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Mark Grant On Europe's Plan B, Greek Bank Runs, and Why We Need New Sunglasses
Via Mark J. Grant, Author of Out of the Box,
“I'm not upset that you lied to me, I'm upset that from now on I can't believe you.”
-Friedrich Nietzsche
The words were spoken by many; Juncker, the German Finance Minister, Merkel, Barroso, Monti and you can just keep going. They all said the same thing about the Greek PSI, “This is the best and final offer.” Each intonation was made with great moral suasion; each speech was directed toward the world’s institutional investors as we were reminded again and again that there was no “Plan B.” In the end most money managers swallowed the bitter pill, given such forceful pronouncements and took the deal offered on the $261 billion swap only to watch the value of the new bonds sink into horizon but no choice was given so there was nothing else, really, that could have been done.
“Trust ... plays a key role in economic exchange and politics. In the absence of trust among trading partners, market transactions break down. In the absence of trust in a country's institutions and leaders, political legitimacy breaks down. Much recent evidence indicates that trust contributes to economic, political and social success.”
-The scientific journal, Nature
Of all of the events of yesterday, of all of the news, the most significant in my view was the announcement that Greece had paid off the $554 million bond maturity that was due yesterday and paid it off in full; 100 cents on the Dollar. With approximately $6 billion left in international bonds outstanding governed under some law besides Greek law two things are now obvious; there was a Plan B and it was just implemented and that Brussels and Berlin supported the Greek pay-off as there was not one peep of objection from any capital in Europe. What we were told, consequently, was not the truth and no financial paradigm can last for long when they lie to investors and breach the trust that had been placed in them.
"If you take a broad enough definition of trust, then it would explain basically all the difference between the per capita income of the United States and Somalia. That suggests that trust is worth $12.4 trillion dollars a year to the U.S., which, in case you are wondering, is 99.5% of this country's income.”
-Steve Knack, Senior Economist at the World Bank
With the yield on the Italian ten year hovering around 6.00% now and the yield on the Spanish 10 year fluctuating around 6.50% the markets are clearly reacting to the breach of faith that has been demonstrated by Europe. This morning the Prime Minister of Spain said that “Spain faces the serious risk of being shut out of the markets.” This comment, by the way, may be the precursor to Spain turning to the EU/ECB/IMF for help and then between the total breakdown in governance in Greece and a plea for financial assistance from Spain is a spot, a line in the sand, where not only Angels but any rational man should well have great fear to tred.
If indications become reality then we are faced with a leftist government in Greece that will either renegotiate a new bailout agreement with Europe or it will head back to the Drachma or be forced there by the refusal of European Union to provide any additional funds. In Spain we are faced with bare bones arithmetic where the country cannot bailout its Regional debt and its back debt because they do not have the capital to do either; much less both. Both countries can flop about for a brief period of time but the conclusions are unavoidable I am afraid and so a very unpleasant landscape awaits us in the coming days. I have warned about all of this for quite some time and I have hammered upon it in recent days as equities, credit/risk assets, the Euro have all declined in value as I had predicted. There may well be a bounce or two along the way but I continue to maintain that dark days lie ahead based not only upon fundamentals but based upon a union in Europe that has been deceptive in presentation and deceitful in practice. Much of this could have been avoided, should have been avoided, but whether it was the European bank stress tests, the inaccurate debt to GDP ratios or the statements on the Greek bailout; Europe has systemically, methodologically and purposefully tried and tried hard to mislead not only investors but the public in the most shameful of manners. The liabilities that they have deemed “contingent” which have not been counted or used as a part of any balance sheet are now beginning to come home to roost and the falsification by omission can no longer be denied as real losses are taken. The lies of the State always give way to the truth of the numbers in the end and the end is nigh on a number of fronts. Long live the Emperor without any clothes but the poor fellow is naked no matter what is said.
In the last 10 days there has been a run on the Greek banks with the President of Greece announcing this morning that almost $1.27 billion has been pulled from their coffers in the last 10 days. The same kind of situation is beginning in Spain as people and institutions react to the unfolding truth. Bloomberg reports this morning that Mr Papoulias said he had been warned by the central bank and finance ministry that the country faced “the risk of a collapse of the banking system if withdrawals of deposits from banks continue due to the insecurity of the citizens generated by the political situation”. Wolfgang Schauble, the German finance minister, stated his view quite clearly this morning, warning that unless Greece delivers a government that honors the terms of the bail-out, that “the country will have to leave the Euro.” Christine Lagarde, head of the IMF, warned she was “technically prepared for anything” and said the effect was likely to be “quite messy” with risks to growth, trade and financial markets. “It is something that would be extremely expensive and would pose great risks but it is part of options that we must technically consider.” If Greece defaults on its debts it is a $1.3 trillion dollar number, forget the drivel that you read in the press because it will not just be the sovereign debt but the municipal debt, the derivatives, the bank debt, the corporate debt and all of the obligations of the country that will fall into the sinkhole of no return.
