en Is It Really Different This Time? <p><a href=""><em>Submitted by Lance Roberts via STA Wealth Management</em></a>,</p> <div class="highslide-gallery"> <p>This morning, as I settled in to begin my morning research routine, I was greeted by an email containing a speech delivered at the University of California. The opening paragraph immediately grabbed my attention:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;The stock market has been advancing with only one significant setback throughout the decade...It has thus established a new record for the length of its rise, although it has not equaled the extent of the record advance of the 1920&#39;s: 450 percent from 1921-1929.</p> <p>&nbsp;</p> <p>What does this phenomenal upward movement portend for investors and speculators in the future? There are various ways of approaching this question. To answer it, I shall divide the question into two parts. <strong>First, what indications are given us by past experience? Second, how relevant is past experience to the present situation and prospects?&quot;</strong></p> </blockquote> <p>The issue of past experience, known as &quot;<a href="">recency or anchoring bias,</a>&quot; is one of the primary factors that has the greatest effect on investor returns over time. As stated in the speech:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;However, in order to judge today&#39;s market level, it is desirable, perhaps essential, to have clear picture of its past behavior. <strong>Speculators often prosper through ignorance;</strong> it is a cliche that in a roaring bull market knowledge is superfluous and experience a handicap. <strong>But the typical experience of the speculator is one of temporary profit and ultimate loss.&quot;</strong></p> </blockquote> <p>The importance of that statement is that most individuals extrapolate past performance indefinitely into the future. This tendency is what leads investors to <em>&quot;buy high and sell low.&quot;</em> This psychology is displayed in the following chart.</p> <p><a class="highslide ageent-ru" href="" target="_blank" title="Investor-Psychology-Cycle-082814"><img alt="Investor-Psychology-Cycle-082814" class="i_want_img5" src="" style="height: 345px; width: 600px;" /></a></p> <p>The two questions that must be answered are whether this is just a bull market or some sort of <em>&quot;new market&quot;</em> that will defy all previous experiences?</p> <p>If this is just a bull market, then the term itself suggests that it is just the first half of a full-market cycle and that eventually a bear market will follow. The chart below shows the history of full market cycles going back to 1900.</p> <p><a class="highslide ageent-ru" href="" target="_blank" title="Full-Market-Cycles"><img alt="Full-Market-Cycles" class="i_want_img5" src="" style="width: 601px; height: 382px;" /></a></p> <p>Historically, full market cycles have finished when prices complete a <em>&quot;mean reverting&quot;</em> process by falling well below the long-term mean. Since the beginning of the secular bull market in the 1980&#39;s that full &quot;mean reverting&quot; process has not yet been completed due to the artificial interventions by Central Banks to prop up asset prices.</p> <p>There is an argument to be made that this is could indeed be a <em>&quot;new market&quot;</em> given the continued interventions by global Central Banks in a direct effort to support asset prices. However, despite the coordinated efforts of Central Banks globally to keep asset prices inflated to support consumer confidence, <strong>there is plenty of historic evidence that suggest such attempts to manipulate markets are only temporary in nature.</strong></p> <p><a href="">Beijnath Ramraika and Prashant Trivedi </a>recently discussed this topic showing a chart of the rate of change for the S&amp;P 500 index over a 75-month period which is the length of time of the current market advance from the financial crisis lows. I have reproduced the chart below with some modifications. I have used a 72-month rolling rate of change of the real, inflation-adjusted, return of the S&amp;P 500 index from 1900 to present. I have also overlaid that with the actual real S&amp;P 500 index (log-2 basis). This more clearly shows that from current peaks of the long-term rate of change in the index, forward market returns have become less desirable.</p> <p><a class="highslide ageent-ru" href="" target="_blank" title="SP500-Real-72mth-ROC-070715"><img alt="SP500-Real-72mth-ROC-070715" class="i_want_img5" src="" style="height: 328px; width: 601px;" /></a></p> <p>Their conclusion is simple:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;Clearly, the current rate of change is in extreme territory and is exceeded only by three other market up-moves: the roaring bull market of twenties leading into the Great Depression, the bull market of the fifties and the technology boom. Further, the trajectory of the up-move is similar to that of the market leading into the highs of 1929 and the highs in 1983.</p> <p>&nbsp;</p> <p>We have had a market on potent steroids.&quot;</p> </blockquote> <p>Such extreme movements in prices over a relatively short period, regardless of underlying circumstances, have all had similar outcomes. Consequently, investors should expect a similar outcome in the future. However, in the short-term psychology tends to overtake more logical thought processes as the &quot;need for greed&quot; keeps investors at the table long after the <em>&quot;cards have turned cold.&quot;</em></p> <p>Valuations also provide similar evidence that the current market is most likely no different than previous bull market cycles. <a href=";utm_medium=feed&amp;utm_campaign=Feed%3A+clusterstock+%28ClusterStock%29">Sam Ro at Business Insider</a> recently posted the following bit of analysis:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;The forward price/earnings (PE) ratio &mdash; the price of the S&amp;P 500 divided by the expected earnings of those S&amp;P 500 companies &mdash; is probably the most popular way to measure value in the stock market.</p> <p>&nbsp;</p> <p>In theory, it tells us if the market is cheap or expensive relative to some long-term average.</p> <p>&nbsp;</p> <p>Unfortunately, it is horrible at signaling where the market will go in the near-term, like in the next year. This is not news.&quot;</p> </blockquote> <p>Sam is correct. In the very short-term, valuations are a horrible market timing metric due to the psychological impact of investor behavior on the markets.</p> <p>However, as shown in the series of charts below <strong>(compiled by my colleague Nan Lu)</strong>, valuations can tell us much about what we should expect as investors over the longer term. The charts below are the total dividend reinvested returns of the inflation adjusted S&amp;P 500 index.</p> <p><a class="highslide ageent-ru" href="" target="_blank" title="Valuation-ForwardReturn-10yrs-070715"><img alt="Valuation-ForwardReturn-10yrs-070715" class="i_want_img5" src="" style="height: 366px; width: 601px;" /></a></p> <p><a class="highslide ageent-ru" href="" target="_blank" title="Valuation-ForwardReturn-15yrs-070715"><img alt="Valuation-ForwardReturn-15yrs-070715" class="i_want_img5" src="" style="height: 366px; width: 600px;" /></a></p> <p><a class="highslide ageent-ru" href="" target="_blank" title="Valuation-ForwardReturn-20yrs-070715"><img alt="Valuation-ForwardReturn-20yrs-070715" class="i_want_img5" src="" style="height: 368px; width: 600px;" /></a></p> <p><a class="highslide ageent-ru" href="" target="_blank" title="Valuation-ForwardReturn-25yrs-070715"><img alt="Valuation-ForwardReturn-25yrs-070715" class="i_want_img5" src="" style="height: 365px; width: 600px;" /></a></p> <p>Not surprisingly, the expected total inflation-adjusted returns from currently high levels of valuation have historically been disappointing relative to what investors had witnessed previously.