I firmly believe we will see Europe start to crumble during the May-June window of time. We have a confluence of political (French, Greece, Irish elections), fundamental, seasonal, technical, and monetary factors (Operation Twist 2 ends in June) occurring in that time period make the possibility of a banking Crisis in Europe higher than at any other point in the last three years.
Remember Europe's so-called success story - Ireland? Time to scratch it off the list, as the "best performing" PIIG, and "peripheral reform" wunderkind, just reminded everyone that the only true success story in Europe is that other I country - Iceland, after its fourth quarter GDP unexpectedly dropped 0.2%, well below consensus estimates of a 1.0% GDP boost. Odd - recall that back in October, following the announcement that Greece would be allowed to extract a bondholder haircut, initially at 50% and ultimately at 78.5%, we said that "this means that Portugal, Ireland, Spain and Italy will promptly commence sabotaging their economies (just like Greece) simply to get the same debt Blue Light special as Greece." Looks like Ireland is well on its way to doing just that, and the GDP slide is actually not all that surprising. Next: prepare for more "surprising" GDP misses from Portugal, Spain and, of course, Italy.
- So much for that: Obama to fast track southern portion of Keystone XL Pipeline (1600 Report)
- French Police Say They Have Cornered Suspect in School Shooting (NYT); French shooting suspect had been arrested in Afghanistan (Reuters); Suspect in French shootings says he’ll surrender to end standoff (Globe & Mail), Toulouse suspect escaped from Kandahar jail in mass Taliban jailbreak in 2008 (BBC)
- Bernanke Says Europe Must Aid Banks Even as Strains Ease (Bloomberg)
- Monti faces clash with unions over reform (FT)
- UK budget to balance tax breaks with austerity (Reuters)
- Romney scores big win over Santorum in Illinois (Reuters)
- U.S. Exempts Japan, 10 EU Nations From Iran Oil Sanctions (Bloomberg)
- Bernanke Says Fed Failed to Meet Goals During Great Depression (Bloomberg)
- Revised tax deal reached on Swiss accounts (FT)
When it comes to being a NWO debt slave, one can accept their fate demurely and bent over, like a conditionally habituated dog electroshocked into perpetual submission just as the banker elites like it, with threats that the world would end the second one dared to change the status quo (see Greece), or one can do something about being a debt slave. Like Iceland. And then rapidly proceed to be the best performing economy in Europe. And reading some of the latest news out of Hungary, which has to count its lucky stars is not stuck in the inflexible nightmare that is the mercantilist Eurocurrency union, gives us hope that we may soon witness the next sovereign rebellion against the banker yoke. The WSJ reports: "Hungary's premier fired a new broadside in the country's running battle of wills with the European Union, saying that Hungarians should be free to make their own laws without interference from Brussels. Speaking to a large crowd of supporters celebrating the anniversary of a 19th-century Hungarian revolt against Austrian rule, Prime Minister Viktor Orban said: "Hungarians will not live as foreigners dictate." This has promptly generated the anticipated response from European unelected dictator Barroso, who minutes ago said that Hungary's Orban doesn't get democracy. Oh, we think he does. What he doesn't seem to get, or like, is existence in a banker-governed technocratic, klepto-fascist state, in which the peasantry is merely an intermediary vessel for asset confiscation by insolvent banks. Like Greece... which however already is the butt of all jokes of personal submission to a foreign oppressor, so there is no dignity in kicking a dog that is down.
Following the latest temporary swoon in gold, the PM naysayers have once again crawled out of the woodwork, like a well tuned Swiss watch (made of 24K gold of course). Of course, they all crawl right back into their hole never to be heard of again until the next temporary drop and so on ad inf. Naturally, the latest incursion of "weak hand" gold longs is screaming bloody murder because the paper representation of the value of their hard, non-dilutable, physical gold is being slammed for one reason or another. Ironically, these same people tend to forget that the primary driver behind the value of gold is not for it to be replaced from paper into paper at some point in the future, but to provide the basis for a solid currency following the reset of a terminally unstable system, unstable precisely due to its reliance on infinitely dilutable currency, and as such any cheaper entry point is to be applauded. Yet it seems it is time for a refresh. Luckily, SocGen's Dylan Grice has coined just that with a brief explanation of "when to sell gold" which while having a modestly different view on the intrinsic value of gold, should provide some comfort to those for whom gold is not a speculative vehicle, but a true buy and hold investment for the future. And in this day and age of exponentially growing central bank balance sheets (chart), this should be everyone but the die hard CNBC fanatics. In brief: "Eventually, there will be a crisis of such magnitude that the political winds change direction, and become blustering gales forcing us onto the course of fiscal sustainability. Until it does, the temptation to inflate will remain, as will economists with spurious mathematical rationalisations as to why such inflation will make everything OK. Until it does, the outlook will remain favorable for gold. But eventually, majority opinion will accept the painful contractionary medicine because it will have to. That will be the time to sell gold."