Actually the correct response to all of this will surprise you. You must go out and get the correct pair of sunglasses. That is the answer.
“Joo Janta 200 Super-Chromatic Peril Sensitive Sunglasses have been specially designed to help people develop a relaxed attitude to danger. At the first hint of trouble, they turn totally black and thus prevent you from seeing anything that might alarm you.”
-Douglas Adams, The Restaurant at the End of the Universe
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Seems that knowing the date of Greece elections was important for markets:
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&start=1860#p37532
And the race for the horse fastest to the glue factory starts....look at Forex. How the hell do people trade that slop?
they get stuck, its superglue!
Remember : Christianity was based on Faith, Hope and Charity.
Capitalism, the new religion, is based on : Faith, Hope and Trust.
Oh yeah.....Plan B....why didn't we roll this sucker out sooner?
Hat tip to Mark on the great quotes.
Because Plan B is what they've really been working on all along. That's what all the can-kicking's been about. In the end it's every man/country for himself over there and they all know it.
Trust, what trust? The only thing that you can count on now is that if you can't touch it, chances are "it" has already been stolen. The paper-pushers (who create nothing of real value) are doing everything they can to maintain power and control. Possession is the fucking law for now.
Atlas continues to shrug. Long black markets and guillotines.
http://finance.yahoo.com/news/greeks-pull-funds-banks-073408269.html
More intel' on the Greeks pulling cash out of their accounts...
If depositors continue to withdraw their money, does not the amount of leverage for each bank increase? Doesn't it increase daily? Since there is less and less actual money backstopping the loans and investments already made?
How long can this go on, before each institution is so leveraged that they just collapse?
That is the $1.2-trillion question!!!!!
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Let's put Obama on the View so he can tell us he will solve Greece too!
TPTB have a plan B and it's a god damn dance routine!
http://www.youtube.com/watch?v=-DOBiT1ANNc&feature=youtube_gdata_player
...not because the future's so bright?
-->The liabilities that they have deemed “contingent” which have not been counted or used as a part of any balance sheet are now beginning to come home to roost and the falsification by omission can no longer be denied as real losses are taken. The lies of the State always give way to the truth of the numbers in the end and the end is nigh on a number of fronts.
Does Team Obama know about this?
Should I still tell Michelle I'm in?
When in doubt, holdout.
Also, the IMF is not ready for anything. They're waiting to light a few more billions on fire.
It's all tough talk from the French butch number. She, Merkel, and Billary, are the Lesbian Legion waiting in the wings after castrating a few more men with easily paid-off chamber maids and high-end escorts in NY hotels.
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The sunglasses needed should be like the one's from J. Carpenter's 'They Live'
- Not so you can see who the 'lizards' are - but to open the doors of perception in ones mind to see what the global elite really stand for.
Which is:
Lies, to pervert whatever is good, manipulate, deceit - and that in no way, shape or form do they care about the well being of the citizens of the world.
Welcome to 2012 - we are totally regressing because our society has been hijacked and infiltrated on all levels and fronts by the scum of the earth.
In They Live, the ruling class within the moneyed elite are in fact aliens managing human social affairs through the use of a signal on top of the TV broadcast that is concealing their appearance and subliminal messages in mass media.
Looking through the sunglasses reveals to Nada that all advertisements and media in the world actually contain subliminal messages designed to control an unwitting human population; billboards, television programs, magazines, and store products now simply display totalitarian commands such as "Obey", "Consume", "No Independent Thought", "Marry and Reproduce", or in the case of money, "This is your God."
I come here to kck ass and chew bubblegum! And I am all out of bubblegum!! or
Lady, that is like putting perfume on a pig!, Lady: I've got one that can see!!
so polititians lied? shocking....truly shocking!
Lol and i believed them
Is there really no more can to kick?
Keep that motherfucking can rolling please, i havent stacked enough! Why did i blow that money i was suppose to buy gold for on beer and weed? Why God?!?! WHY!?!?!
OT, but that new chick in the Snorg Tees ad with the big sunglasses and thick neck is just weird looking. Bring back the redhead or the little brunette with the camel toe.
Penny Arcade FTW!
Check out the latest from the Capital Research Institute (CRI)
The Greek Dilemma
Douglas Adams also wrote: Dirk Gently's Holistic Detective Agency, The Long Dark Teatime of the Soul, and, becoming more relevant these days: Starship Titanic
TRUST is the key word......I was told when I was starting a new career but an "old salt"..."you come here with 100% credibility...you drop from there"
The Politicians lied..the Bankers lied....so no they will be at war with the Vultures from here on out...yes they control the markets with their printing and their rules and regulations...and they can change the laws...but they have lost their credibility...big time...