</p> <p>Importantly, the charts above <strong>DO NOT mean that EVERY year will be a low return.</strong> What history suggests is that <strong>forward returns will be much more volatile with periods of significant drawdowns</strong> that will comprise a total long-term return at lower levels. Unfortunately, most investors will not survive to see that outcome.</p> <p>This was a point made within the speech:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;Now, what can past experience tell us about the validity and dependability of this rosy view as to the future of business and common stocks? Its verdict cannot be conclusive, because NO prediction, whether of a repetition of past patterns or of a complete break with past patterns, can be proved in advance to be right.</p> <p>&nbsp;</p> <p>Nevertheless, past experience does have some things to say that are at least relevant to our problem. <strong>The first is that optimism and confidence have always accompanied bull markets; they have grown as the bull market advanced, and they had to grow, otherwise the bull market could not have continued to their dizzy levels; and [secondly] they have been replaced by distrust and pessimism when the bull markets of the past collapsed.&quot;</strong></p> </blockquote> <p>So, who was this mysterious speech giver? <strong>It was delivered by Benjamin Graham</strong> at the University of California, Los Angeles on <strong>December 7th, 1959.&nbsp;</strong><em>(The speech can be <a href="">found here</a>.)</em></p> <p>As the evidence suggests, the current bull market is likely not a <em>&quot;new market&quot;</em> but just the first half of a full market cycle. Eventually, the cycle will complete itself as price goes through a mean reverting event. <strong>This is not a BEARISH prognostication but a simple reality</strong>. Nothing more. Nothing less.</p> <p>In there near term, over the next several months or even couple of years, markets could very likely continue their bullish trend as long as nothing upsets the balance of investor confidence and market liquidity. However, of that there is no guarantee.</p> <p>As Ben Graham concluded:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;&#39;<strong>The more it changes, the more it&#39;s the same thing.&#39;</strong> I have always thought this motto applied to the stock market better than anywhere else. Now the really important part of the proverb is the phrase, &#39;the more it changes.&#39;</p> <p>&nbsp;</p> <p>T<strong>he economic world has changed radically and will change even more. Most people think now that the essential nature of the stock market has been undergoing a corresponding change.</strong> But if my cliche is sound,&nbsp; then the stock market will continue to be essentially what it always was in the past, <strong>a place where a big bull market is inevitably followed by a big bear market.</strong></p> <p>&nbsp;</p> <p>In other words, <strong>a place where today&#39;s free lunches are paid for doubly tomorrow.</strong> In the light of recent experience, <strong>I think the present level of the stock market is an extremely dangerous one.&quot;</strong></p> </blockquote> </div> <p>&nbsp;</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="597" height="303" alt="" src="" /> </div> </div> </div> Bear Market Ben Graham Central Banks Consumer Confidence Great Depression Market Cycles Market Timing Rate of Change Reality University of California Tue, 07 Jul 2015 19:43:58 +0000 Tyler Durden 509406 at Obama Calls Merkel, Reinforces IMF Case Of Debt Haircut <p>Just a few short hours after Tsipras called Obama, the US president in turn called the German chancellor and told Merkel to get a "durable" deal done asap (or else the stock market "wealth effect" for the 1% may promptly evaporate). More importantly was Obama's insistence to support the IMF sticking point, namely to "achieve debt sustainability", which of course is ludicrous, but it means that both Lagarde and Obama are now pressuring Germany to haircut Greek debt. </p> <p>From the White House:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Readout of the President's Call with Chancellor Angela Merkel of Germany</strong></p> <p>&nbsp;</p> <p>The President and German Chancellor Angela Merkel spoke by phone this morning about Greece. The leaders agreed it is in everyone's interest to reach a durable agreement that will allow Greece to resume reforms, return to growth, and <strong>achieve debt sustainability within the Eurozone</strong>. The leaders noted that their economic teams are monitoring the situation in Greece and remain in close contact.</p> </blockquote> <p>And moments ago the White House also reported that Obama told Tsipras that a deal is in "everyone's interest" by which he, of course, means everything should be done to avoid a market collapse. </p> <p>So will Obama save the day?&nbsp; Or, like the case of IMF, will the mere specter of a forced debt haircut spook the Eurogroup (i.e., Merkel) who know that if Greece gets a concession then all the other PIIGS will promptly line up? </p> <p>Tune in tomorrow to find out if today's session of late day hopium fizzles or actually transforms into an actual deal. </p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="279" height="181" alt="" src="" /> </div> </div> </div> Eurozone Germany Greece White House Tue, 07 Jul 2015 19:26:44 +0000 Tyler Durden 509405 at Caught On Tape: HSBC Bankers Recreate ISIS Beheading Execution <p>HSBC just can't seem to help itself. <a href="">As The Sun reports</a>,<strong> as part of a "team-building" exercise, six bankers filmed the fake ISIS-style beheading of an Asian colleague - while yelling 'Allahu Akbar'.</strong> However, given that these were not C-level executives, there has been some consequences - the six bankers have been fired with HSBC noting "this is an abhorrent video and HSBC would like to apologize for any offense."</p> <p>&nbsp;</p> <p>Caught On Tape...</p> <p><iframe src="" width="480" height="360" frameborder="0"></iframe></p> <p>*&nbsp; *&nbsp; *</p> <p>HSBC said:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>“We do not tolerate inappropriate behaviour.</p> <p>&nbsp;</p> <p>“As soon as The Sun brought this video to our attention we took the decision to sack the individuals involved.</p> <p>&nbsp;</p> <p>“This is an abhorrent video and HSBC would like to apologise for any offence.”</p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>But rigging FX markets and money laundering for drug dealers is 'cost of doing business'?</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="629" height="701" alt="" src="" /> </div> </div> </div> Tue, 07 Jul 2015 19:09:40 +0000 Tyler Durden 509404 at Dear China, This Is How You Rig A Market Higher <p>It seems China better hurry up and a) enable HFT on Shanghai and Shenzhen bourses, and b) enable options trading directly...</p> <p>Dare we suggest, someone got a tap on the shoulder to make sure this does not come apart...</p> <ul> <li>WHITE HOUSE: OBAMA DISCUSSED GREECE W/ GERMANY'S MERKEL</li> <li>WHITE HOUSE: NEED DEAL TO RESUME REFORMS, ACHIEVE DBT SUSTNBLTY</li> <li>WHITE HOUSE: OBAMA AGREED W/MERKEL ON NEED FOR DURABLE DEAL</li> </ul> <p><a href=""><img src="" width="600" height="926" /></a></p> <p>Because what else do you so when Greece is on the verge, China is collapsing, and commodities are carnaging - sell Vol and buy stocks!!