When it comes to the New Normal, there are just two precedents: complacent and doomed debt slaves, such as Greece, which continues to voluntarily hand over any and all of its real assets to the vampiric banking oligarchy in exchange for simply being the member of a doomed club, while trembling at constant threats of fire and brimstone if it dares to split away from its monetary parasites (and where unemployment rises by 3% in one quarter), or the rare success story such as Iceland, which showed the bankers a middle finger, took the red pill and disconnected from the globalization matrix. And while even Bloomberg recently extolled the virtues of the Iceland "case", which will likely be solitary until the entire ponzi scheme comes crashing down, we are heartened when we observe all incremental milestones of further economic and financial success by the one country that dared to call the banker bluff, and won. Such as this press release from the IMF.
Central banks are printing money all over the world. New names have been given to what is really an age old phenomenon. Desperate governments have traditionally debased their currencies when they have no other way of financing their deficits. So far the world’s central banks have been “lucky”. Thanks to the prior global bubble ending in 2008 and the realization that the so-called advanced countries are reaching the end of their borrowing capacity, the world is in a massive deleveraging mode which tends to be deflationary. For the moment the central banks can get away with printing all the money they want without massive increases in consumer price indexes. The public doesn’t connect increases in prices of commodities like gold or oil with the current bout of money printing. But if history is any guide, this money printing will matter and the age of deflation and deleveraging will be followed by an age of inflation.The coming battles over solving the problems of the bankrupt American government will not be pretty. It will be a bit more difficult for an American president to preach patriotism to the affluent in these circumstances. Although, if there is a war with Iran, he might try.
Not the US Dollar of course: why would the only country to successfully overthrow the chains of banker tyranny and default in their face want to ever have anything to do with the USD, the source of all the world's problems. No, the dollar in question is that of Canada. According to the Globe and Mail tiny Iceland, "is looking longingly to the loonie as the salvation from wild economic gyrations and suffocating capital controls...And for the first time, the Canadian government says it’s open to discussing idea. There’s a compelling economic case why Iceland would want to adopt the Canadian dollar. It offers the tantalizing prospect of a stable, liquid currency that roughly tracks global commodity prices, nicely matching Iceland’s own economy, which is dependent on fish and aluminum exports." Yes, yes, there are all the fundamental reasons, but more importantly, it is a huge slap in the face of those statists (and the United States of course) who keep repeating no matter the facts that the USD will never lose its reserve status. Here's a hint: it can and it will. And so much for the thought experiment of printing endless amounts of currency in non-reserve format and getting away with everything unpunished. Finally, there is this startling dose of reality from an earlier and calmer time, when S&P, back in 2006, released its long-term baseline scenario of sovereign debt ratings. This oddly prescient table speaks for itself.
The modern, debt-based economy requires constant economic expansion if only to service all that debt. So what happens when the modern economy goes ex-growth and stops expanding? Iceland already found out. Greece is in the process of discovering. But we will all get a chance to participate in this lesson. Runaway fiscal and monetary stimulus throughout the western economies is in the process of destroying the concept of creditworthiness at the centre of the modern monetary system. Private investors, we suspect, have little or no conception of the extent to which the state is now the predominant player in the financial markets. Central banks control the money supply and interest rates. Central banking and commercial banking interests have essentially become fused. The ECB's long-term refinancing operations are banking bailouts by the back door. Central banks are now also the swing players in government bond markets which directly influences the price for corporate credit. Central bank monetary stimulus also directly influences equity market direction and confidence. Be careful, be very careful about the sort of government debt you hold. You may well end up being paid in whole- but in such depreciated terms that being "kept whole" will be meaningless in real terms.
