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The Greek Butterfly Effect
Submitted by Northman Trader
The Greek Butterfly Effect
Many times nothing happens for a long time. Then all of a sudden everything happens at once. Like a dam break. It builds slowly and then it bursts. Example: Who would have ever thought the Confederate flag would be taken down across the South during the same week that a rainbow flag is symbolically hoisted across the entire country? Just because things seem unthinkable doesn’t mean they won’t happen.
Take the global debt construct as another example. For decades the world has immersed itself in ever higher debt. The general attitude has been one of indifference. Oh well, it just goes higher. Doesn’t really impact me or so the complacent rationalize.
When the financial crisis brought the world to the brink of financial collapse the solution was based on a single principle:
Make the math workable.
In the US the 4 principle “solutions” to make the math workable were to:
1. End mark to market which had the basic effect of allowing institutions to work with fictitious balance sheets and claim financial viability.
2. Engage in unprecedented fiscal deficits to grow the economy. To this day the US, and the world for that matter, runs deficits. Every single year. The result: Global GDP has been, and continues to be overstated as a certain percentage of growth remains debt financed and not purely organically driven.
3. QE, to flush the system with artificial liquidity, the classic printing press to create demand out of thin air.
4. ZIRP. Generally ZIRP has been sold to the public as an incentive program to stimulate lending and thereby generate wage growth & inflation. While it could be argued it had some success in certain areas such as housing, the larger evidence suggests that ZIRP is not about growth at all.
If ZIRP’s true goal were to stimulate growth the result of this:
…would not have produced this:
No, ZIRP’s true purpose is actually much more sinister:
To make global debt serviceable. To make the math work without a default.
Here’s the reality: If we had “normalized” rates tomorrow the entire financial system would collapse under the weight of the math. In short: Default.
Which brings us to Greece the butterfly, the truth and indeed the future:
Greece for all its structural faults is the most prominent victim of fictitious numbers. From the original Goldman Sachs deal to get them into the EU based on fantasy numbers and to numerous bail-outs, the simple truth has always been the same: The math doesn’t work.
It never has and it never will until there is a default on at least some of the debt.
And in this context the Greek government’s move to call for a public referendum on July 5 may be a very clever strategic move as it forces the issue of math.
Here’s the strategic frame-up:
Ultimately what Greece needs is debt relief. Big time debt relief to make the math work.
The global cabal of creditors, ECB, EU, and IMF do not want that.
Why not? Because the very second they do this the classroom will look like this:
Everybody would want a cut on their debt starting with Italy, Spain, Portugal etc. and the dominos would be rolling.
No, they do not want this as a default would require acknowledging that debt matters.
What are the alternatives?
Greece’s referendum move risks putting a debt deal up for a vote to citizens. When has that ever happened? Have Americans every voted on their government’s debt spree? Have citizens ever had a say on their central bank’s policies and balance sheet expansions? The answer is no. This so ever important element of our global economic system is completely removed from voters.
And so Yanis Varoufakis is very much correct in highlighting this open secret:
Democracy deserved a boost in euro-related matters. We just delivered it. Let the people decide. (Funny how radical this concept sounds!)
— Yanis Varoufakis (@yanisvaroufakis) June 26, 2015
No, voters are very much not permitted to participate in this decision making process. And hence the only reason a Greek referendum may actually proceed is this: To make an example of Greece. You want to default? Watch what we will do to Greece.
But that’s a big gamble for the EU, for the ECB, the IMF and everybody else including China and the US.
Why? Because all of them have carefully orchestrated a construct that they do no want to see disturbed. It’s not an accident that we have seen 46+ rate cuts this year. It’s not an accident that China announced another rate cut just a day after Chinese stocks plummeted 7% this past Friday. It was no accident that the Fed’s Bullard talked about QE4 in October the moment US stocks got close to a 10% correction.
No, you see their primary mission in their timed actions and their words: To make the math work. And to continue to make the math work.
And hence Janet Yellen is not delaying rate hikes because she is “data dependent”. She is dealing in reality: Over $18 trillion in US debt (and ever growing) a large portion of which needs to be refinanced over the next 5 years. And higher rates will become an ever larger burden on the discretionary budget of the US. And the world, heavily indebted that it is, has the same problem:
Math.