</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="189" height="157" alt="" src="" /> </div> </div> </div> B+ China Greece HFT Shenzhen White House Tue, 07 Jul 2015 18:51:35 +0000 Tyler Durden 509403 at Ragin' Contagion: When Debtors Go Broke, So Do Mercantilist Exporters <p><a href=""><em>Submitted by Charles-Hugh-Smith of OfTwoMinds blog</em></a>,</p> <p><em>Papering over the structural imbalances in the Eurozone with bailouts or bail-ins <strong>will not resolve the fundamental asymmetries in trade.</strong></em></p> <p><strong>Beneath the endless twists and turns of Greece&#39;s debt crisis lie fundamental asymmetries that doom the euro,</strong> the joint currency that has been the centerpiece of European unity since its introduction in 1999.</p> <p>The key imbalance is between export powerhouse Germany and its trading partners, which run large structural trade and budget deficits, particularly Portugal, Italy, Ireland, Greece and Spain.</p> <p><strong>Those outside of Europe may be surprised to learn that Germany&#39;s exports (<a href="" target="resource">$1.5 trillion</a>) are roughly equal to the exports of the U.S. (1.6 trillion), and compare favorably with China&#39;s</strong> <a href="" target="resource">$2.3 trillion</a> in exports, given that Germany&#39;s population of 81 million is a mere 6% of China&#39;s 1.3 billion and 25% of America&#39;s population of 317 million.</p> <p>German GDP in 2014: $3.82 trillion</p> <p>Chinese GDP in 2014: $10.36 trillion</p> <p>U.S. GDP in 2014: $17.42 trillion</p> <p><strong>Germany&#39;s dependence on exports places it in the mercantilist camp</strong>, countries that depend heavily on exports for their growth and profits. Other (non-oil-exporting) nations that routinely generate large trade surpluses include China, Taiwan and the Netherlands.</p> <p><strong>While Germany&#39;s exports rose an astonishing 65% from 2000 to 2008, its domestic demand flatlined near zero.</strong> Without strong export growth, Germany&#39;s economy would have been at a standstill. The Netherlands is also a big exporter (trade surplus of $33 billion) even though its population is relatively tiny, at only 16 million. The &quot;consumer&quot; countries, on the other hand, run large current-account (trade) deficits and large government deficits. Italy, for instance, runs a structural trade deficit and its total public debt is a whopping <a href="" target="resource">137% of GDP</a>.</p> <p><strong>Here&#39;s the problem when debtor/importer eurozone members such as Greece go broke and default: Who is left standing to buy all the mercantilist exporters&#39; goods?</strong> Ultimately, much of those goods were purchased with debt, and when debtor nations default, the credit spigot is turned off: no more borrowing, no more money to buy Dutch, German and Chinese exports.</p> <p><strong>This chart illustrates the dynamic between mercantilist and consumer nations:</strong></p> <p><img align="middle" border="0" src="" /></p> <p><strong>Although the euro was supposed to create efficiencies by removing the costs of multiple currencies, it has had a subtly pernicious disregard for the underlying efficiencies of each eurozone economy.</strong></p> <p>Though German wages are generous, the German government, industry and labor unions have kept a lid on production costs even as exports leaped. As a result, the cost of labor per unit of output -- the wages required to produce a widget -- <strong>rose a mere 5.8% in Germany in the 2000-09 period, while equivalent labor costs in Ireland, Greece, Spain and Italy rose by roughly 30%.</strong></p> <p>The consequences of these asymmetries in productivity, debt and trade deficits within the eurozone are subtle. In effect, the euro gave mercantilist Germany a structural competitive advantage by locking the importing nations into a currency that makes German goods cheaper than the importers&#39; domestically produced goods.</p> <p>Put another way: By holding down production costs and becoming more efficient than its eurozone neighbors, Germany engineered a de facto &quot;devaluation&quot; within the eurozone by lowering the labor-per-unit costs of its goods.</p> <p><strong>The euro has another deceptively harmful consequence: The currency&#39;s overall strength enables debtor nations to rapidly expand their borrowing at low rates of interest.</strong> In effect, the euro masks the internal weaknesses of debtor nations running unsustainable deficits and those whose economies had become precariously dependent on the housing bubble (Ireland and Spain) for growth and taxes.</p> <p>Prior to the euro, whenever overconsumption and overborrowing began hindering an importer-consumer economy, the imbalance was corrected by an adjustment in the value of the importer&#39;s currency. This currency devaluation would restore the supply-demand and credit-debt balances between mercantilist and consumer nations.</p> <p>Absent the euro today, the Greek drachma would fall in value versus the German mark, effectively raising the cost of German goods to Greeks, who would then buy fewer German products. Greece&#39;s trade deficit would shrink, and lenders would demand higher rates for Greek government bonds, effectively forcing the government to reduce its borrowing and deficit spending.</p> <p>But now, with all 16 nations locked into a single currency, devaluing currencies to enable a new equilibrium is impossible. And it leaves Germany facing with the unenviable task of bailing out its &quot;customer nations&quot; -- the same ones that exploited the euro&#39;s strength to overborrow and overconsume.</p> <p>On the other side, residents of Greece, Italy, Spain, Portugal and Ireland now face the painful (and ultimately unworkable) effects of government benefit cuts aimed at realigning budgets with the productivity of the underlying national economy.</p> <p>Either Germany and its export-surplus neighbors continue bailing out the eurozone&#39;s importer/debtor consumer nations, or eventually the weaker nations will default or slide into insolvency. Greece is merely the first domino to fall.</p> <p><strong>Now an inescapable double-bind has emerged for Germany:</strong> If Germany lets its weaker neighbors default on their debts, the euro will be harmed, and German exports within Europe will slide. But if Germany becomes the &quot;lender of last resort,&quot; then its taxpayers end up footing the bill.</p> <p>If public and private debt in the troubled nations keeps rising at current rates, it&#39;s possible that even mighty Germany may be unable (or unwilling) to fund an essentially endless bailout. That would create pressure within both Germany and the debtor nations to jettison the single currency as a good idea in theory, but ultimately unworkable in a 16-nation bloc as diverse as the eurozone.</p> <p><strong>Despite endless assurances that the Greek debt crisis is contained, the reality is that the ragin&#39; contagion of debt crises will spread not just to other deeply indebted nations but to the mercantilist economies that depend on selling goods to borrowers.</strong> Strip out the borrowing, and you strip out most of the customers for German, Dutch and Chinese goods.