Funny thing.....gold does not lie....and it keep its 100% credibility....
"Funny thing.....gold does not lie....and it keep its 100% credibility"
That's why ZH's guest Fed-tard, Robert Brusca, tries to denigrate it.
Somebody has to pay the dad gum piper and the fat lady.
AND ... IMHO ... pottery barn rules rule.
Why would the people of Greece continue to pay debt with Euros they do not have? To borrow to pay lenders what you already borrowed makes no sense. Wish them all a good day in Europe, pay the piper, as we will have to do at some point, take the pain, and their will be suffering, and come out holding your head up high. But they must make the internal changes to avoid anarchy. It will take years, they have spoiled themselves beyond recognition and must admit it and change.
Iceland put its corrupt bankers in jail, unlike America, told all to fuck off and they are taking the pain, reforming, and ever so slowly coming out of the abyss. The Euro and its experiment are obviously failing, it will not work long term. How do you get 17 nations to agree on economic decisions when all have their own drummer to march to. It is over, let it blow up and let nations do what they can do best....Take care of themselves.
Again (as has been explained a zillion times) comparing Greece to Iceland it like apples to oranges. Iceland's economy was not (essentially) a State economy as was Greeki's where the government was the primary employer. Iceland did not predicate their future on continual massive debt. Nor did they insititue the absurdities like 13th and 14th payments, unsustainable pension plans and massive borrowing.
Iceland was almost solely a banking problem whereas Greece is primarily a sovereign debt issue. In fact, the problem with Greek banks is a direct result of the massive debt incurred. Incidentally, throwing bankers in jail for fraud was not a key component of their solution but instead was a byproduct of being a land of laws.
Property rights is the number one creater of wealth. When people do "trust" or believe their property rights will be protected capitol flees to that safe place. e.g. capitol flees Somalia. Capitol is starting to flee the US, just see Facebook founder.
You are correct sir, in the meantime the paper pushers (who create nothing of real value) will continue to commit treason in order to stay in power. The resource and capital mis-allocation and mal-investment continues. Possession is the law now, not good.
In addition to capital, I'd say it won't be long before talent will start to leave as well.
I wish Jefferson had retained Locke's original phrase "Life, liberty, property" that he used in crafting the Declaration of Independence. Although property rights and the rule of law are the bedrock of our system,it would have been explicit rather than implicit.
risk... is that a new kind of cereal?
I LOVE your icon!!
But what exactly is it?????
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Yes, economics and truth are inseparable...the lying liars and the lies they lie about are expressed as an economic system- dollars, euros, etc, all lies... we eat lies, drink lies, watch lies on television and on our computers, put lies in our gas tanks, live lies in our private and public lives...what does the truth look like? None of us really know, but we suspect it is a much less glamorous thing than the grandiloquent finery we have grown accustomed to...
Deflation, bitchez, is a real bitch, whether it is a deflation in economic terms, or one in terms of the shrinkage of what we thought reality really was.
The only reason we view deflation as "bad" is that we don't recognize that over time, deflation brings greater buying power. We assume that higher and higher prices bring prosperity but that is not the case for one reason - salaries do not keep up with price inflation. But deflations biggest enemy is the (new) notion that a home is not a place to live but an "investment" that, of course, must appreciate like other investments.
If we lived in a natural system with an absolute currency such as gold, while having technological progress and increased energy consumption, resulting in steady deflation, what would prevent hoarding?
With inflation, pensions grow based on compounding interest.
In a perpetual deflation environment, people would have to hoard gold coins for retirement. The more people hoarded gold, the more valuable it would be, driving more deflation and encouraging more hoarding.
Why would anyone invest in anything, if simply holding money (gold) would outperform any productive assets? Of course, one could ask the same thing now in an inflationary environment, too.
On the other side of things, might the problem be a glut of labor? Too many workers in the world for too few jobs? This prevents wage inflation from keeping up with real inflation, since workers earn less and there are fewer workers paying insufficient taxes to keep up with inflation, so the government has to borrow to make up the difference, causing even more inflation?
If Europe had any brains it would undertake to pay the interest on Greek debt for 2-3 years so as to give Greece the opportunity to catch her breath. This would have been a better approach from the beginning rather than going through that messy and hypocritical bail out of the banks.
In this way the Greeks could have their pro-growth policies funded from the interest savings and at the same time achieve austerity through productivity improvements, better tax collection and structural changes.
At the end of that period a realistic assessment would be carried out as to whether the Greek debt could in fact be serviced or whether a real write-off would be inevitable.