- U.S. Postal Service to Cut 35,000 Jobs as Plants Are Shut (BBG) -Expect one whopper of a seasonal adjustment to compensate
- European Banks May Tap ECB for $629 Billion Cash (Bloomberg) - EURUSD surging as all ECB easing now priced in; Fed is next
- Madrid presses EU to ease deficit targets (FT)
- Greek Parliament Approves Debt Write-Down (WSJ)
- Mentor of Central Bankers Fischer Rues Complacency as Economy Accelerates (Bloomberg)
- Draghi Takes Tough Line on Austerity (WSJ)
- European Banks Hit by Losses (WSJ)
- Moody's: won't take ratings action on Japan on Friday (Reuters)
- Athens told to change spending and taxes (FT)
An explicit contagion path chart, since you probably won't get info like this anywhere else...
Negative Salaries, Negative Bailout And Now Negative Gold - Greece Just Became The Bankster's ParadiseSubmitted by Tyler Durden on 02/22/2012 16:58 -0500
While Iceland is now known as the country that is the closest earthly approximation to banker hell, it is safe to say that Greece is the terrestrial equivalent of banker heaven. Because as explained earlier today, the country's population is about to get a worse deal than your average run of the mill slave - they may get whipped, but at least never have to pay for the privilege, unlike the Greeks. Hence negative salaries. As also explained, the European bailout of Greece, is now formally a Greek bailout of Europe, funded by the country's already negative primary surplus, or better said - deficit (don't try to make mathematical sense of that - a scene out of Scanners is guaranteed). Hence, negative bailout. But the piece de resistance, and the reason why Greece is the in situ version of bankster heaven is the news from the NYT that Greece is also about to have negative gold.
- Obama Administration Said Set to Release Corporate Tax-Rate Plan Today (Bloomberg, WSJ)
- Greece races to meet bail-out demands (FT)
- IAEA ‘disappointed’ in Iran nuclear talks (FT)
- Hilsenrath: Fed Writes Sweeping Rules From Behind Closed Doors (WSJ)
- Fannie-Freddie Plan, Sweden FSA, Trader Suspects, CDO Lawsuit: Compliance (Bloomberg)
- Bank of England’s Bean Says Greek Deal Doesn’t End Disorderly Outcome Risk (Bloomberg)
- Greece Second Bailout Plan an ‘Important Step,’ Treasury’s Brainard Says (Bloomberg)
- Shanghai Eases Home Purchase Restrictions (Bloomberg)
Let's put things back into perspective. Europe is lending money to Greece, which according to latest rumors will at least for the time being be in the form of the dreaded Escrow Account, which in turn means that the only recipients of bailout cash will be Greek creditors, whose claims will be senior to that of the government. In other words, it will be up to Greece, and specifically its own tax "collectors" to provide the actual funding needed to run the country as bailout or not bailout, Greek mandatory (forget discretionary) expenditures will not see one penny from Europe. As a reminder, the country is already €1 billion behind schedule in revenue collections which are down 7% Y/Y compared to an expectation of 9% rise. As a further reminder, the one defining characteristic of Greek tax collectors is that they are prone to striking. Virtually all the time. And that is assuming they even have the ink to print the required tax forms. Which last year they did not. So under what realistic assumptions are Greek tax collectors laboring in the current tax year? Why, nothing short of them having to be not 100%, but 200% more efficient. From Kathimerini: "Greece’s tax collectors were told over the weekend that they would have to do a much better job this year at gathering overdue taxes. How much better? Almost 200 percent." And this, unfortunately, is where the Greek bailout comes to a screeching halt, because while it is no secret that Greek "bailouts" do nothing for the country, but merely enforce ever more stringent austerity to mask the fact that all the cash is simply going from one banker pocket to another, it is the pandemic corruption embedded in generations of behavior that is at the root of all Greek evil. And there is no eradicating that. Now tomorrow, and not by 2020.
While Greece and Europe continue sinking ever deeper into the colonial quicksand of Pax Goldmania, Iceland, which blew up, pushed its banks into bankruptcy, and arrested its corrupt bankers, is well on its way to being the world's only normal country.
- ICELAND RATINGS RAISED TO INVESTMENT GRADE BY FITCH
- FITCH UPGRADES ICELAND TO 'BBB-'; STABLE OUTLOOK
- FITCH DOES NOT EXPECT ICELAND TO SLIP BACK INTO RECESSION
- FITCH SAYS ICELAND GOVERNMENT DEBT PEAKED AT 100% OF GDP IN '11
Too bad the Goldman colony of Greece (and soon everyone else - thank you first lien "bailout" debt) will not see headlines such as these written about it any time in the next century.