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="289" height="154" alt="" src="" /> </div> </div> </div> China default Deficit Spending Eurozone Germany Greece Housing Bubble Ireland Italy Netherlands Portugal Reality Trade Deficit Tue, 07 Jul 2015 18:45:52 +0000 Tyler Durden 509402 at US Mint Runs Out Of Silver On Same Day Price Of Silver Plunges To 2015 Lows <p>In the aftermath of the latest breakout of the Greek crisis, Europeans across the continent, not just in Greece (even though with capital controls, potential deposit confiscation and currency devaluation they would have benefited by far the most), scrambled to buy physical gold and silver. </p> <p>This is what the <a href="">UK Royal Mint said a week ago</a>, "During June, we experienced twice the expected demand for Sovereign bullion coins from our customers based in Greece."</p> <p>Other dealers had comparable experiences: “Most of our common gold coins are sold out,” Daniel Marburger, a director of Frankfurt-based, said by phone. “When people learned that the Greek banks will be closed, they started to think that it may not be such a bad idea to have some money in gold.”</p> <p>GoldCore, which buys and sells bullion, reported coin and bar demand increased “significantly” on Monday. Sales to U.K. and Ireland today are about three times the average level for the past three Mondays, according to an e-mailed statement from the Dublin-based firm.</p> <p>BullionVault, which operates the largest online physical gold trading platform, reported a jump in sales during the first half of this year, a sign of a broader increase.</p> <p>Earlier today, we learned that the latest place that hit by the precious metal scramble was the US itself, when we learned that the US mint had suspended Silver Eagle sales as a result of a spike in demand, with our source advising that "all bullion distributors (like A-Mark, Dillon Gage, CNT, etc) were already raising premiums."</p> <p>And while the US Mint rarely issues press releases to confirm such adverse matters, moments ago this was confirmed by Bloomberg:</p> <ul> <li><strong>U.S. MINT SAYS 2015 AMERICAN EAGLE SILVER COINS SOLD OUT</strong></li> </ul> <p>When will the Mint restock and resume sales? </p> <ul> <li>U.S. MINT PLANS TO RESUME SILVER COIN SALES IN TWO WEEKS</li> </ul> <p>In other words, no orders until August. </p> <p>And while the US mint halting sales of silver (or gold) during times of peak <a href="">demand is nothing new</a>, what is surprising is that as the chart below of monthly silver American Eagle sales, demand in recent months has hardly been off the charts.</p> <p><a href=""><img src="" width="600" height="360" /></a></p> <p>Which makes one wonder: just what is the inventory buffer at the mint if a modest 1.6 million ounces of silver sold in one week can deplete the Mint's planned holdings for one entire month.</p> <p>And another question: <strong>in just what supply/demand universe does such an explicit confirmation of a surge in demand for silver result in a plunge in the price of spot silver to its lowest level of the year!?</strong> </p> <p><img src="" width="600" height="314" /></p> <p>One wonders if Citigroup, and its soaring silver derivative exposure, <a href="">may have anything to do with this</a>...</p> <p><a href=""><img src="" width="600" height="377" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="943" height="566" alt="" src="" /> </div> </div> </div> Citigroup ETC Greece Ireland Tue, 07 Jul 2015 18:25:47 +0000 Tyler Durden 509401 at China Bans Use Of Terms “Equity Disaster” And “Rescue The Market" <p><span style="font-size: 1em; line-height: 1.3em;">Although it’s not possible to know exactly what the mood is among Party officials in China regarding the inexorable slide in stock prices that’s unfolded over the course of the last three weeks, it’s reasonable to assume that at least some officials in Beijing are in the throes of Politburo panic after watching some $3 trillion in market value disappear into thin (and probably polluted) air.&nbsp;</span></p> <p>Amid the turmoil, China has resorted to an <a href="">eye-watering array</a> of policy maneuvers, pronouncements, and plunge protection schemes aimed at arresting the slide. </p> <p>Nothing has worked. </p> <p>Not suspending compulsory liquidation for unmet margin calls, not billions in committed market support from brokerages, not a PBoC backstop for the CFSC, and not even a <a href="">ban on selling</a> by the Social Security Council.&nbsp;</p> <p>For reference, here (courtesy of <a href="">Bloomberg</a>) is an annotated chart of the wild ride Chinese stocks have had in 2015:</p> <p><a href=""><img src="" width="600" height="544" /></a></p> <p>And so, with every attempt to manipulate the market higher falling flat in the face of selling pressure from the hairdresser/ farmer/ banana vendor day trading crowd (which has now thrown in the towel on the whole “it’s <a href="">easier than farm work</a>” theory and now just wants to break even and head for the hills) the only thing left for China to do is “fix” the narrative. </p> <p>In other words, when banning selling doesn’t work,<strong> the logical next step is to ban <em>talking about selling</em>.</strong> Here’s FT <a href="">with more</a>: &nbsp;</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>Shares have shed some 30 per cent of their value since mid-June, punishing small investors, some of whom have borrowed heavily to jump on board what had been a spectacular bull run.</em></p> <p>&nbsp;</p> <p><em>“There is a panic but no matter how they [the authorities] jump in, this thing just doesn’t stop falling,” said Dong Tao, regional economist at Credit Suisse in Hong Kong.</em></p> <p>&nbsp;</p> <p><em>Analysts said the more Beijing does the more it risks creating a perception of desperation, particularly if its efforts have no discernible effect.</em></p> <p>&nbsp;</p> <p><em><strong>“All this activity has supported a view that policy makers are in a state of panic,” </strong>wrote Mark Williams at Capital Economics.&nbsp;</em></p> <p>&nbsp;</p> <p><em>“The financial system is about trust and transparency, but we’re not getting either from the government,” said Dee Sum, a 35-year-old banker in Hong Kong, whose family has sustained heavy losses on the stock market in recent weeks.</em></p> <p>&nbsp;</p> <p><strong><em>One domestic journalist, who did not want to be named, said the government had banned local media from using the terms “equity disaster” and “rescue the market” in their reports on the stock market.</em></strong></p> <p><em><br /></em></p> <p><img src="" width="469" height="292" /></p></blockquote> <p>So apparently, Beijing will now prevent journalists from accidentally jawboning the market lower so that Party mouthpiece media outlets are free to jawbone the market higher.&nbsp;</p> <p>Needless to say, we doubt if this hail mary attempt to <span style="text-decoration: line-through;">rescue the market</span> will do anything at all to save China from its homemade <span style="text-decoration: line-through;">equity disaster</span>.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="469" height="292" alt="" src="" /> </div> </div> </div> China Credit Suisse Hong Kong Transparency Tue, 07 Jul 2015 18:20:45 +0000 Tyler Durden 509387 at Europe Revolts: "What Is Happening Now Is A Defeat For Germany" <p><strong>In Spain, only Vladmir Putin is more disapproved of than Angela Merkel.</strong> Such is the level of polarization that Germany&#39;s chancellor has created in Europe that, <a href="">as WSJ reports,</a> even domestically she is being deriled for saddling Greeks with &quot;soup kicthens upon soup kitchens.