Might work but why would the Greeks make productivity improvements, better tax collection and structural changes? They haven't done this for thousands of years and despite what they say, they are not doing it now either.
Precisely. At this point, the solution to Greece, must come from the greeks. If the E.U. can't handle that, then there are much larger problems to deal with (which may be the truth anyway).
That is the point of picking up the interest tab. You give them one last opportunity to make the changes on their own rather than dictating to them. And before we get ahead of ourselves, do we honestly believe that the USA would not deteriorate virtually overnight if a similar austerity program was enforced on both the government and the people?
As my father (RIP) told me, there is no way you are going to see people line up for soup in America. Just ain't gonna happen.
If you haven't figured it out yet, the Black Racists have taken over the Just Us Department. Note the incredible decision-in-the-making to charge Zimmerman with a hate crime.
Yeah, he stood there and said to himself, "I think I'll let this no limits nigga beat my ass to a bloody pulp, crack my skull on the concrete sidewalk, break my nose, and bring me to the point of death so I can kill me a nigga tonight."
The FBI is now another sold-out institution worthy of no respect whatsoever. What a bunch of whores. Teaming up with the pathological liar prosecuting the case ("We don't prosecute on the basis of public agitation"), and the slut sheriff who is assisting her ("Let's leave out the photos taken within three minutes of the shooting showing Zimmerman's highly lacerated head from the discovery motion fulfillment - and whatever else we can keep from the defense"), and those two assistant state attorneys with their dour looks like reincarnations of 1950's politburo members, we can see the Black Racists are firmly in charge of the white lackeys.
The total lack of any integrity whatsoever is soaked throughout the Status Quo. Yeah, every moment in history has had a share of dishonesty - but it is when it reaches this level that the facade cracks, and the culture collapses. Imagine MSNBC giving David Duke a prime-time show to spout White Racism as the unreverent Al "Gotta find me another Twana Brawley" Sharpton spouts Black Racism. Even the formerly "conservative" Joe Scarborough is on-board to protect his gravy train at the network (He [Zimmerman] gunned him down . . .").
If you think the financial collapse is going to be something to fear, just wait until the pent-up white anger at the "niggas" bursts forth. The truth is that they and the rest of the so-called Underclass are responsible for the collapse in the USA. You may get Smart Alec about it, but when the economy really drops beneath the floor, and the government money runs out to buy the domestic peace, having gold, silver, farmland, domesticated animals, a safe house, and the armament to protect it all won't be so funny anymore.
It will be the difference between those that survive, and those that don't.
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There are no soup lines in America because they replaced them with the 11:59 PM Wal-Mart checkout lines. Clever way to mask the lines, while washing the money through Wal-Mart and the Banks via EBT cards.
Humanity consists of perpetually and irrevocably sovereign individuals who must each choose their desired location on the continuum that runs between safety and freedom, which exist at opposite ends of a spectrum. This individual sovereignty is forced upon us by the nature of reality and our existence, and cannot be handed or delegated away. The social contract is the unspoken agreement we have with all other sovereign individuals, and this unspoken agreement is based on the reciprocal recognition of each others sovereignty and with it the reciprocal extension of trust that we will each honor our aspect of the contract.
The social contract represents an exchange of freedom for safety. But, this exchange is not irrevocable. If trust is violated, thus demonstrating that the social contract is a false and untrustworthy instrument, individuals awaken to the reality that the safety they believe they have purchased by giving up their freedom is fake and does not exist. They then begin to make decisions based on the position they actually find themselves to inhabit on the continuum between freedom and safety rather than the position the fraudulent social contract fooled them into thinking they inhabited.
I would have to agree that trust is lacking when you know your fellow citizens have voted to allow governments to confiscate your property, and take from you what you have earned through your own hard labor. We are seeing theft on a grand scale never before imagined. The tyranny of the majority is alive and well, but it will soon fall victim to its own greed. It's a cultural shift that leads nowhere but collapse.
I don't think "trust" can be extorted. It's not "trust" that permits the USA to hold $16T in debt.
If a guy with a gun to your head says you can trust him, you're likely to pretend you do. That's not quite the meaning of the word, though.
Whatever. It's all good for the S&P today, anyway.
Circle of Trust: once you are out, you are out, there's no coming back in!
I choose to wear prescription sunglasses.
Allows me to see dark days with clarity.
-greeks-withdraw-894-million-in-a-day-is-this-beginning-of-a-run-on-banks?lite
Ya THINK????????????????????
http://worldnews.msnbc.msn.com/_news/2012/05/16/11729795-greeks-withdraw-894-million-in-a-day-is-this-beginning-of-a-run-on-banks?lite
Well the Greeks could slow the pace to a jog or brisk walk.
But if I were them, I'd be wearing sprinter's shoes.