees to fund another bailout deal to help Greece rise from the ashes, providing them with another $8.7 billion in financial aid, the question that begs an answer is: will this have any effect on the austerity that is being imposed on the country. Throwing good money after bad?

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• China Posts Surprise Drop in Exports (WSJ) - lol: "surprise"
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• Brussels sets up clash with Berlin over banks (FT)
• EU to Toughen Creditor-Loss Rules at Failing Banks From August (BBG) - or September, or October, but definitely November... 2023
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Five days ago the latest episode of the endless "Europe pays Greece to pay Europe" charade played out when the Eurozone gave Greece its latest three-day "ultimatum" to fix itself or else. Obviously, Greece did not fix itself, but since the three day ultimatum ran out two days ago, and since the BBG ticker for the Greek currency is still not XGD, one can assume that the latest European bluff, especially one coming 2 months before Merkel's reelection when nothing is allowed to disturb the precarious European house of insolvent cards, was just that: a bluff.

If there is one equivalent to Goldman's FX "strategist" Tom Stolper in the macroeconomic arena when it comes to perpetually inaccurate, flawed and flat out wrong predictions about the future, it is the IMF. Previously we compiled a brief history of their consistently overoptimistic, (downward) revisionistic forecasts based on their semi-annual reports which can only be summarized as "laughable." And, sure enough, we just learned that the IMF is about to trim its unrealistic optimism some more.