&quot; As Marcel Fratzscher, head of the German Institute for Economic Research, a leading Berlin think tank notes, &quot;Germany has, at the end of the day, helped determine most of the European decisions of the last five years,&quot; and therefore, <strong><em>&quot;what is happening now is a defeat for Germany, especially, far more than for any other country.&quot;</em></strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>&ldquo;They want to humiliate Greece to send a warning to Spain, Portugal and Italy,&rdquo; </strong>Hilario Montero, a pensioner at a pro-Greece demonstration in Madrid recently, said of Berlin and Brussels.<strong> &ldquo;The message is you are not allowed to cross the lines they set.&rdquo;</strong></p></blockquote> <p><strong><em>&quot;Disapproved&quot;</em></strong></p> <p><a href=""><img height="502" src="" width="600" /></a></p> <p><a href=""><em>As The Wall Street Journal reports,</em></a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Ms. Merkel&rsquo;s power after a decade in office has become seemingly untouchable, both within Germany and across Europe.</strong> But with <u><strong>the &ldquo;no&rdquo; vote in Sunday&rsquo;s Greek referendum on bailout terms posing the biggest challenge yet </strong></u>to decades of European integration, risks to the European project resulting from Germany&rsquo;s rise as the Continent&rsquo;s most powerful country are becoming clear.</p> <p> </p><p>On Friday, Spanish antiausterity leader Pablo Iglesias urged his countrymen:<strong> &ldquo;We don&rsquo;t want to be a German colony.&rdquo; </strong>On Sunday, after Greece&rsquo;s result became clear, Italian populist Beppe Grillo said, &ldquo;Now Merkel and bankers will have food for thought.&rdquo; On Monday, Ms. Merkel flew to Paris for crisis talks amid signs the French government was resisting Berlin&rsquo;s hard line on Greece.</p> <p>&nbsp;</p> <p><strong>&ldquo;What is happening now is a defeat for Germany, especially, far more than for any other country,&rdquo; </strong>said Marcel Fratzscher, head of the German Institute for Economic Research, a leading Berlin think tank.<strong> &ldquo;Germany has, at the end of the day, helped determine most of the European decisions of the last five years.&rdquo;</strong></p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p>In Greece last week, it was the stern face of 72-year-old German Finance Minister Wolfgang Schäuble that appeared on some of the posters urging voters to reject Europe&rsquo;s bailout offer.<strong> &ldquo;He&rsquo;s been sucking your blood for five years&mdash;now tell him NO,&rdquo;</strong> the posters said.</p> <p>&nbsp;</p> <p><strong>&ldquo;They want to humiliate Greece to send a warning to Spain, Portugal and Italy,&rdquo;</strong> Hilario Montero, a pensioner at a pro-Greece demonstration in Madrid recently, said of Berlin and Brussels. <strong>&ldquo;The message is you are not allowed to cross the lines they set.&rdquo;</strong></p> </blockquote> <p>And she is left stuck between a rock and hard place...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>&ldquo;Germany is in this hegemonic role in Europe because we have no relevant right-wing populist parties,&rdquo;</strong> Mr. Münkler said.</p> <p>&nbsp;</p> <p>That is why Europe&rsquo;s current showdown with Greece is critical for the future of Germany&rsquo;s place in Europe, analysts say.</p> <p>&nbsp;</p> <p><strong>If Ms. Merkel approves a new lifeline for Athens </strong>after weeks of vitriolic debate, she is likely to face a furor from Germany&rsquo;s right and stoke the country&rsquo;s incipient euroskeptic movement.</p> <p>&nbsp;</p> <p><strong>If Greece careens out of the euro,</strong> Ms. Merkel will face blame for an episode that has further polarized Europe at a time when controversies over the U.K.&rsquo;s EU membership and how to treat migrants and refugees are adding to the tensions wrought by the Ukraine crisis.</p> <p>&nbsp;</p> <p>Claudia Major, a security specialist at the German Institute for International and Security Affairs, said:<strong> &ldquo;If Greece were to leave the eurozone, this may someday be seen as the beginning of the end of the project of European integration&mdash;when the Germans were not in the position, as the leading power in shaping Europe, to be able to resolve things with the Greeks.&rdquo;</strong></p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>As they conclude...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><span style="text-decoration: underline;"><strong>With every crisis in which Ms. Merkel acts as the Continent&rsquo;s go-to problem solver, the message to many other Europeans is that for all the lip service about the common &ldquo;European project,&rdquo; it is the Germans and faceless bureaucrats in Brussels who run the show.</strong></span></p> <p>&nbsp;</p> <p><strong>The pushback against German power in Europe is likely to grow if the eurozone crisis worsens or if Berlin&rsquo;s policies grow more assertive.</strong></p> </blockquote> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1267" height="1060" alt="" src="" /> </div> </div> </div> Eurozone Germany Greece Italy Portugal Ukraine Wall Street Journal Tue, 07 Jul 2015 18:04:05 +0000 Tyler Durden 509400 at Top Corrupt Leaders in the World <div> <div class="clear-block clear" style="font-family: 'Lucida Grande', Verdana, sans-serif; font-size: 13.3333330154419px; line-height: 17.3333320617676px;"><a href="" style="font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 14px; font-weight: bold; line-height: 22.3999996185303px;">Follow ZeroHedge in Real-Time on FinancialJuice&nbsp;with Voice News</a></div> </div> <p>Corruption has been the coveted jewel in everybody&rsquo;s crown since antiquity. Aristotelian philosophy believed that everybody who had power could become corrupt. Nietzsche said that we commit corruption only because there is financial gain. In the 19th&nbsp;century when those that had the power made politics apparently accessible even to the poor by paying politicians a salary in our democracies where already paving the way for their own wealth accumulation. Paying salaries to politicians for the first time so that the wealthy did not have the monopoly of the control of the function of decision making? Were they kidding us back then into believing that politics was democratic? Of course they were pulling the wool over our eyes into making us believe that everybody, whatever their status, would get to govern the country. What they were really doing was making sure that they were able to siphon of the greenbacks from the state, but this time making it look as if it were all above board. How rueful we may feel when we look back those wily boys and how &lsquo;we the people&rsquo; all fell for it.</p> <p>Corruption is a many splendid thing: the dishonest and illegal behavior of our powerful, void of all principle or moral virtue, inducement to wrong-doing through improper means. The thing our politicians seem to do every day. But, who&rsquo;s the worst of them all? Who&rsquo;s done things that are unique and that&rsquo;s not just talking about the millions or billions that are diverted from public to private accounts in the click of a button or the blink of an eye.&nbsp; Here&rsquo;re the winners it would seem. It&rsquo;s up to you to decide who the losers in this big fun game actually might be.</p> <p>Transparency International looked at who the worst (or the best) at corruption were and here&rsquo;s who they came up with.