So this next week is not so much about Greece the butterfly, but it is about keeping the butterfly from becoming a hindrance to the math working globally. And the Greek government knows this. They are negotiating on the basis that a bad Greek deal from Europe’s point of view is better than a default. Angela Merkel wanted a concluded Greek deal before markets open on Monday. Now she has a mess.
And in the world of gamesmanship every percentage drop in the #DAX will enhance Greece’s negotiation stance.
This past week saw a massive rally in the #DAX in the hopes that a deal would certainly be positively concluded. Now this weekend all this bullish sentiment may find itself tested come Sunday night and Monday morning unless Europe blinks quickly. China is doing its part to support the construct with this latest rate cut, but the ECB can’t be happy about its QE program challenged by the constant Greece distraction:
As we outlined in technical charts a default of Greece would risk a structural repeat of 2011:
And it couldn’t come at a worse time:
No, odds are they’re not going to let Greece default. They can’t afford to. The math has to work.
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Yup we are all going into a big big Default simply because the biggest problem with those that talk about GDP is that they fail to mention What Percentage of the GDP is Debt ...
That number would surprise many so called "analysts".
Greece in case they would default, would be the beggining of the end ... and we all they they want to make that as late as possible ... likelly until September ... then we all shell see what happens :)
http://www.blacklistednews.com/Riot_Police_Deployed_in_Armenia_as_Protes...
Riot police have been deployed to the site of demonstrations in Armenia's capital city Yerevan, as protests continued on Friday in the country following the government's refusal to back down plans to hike electricity prices.
As night fell on Friday, reports emerged that buses with riot police had arrived at a major street in Yerevan where nearly 20,000 protesters had gathered to demand a reversal of a 17 percent price hike that is set to kick in on August 1. The protests are being referred to on social media as the Electric Yerevan demonstrations.
==========
A little background: (look at the electric grid map and who borders the country).
An Energy Overview of the Republic of Armenia
http://www.geni.org/globalenergy/library/national_energy_grid/armenia/En...
More here:
EUROPE COULD DRAW GAS THROUGH IRAN-ARMENIA PIPELINE http://eurodialogue.eu/676
Gas Operator To Buy Iran-Armenia Pipelinehttp://www.azatutyun.am/content/article/27052147.html
The people want to stay in the EU (80%)
The people want the austerity to end (80%)
The people want it both ways. Varoufakis is correct, let them decide except what they want is not possible
Here is an interesting post about foreign bank holdings of Greece debt in the years 2013 and 2014. The great majority have reduced their holdings. Some have increased holdings.
Those with increased holdings are Deutsche Bank (+1.5%), Barclays Bank (+51.8%), RBS Group (+15.5%) and Commerzbank (+22.0%) in decreasing order of absolute holdings.
http://trueeconomics.blogspot.ru/2015/06/26615-grexit-and-european-banks...
Fuck Merkel and her crusty ass with her big power trip and all.
"The math has to work."
But the math cannot work, longterm....
("The math has to work."
But the math cannot work, longterm.)
Which means it doesn't work short term. The long term is made up of numerous short terms. At the end of every short term, the mantra is that it is still not a problem today, so let it go on. So the problem builds and builds on each short term. Then the system crashes, because no one fixed it in the short term, to prevent it from becoming a long term problem.
When accounting rules were changed to allow bad com[paies to flourish, I knew it cannot end well.
Accounting is just math; and math has to be as real as humanity can make it.
Pitchforks may not be bad enough for thse subhumans
"This next week is not so much about Greece the butterfly, but it is about keeping the butterfly from becoming a hindrance to the math working globally."
The math doesn't work. Creating a bigger global debt bubble doesn't solve a debt bubble. The depression that has been running since 2008, is going to get worse. Greece is not a one off, but a symptom of a much larger problem.
The laws of math are an absolute. Math dictates that 100% of bubbles burst and deflate.
"No, odds are they’re not going to let Greece default. They can’t afford to. The math has to work."
The math is going to work. 100% of bubbles burst and deflate. The global debt bubble will collapse.
"And hence Janet Yellen is not delaying rate hikes because she is “data dependent”. She is dealing in reality: Over $18 trillion in US debt (and ever growing) a large portion of which needs to be refinanced over the next 5 years."
Yellen isn't dealing with reality. 100% of bubbles burst and deflate. Yellen is denying reality.