There is one thing that keeps Angela Merkel awake at night. It's not the cries of despair from Greek pensioners; it's not the stomach rumbles of starving Portuguese; it's not the penniless Cypriots... it's the rise of the euroskeptic and the possibility that her empire will be forced to wage not financial war but another type of conflict...
Every nation has a right to defend itself against attack – financial attack just as overt military attack. That is an essential element in the principle of self-determination. Greece, Spain, Portugal, Italy and other debtor countries have been under the same mode of attack that was waged by the IMF and its austerity doctrine that bankrupted Latin America from the 1970s onward. International law needs to be updated to recognize that finance has become the modern-day mode of warfare. Its objectives are the same: acquisition of land, raw materials and monopolies. A byproduct of this warfare has been to make today’s financial network so dysfunctional that nations need a financial Clean Slate.
While the party in the 1990s ended badly, the festivities currently underway may end in outright disaster. The party-goers may not just awaken with hangovers, but with missing teeth, no memories, and Mike Tyson's tiger in their hotel room.
The Greek Drachma has made two mysterious appearances this week, suggesting that the EU is on the verge of forcing the Greek economy into the adoption of a parallel currency and while this week’s Drachma “sightings” might properly be called anecdotal, a report from Kathimerini and comments from deposed FinMin Yanis Varoufakis suggest redenomination rumors are not entirely unfounded. Now, with the ECB set to cut Greek banks off from the ELA lifeline on Monday morning in the absence of a deal, some businesses are mitigating the liquidity shortage by accepting foreign currency.
Yes, it’s still entirely possible that Tsipras submitted this last set of proposals knowing full well they won’t be accepted. But he’s already gone way too far in his concessions. This is an exercise in futility. It’s time to acknowledge this is a road to nowhere.
"There is an estimated need of about 10 to 14 billion euros in new capital. Given the magnitude of the shock we have been through, regulators will take stock of the situation and the impact on non-performing loans."
Facing pressure from all sides, Greek PM Alexis Tsipras sells out voters and looks to push concessions through parliament ahead of Sunday deadline.
In short… the two biggest reasons for the markets to be rallying today (Greece and China) are simply temporary issues. They will resolve, very likely for the worse, in the coming weeks. Smart investors should be using this bounce to prepare for the next wave of the Crisis.
This much-needed re-set to an economy that serves the many rather than the few is what the Powers That Be are so fearful of. On the surface, everything still looks remarkably stable in the core industrial economies. But surface stability is all the status quo can manage at this point, because the machine is shaking itself to pieces just maintaining the brittle illusion of prosperity and order. In effect, the status quo has greatly increased the system's vulnerability, fragility and brittleness--the necessary conditions for catastrophic collapse--all in the name of maintaining a completely bogus facade of stability for a few more years.
Markets are beginning to signal that policy makers are losing control. Many second-order-effects of the unprecedented and experimental global actions taken since the 2008 crisis are beginning to manifest. There are always causes and effects that develop; but they do so at different speeds. Many actions in recent years have prioritized 'benefits today' over 'consequences tomorrow'. 'Tomorrow' is approaching ever more quickly. There is no 'free lunch'.
- Fed Chair Yellen To Speak As Global Tensions Rise (WSJ)
- Greek PM Tsipras seeks party backing after abrupt concessions (Reuters)
- France Hails Greek Aid Proposals as Germany Reserves Judgment (BBG)
- Greek PM says does not have mandate to exit eurozone (Reuters)
- France Intercedes on Greece’s Behalf to Try to Hold Eurozone Together (WSJ)
- Frozen Funds, Fleeing Tourists: Greek Startups Feel the Pinch (BBG)
- Doubts Simmer Despite China’s Gain (WSJ)
It's officially Groundhog day... and month... and year... and so on.
"Chirac and many others were appalled as I told them in 1998... joining the euro would exacerbate recession in some countries, and that some would find themselves 'trapped in a burning building with no exits' - a phrase that brought me a fair amount of controversy and abuse... I hope the eurozone leaders meeting today will remember that those of us who criticised the euro at its creation were correct in our forecasts. Otherwise they risk adding to the monumental errors of judgment, analysis and leadership made by their predecessors in 1998."
The tense division in Europe's union are becoming increasingly evident. Between Greece's "no" vote, yesterday's EU Parliament outbursts, and today's German parliament commentary it is clear that, as Bloomberg reports, the centerpiece of Merkel’s cure for Europe - fiscal retrenchment - has catalyzed her in the eyes of many as despite her calm but firm entreaties, an economic bully. “The lesson of this crisis is more Europe, not less Europe,” Angela Merkel said in 2012 as the integrity of the region’s monetary union was threatened by financial instability, but many, like Greece, have come to understand "more Europe" means something different: "more Germany."
When the going gets tough, the taxed get going and that is what Nobel Prize winning economist Joseph Stiglitz thinks should happen. In a Time op-ed, Stiglitz warns (likely correctly) that if Greece continues with austerity, it would be depression without end; and so his solution is simple... "The U.S. was generous with Germany as we defeated it. Now, it is time for the U.S. to be generous with our friends in Greece in their time of need, as they have been crushed for the second time in a century by Germany, this time with the support of the troika." Strawman much?