</p> <div> <p><strong>The Most Corrupt</strong></p> </div> <p><strong>10. Joseph Estrada</strong></p> <p>In the Philippines this guy was elected both President and Vice-President. He was sentenced to life imprisonment in 2007 and found guilty of corruption. He said that the court that sentenced him, after being ousted from power in 2001 was nothing more than a &ldquo;kangaroo court&rdquo;, with blatant disregard for upholding the law. That&rsquo;s always the way with corrupt leaders; they are always the first to blow the whistle on someone else, aren&rsquo;t they? He diverted $78 as well as receiving money from the sale of shares in government pension funds. He had originally risen to power defending the poor and protecting the interests of the neediest in the country. Prior to entering politics he was an actor (sound familiar?) and he always had the role of the tough guy that defended the poor too even on screen. Corrupt deep down or just diverted from the original goal as he got more and more powerful? By the time he was ousted from power the debt of the country had risen to P2.1 trillion ($0.05 trillion) (1999). He had doubled the fiscal debt to P100 billion (2.23 billion) also.</p> <p><strong>9. Arnoldo Alemán</strong></p> <p>Alemán was the 81st&nbsp;President of Nicaragua between 1997 and 2002. Information was made available to the public showing that there was widespread corruption in his administration and he was subsequently barred from running from office again. 14 people were charges with corruption under his administration (including his family, who fled the country, and the Chief of the Department of Taxes, Byron Jeréz. Alemán was sentenced in 2003 to 20 years in prison for his corruption at the highest level of the country. He was convicted of money laundering and embezzlement amongst other things. The former President was shown to have used government credit cards for personal use: $13,755 at the Ritz Carlton Hotel in Bali; $68,506 in India spent on handicrafts and hotels, for example. The average citizen of the country was only making $430 a year at the time. In 2004, Transparency International named him as the 9th&nbsp;most corrupt person in the world stating that he had probably looted roughly $100 million, siphoning it off from state coffers. In 2009, a court overturned the prison sentence and he was set free. Some say there was a secret deal with Daniel Ortega, President of Nicaragua (president since 2007).</p> <p><strong>8. Pavlo Lazarenko</strong></p> <p>This former Prime Minister of Ukraine is reported to have stolen $200 million from the state. It was siphoned off from state funds over a period of just twelve months and placed in bank accounts in the Bahamas. He was convicted and sentenced in 2006 for money laundering and extortion as well as wire fraud. He is reported by the United Nations to have extorted 50% of the profits ($60 million) of businessman Peter Kiritchenko. The money was then laundered through a shell company in the USA to conceal property that had been bought. In 2013 the US authorities confiscated a mansion in California worth $6.75 million.</p> <p><strong>7. Alberto Fujimori</strong></p> <p>Fujimori was president of Peru from 1990 until 2000. He fled to Japan after the breaking of a major corruption scandal and human rights abuses accusations were revealed. He is perhaps most famous for his Fujimorism policies of anti-terrorism and free-market economics accompanied by right-wing pragmatism and an anti-communist approach. In 2007 he was convicted of search and seizure under illegal circumstances in the country and in 2009 he was convicted of human rights violations (25 years in prison). He killed and kidnapped opponents fighting against the leftist guerillas (1990s). He was the first elected head of state to be extradited (in 2007) back to his own country (from Chile where he was arrested in 2005). He was found guilty of forced sterilization of indigenous women (300,000) under a campaign called Voluntary Surgical Contraception.</p> <p><strong>6. Jean-Claude Duvalier</strong></p> <p>The Haitian Baby Doc (1971-1986) succeeded his father Papa Doc, François Duvalier as President of the country when the latter died in 1971. Thousands were killed and tortured and hundreds of thousands decided to flee the country. His wedding was state-sponsored to the tune of $2 million in 1980 and he was found guilty of selling body parts as well as running a drug-trafficking business. He fled to France in 1986, ousted from power and that was on board a US Air Force aircraft. He remained in France until 2011 when he finally returned to Haiti. He was arrested the day after arrival in the country and charged with corruption. He pleaded not guilty and he died of a heart attack in 2014. The world was largely tolerant for some reason to his human-rights abuses and corruption. He is supposed to have amassed somewhere in the region of $300 to $800 million during his time in office, but this is probably just the tip of the iceberg.</p> <p><strong>5. Slobodan Milosevic</strong></p> <p>Milosevic was President of Serbia and then subsequently Yugoslavia (1989-1997 and then 1997-2000). His nickname was Sloba. He was arrested in 2001 after resigning as president in 2000 and charged with corruption, abuse of power and embezzlement. He was extradited to the International Criminal Tribunal of the former Yugoslavia and charged with war crimes when there was a lack of evidence regarding his corruption. He defended himself during the trial and refused to recognize its authority because of it not having been mandated by the United Nations General Assembly. He died in his prison cell in 2006, apparently from heart ailments and after having refused to take his medication. He was also charged with having kidnapped and murdered political opponent former President Ivan Stambolic in 2000. He reportedly embezzled $1 billion from the state.</p> <p><strong>4. Sani Abacha</strong></p> <p>The Nigerian General was the de facto President of Nicaragua (1993-1998). Under his presidency there were economic records in growth. Foreign-exchange reserves increased from $494 million (1993) to $9.6 billion (1997). External debt of the country fell from $36 billion (1993) to $27 billion (1997). Inflation was stunted from dizzy heights of 54%, ending up at just 8.5% in 1998. But, despite all of the economic prosperity he was accused of human rights abuses (notably, killing by hanging opponent Ken Saro-Wiwa). He reportedly diverted $5 billion from government funds during his term in office? The US revealed in 2014 that it had frozen accounts that had $458 million that it believed to have been illegally obtained by Abacha.</p> <p><strong>3. Mobutu Sese Seko</strong></p> <p>Once the president of Zaire. But before getting to the highest ranks of the country he led an army coup in 1960 and got appointed as army chief of staff as a result. In a 2nd&nbsp;coup that took place in 1965 he became prime minister and then as from 1967 became president of the country. He suppressed tribal conflict and made all citizens drop names that were not African in origin. His biggest aim was to amass wealth through economic exploitation and corruption or exploitation in a kleptocratic type of rule of law. Due to his anti-Communist stance the USA maintained his position as dictator supporting him. He is recorded as having embezzled some $5 billion.</p> <p><strong>2. Ferdinand Marcos</strong></p> <p>This corrupt political leader stole $10 billion from the Philippines during his reign. He is well-known for having diverted public funds intended for a nuclear power station to buying gifts for his family and friends. The country is still paying it off today. The number of people in the Philippines living below the poverty line doubled between 1965 and 1986 under Marco (going from 18 million to 35 million). The percentage of forest cover in the country was depleted from 75% to just 27% during that same period. Marcos&rsquo; wife spent over $2 million on jewelry in just one day on a shopping trip.