European Central Bank

Essentially, our analysis suggests that there is a large divergence in the perceptions of both sides but the rational choice is to hold to their respective positions. In other words, our analysis of the payoffs suggest that the EU won’t offer debt relief and Syriza won’t back down from demanding it. Our fear is that the markets, inured by previous bailouts, expect the Greeks to cave, leaving the risk of an unexpected negative outcome in Europe is probably higher than what is currently being discounted. At the same time, EU policymakers are assuming that contagion will not occur, which may not be accurate.

The usual bag of tricks no longer works. And the subject Varoufakis brings to the table, that the EU and ECB economical policies have been an abject failure is no longer an extreme notion. The contagion from Syriza success can be considerable, and though it pretends otherwise, the EU has no idea what it would mean down the line. Every single option they look at that is NOT Varoufakis surrendering, must scare them out of their socks. Anything they give up will be seen as a sign of weakness, and it will encourage parties for which Syriza ‘carries the torch’, and likely raise their support and votes.

With talk that Greek banks have hit their emergency lending limit with the ECB (which has prompted a teleconference this morning among ECB polcy-makers), it seems the newly-found position of negotiating strength for Greece (perhaps encouraged by China or Russia behind the scenes) has prompted more demands:

• GREECE'S SYRIZA CHIEF ECONOMIST JOHN MILIOS PROPOSES OVERALL EURO ZONE DEBT OVERHANG REDUCTION BY ECB
  
• ECB COULD BUY ALL EURO ZONE DEBT MATURING IN 2016-2020 AND ALL INTEREST PAYMENTS-SYRIZA'S MILIOS
• ECB WOULD FOOT THE BILL NOW, BUT BY 2040 IT WOULD BE ABLE TO ERASE ALL LOSSES THROUGH PROFIT RETENTION-MILIOS

Roughly translated - "Get back to work, Mr.Draghi" and monetize all of Europe's debt. With negative net issuance (i.e. central banks already monetizing over 100% of 2015's expected issuance) already here, this demand merely pushes the 'independent' monetary policymakers to enable more fiscal profligacy.

So far it has been an overnight session which clearly forgot to take its lithium, with futures first tumbling after CNBC's "leak" that a Greek deal had been reached was refuted, only to surge subsequently on both the Riskbank's foray into NIRP and QE which crushed the Swedish currency and sent its stocks to recorder highs, and more importantly, on the latest ceasefire out of Minsk which has pushed Russian and European assets substantially higher. While only the most naive believe that any palpable end to Ukraine hostilities will emerge as a result of today's delay, expect for Greek headlines to return with a vengeance as today it is Tsipras' turn to speak at a summit of the 28 European Union leaders set to begin momentarily.

With a sane (and apparently honest/legitimate) government achieving election in Greece, the past six years of European “bail-out” fraud is about to be fully exposed. Indeed, the recent history of Greece, alone, is little more than a road-map of fraud, conclusively illustrated by a concise summation of events.

a) In 2009 and early 2010, the ECB “bailed-out” Greece on several occasions – and then it immediately went bankrupt, defaulting on 75% of its national debt.

Exactly as I warned 3 wks ago, Nordic countries are facing pressure. Here's strong evidence of a krone break, havoc to ensue in global banks, how to monetize when skittish brokers pull access & leverage. 

The future of Europe now depends on something apparently impossible: Greece and Germany must strike a deal.

The world economy stands on the brink of a second credit crisis as the vital transmission systems for lending between banks begin to seize up and the debt markets fall over. The latest round of quantitative easing from the European Central Bank will buy some time but it looks like too little too late.

While we are sure the spin from any and every talking head will be that Grexit is overall positive for the Eurozone (until they see Podemos in the lead in the Spanish polls and Italy's Beppe Grillo previous threasts to "leave the Euro and bring down this system of bankers, of scum"), the early pressure to sell Euros (and not in a 'great news we are devaluing our currency and exports will be awesome way' - more a Venezuela 'get my capital away from this hell-hole' way) has been v-shaped recovered as, without doubt every central bank from Switzerland to Swaziland will be buying Euros tonight to maintain the illusion but for how long... While 'they' tried to save EURUSD, US equity futures aren't buying it (giving up the late-Friday Ukraine-is-solved and Dow is gren YTD surge) - The Dow is down 65 points, S&P down 8 points, and Nasdaq down 14 points.

The cracks in the foundation, walls, and ceiling of the European Union are beginning to widen. During an interview with Italian State TV RAI3, Greek Finance Minister Yanis Varoufakis hinted at Greece's "New Deal for Europe" strategy (to be financed by the EIB) but it was the glimpse behind the curtain of EU solidarity that was most shocking as he explained, "Greeks don't have a monopoly on the truth. What we can do, for the rest of Europe, and for Italy in particular, is to open a small door to the truth," adding rather stunningly, that Italy "stands in solidarity with [Greece] but cannot tell the truth as they fear of possible consequences on behalf of Germany."

It took a while, but three months after we wrote "How The Petrodollar Quietly Died, And Nobody Noticed", someone finally noticed.

Needless to say, Greece is only the poster child. The McKinsey numbers above suggest that “peak debt” is becoming a universal condition, and that today’s Keynesian central bankers and policy apparatchiks are only pushing on a giant and dangerous global string. So now we get to ground zero of the global Ponzi. That is the monumental pile of construction and debt that is otherwise known on Wall Street as the miracle of “red capitalism”. In truth, however, China is not an economic miracle at all; its just a case of the above abandoned Athens stadium writ large.

The new Greek political party, known as Syriza, the Coalition of the Radical Left, has done the unthinkable: they've dared to speak the truth.

"Conditions in the global economy are clearly abnormal. The policymaker response to those conditions is extraordinary, with minimal focus on an all-out push for higher growth. Instead, the primary focus is on boosting “inflation” with repeated doses of bondbuying, stock-buying and super-low interest rates"

"A trait you'll see among the world's best investors is the willingness -- even desire -- to talk about their mistakes. They analyze what went wrong, why they were mistaken, and how they can learn from their errors so they don't repeat them. Everyone makes mistakes, but they seem to grasp what most of us have a hard time admitting: It's your (and my) fault."

What any student with an eye to getting on in the world should realize is the core truth underpinning right-minded economic analysis: the value of assets in a properly constituted economic system is a direct function of the money created by the central bank. All other knowledge is subsidiary to this key insight. I know this to be true because the great minds of Princeton declare it to be so, and who am I to argue? This insight results in the key truth that money equals value. It therefore follows that the more money that is created, the more value there is in the system. As the discoverer of these great truths, Lord Keynes has clearly shown this to be true... but there is another way.