</p> <p><strong>1. Mohammed Suharto</strong></p> <p>This is apparently the most corrupt leader that embezzled the most money from the state. Or, at least, the one that was caught or denounced. He stole some $15 billion from Indonesia. He nationalized state industries and gave them to his friends to benefit from their wealth. He is said to have stolen money from state charities also. The ex-president of Indonesia (1967-1998) was forced to resign in 1998 and there was a government investigation that was carried out. He was placed under house arrest, but as usual in such circumstances his health issues were used as a means to make sure that the court case was dropped. Or perhaps somebody took another back-hander and dropped the accusations.</p> <p><span style="font-size: 10pt; line-height: 1.3em;">It&rsquo;s surprising that Transparency International saw the list of the most corrupt leaders like this. Why didn&rsquo;t they list anybody from the western world in there or is that a dumb question? Are the leaders of our countries any better than those above? Isn&rsquo;t a monarch or a leader just a person that descends from or that has acquired the ability to be bloody ruthless in waging a war of arms or words to get to the top? Weren&rsquo;t these people just the ones that killed literally or metaphorically speaking the opponents that were around them in order to amass greater wealth? Naively, we should ask ourselves why on earth the western leaders are not in there for good measure too.</span></p> <p>Politics is a byword today for corruption. How is it that we allow it to happen and to moan at home and yet do nothing to fight against it? If corruption is inevitable where power is concerned, then take the power away from them. Remove their power and reduce their ability to corrupt others to get what they want. These days even the fact that the public might find out wouldn&rsquo;t stop corruption.</p> <p>These days corruption happens even before you know it and then we quickly forget.&nbsp; Why not draw up a long list of misdemeanors of our own politicians and make them known? Who would you put on that list and why?</p> <p>The present salary of a US House and Senate member (rank and file) is $174,000 per year, plus benefits. Leaders of the House and Senate are paid $193,400. Is that enough for them to stop committing fraud and to prevent them from being corrupt?&nbsp;</p> <p><a href="" style="font-family: 'Lucida Grande', Verdana, sans-serif; font-size: 13.3333330154419px; line-height: 17.3333320617676px;"><img src="" style="border: 0px; max-width: 100%; height: auto; font-size: 10pt; line-height: 1.3em;" /></a></p> 8.5% Corruption France India Japan Nuclear Power Transparency Ukraine Tue, 07 Jul 2015 17:55:36 +0000 Pivotfarm 509399 at "We Greeks Voted 'No' To Slavery, But 'Yes' To Our Chains" <p><a href=""><em>Submitted by Michael Nevradikis and Greg Palast via</em></a>,</p> <p><strong>We Greeks have voted &#39;No&#39; to slavery -- but &#39;Yes&#39; to our chains.</strong></p> <p>Not surprisingly, by nearly two-to-one, Greeks have overwhelmingly rejected the cruel, economically bonkers &quot;austerity&quot; program required by the European Central Bank in return for an ECB loan to pay Greece&#39;s creditors. In doing so, the Greek people overcame an unprecedented campaign of fear from the Greek and international media, the European Union (EU), and most of our political parties.</p> <p><strong>What&#39;s simply whack-o is that, while voting &quot;No&quot; to austerity, many Greeks wish to remain shackled to the euro, the very cause of our miseries.</strong></p> <p><u><strong>Resistance, not Crisis</strong></u></p> <p>Before we explain how the euro is the cause of this horror show, let&#39;s clear up one thing right away. All week, worldwide media was filled with news of the Greek &quot;crisis.&quot; Yes, the economy stinks, with one in four Greeks unemployed. But two other euro nations, Spain and Cyprus, also are suffering this depression level of unemployment. Indeed, more than <a href=",_seasonally_adjusted,_May_2015.png" target="_blank">11% of workers</a> in seven euro nations, including Portugal and Italy, are out of work.</p> <p><strong>But unlike Greece, these other suffering nations have quietly acquiesced to their &quot;austerity&quot; punishments.</strong> Spaniards now accept that they are fated forevermore to be low-paid servants to beer-barfing British tourists. Spanish prime minister Mariano Rajoy, who has enacted a draconian protest ban at home to keep his own suffering masses at bay, has joined in the jackal-pack rejecting anything but the harshest of austerity terms for Greece.</p> <p><strong>The difference between these quiescent nations and Greece is that the Greeks won&#39;t take it anymore.</strong></p> <p>What the media call the Greek &quot;crisis&quot; is, in fact, <em><span style="text-decoration: underline;">resistance</span></em>.</p> <p><u><strong>Resistance to nowhere</strong></u></p> <p><strong>But it&#39;s a resistance whose leaders are leading them nowhere.</strong></p> <p>For decades, Greeks have suffered governments that are both corrupt and dishonest. The election of SYRIZA changed all that: the government is now merely dishonest.</p> <p>Our new SYRIZA Prime Minister, Alexis Tsipras, correctly called the austerity plan &quot;blackmail.&quot; However, before Sunday&#39;svote, Tsipras told the nation a big fat fib. He said we could vote down the European Bank&#39;s plan but keep the European Bank&#39;s coin, the euro. How? Tsipras won&#39;t say; it&#39;s part of a policy ploy his outgoing finance minister Yanis Varoufakis calls &quot;creative ambiguity.&quot; To translate: <em>Creative ambiguity </em> is Greek for &quot;bullshit.&quot;</p> <p><strong>Sorry, Alexis, if you want to use the Reich&#39;s coin you have to accept the <em>Reichsdiktat</em>.</strong></p> <p><u><strong>Not a coin, a virus</strong></u></p> <p><strong>Tsipras&#39; claim that Greece can keep the euro while rejecting austerity is crazy-talk.</strong> The fact is that German Chancellor Angela Merkel, the Cruella De Vil of the Eurozone, will ignore the cries of the bleeding Greeks and demand we swallow austerity--or lose the euro.</p> <p>But, <em>so what if we lose the euro? </em> The best thing that can happen to Greece, and should have happened long, long ago, is that Greece flee the Eurozone.</p> <p><strong>That&#39;s because it is the euro itself that is the virus responsible for Greece&#39;s economic ills.</strong></p> <p>Indeed, the sadistic commitment to &quot;austerity&quot; was minted into the coin&#39;s very metal. We&#39;re not guessing. One of us (Palast, an economist by training) has had long talks with the acknowledged &quot;father&quot; of the euro, Professor Robert Mundell. It&#39;s important to mention the other little bastard spawned by the late Prof. Mundell: &quot;supply-side&quot; economics, otherwise known as &quot;Reaganomics,&quot; &quot;Thatcherism&quot; -- or, simply &quot;voodoo&quot; economics.</p> <p><strong>The imposition of the euro had one true goal: To end the European welfare state.</strong></p> <p>For Mundell and the politicians who seized on his currency concept, the euro itself would be the vector infecting the European body politic with supply-side Reaganomics. Mundell saw a euro&#39;d Europe as free of trade unions and government regulations; a Europe in which the votes of parliaments were meaningless. Each Eurozone nation, unable to control neither the value of its own currency, nor its own budget, nor its own fiscal policy, could only compete for business by slashing regulations and taxes. Mundell said, &quot;[The euro] puts monetary policy out of the reach of politicians&quot; Without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business.&quot;</p> <p>Here&#39;s how it works. To join the Eurozone, nations must agree to keep their deficits to no more than 3% of GDP and total debt to no more than 60% of GDP. In a recession, that&#39;s plain insane. By contrast, President Obama pulled the USA out of recession by increasing deficit spending to a staggering <a href="" target="_blank">9.8% of GDP</a>, and he raised the nation&#39;s debt <a href="" target="_blank">to 101% from a pre-recession 62%</a>. Republicans screamed, <em>but it worked. </em> The US has lower unemployment than any Eurozone nation.</p> <p><strong>As Obama scolded the European tormentors of Greece:</strong> &quot;You cannot keep on squeezing countries that are in the midst of depression.&quot; Cutting spending power only leads to less spending which leads to further cuts in spending power -- a death spiral we see today in the Eurozone from Greece to Italy to Spain--but not in Germany.</p> <p>&quot;Not in Germany.&quot; There&#39;s the rub. Normally, a nation such as Greece can quickly recover from debt-induced recession by devaluing its currency. Greece would become a dirt cheap tourist destination once more and its lower-cost exports would zoom, instantly increasing competitiveness. And that&#39;s what Germany can&#39;t allow. Germany lured other European nations into the euro in order to keep them from undercutting Germany&#39;s prices in export markets.</p> <p>Restricted by the 3% deficit rule, the only recourse left for Eurozone debtors: pay the piper with &quot;austerity&quot; measures.</p> <p><u><strong>Tsipras in Wonderland</strong></u></p> <p>So therein lies the lie. Tsipras tells his fellow Greeks that we can live in a Looking Glass world, where we can have our euro and eat it too; that we can stay handcuffed to the euro but run free without austerity.</p> <p><strong>The nonsense continues:</strong> Following the announcement of the official results of the referendum on Sunday night, Tsipras tweeted that the Greek electorate voted for a &quot;Europe of solidarity and democracy,&quot; while the now-resigned finance minister Varoufakis tweeted that &quot;Greece&#39;s place in the Eurozone is non-negotiable,&quot; claiming that he would not allow the &quot;only alternative,&quot; the old drachma trading alongside the euro.</p> <p>SYRIZA&#39;s euro-fetish was already evident in its pre-referendum proposals to the IMF and European Bank, <a href="" target="_blank">a 47-page document</a> which included 8 billion euros in new austerity measures plus a new round of sell-offs of state industries, the maintenance of a primary surplus of 1% this year which would increase in the coming years, the increase of the retirement age to 67, and making permanent the previously &quot;temporary&quot; taxes upon an already overtaxed populace. In Tsipras&#39; own proposal, there was no word of a debt write-down or stoppage of payments, despite the fact that the government&#39;s own <a href="" target="_blank">Debt Audit Commission announced</a> on June 17 that the bulk of Greece&#39;s debt is illegal, &quot;odious,&quot; and should not be paid.</p> <p><strong>Instead, Tsipras has come out in support of the IMF&#39;s proposal for a mere 30% &quot;debt haircut&quot; and a 20-year grace period, effectively sweeping the problem under the rug. Greece is currently running a deficit, meaning that in order for the 1% surplus to be achieved, SYRIZA must cut, cut, cut.</strong> Exactly as Mundell and the supply-siders intended.</p> <p><u><strong>Death by &quot;Reform&quot;</strong></u></p> <p>Like Obama, Tsipras knows that cutting pensions, privatizing and closing industries, slashing wages -- in other words, &quot;austerity&quot; -- or, to use the latest jargon, &quot;reform&quot; -- is not just cruel, it&#39;s plain stupid: it can only push a nation in recession into depression.</p> <p>That&#39;s not just theory. The Troika (the European Central Bank, IMF and European Commission) first imposed their vicious austerity measures on Greece in 2010. Greeks watched their <a href=";lang=en" target="_blank">annual salaries plummet</a> to half of a German&#39;s paycheck. Greece&#39;s supposedly generous pensions have been cut eight times during the crisis, while two-thirds of pensioners live below the poverty line. Everything from Greece&#39;s airports to harbors, the national lottery to prime publicly-owned real estatewas sold off, while schools and hospitals were shuttered.</p> <p>And, for the first time since World War II, widespread starvation had returned. 500,000 children in Greece are said to be malnourished. Students fainting from hunger in frigid schools which cannot afford heating oil is now a common phenomenon.</p> <p><strong>This cruel &quot;belt tightening,&quot; the Troika promised, would restore Greece&#39;s economy by 2012 (and then 2013, 2014, and 2015). In reality, unemployment went from a terrible 12.5% in 2010 to a horrendous 25.6% today.</strong></p> <p><strong>Now, the Troika demands more of the same, a continuation of this disastrous policy.</strong></p> <p><u><strong>Crashing into Africa?</strong></u></p> <p>Meanwhile, following the referendum result which made him a hero, finance minister Varoufakis resigned. Ironically, while Varoufakis rubbed German officials the wrong way with his unorthodox style, he, too, maintained the pro-euro myth. Previous austerity measures continued under his watch. To please the mad austerity masters, he said he would &quot;squeeze blood from a stone&quot; to repay the IMF--which he did in May, when all remaining funds in the Greek Treasury were rounded up by presidential decree to make that month&#39;s IMF loan payment. Varoufakis was so wedded to the euro that he claimed that Greece would be unable to print its old currency, the drachma, because we destroyed our currency printing presses when we joined the euro. In fact, the government&#39;s banknote printing facility in Athens still operates, printing the 10-euro note.</p> <p><strong>Meanwhile, our future flees.</strong> A quarter million university graduates have abandoned our nation. They have no choice: unemployment for those under 25 has hit 48.6%.</p> <p>I know that many Greeks, Cypriots, Italians and Portuguese all express a visceral fear of leaving the euro. Depending on which polls one chooses to believe, anywhere from a <a href="" target="_blank">near-majority</a> to an overwhelming majority of Greeks wish to remain in the euro <em>at all costs</em>. <strong>From the hysterical statements I heard from some Greeks that, &quot;We cannot leave Europe!&quot;, you&#39;d think that dropping the euro will cause Greece to break off at the Albanian border and crash into Africa.</strong></p> <p><strong>It would be refreshing to hear political leaders say the honest economic truth: &quot;Workers of Europe unite! You have nothing to lose but the euro--and your chains.&quot;</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="294" height="202" alt="" src="" /> </div> </div> </div> Creditors Deficit Spending European Central Bank European Union Eurozone Germany Greece Italy Monetary Policy Portugal President Obama Reality Recession Unemployment Tue, 07 Jul 2015 17:42:30 +0000 Tyler Durden 509398 at